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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549




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Form 10-K

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2003                                                 
|          
|or        
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10218



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Collins & Aikman Corporation

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 13-3489233                                 
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)

250 Stephenson Highway

Troy, Michigan 48083


(Address of principal executive offices,
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 filed all
reports required to be filed 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 file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes o  No þ

Indicate by check
mark if disclosure of delinquent filers 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
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K. þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in Exchange Act
Rule 12b-2). Yes þ  No o.

The aggregate
market value of voting stock held by non-affiliates of the
Registrant was $168,794,241 as of March 1, 2004.

As of
February 26, 2004, the number of outstanding shares of the
Registrants common stock, $.01 par value, was 83,630,087
shares.

WEBSITE ACCESS TO COMPANYS
REPORTS:

Collins &
Aikmans internet website address is www.collinsaikman.com.
The Companys annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and
amendment to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act are available
free of charge through the Companys website and as soon as
reasonably practicable after the reports are electronically
filed with, or furnished to the Securities and Exchange
Commission.

The Companys
Code of Business Conduct is available free of charge through the
Companys internet website. Any amendments to the
Companys Code of Business Conduct and any waivers of the
Code of Business Conduct involving executive officers or
directors of the Company will also be made available on the
Companys internet website. Printed copies of the
Companys Code of Business Conduct are also available free
of charge to any shareholder upon request to: Corporate
Secretary, Collins & Aikman Corporation, 250 Stephenson
Highway, Troy, MI 48083.



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COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES

FORM 10-K ANNUAL REPORT INDEX

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page |   
|         |  |                                                                                           |  |      |   
|PART I  
|Item 1.  |  | Business                                                                                  |  |      | 8  | 
|Item 2.  |  | Properties                                                                                |  |      | 16 | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 17 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |      | 17 | 
|PART II 
|Item 5.  |  | Market for Registrants Common Equity and
    Related Stockholder Matters                 |  |      | 17 | 
|Item 6.  |  | Selected Financial Data                                                                   |  |      | 18 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |      | 19 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |      | 44 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                               |  |      | 44 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |      | 45 | 
|Item 9A. |  | Controls and Procedures                                                                   |  |      | 46 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                        |  |      | 47 | 
|Item 11. |  | Executive Compensation                                                                    |  |      | 52 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |      | 63 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |      | 65 | 
|Item 14. |  | Principal Accounting Fees and Services                                                    |  |      | 68 | 
|PART IV 
|Item 15. |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                       |  |      | 70 | 

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PART I

Cautionary Statements
Regarding Forward-Looking Information and Risk Factors

This Report on Form 10-K contains
forward-looking information, as that term is defined
by the federal securities laws, about our financial condition,
results of operations and business. You can find 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 differ 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 Collins & Aikman Corporation
(the Company) or persons acting on its behalf may
issue. The Company does not undertake any obligation to review
or confirm analysts expectations or estimates or to
release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this report
or to reflect the occurrence of unanticipated events.

This Report on Form 10-K contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results and
events may differ 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:

Demand in the automotive industry is
significantly dependent on the U.S. and the global economies and
the Companys business and profitability are exposed to
current and future uncertainties.

The Companys financial performance depends,
in large part, on conditions in the global automotive markets
and, generally, on the U.S. and global economies. Demand in the
automotive industry fluctuates in response to overall economic
conditions and is particularly sensitive to changes in interest
rate levels, consumer confidence and fuel costs. The threat or
act of terrorism and war, the recession and other recent
developments adversely affected consumer confidence throughout
the U.S. and much of the world and exacerbated the uncertainty
in the Companys markets. The future impact on us is
difficult to predict. We would be harmed by any sustained
weakness in demand or continued downturn in the economy.

The Companys sales are impacted by retail
inventory levels and production schedules. In 2003, Original
Equipment Manufacturer (OEM) customers continued to
significantly reduce their production and inventory levels due
to the uncertain economic environment. In the current
environment, it is extremely difficult to predict future
production rates and inventory levels and the sustainability of
any recovery.

The base of customers which the Company serves
is concentrated, and the loss of business from a major customer
or the discontinuation of particular vehicle models could reduce
the Companys sales and harm the Companys
profitability.

Because of the relative importance of a few large
customers and the high degree of concentration of OEMs in the
automotive industry, the Companys business is exposed to a
high degree of risk related to customer concentration.
DaimlerChrysler AG, General Motors Corporation and Ford Motor
Company and their respective affiliates were the Companys
three largest customers, and they directly or indirectly
accounted for approximately 28%, 22% and 25% of the
Companys 2003 net sales, respectively. A loss of
significant business from, or adverse performance by, any of
these customers would be harmful to the Companys
profitability. Although the Company receives purchase orders
from most of the Companys customers, these purchase orders
typically provide for the supply of a customers annual
requirements for a particular model or assembly plant, renewable
on a year-to-year basis, rather than for the purchase of a

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specific quantity of products. It is difficult to
accurately predict the level of new production for 2004 car
sales. The loss of business with respect to significant vehicle
models could have a material adverse effect.


In addition, there is substantial and continuing
pressure from automotive manufacturers to reduce costs,
including costs associated with outside suppliers like Collins
& Aikman. For example, OEM customers in the automotive
industry attempted to impose price decreases and givebacks
throughout 2003. Such attempted price decreases were generally
in the 2% to 4% range. Several reductions have been agreed to,
and others are currently being negotiated with OEMs and
pressures may increase if overall economic and industry
conditions do not improve. It is difficult for the Company to
offset downward pricing pressures through alternative, less
costly sources of raw materials. In addition, throughout 2003,
the Company has experienced pricing pressure from its suppliers.
The Company cannot assure you that it will not be materially and
adversely affected by substantial and continuing pricing
pressures.

The prices that the Company can charge some of
the Companys customers are predetermined, and the Company
bears the risk of costs in excess of its estimates.

Sales contracts with some of the Companys
customers require it to provide its products at predetermined
prices. In some cases, these prices decline over the course of
the contract. The costs that the Company incurs in fulfilling
these contracts may vary substantially from its initial
estimates. Unanticipated cost increases may occur as a result of
several factors, including increases in the costs of labor,
components or materials. In some cases, the Company may be
permitted to pass on cost increases associated with specific
materials to its customers. Cost overruns that the Company
cannot pass on to its customers could have a material adverse
effect.

The Company may not be able to successfully
integrate the Companys acquired operations or realize the
intended benefits of the Companys acquisitions.

The Companys future operations and cash
flow will depend largely upon its ability to integrate
acquisitions, achieve the strategic operating objectives for
these acquisitions and realize significant synergies and cost
savings as a result. Acquisitions since January 2001 account for
48 of the Companys current 102 plants and facilities and
approximately 58% of the Companys approximately 23,900
employees. The Textron Automotive Companys Trim division
(TAC-Trim) acquisition in 2001, at that time,
individually accounted for 41 of the Companys plants and
facilities and approximately 12,000 of the Companys
employees located across seven different countries, including
two countries where the Company did not previously operate. The
Company has not previously undertaken an integration process as
large or complex as the integration plans required by these
recent acquisitions collectively or by the TAC-Trim acquisition
individually. In order to succeed, the Company will need to
realize projected synergies and cost savings on a timely basis,
consolidate information technologies, capitalize on the
Companys increased purchasing power, effectively control
the progress of the Companys integration process and
associated costs, consolidate the Companys program
management, research and development and engineering operations,
capitalize on the Companys prime contractor strategy and
the opportunities afforded by the Companys broader
products offering and maintain strong relationships with Tier I
integrators and OEMs.

To the extent the Company has misjudged the
nature and extent of industry trends or its competition, it may
have difficulty in achieving its operating and strategic
objectives. In addition, the Companys integration
activities will place substantial demands on its management,
operational resources and financial and internal control
systems. The Companys future operating results will depend
upon the Companys ability to implement and improve its
operating and financial controls and to combine, train and
manage the Companys employee base. There is a risk that
the diversion of management attention, particularly in a
difficult operating environment, will affect sales and the
attention that management can devote to this and other
operational, financial and strategic issues. In addition, in
some of the Companys past non-U.S. acquisitions, the
Company has encountered integration and systems difficulties
typical of foreign transactions, which have given rise to
material weaknesses that had to be subsequently corrected. The
Company cannot assure you that it will not encounter similar
difficulties going forward. All statements concerning the
benefits, cost savings and synergies the Company expects to
realize from its acquisitions are forward-looking statements.

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The Company may pursue additional acquisitions
that further the Companys current strategies.

The Company may selectively identify and acquire
other businesses with complementary products, manufacturing
capabilities or geographic markets, and the Company expects to
continually evaluate such opportunities. The Company cannot
assure you that any business acquired will be successfully
integrated with other operations or prove to be complementary in
the manner expected or be profitable. The Company could incur
further indebtedness in connection with the Companys
acquisition strategy and increase the Companys leverage.
Acquisitions outside of North America may present unique
difficulties and increase the Companys exposure to the
risks attendant to international operations. The process of
integrating acquired companies and operations into the
Companys existing operations may result in unforeseen
operating difficulties and may require significant financial
resources that would otherwise be available for the ongoing
development or expansion of existing operations.

The Company may incur unanticipated contingent
liabilities as a result of acquisitions and may experience
unanticipated liabilities associated with former discontinued
operations.

The Company might incur unforeseen environmental,
tax, pension, litigation or other liabilities in connection with
the Companys recent or future acquisitions, or the Company
might underestimate the known liabilities. If such liabilities
materialize or are greater than the Company estimates, they
could have a material adverse effect on us. In addition, the
Company has significant responsibilities related to some of its
formerly owned businesses, or discontinued operations, such as
those relating to post-retirement, casualty, environmental,
product liability, lease and other matters. Based upon the
information presently available and the Companys insurance
coverage, the Company does not believe that any of these
liabilities will have a material adverse effect upon the
Companys financial condition or results of operations,
however, the Company might be incorrect in its assumptions; and
the extent of those contingent liabilities of which the Company
is aware could exceed its expectations. In addition, there may
be other such liabilities of which the Company presently has no
knowledge.

If the Company is unable to meet future
capital requirements, the Companys competitive position
may be adversely affected.

In securing new business, the Company typically
is required to expend significant amounts of capital for
engineering, development, tooling and other costs. Generally,
the Company seeks to recoup these costs through pricing over
time, but the Company may be unsuccessful due to competitive
pressures and other market constraints or if a customer ceases
production of a particular vehicle. While the Company believes
that it will be able to fund capital expenditures through cash
flow from operations, borrowings under the Companys credit
facilities, sale and leaseback agreements and sales of
receivables including sales under the Companys receivables
facility and factoring arrangements, there can be no assurance
that it will have adequate funds to make all the necessary
capital expenditures or that the amount of future capital
expenditures will not be materially in excess of its anticipated
expenditures.

Recent trends among the Companys
customers will increase competitive pressures in the
Companys businesses.

In recent years, the competitive environment
among suppliers to the vehicle manufacturers in the automotive
industry has changed significantly as these manufacturers have
sought to outsource more vehicular components, modules and
systems and to use on-line auctions in order to obtain further
price reductions. In addition, these sectors have experienced
substantial consolidation as OEMs have sought to lower costs,
improve quality and increasingly purchase complete systems and
modules rather than separate components. This consolidation has
caused, and its continuation will continue to amplify, the
pricing pressures outlined above in the discussion of the
concentration of the Companys customers. The
Companys competitive strategy will be to position itself
as the prime contractor of choice to both Tier I integrators and
OEM assembly plants by supplying a full spectrum of integrated
interior trim components. This strategy presents the risk that
some of the Companys customers may be in competition with
the Company as well. Furthermore, the trend toward consolidation
among automotive parts suppliers is resulting in a smaller
number of large

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suppliers like us who benefit from purchasing and
distribution economies of scale. The Company may be unable to
achieve the cost savings and operational improvements expected
from the Companys prime contractor business strategy,
which could harm its ability to compete favorably in the future
with other larger, consolidated companies.


The Companys strategy may not succeed if
anticipated outsourcing fails to occur due to union
considerations.

Because of the economic benefits inherent in
outsourcing to suppliers and the costs associated with reversing
a decision to purchase automotive interior systems and
components from an outside supplier, automotive
manufacturers commitments to purchasing automotive
interior systems and components from outside suppliers,
particularly on a just-in-time basis, are contemplated to
increase. However, under the contracts presently in effect in
the United States and Canada between each of Ford, General
Motors and DaimlerChrysler and the United Auto Workers
(UAW) and the Canadian Auto Workers
(CAW), in order for any of such automotive
manufacturers to obtain from external sources components that it
currently produces, it must first notify the UAW or the CAW of
such intention. If the UAW or the CAW objects to the proposed
outsourcing, some agreement will have to be reached between the
UAW or the CAW and the automotive manufacturer. Factors that
will normally be taken into account by the UAW, the CAW and the
automotive manufacturer include whether the proposed new
supplier is technologically more advanced than the automotive
manufacturer, whether the new supplier is unionized, whether
cost benefits exist and whether the automotive manufacturer will
be able to reassign union members whose jobs are being displaced
to other jobs within the same factories.

The Companys products are subject to
changing technology, which could place us at a competitive
disadvantage relative to alternative products introduced by
competitors.

The Company believes that its customers
rigorously evaluate their 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, manufacturing
expertise, operational flexibility, customer service and overall
management. The Companys success will depend on its
ability to continue to meet customers changing
specifications with respect to these criteria. The Company may,
therefore, require significant ongoing and recurring additional
capital expenditures and investment in research and development,
manufacturing and other areas to remain competitive.

The Company may be subject to work stoppages
at its facilities or those of its principal customers, which
could seriously impact the profitability of the Companys
business.

As of December 31, 2003, approximately 62%
of the Companys global work force was unionized. If the
Companys unionized workers were to engage in a strike,
work stoppage or other slowdown in the future, the Company could
experience a significant disruption of the Companys
operations, which could have a material adverse effect on us.
Many OEMs and their suppliers have unionized work forces. Work
stoppages or slowdowns experienced by OEMs or their suppliers
could result in slowdowns or closures of assembly plants where
the Companys products are included in assembled vehicles.
Furthermore, organizations responsible for shipping the
Companys customers products may be impacted by
occasional strikes staged by the unions representing
transportation employees. Any interruption in the delivery of
the Companys customers products would reduce demand
for the Companys products.

A growing portion of the Companys
revenue may be derived from international sources, which exposes
us to additional uncertainty.

A significant portion of the Companys 2003
sales was derived from shipments to destinations outside of the
United States and Canada. As part of the Companys business
strategy, the Company intends to expand the Companys
international operations and customer base. Sales outside of the
U.S. and Canada, particularly sales to emerging markets, are
subject to other various risks, including: governmental
embargoes or foreign trade restrictions such as antidumping
duties; changes in U.S. and foreign governmental regulations;
tariffs;

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fuel duties; other trade barriers; political,
economic and social instability and foreign exchange risk. In
addition, there are tax inefficiencies in repatriating funds
from non-U.S. subsidiaries. To the extent such repatriation is
necessary for us to meet the Companys debt service or
other obligations, this will adversely affect us. International
operations frequently are conducted through joint venture
arrangements that can materially limit the Companys
operational and financial control of the business.


The Company may incur material losses and
costs as a result of product liability and warranty claims that
may be brought against us.

The Company faces an inherent business risk of
exposure to product liability claims in the event that the use
of its current and formerly manufactured or sold products
results, or is alleged to result, in bodily injury and/or
property damage. The Company may experience material product
liability losses in the future or incur significant costs to
defend such claims. The Companys product liability
insurance coverage will be inadequate for any liabilities that
may ultimately be incurred or may be unavailable on acceptable
terms in the future. In addition, if any of the Companys
products are or are alleged to be defective, the Company may be
required to participate in a government-required or
OEM-instituted recall involving such products. Each vehicle
manufacturer has its own policy regarding product recalls and
other product liability actions relating to its suppliers.

In addition, as suppliers become more integrally
involved in the vehicle design process and assume more of the
vehicle assembly functions, vehicle manufacturers are
increasingly looking to their suppliers for contribution when
faced with product liability claims. A successful claim brought
against us in excess of the Companys available insurance
coverage or a requirement to participate in a product recall may
have a material adverse effect.

In the ordinary course of the Companys
business, contractual disputes over warranties can arise. In the
past five years or more, the Company has not been required to
make any material payments in respect of warranty claims. In
most cases, financial responsibility for warranty costs are
contractually retained by the Companys customer so long as
the customers specifications are met, but the Company may
nonetheless be subjected to requests for cost sharing or pricing
adjustments as a part of the Companys commercial
relationship with the customer.

The Companys business may be materially
and adversely affected by compliance obligations and liabilities
under environmental laws and regulations.

The Company is subject to federal, state, local
and foreign environmental, and health and safety, laws and
regulations that affect ongoing operations and may increase
capital costs and operating expenses in order to maintain
compliance with such requirements and impose liability relating
to contamination at the Companys facilities, other
locations such as former facilities, facilities where the
Company has sent wastes for treatment or disposal and other
properties to which the Company (or a company or business for
which the Company is responsible) are linked. See Note 21
Commitments and Contingencies 
Environmental.

The Company may not be able to manage its
business as it might otherwise due to its high degree of
leverage.

The Company has indebtedness that is substantial
in relation to the Companys stockholders equity and
cash flow. At December 31, 2003, the Company had
$1,285.2 million of outstanding total debt and short-term
borrowings. The Companys percentage of total debt and
outstanding preferred stock of its subsidiary,
Collins & Aikman Products Co. (Products)
(Products Preferred Stock) to total capitalization
was 76.7% at December 31, 2003. The degree to which the
Company is leveraged will have important consequences, including
the following:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Companys ability to obtain additional
    financing in the future for working capital, capital
    expenditures, acquisitions, business development efforts or
    general corporate purposes may be impaired;

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a substantial portion of the Companys cash
    flow from operations will be dedicated to the payment of
    interest and principal on the Companys indebtedness,
    dividends on Products Preferred Stock and capital and operating
    lease expense, thereby reducing the funds available to us for
    other purposes                                                                     
|
| |  | the Companys operations are restricted by
    the Companys debt instruments and the terms of the
    Products Preferred Stock, which contain material financial and
    operating covenants, and those restrictions will limit, among
    other things, the Companys ability to borrow money in the
    future for working capital, capital expenditures, acquisitions
    or other purposes;
|
| |  | indebtedness under the Companys senior
    credit facilities and the financing cost associated with its
    receivables facility will be at variable rates of interest,
    which makes it subject to increases in interest rates;                                                                                                                                                             
|
| |  | the Companys leverage may place us at a
    competitive disadvantage as compared with the Companys
    less leveraged competitors, and the Companys leverage will
    make it more vulnerable in the event of a downturn in general
    economic conditions or in any of the Companys businesses;
    and                                                                                   
|
| |  | the Companys flexibility in planning for,
    or reacting to, changes in its business and the automotive
    industry may be limited.                                                                                                                                                                                                                                                          

The Company has significant debt obligations
maturing in 2005 and 2006. The Companys ability to service
or refinance, when required, the Products Preferred Stock and
the Companys debt, lease and other obligations will depend
principally upon the Companys future operating
performance, which will be affected by prevailing economic
conditions and financial, business and other factors, many of
which are beyond the Companys control.

In addition, factors more specific 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 identified as providing cost saving opportunities and
pursuing 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 affected
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 affect 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 filings with the Securities and Exchange
Commission.

Completion of Audit Committee
Inquiry

The Companys Audit Committee inquiry,
initiated in August 2003, into certain assertions made by two
former executives and related matters has been completed. The
Audit Committee, aided by its independent counsel, Davis Polk
& Wardwell, and by an outside accounting expert, reported
its findings and recommendations to the Companys full
Board of Directors. In general, the Audit Committees
inquiry extended into the following areas: (1) assertions
regarding the Companys accounting for revenue and tooling,
(2) a comprehensive review of related party transactions
and (3) certain corporate governance procedures. The
following summarizes the Committees principal findings and
recommendations:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Audit Committee has not become aware of any
    events that would necessitate a restatement of any previously
    issued financial statements.                                                                                                                                                                                                                                                                                         
|
| |  | While the assertions concerning related party
    transactions were limited to certain transactions involving
    Charles Becker and Elkin McCallum and entities controlled by
    them, the Audit Committee reviewed all material transactions
    entered into between the Company and Heartland Industrial
    Partners, L.P., Mr. McCallum and Mr. Becker and their
    respective affiliates. Both Mr. Becker and
    Mr. McCallum are

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| |  |                                                                                                                                                                 
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | directors and significant shareholders of the
    Company and are, directly or indirectly, limited partners in
    Heartland, the Companys largest shareholder.

The Audit Committee concluded that each of these
transactions had a legitimate business purpose, was negotiated
fairly, and was intended to advance the interests of the Company
and not to benefit the related parties at the Companys
expense. The Audit Committee further concluded that, by and
large, these transactions were appropriately presented to and
approved by the full Board of Directors of the Company and were
properly documented and adequately disclosed.

The Audit Committee concluded that certain
related party matters referred to below had not been formally
submitted for Board approval, and that others should have been
more appropriately documented. The Audit Committee recommended
that disinterested members of the Board review those matters and
take whatever procedural action may be deemed appropriate.
Specifically, the matters to be reviewed are (1) with
respect to Mr. Becker and his affiliates: leases of two
buildings adjacent to the Companys headquarters, which was
already the subject of a Board-approved lease from an affiliate
of Mr. Becker; an amendment reducing the rent at the
Companys headquarters to the rent at these two additional
buildings; and amendments of existing plant leases with an
affiliate of Mr. Becker to extend the term and reduce the
rent for the initial term; and (2) with respect to
Mr. McCallum and his affiliates, an amendment of the
previously Board-approved Joan Automotive merger agreement
clarifying ownership of certain equipment listed in a schedule
attached to that agreement; and the final terms of a supply
agreement contemplated at the time the Board approved a January
2003 purchase of certain fabrics equipment from an affiliate of
Mr. McCallum. Subsequent to the Boards initial
discussion with the Audit Committee on March 10, 2004, the
Board has held a meeting and ratified all of these actions.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Audit Committee also recommended that the
    Company review its public filings to determine whether
    disclosure of certain aspects of the related party transactions
    reviewed by the Audit Committee should be enhanced and
    additionally, it proposed a resolution for the Board that will
    require pre-approval of all future related party transactions,
    even where pre-approval of the Board is not legally required.
    The resolution also reiterates procedures for ensuring proper
    documentation and disclosure of such transactions. Subsequent to
    the Boards initial discussion with the Audit Committee on
    March 10, 2004, the Board has adopted and approved this
    resolution.

As a result of the Audit Committees
recommendations, the Company has included enhanced disclosure in
this Annual Report with respect to the following:
(1) disclosure of the Board-approved payment of $300,000 as
compensation to Mr. Becker in 2002 for his temporary
service as Vice Chairman of the Company during that year;
(2) an improved description of the 2003 fabrics and 2002
Dutton Yarns air-texturing operations transactions with Mr.
McCallum; and (3) the dollar volume of previously disclosed
ordinary course arrangements with Mr. McCallum,
specifically, from transition services, supply and rebate
arrangements.

The members of the Companys Audit Committee
are Robert C. Clark, the former Dean of the Harvard Law
School, Marshall A. Cohen, counsel at Cassels Brock and
Blackwell, a Canadian law firm, and former Senator Warren B.
Rudman. The accounting expert who advised the Audit Committee is
Alex Arcady, a retired partner from Ernst & Young LLP,
who spent the last ten years of his career in that firms
national office.



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,
floor and acoustic systems, automotive fabric, and interior
trim, as well as exterior trim and convertible roof systems. In
North America, the Company manufactures components for
approximately 90% of all light vehicle production platforms.
Sales are primarily made to North American based global OEMs, as
well as Asian and European based global OEMs. The automotive
supply industry in which the Company competes is cyclical and is
influenced by the level of North American and European vehicle
production. The Company has approximately 23,900

8



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employees and 102 plants and facilities
worldwide. The Company is a Delaware corporation formed on
September 21, 1988. The Company conducts all of its
operating activities through its wholly owned subsidiary
Collins & Aikman Products Co. (Products).
Predecessors of Products have been in operation since 1843.


Collins & Aikman is 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 customer business
units, which supplies products from three primary categories:
plastic components and cockpits, carpet and acoustics,
automotive fabrics and convertible roof systems.

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. OEMs also continue to increase their need for
    multiple products on any given assembly line, further driving
    the need for suppliers to be able to handle extreme complexity.
|
| |  | 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 field
    engineering relative to todays light vehicles.                           
|
| |  | Global Customer
    Requirements.Due to the opportunity
    for significant 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 the combination of its
portfolio of products. The Company intends to leverage its
product development, patented new materials, continuous enhanced
manufacturing capability, an unwavering dedication to lean
manufacturing, error proofing and APQP (Advanced Product Quality
Planning) launch readiness systems to meet customers
demands. 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 offering affords the Company a significant
    advantage as OEMs increasingly view the vehicle interior as a
    major point of differentiation 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 offer integrated product solutions to its
    customers.
|
| |  | Capitalize on position as full
    service provider 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 just in time sequenced delivery of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | complete interior systems. The Company is well
    positioned to capitalize on these opportunities. Furthermore,
    the Companys products are used in approximately 90% of all
    North American light vehicle platforms and are sold to all North
    American OEMs, transplants such as Toyota, Nissan 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 significantly 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 its 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 efficiency.The Company
    believes it has many opportunities to improve manufacturing
    efficiency and cost structure by rationalizing existing
    operations and incorporating manufacturing best
    practices, processes, procedures and technologies into its
    operations. For example, the Company is believed to be among the
    most efficient plastics suppliers in North America and Europe
    due to numerous proprietary manufacturing technologies, such as
    Invisitec and Envirosoft 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 to the Companys
    other operations, as well as the continued roll-out of these
    technologies throughout the Companys operations, will
    significantly improve plastics manufacturing cycle times, labor
    costs and scrap rates.
|
| |  | Pursue cost savings
    opportunities.The Company expects to
    continue to realize 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.
    While the Company believes that the majority of restructuring
    activities have already been undertaken, in an effort to achieve
    cost savings, the Company may also elect to implement
    restructuring activities in future periods above and beyond
    activities initiated during 2003.                                                                                                                                                                                                                                                                                                                   

SEGMENT AND GEOGRAPHICAL
INFORMATION

The Company changed the composition of its
reportable segments on January 1, 2003 and further
redefined the segments July 1, 2003 to reflect
organizational changes and restated prior period segment data to
be comparable. The Company operates through three segments: U.S.
and Mexico Plastics, International Plastics and Global Soft
Trim. 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 
Results of Operations and to
Footnote 20  Information About the
Companys Operations.

PRODUCTS

The Company markets the majority of its products
to customers through customer business units, which manage
products from two primary categories: plastic components and
cockpits, and soft trim which include: carpet and acoustics,
automotive fabrics and convertible roof systems.

Plastic Components and
Cockpits

The U.S. and Mexico Plastics and International
Plastics segments include interior trim components such as door
panels, instrument panels, consoles, package trays and cargo
management systems, exterior trim components such as bumper
fascias and cladding and fully assembled cockpit systems and
components

10



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thereof. This broad portfolio of plastic
components and cockpits products allows the Company to offer
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 the Company
    employs include Envirosoft castable thermoplastic
    materials, high performance PVC alloys, high-definition grain
    and texture formulation and vacuum forming. The Company also has
    the proprietary Invisitec 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 its plastic
    component offerings has enabled the Company to become a leader
    in offering 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 effectively the customer base by offering the IP along
    with complementary plastic accoutrements and additional products
    from its other business units. The Company sources 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
    significant opportunities to in-source more manufactured content
    in the future. Through the proprietary Intelliquence
    software, finished 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 flares.
    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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Soft Trim

The Soft Trim segment includes the Companys
global carpet and acoustics products, global automotive fabrics
products and global convertible roof systems. Some of the major
products of each group include:

Carpet and Acoustics

Carpet and acoustics products includes molded
non-woven and tufted carpet, alternative molded flooring,
accessory mats and acoustics systems consisting of absorbing
materials, damping materials, engine compartment noise vibration
and harshness systems and interior insulators. The Company
evolved from a North American carpet producer to become a market
leader in a broad range of automotive floor 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 floor
carpet to provide complete interior floor systems, it is useful
to describe four carpet and acoustics product categories:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Molded Floor
    Systems:Molded floor 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 fiber underlay system or a
    foam-in-place system. Products include Tuflor, the
    Companys proprietary thermoplastic flooring product, which
    is rugged, durable and washable. The products in molded floor
    systems are highly engineered, and their manufacture requires a
    high degree of precision and draws on the Companys
    robotics capabilities. The Company believes it is the number one
    producer of molded floor and acoustic systems in the North
    American market and manufactures molded floor systems for all of
    the North American and Japanese OEMs as well as a number of the
    European OEMs.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 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 floormats 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® floormats. Largely due to this product
    differentiation, the Company has become the largest fully
    integrated auto floormat 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 floor, 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 field engineering relative to todays light
    vehicles.

Automotive Fabrics

The Company is positioned as the market leader in
the North American automotive fabrics market. The principal
automotive products include body cloth (woven or knitted fabrics
for seating surfaces and other interior applications) and
headliner fabric. The Company is able to offer virtually every
major weave/knit technology currently available in the
marketplace including dobby velours, jacquard velours, flat
wovens, double-needlebar knits, circular knits and tricot knits.
This allows the Company to effectively serve changing customer
styling and cost directives.

Strategic acquisitions have allowed the Company
to increase its backward and forward integration levels by
adding yarn dyeing and fabric lamination operations. This
additional value-add manufacturing and improved control of the
supply chain have contributed to improved operational
efficiencies and manufacturing performance.

Convertible Roof
Systems

The Company is the only vertically integrated
full service supplier of convertible roof systems, which
designs, engineers and manufactures all aspects of a convertible
top including the framework, trim set, backlights, well slings,
tonneau covers and power actuating system. Recently, in order to
differentiate products in the marketplace, OEMs have been
increasing the number of convertible and open roof derivative
vehicles on both existing and new platforms. The Companys
management believes that this trend will continue to drive
demand for convertibles and other innovative open roof systems.
The Company is well positioned to secure additional business
based upon demonstrated new innovative roof system concepts.

Top-in-a-Box, a system pioneered by the
Company, 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 significantly reduces the
time and labor traditionally required to manufacture a
convertible model, enabling OEMs to more profitably produce and
sell convertibles. The Company has the industrys most
complete line of fabric coverings for convertible and sport
utility top covers for OEMs globally. The Company maintains
final assembly and trim operations near the OEMs plants,
and thereby offers customers complete just-in-time delivery and
sequencing capabilities.

CUSTOMERS

Customers include OEMs and Tier I total interior
integrators, both of which have been increasingly divesting
component manufacturing. OEMs have typically been direct
customers for the Companys plastic components and
cockpits, and soft trim products, while Tier I total interior
integrators have typically been direct customers for fabrics and
carpet and acoustics products.

12



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Through strategic acquisitions, the Company has
broadened its customer base globally, with European and South
American sales representing 27% of total sales for 2003 versus
19% in 2002. 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 and indirectly represented approximately 28%, 22% and
25% of 2003 sales, respectively. The following is a list of
primary customers:

|                  |  |                    |  |              |  |             
|----------------- |  | ------------------ |  | ------------ |  | ------------
| Alfa Romeo      |  |  General Motors   |  |  MAN        |  |  MG Rover  
| Audi            |  |  Honda            |  |  Mazda      |  |  Saab      
| BMW             |  |  Intier           |  |  Mitsubishi |  |  Scania    
| CAMMI           |  |  Isuzu            |  |  Nissan     |  |  Seat      
| DaimlerChrysler |  |  Jaguar           |  |  NUMMI      |  |  Subaru    
| Faurecia        |  |  Johnson Controls |  |  Opel       |  |  Toyota    
| Fiat            |  |  Land Rover       |  |  Porsche    |  |  Visteon   
| Ford            |  |  Lear Corporation |  |  PSA        |  |  Volkswagen
| Freightliner    |  |  Magna            |  |  Renault    |  |  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 and exterior 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 and
exterior components, the Company differentiates itself in the
marketplace by consistently providing high quality products,
outstanding customer service and program management and cost
effective automotive solutions to global customers.
Historically, the Company marketed individual components,
modules and complete systems to customers. The Company has
realigned marketing efforts to sell integrated product
bundles to customers in an effort 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.

Products are sold directly to customers under
sales contracts that are obtained primarily through competitive
bidding. These sales are originated almost entirely by sales
staff. This marketing effort is augmented by design and
manufacturing engineers that work closely with automotive
manufacturers from the preliminary design to the manufacture and
supply of automotive 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. The
primary focus of the Design Engineering and Technology,
therefore, is to work closely with customer engineering
personnel to develop new products, processes, innovations, etc.
that are central to winning new business from customers.

Through sales offices in North America, South
America, Europe and Asia-Pacific, the Companys marketing
personnel maintain regular contact with their 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.                                

13



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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,
favorably positions 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
specific 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 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 effort.
Especially noteworthy are the Companys proprietary
Invisitec invisible passenger air bag door system and
Envirosoft castable TPU (Thermalplastic Polyurethane) and TPO
(Thermalplastic Olefin) materials.

In order to effectively 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;
Troy, Michigan and 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 Troy 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
efficient layouts and the ability to reduce fixed 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 as well as stamping,
welding, machining and painting of metals and cutting and sewing
of fabric components. Management believes the sophistication of
the Companys carpet tufting and dyeing processes, the
foam-in-place process for molded floors and its small-part
plastic moldings and assemblies capabilities create a
competitive advantage.

The Company also possesses a scaleable, low-cost
package automotive yarn dyeing capability that provides an
important source of supply for the manufacture of our fabrics
products.

The Company possesses 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. Specific product
and processes include the proprietary Intelliquence
software sequencing system which should enable product delivery
on a just-in-time basis to global OEM customers.

Through its extensive in-house tooling resources,
the Company has the ability to in-source a significant amount of
its tooling requirements for manufacturing carpet, acoustic, and
injection molded components.

14



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TECHNOLOGY AND INTELLECTUAL
PROPERTY

Significant 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, Cavelflex (stretch woven) fabrics and the
AcT family of acoustically tunable products.

Patents and patent applications exist in five
primary areas: automotive floor mats, automotive fabric
products, acoustics, interiors and convertible systems. With
respect to floormats, the Company holds several U.S. and foreign
patents relating to the Akro Edge® floormats. Akro
Edge® floormats 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 floor panels. In
the acoustics area, in addition to the proprietary Fused
Fiber technology, the Company is actively seeking
protection of various aspects of its AcT fiber 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.
The Company owns the patents relating to Intellimold
injection molding control process for use in its business. The
Intellimold patents are related to methods and/or
apparatus for injection molding. The Company also holds
technology relating to certain skin materials and compounding
solutions that provide the capability to design cost-effective
materials with outstanding performance and aesthetic qualities.
Examples of these materials include Envirosoft castable
thermoplastic materials, high performance PVC alloys,
high-definition grain and texture formulation and vacuum
thermoplastic applications. Additionally, a new patented
process, TACII has been developed in concert with the
castable Envirosoft materials. The Company also holds
technology relating to the Invisitec invisible passenger
air bag system, which provides improved appearance and
craftsmanship at reduced cost. Invisitec 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, the Company
holds approximately 390 U.S. and approximately 1,500 foreign
active patents and has approximately 300 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
Licensed-Back 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 defined field 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 affiliates 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 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 77 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 field.

15



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##### 



As described below under the heading
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Other
Information  Off-Balance Sheet Arrangements,
the Company leases certain equipment from Textron. When those
leases terminate, if Textron and its affiliates 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 effect on the Company. The Company is sensitive to price
movements in its raw materials supply base and has not hedged
against price fluctuations 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
significant portion of increased cost may be offset through
volume purchase savings, value engineering/value analysis in
conjunction with our major customers and reductions in the cost
of off-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.
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 flexibility, customer service and
overall management. Some competitors may have greater financial
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 forms joint ventures in order to
facilitate the exchange of technical information, gain entry
into new markets and expand product offerings to its customer
base. The Companys investment in unconsolidated joint
ventures totaled $2.5 million at December 31, 2003. In
January 2003, the Company acquired from Textron the remaining
50% interest in Textron Automotive Holdings (Italy) S.r.L., a
joint venture that was formed as part of the TAC-Trim
acquisition. Refer to Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations for additional discussion regarding this
acquisition of the remaining 50% interest in the Italian joint
venture.

LABOR MATTERS AND
EMPLOYEES

As of December 31, 2003, the Companys
continuing operations employed approximately 23,900 persons on a
full-time or full-time equivalent basis. Approximately 62% of
such employees were represented by labor unions in the United
States, Canada and other countries. Each facility with
represented employees has its own collective bargaining unit and
management believes that its relations with employees
represented by labor unions and other employees are generally
good. From time to time in the ordinary course of our business,
grievances are filed against the Company by employees and unions.

ENVIRONMENTAL
MATTERS

A discussion of environmental matters is included
in Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations and in
Note 21 Commitments and Contingencies of this
report.



Item 2.     Properties


The Company has 102 plants and facilities in
North America, South America, Europe and Asia. Approximately 45%
of the over 12 million total square footage of these
facilities is owned, and the remainder is

16



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##### 



leased. Many facilities are strategically located
to provide product delivery to our customers on a just-in-time
basis.


Facilities by Geographic Region

|                                                          |  |         |    |  |         |  |   |        |  |  |      |  |  |       |   |  |  |  |     | 
|--------------------------------------------------------- |  | ------- | -- |  | ------- |  | - | ------ |  |  | ---- |  |  | ----- | - |  |  |  | --- | 
|                                                          |  | North   |    |  | South   |  |   |        |  |  |      | 
|Type of Facility                                          |  | America |    |  | America |  |   | Europe |  |  | Asia |  |  | Total |  
|                                                          |  |         |    |  |         |  |   |        |  |  |      |  |  |       |  
|Manufacturing                                             |  |         | 51 |  |         |  | 3 |        |  |  | 27   |  |  |       |  |  |  |  | 81  | 
|Design, Research & Development, and
    Technical Centers |  |         | 12 |  |         |  |  |        |  |  | 6    |  |  |       |  |  |  |  | 18  | 
|Sales Branches, Offices, Other                            |  |         | 12 |  |         |  |  |        |  |  | 3    |  |  |       | 1 |  |  |  | 16  | 
|                                                          |  |         |    |  |         |  |   |        |  |  |      |  |  |       |  
|Total(1)                                                  |  |         | 75 |  |         |  | 3 |        |  |  | 36   |  |  |       | 1 |  |  |  | 115 | 



---



|    |                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total facilities shown per the table exceeds the
    102 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


A discussion of environmental matters and
litigation is included in Note 21 Commitments and
Contingencies of this report.



Item 4.     Submission
of Matters to a Vote of Security Holders


None during the fourth quarter of 2003.

Supplemental Disclosure.
Executive Officers of the Registrant

Information regarding the Companys
executive officers is included in Directors and Executive
Officers of the Registrant  Executive Officers of the
Company.

PART II



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 1, 2004, there were
approximately 120 holders of record. The following table lists
the high and low closing prices for the Common Stock for the
full quarterly periods during the two most recent years.

|               |  |      |      |  |      |  |      |      |  |  |        |  |  |  |        | 
|-------------- |  | ---- | ---- |  | ---- |  | ---- | ---- |  |  | ------ |  |  |  | ------ | 
|               |  |      |      | 
|               |  | 2003 |      |  | 2002 | 
|               |  |      |      |  |      | 
|               |  | High |      |  | Low  |  |      | High |  |  | Low    | 
|               |  |      |      |  |      |  |      |      |  |  |        | 
|First Quarter  |  |      | 4.83 |  |      |  | 3.28 |      |  |  | 25.500 |  |  |  | 16.750 | 
|Second Quarter |  |      | 4.18 |  |      |  | 2.82 |      |  |  | 28.375 |  |  |  | 9.000  | 
|Third Quarter  |  |      | 3.41 |  |      |  | 2.09 |      |  |  | 9.000  |  |  |  | 2.810  | 
|Fourth Quarter |  |      | 4.33 |  |      |  | 2.43 |      |  |  | 4.450  |  |  |  | 2.450  | 

As of December 31, 2003, Heartland
Industrial Partners, L.P. (Heartland) owned
approximately 37% of the outstanding shares; Blackstone Capital
Partners LP owned approximately 5%; Joan Fabrics Corp.,
Mr. Elkin McCallum and affiliates owned approximately 6%;
Mr. Charles E. Becker owned approximately 9% and
Textron, Inc. owned approximately 6% (Which it has subsequently
sold). See Item 7, Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Effects of Certain Transaction with
Related Parties for further information about these
parties.

The Company has paid no dividends or made similar
distributions with respect to its common stock during 2003 or
2002. Any payment of future dividends and the amounts thereof
will be dependent upon the Companys earnings, financial
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,

17



---



##### 



Managements Discussion and Analysis
of Financial Condition and Results of Operations 
Liquidity and Capital Resources and Note 9,
Long-Term Debt and Capital Lease Obligations of this
report.




|        |                            
|------- | ---------------------------
|Item 6. | Selected Financial
    Data

|                                        |                                                                                    |                                      |   |         |              |  |   |              |   |  |              |         |   |              |   |         |   |  |   |         |  
|--------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------ | - | ------- | ------------ |  | - | ------------ | - |  | ------------ | ------- | - | ------------ | - | ------- | - |  | - | ------- | -
|                                        |                                                                                    |                                     
|                                        |                                                                                    | Year Ended(1)                        |  
|                                        |                                                                                    |                                      |  
|                                        |                                                                                    | December 31,                         |   |         | December 31, |  |   | December 31, |   |  | December 31, |         |   | December 25, |  
|                                        |                                                                                    | 2003                                 |   |         | 2002         |  |   | 2001         |   |  | 2000         |         |   | 1999         |  
|                                        |                                                                                    |                                      |   |         |              |  |   |              |   |  |              |         |   |              |  
|                                        |                                                                                    |                                     
|                                        |                                                                                    | (In millions, except per share data) |  
|Statement of Operations Data:           |                                                                                    |                                      |   |         |              |  |   |              |   |  |              |         |   |              |   |         |   |  |   |        
|                                        | Net sales                                                                          |                                      | $ | 3,983.7 |              |  | $ | 3,885.8      |   |  | $            | 1,823.3 |   |              | $ | 1,901.8 |   |  | $ | 1,898.6 |  
|                                        | Gross profit                                                                       |                                      |   | 444.2   |              |  |   | 518.1        |   |  |              | 218.8   |   |              |   | 266.6   |   |  |   | 284.7   |  
|                                        | Selling, general and administrative expenses
    (excluding goodwill amortization) |                                      |   | 273.2   |              |  |   | 293.5        |   |  |              | 157.3   |   |              |   | 151.4   |   |  |   | 145.8   |  
|                                        | Restructuring charge and impairment of long-lived
    assets(2)                    |                                      |   | 69.0    |              |  |   | 56.9         |   |  |              | 18.8    |   |              |   |        |   |  |   | 33.4    |  
|                                        | Goodwill amortization                                                              |                                      |   |        |              |  |   |             |   |  |              | 7.1     |   |              |   | 7.1     |   |  |   | 7.0     |  
|                                        | Operating income                                                                   |                                      |   | 102.0   |              |  |   | 167.7        |   |  |              | 35.6    |   |              |   | 108.1   |   |  |   | 98.5    |  
|                                        | Interest expense, net                                                              |                                      |   | 151.3   |              |  |   | 148.9        |   |  |              | 84.3    |   |              |   | 96.6    |   |  |   | 92.1    |  
|                                        | Interest expense from subsidiary preferred stock
    requirements                  |                                      |   | 37.3    |              |  |   |             |   |  |              |        |   |              |   |        |   |  |   |        |  
|                                        | Subsidiary preferred stock requirements                                            |                                      |   |        |              |  |   | 38.4         |   |  |              | 2.4     |   |              |   |        |   |  |   |        |  
|                                        | Loss on sale of receivables                                                        |                                      |   | 7.3     |              |  |   | 4.2          |   |  |              | 10.8    |   |              |   | 9.2     |   |  |   | 5.4     |  
|                                        | Income (loss) from continuing operations before
    income taxes                   |                                      |   | (61.0   | )            |  |   | (33.8        | ) |  |              | (76.3   | ) |              |   | 0.8     |   |  |   | (1.2    | )
|                                        | Income tax expense (benefit)                                                       |                                      |   | (1.9    | )            |  |   | 17.5         |   |  |              | (21.3   | ) |              |   | 2.2     |   |  |   | 0.2     |  
|                                        | Loss from continuing operations                                                    |                                      |   | (59.1   | )            |  |   | (51.3        | ) |  |              | (55.0   | ) |              |   | (1.4    | ) |  |   | (1.4    | )
|                                        | Income from discontinued operations, including
    disposals, net of income taxes  |                                      |   | 1.6     |              |  |   | 9.5          |   |  |              | 8.8     |   |              |   | 6.6     |   |  |   |        |  
|                                        | Income (loss) before cumulative effect of a
    change in accounting principle     |                                      |   | (57.5   | )            |  |   | (41.8        | ) |  |              | (46.2   | ) |              |   | 5.2     |   |  |   | (1.4    | )
|                                        | Net income (loss)(3)                                                               |                                      |   | (57.5   | )            |  |   | (53.5        | ) |  |              | (46.2   | ) |              |   | 4.5     |   |  |   | (10.2   | )
|Per Share Data:                         |                                                                                    |                                      |   |         |              |  |   |              |   |  |              |         |   |              |   |         |   |  |   |        
|                                        | Loss from continuing operations per basic and
    diluted share                    |                                      |   | (0.71   | )            |  |   | (1.15        | ) |  |              | (1.42   | ) |              |   | (0.06   | ) |  |   | (0.05   | )
|                                        | Dividends per share                                                                |                                      |   |        |              |  |   |             |   |  |              |        |   |              |   |        |   |  |   | 0.32    |  
|Balance Sheet Data (at period
    end): |                                                                                    |                                      |   |         |              |  |   |              |   |  |              |         |   |              |   |         |   |  |   |        
|                                        | Total assets                                                                       |                                      | $ | 3,191.2 |              |  | $ | 3,157.1      |   |  | $            | 2,987.9 |   |              | $ | 1,280.3 |   |  | $ | 1,348.9 |  
|                                        | Long-term debt, including current portion                                          |                                      |   | 1,269.2 |              |  |   | 1,278.7      |   |  |              | 1,302.5 |   |              |   | 884.0   |   |  |   | 912.5   |  
|                                        | Mandatorily redeemable preferred stock of
    subsidiary                           |                                      |   | 161.2   |              |  |   | 123.9        |   |  |              | 149.3   |   |              |   |        |   |  |   |        |  
|                                        | Common stockholders equity (deficit)                                              |                                      |   | 440.3   |              |  |   | 397.5        |   |  |              | 374.7   |   |              |   | (154.9  | ) |  |   | (151.1  | )
|Other Data:                             |                                                                                    |                                      |   |         |              |  |   |              |   |  |              |         |   |              |   |         |   |  |   |        
|                                        | Capital expenditures                                                               |                                      | $ | 175.1   |              |  | $ | 147.9        |   |  | $            | 54.5    |   |              | $ | 69.0    |   |  | $ | 86.4    |  
|                                        | Depreciation and amortization                                                      |                                      |   | 140.2   |              |  |   | 117.0        |   |  |              | 81.8    |   |              |   | 74.8    |   |  |   | 71.5    |  



---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The years 2003, 2002 and 2001 were calendar
    years; fiscal year 2000 had 53 weeks; fiscal year 1999 had
    52 weeks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(2) | In 2003, the Company recorded $69.0 million
    in charges consisting of restructuring of $32.2 million in
    severance costs; $9.2 million in costs associated with
    global rationalization and other exit related costs and
    $28.4 million in asset impairments. Included in the 2003
    charges are adjustments related to previously established
    accruals which did not require cash outlays of
    $0.8 million. In 2002, the Company recorded a
    $56.9 million restructuring charge consisting of
    $18.0 million in asset impairments and $33.2 million
    primarily related to severance accruals and $5.7 million
    primarily related to other contractual obligations. In 2001, the
    Company recorded a restructuring charge consisting of
    $7.6 million in asset impairments and $11.2 million
    primarily related to severance accruals. In 1999, the Company
    recorded a restructuring charge consisting of $13.4 million
    in asset impairments and $20.0 million primarily related to
    severance accruals.

18



---



##### 





|    |                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | In 2002, the Company recorded an
    $11.7 million charge for the cumulative effect of a change
    in accounting principle related to an impairment loss. In 1999,
    the Company recorded an $8.8 million charge for the
    cumulative effect of a change in accounting principle related to
    start-up costs.



|        |                                                                                              
|------- | ---------------------------------------------------------------------------------------------
|Item 7. | Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations

GENERAL

The following discussion and analysis of our
financial condition and results of operations includes
statements concerning our expectations for our industry and our
performance. These statements are forward-looking statements and
are subject to numerous risks and uncertainties, including those
highlighted elsewhere under Cautionary Statements
Concerning Forward-Looking Information and Risk Factors.
Our actual results may differ materially from those contained or
implied by the following discussion.

Introduction

The Company is a global leader in the design,
engineering and manufacturing of automotive interior components,
including instrument panels, fully assembled cockpit modules,
floor and acoustic systems, automotive fabric and interior trim,
as well as exterior trim and convertible roof systems. In
reviewing the Companys results for the periods discussed,
consideration should be given to the following critical events:
the impact of the material acquisitions that we have made, the
numerous restructuring and acquisition integration activities
that we have undertaken, the material impact of general economic
conditions in North America and within our industry
specifically, the increasingly difficult customer and
competitive environment, the capital intensive nature of our
business and our high degree of leverage and liquidity and debt
maturity position.

Key Factors Impacting Our Reported Results.Critical factors affecting our ability
to succeed include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Automotive Sales and OEM Production Levels.In North America, the Company
    manufactures components for approximately 90% of all light
    vehicle production platforms. Sales are primarily made to North
    American based global OEMs, as well as Asian and European based
    global OEMs. The automotive supply industry in which the Company
    competes is cyclical and is influenced by the level of North
    American and Western European vehicle production. The
    Companys sales results are influenced heavily by the
    volume of OEM production of light vehicles (builds)
    in the markets it serves. U.S. retail automotive sales were down
    1.1% in 2003 versus 2002 and down 1.8% in 2002 versus 2001.
    Industry wide North American Free Trade Agreement
    (NAFTA) builds were down 3.0% in 2003 versus 2002
    and up 5.7% in 2002 versus 2001. Within NAFTA, the builds of the
    Big 3 OEMs were down 5.7% in 2003 versus 2002, and up 5.9%
    in 2002 versus 2001. In Western Europe, builds were down nearly
    0.5% in 2003 versus 2002 and down 1.4% in 2002 versus 2001. In
    South America, builds were down 0.5% in 2003 versus 2002 and
    down 8.0% in 2002 versus 2001.                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Our relationships with our customers.Collins & Aikman does
    business with all of the worlds largest vehicle
    manufacturers including Ford, General Motors, DaimlerChrysler,
    Toyota, Honda, Nissan, Volkswagen, Renault and Porsche. These
    relationships have typically developed over a period of many
    years, and have, in many cases, been enhanced by the
    Companys recent acquisitions, which has provided the
    Company with a resulting global footprint and capacity to supply
    a full range of interior products. In each case, there is a
    complex mutual dependency and cooperation between the Company
    and its customers necessary to ensure that vehicle programs are
    successful in key areas of quality, timing and cost. At the same
    time, customer expectations are evolving, as vehicle
    manufacturers continue to outsource more design and integration
    responsibilities to the Company and other Tier 1 suppliers.
    As a result, customer satisfaction, especially at critical
    inflexion points (such as new vehicle launches and vehicle
    refreshes), has become more complicated and places significant
    demands on the Companys resources. Also, there is an
    inherent tension between the Company and its customers resulting
    from intense competition and pricing pressures within the
    industry. For example, OEM customers in the automotive industry
    attempted to impose price decreases and givebacks throughout
    2003. Such attempted price decreases were generally in the 2% to
    4% range. Several reductions have

19



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##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | been agreed to, and others are currently being
    negotiated with OEMs and pressures may increase if overall
    economic and industry conditions do not improve. Finally, on
    some vehicle programs involving component integration at the
    Tier 1-level, the Company is either a supplier to, or a
    customer of, some of its largest Tier 1 competitors, such
    as Delphi, Visteon and Lear. These types of arrangements are
    becoming more common within the industry, and add a new level of
    complexity to customer relationships, including the relationship
    with the vehicle manufacturer as the ultimate customer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Our ability to secure profitable new business.The Company actively pursues new
    business opportunities with its traditional customer base as
    well as with potential new customers. The Company seeks to
    distinguish itself on a variety of factors, including its global
    footprint, its capacity to supply a full range of interior
    products and its full-service capabilities (such as design,
    engineering, manufacturing and quality services). There is
    intense competition and pricing pressure on all of these
    opportunities. Price is typically achieved through direct
    negotiations with the customer, but in certain instances
    customers have utilized auctions or relied on benchmarking data
    that have included reputed world class suppliers in emerging
    markets. At the same time, the Company seeks to manage its cost
    structure through a variety of strategies, such as vertical
    integration initiatives that provide greater cost control
    opportunities. For example, since the Company is a major
    purchaser of raw materials like resins, it can arrange favorable
    supply contracts and benefit broadly from material science
    developments and product simplification. Additionally, the
    Company believes that it has the worlds largest fleet of
    injection molding equipment for automotive products, which
    provides a unique ability to benefit from process improvements
    and best practices with respect to its plastics products on a
    global basis.
|
| |  | Our ability to successfully realize the
    benefits of our restructuring and integration initiatives.The Company has undertaken a series of
    restructuring and integration initiatives to rationalize first
    its global manufacturing footprint and more recently its
    salaried workforce, including home office headcount. These
    activities are expected to have the following primary benefits:
    First, the Company has closed about 20 subscale plants and
    other facilities such as warehouses and consolidated activity
    into 80 world-class operations, which will result in a
    significant densification of production and resulting gains in
    fixed cost absorption and operating efficiencies. Second, the
    Company is beginning to win more bundled
    awards  with a full range of slush molded, injection
    molded and carpet, acoustics and fabric components on new
    vehicle programs. And third, the Companys salaried
    workforce will shrink by more than 20% from the legacy levels,
    while effectiveness and customer service levels will improve due
    to consolidation, standardization and level-loading of support
    infrastructure.                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The impact of raw materials and energy costs.The Company is a significant consumer
    of resin and nylon feedstocks, which presents both a challenge
    and an opportunity for the Company. The challenge results from
    the Companys sensitivity to price movements in these raw
    materials (such as those related to recent short run spikes in
    the oil market), while the opportunity arises from the
    Companys ability to leverage its buying power as, in
    managements opinion, the largest single automotive grade
    resin buyer in the world. The Company has largely been able to
    avoid these pricing pressures due to its ability to negotiate
    with a variety of global suppliers, and to shift volume from one
    supplier to another. However, it is possible that the Company
    may begin to see increased cost pressure if the spikes in the
    oil market continue. The Companys customers have
    historically been reluctant to provide pricing relief based on
    this type of raw material cost increases, as recently
    demonstrated in the handling of the recent near tripling of
    global steel prices.                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Our liquidity and capital resources.The Company is highly leveraged, due
    primarily to financing associated with recent acquisitions.
    Another contributing factor has been that most new business
    awards in the automotive industry require that suppliers advance
    certain costs relating to tooling and engineering and design
    services, which in some cases are incurred years before vehicle
    launch and are reimbursed over many years following vehicle
    launch as part of the piece price. In February 2004, the Company
    obtained amendments to its credit facilities that significantly
    loosened the principal financial covenants. The Company also
    obtained an additional revolving credit facility of
    $100 million and a new term loan in the amount of
    $185 million, the proceeds of which were used to pre-fund
    debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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| |  |                                                                                                                                                                                               
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amortization requirements. As a result, the
    Company has greatly improved its financial flexibility and
    liquidity and has no significant amortization requirements until
    June 2005.

Impact of Acquisitions.Our results for the periods discussed
have been impacted by several key acquisitions, which, together
with related financing transactions, have substantially
increased revenues and cash flow and materially altered the
Companys capital and operating structure.

For example, in 2001, the Company completed three
key acquisitions: (1) the acquisition of Becker Group
L.L.C., a leading supplier of plastic components to the
automotive industry, (2) the acquisition of Joan Automotive
Fabrics, a leading supplier of body cloth to the automotive
industry, and Joans affiliated yarn dyeing operation,
Western Avenue Dyers, L.P., and (3) the acquisition of
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. These acquisitions, together
with the Companys 2002 acquisition of Southwest Laminates,
a fabric lamination business, contributed approximately
$2,090 million of additional net sales in 2002 and drove
the 113% increase in net sales from the prior year. In addition,
these acquisitions were financed by varying combinations of the
Companys common stock and preferred stock, warrants to
purchase the Companys common stock, cash on hand and
borrowings under a revolving credit facility, public issuances
of debt, and sales of the acquired companies accounts
receivable under the receivables facility.

The Company also completed the following
acquisitions in 2002 and 2003: (1) the acquisition of
Dutton Yarns yarn texturizing business, (2) the
acquisition of Delphi Corp.s plastic injection molding
plant and related equipment in Logroño, Spain, and
(3) the acquisition from Textron of the remaining 50%
interest of an Italian automotive joint venture. These
transactions have likewise impacted the Companys financial
results and capital structure, although not to the same degree
as the transactions described above.

Impact of Integration Activities and
Restructuring Initiatives.We have
devoted considerable efforts throughout 2001, 2002 and 2003 to
properly integrate the acquired companies. We have also
implemented a series of restructuring initiatives to ensure that
the resulting combined operations have the proper structure and
necessary resources to perform on a profitable basis. These
initiatives were directed initially at establishing a proper,
global manufacturing footprint and included combining and
rationalizing the Companys legacy and acquired operations
in North America, Europe and South America. More recent
restructuring initiatives have focused on developing an
appropriate overhead structure, including strengthening and
streamlining the senior management team on a worldwide basis. As
a consequence of these restructuring initiatives, the Company
has incurred significant restructuring and impairment charges in
each of 2001, 2002 and 2003 for severance costs, plant and
office closures, equipment and lease impairments, contractual
obligations and other restructuring activities, which have
impacted cash flow, operating income and net income. For a more
detailed description of these charges, see footnote 15,
Results of Operations.

Key Indicators of Performance.In evaluating our business, our
management uses operating income as an important indicator of
performance. In addition management also considers EBITDA to be
a useful proxy for measuring the cash generated by our business,
and it is commonly used in the industry to analyze operating
performance, liquidity and entity valuation. We define EBITDA as
operating income plus depreciation and amortization. Management
believes EBITDA to be a good measure of operating performance
because cash generation is necessary for the Company to achieve
many of the critical success factors outlined above, including
investment in cost reduction activities, reducing leverage and
improving liquidity. Additionally, management reviews return on
invested capital, working capital changes and capital
expenditures as critical financial performance metrics.
Management also uses certain non-financial metrics of
performance, including equipment utilization and efficiency;
service, production and first time quality performance; set up
and tool changeover time; employee turnover and absenteeism; and
safety performance.

21



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SEGMENT
INFORMATION

The following table summarizes financial
information for our operating segments:

|                        |  |                              |         |  |               |   |         |                  |  |   |         |  |  |       |       |   |  |   |         | 
|----------------------- |  | ---------------------------- | ------- |  | ------------- | - | ------- | ---------------- |  | - | ------- |  |  | ----- | ----- | - |  | - | ------- | 
|                        |  |                             
|                        |  | Year Ended December 31, 2003 |        
|                        |  |                              |        
|                        |  | U.S. and Mexico              |         |  | International |   |         |                 
|                        |  | Plastics                     |         |  | Plastics      |   |         | Global Soft Trim |  |   | Other   |  |  | Total |      
|                        |  |                              |         |  |               |   |         |                  |  |   |         |  |  |       |      
|Net sales               |  | $                            | 1,363.4 |  |               | $ | 1,258.0 |                  |  | $ | 1,362.3 |  |  | $     |      |   |  | $ | 3,983.7 | 
|Gross profit            |  |                              | 137.7   |  |               |   | 58.8    |                  |  |   | 238.9   |  |  |       | 8.8   |   |  |   | 444.2   | 
|Operating income (loss) |  |                              | 73.6    |  |               |   | (22.5   | )                |  |   | 140.5   |  |  |       | (89.6 | ) |  |   | 102.0   | 

|                        |  |                              |         |  |               |   |       |                  |  |   |         |  |  |       |       |   |  |   |         | 
|----------------------- |  | ---------------------------- | ------- |  | ------------- | - | ----- | ---------------- |  | - | ------- |  |  | ----- | ----- | - |  | - | ------- | 
|                        |  |                             
|                        |  | Year Ended December 31, 2002 |        
|                        |  |                              |        
|                        |  | U.S. and Mexico              |         |  | International |   |       |                 
|                        |  | Plastics                     |         |  | Plastics      |   |       | Global Soft Trim |  |   | Other   |  |  | Total |      
|                        |  |                              |         |  |               |   |       |                  |  |   |         |  |  |       |      
|Net sales               |  | $                            | 1,512.2 |  |               | $ | 899.0 |                  |  | $ | 1,474.6 |  |  | $     |      |   |  | $ | 3,885.8 | 
|Gross profit            |  |                              | 179.9   |  |               |   | 48.2  |                  |  |   | 274.6   |  |  |       | 15.4  |   |  |   | 518.1   | 
|Operating income (loss) |  |                              | 113.1   |  |               |   | (30.1 | )                |  |   | 161.6   |  |  |       | (76.9 | ) |  |   | 167.7   | 

|                        |  |                              |       |  |               |   |       |                  |  |   |         |  |  |       |       |   |  |   |         | 
|----------------------- |  | ---------------------------- | ----- |  | ------------- | - | ----- | ---------------- |  | - | ------- |  |  | ----- | ----- | - |  | - | ------- | 
|                        |  |                             
|                        |  | Year Ended December 31, 2001 |      
|                        |  |                              |      
|                        |  | U.S. and Mexico              |       |  | International |   |       |                 
|                        |  | Plastics                     |       |  | Plastics      |   |       | Global Soft Trim |  |   | Other   |  |  | Total |      
|                        |  |                              |       |  |               |   |       |                  |  |   |         |  |  |       |      
|Net sales               |  | $                            | 208.0 |  |               | $ | 263.1 |                  |  | $ | 1,352.2 |  |  | $     |      |   |  | $ | 1,823.3 | 
|Gross profit            |  |                              | 15.2  |  |               |   | 15.9  |                  |  |   | 187.6   |  |  |       | 0.1   |   |  |   | 218.8   | 
|Operating income (loss) |  |                              | 1.6   |  |               |   | (2.4  | )                |  |   | 48.7    |  |  |       | (12.3 | ) |  |   | 35.6    | 

Capitalized terms that are used in this
discussion and not defined herein have the meanings assigned to
such terms in the Notes to Consolidated Financial Statements.

Investors can obtain free access to the
Companys filings with the Securities and Exchange
Commission by accessing the Companys website at
http://www.collinsaikman.com/investor/docs.html.

RESULTS OF
OPERATIONS

2003
Compared to 2002

Net
Sales:Net sales for 2003 increased
2.5% or $97.9 million to $3,983.7 million from 2002.
The increase in net sales was primarily driven by approximately
$225 million from acquisitions, primarily from the
remainder of an Italian joint venture from Textron Inc. and a
manufacturing operation in Logroño, Spain, and
$163 million as a result of strengthening European and
Canadian currencies offset by weakening South American
currencies. Without the benefit of the above acquisitions, net
sales decreased 3.3%, consistent with industry trends. Excluding
an $84 million reduction due to the termination of an
agreement with a Tier 1 customer, net new business volume
increased $17 million. Offsetting the increase was a
$23 million loss from the May 2003 tornado that shutdown
production at a customer assembly plant, a $20 million loss
due to plant closures and other factors, including less
continuing business of existing programs of $125 million
and commercial items (includes pricing and contractual
arrangements) of $46 million.

Net sales for the U.S. and Mexico Plastics
segment decreased $148.8 million to $1,363.4 million
from 2002. The decline was primarily due to a $84 million
reduction due to the termination of an agreement with a
Tier 1 customer, a $23 million loss from the May 2003
tornado that shutdown production at a customer assembly plant
and other factors, including reduced production volume of
approximately $14 million and commercial items (includes
pricing and contractual arrangements) of $21 million.
Contributing to the reduced production volume was an extended
period of re-tooling for a new program launch at a customer
assembly plant.

Net sales for the International Plastics segment
increased $359.0 million to $1,258.0 million from
2002. The increase in net sales was primarily driven by
approximately $214 million from acquisitions in Italy and
Spain and $130 million as a result of strengthening
European and Canadian currencies offset by weakening South
American currencies. The increase was also due to net new
business of $110 million, offset by a

22



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decrease in continuing business of existing
programs of $86 million and commercial items (includes
pricing and contractual arrangements) of $6 million.
Contributing to the reduced continuing business of existing
programs was an extended period of re-tooling for new program
launches at customer assembly plants in Canada, customer
directed content changes in Europe and less content placed in
vehicles in South America due to their poor economic situation.


Net sales for the Global Soft Trim segment
decreased $112.3 million to $1,362.3 million from
2002. Included in 2003 net sales was approximately
$10 million from small acquisitions and $34 million in
exchange gains from strengthening Canadian and European
currencies. The decrease primarily resulted from the reduced
impacts of business volume of $78 million, $20 million
due to plant closures and other factors, including a decrease in
continuing business of existing programs of $39 million and
commercial items of $18 million. Contributing to the
reduced continuing business of existing programs was the overall
decrease in automotive builds and lower cost products going into
vehicles in comparison to the prior year.

Gross
Profit:Gross profit for 2003 was
$444.2 million, down $73.9 million from 2002. Gross
margin for 2003 was 11.2% compared to 13.3% in 2002. Overall
margins were impacted by a third and fourth quarter improvement
at the 12 problem plants identified in the first half of 2003.
The remainder of the impact is discussed as follows. The U.S.
and Mexico Plastics segment had a decline in gross profit which
was primarily attributed to an increase in the mix of the
cockpit modules that carry a lower overall margin due to high
purchased component content and commercial items of
$21 million. Offsetting these decreases was
$34 million from improved material and manufacturing
efficiencies. The Global Soft Trim segment also contributed to
the decline in gross profit primarily due to the mix of
components, as well as commercial items of $28 million. The
International Plastics segments gross profit increased due
to a $44 million improvement in material and manufacturing
efficiencies offset by a decrease from volume and mix and
$8 million in commercial items.

Selling, General and
Administrative Expenses:Selling,
general and administrative expenses for 2003 decreased
$20.3 million to $273.2 million compared to
$293.5 million in 2002. As a percentage of sales, selling,
general and administrative expenses decreased from 7.6% for 2002
to 6.9% in 2003. Contributing to the cost decrease were savings
realized in connection with the salaried workforce restructuring
and the previously announced European restructuring programs and
rationalization of selling, general and administrative
functions. Offsetting these decreases were higher net
engineering and design related costs for significant new program
awards of $66 million, a $19 million increase from the
prior year.

Restructuring and Impairment
of Long-Lived Assets Charges:During
2003, the Company undertook three restructuring programs
resulting in a $40.6 million charge. The goal of the first
restructuring program, which resulted in a $4.9 million
charge in the second quarter, was to rationalize operations on a
worldwide basis with the primary focus on domestic operations.
The charge included approximately $4.2 million of severance
cost and $0.7 million of costs related to the establishment
of reserves for lease commitments and other exit costs. The goal
of the second restructuring program, which resulted in a
$21.9 million charge in the third quarter and a
$5.3 million charge in the fourth quarter, was to take
actions aimed principally at rightsizing its support operations.
The restructuring charge included approximately
$20.4 million of severance costs and $6.8 million of
costs related to the establishment of reserves for lease
commitments and other exit costs. Included in the third quarter
restructuring charge was $5.3 million related to the
separation agreement with Jerry L. Mosingo, the former
President and CEO. The goal of the third restructuring program,
which resulted in a $9.3 million charge in the fourth
quarter, was to rightsize the Companys overhead structure,
reduce salaried headcount and strengthen and streamline the
senior management team on a worldwide basis with the primary
focus on domestic operations. The restructuring charge included
approximately $7.6 million of severance costs and
$1.7 million of costs related to the establishment of
reserves for lease commitments and other exit costs. The 2003
restructuring programs affected nearly 3,100 personnel. Included
in the 2003 charges are adjustments related to previously
established accruals which did not require cash outlays of
$0.8 million.

In addition, the Company recognized
$28.4 million in asset impairment charges in 2003. Of the
$28.4 million, $10.4 million related to the impairment
of the Becker non-compete agreement, $7.5 million

23



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related to the initial interest acquired in an
Italian joint venture, $7.8 million related to the above
restructuring programs and $2.7 million related to other
intangible assets.


During 2002, the Company undertook three
restructuring programs resulting in $38.9 million in
restructuring charges and $18.0 million in related
impairment charges. The goal of the first restructuring program
that resulted in a charge of $9.1 million in the first
quarter was to de-layer management in the North American and
European operations. The objective of the second program that
resulted in a $25.1 million restructuring charge and
$8.7 million impairment charge in the third quarter was to
realign the operations in North America. Included in the third
quarter restructuring charge was $8.9 million related to
the separation agreement with Thomas Evans, the former Chairman
and CEO. The third program resulted in a restructuring charge of
$4.8 million and impairment charge of $9.3 million in
the fourth quarter. The objective of this program was to
consolidate plant operations in Europe and to further de-layer
management in North America. The 2002 restructuring programs
resulted in the separation of over 1,100 personnel.

Operating
Income:Operating income for 2003
decreased $65.7 million to $102.0 million compared to
2002. The decrease was primarily due to the problem plants
identified in the first six months of 2003, higher net
engineering and design related costs for significant new program
awards of $19 million, the impact of sales mix of
$58 million and commercial items (includes pricing and
contractual arrangements) of $58 million, offset by
material and manufacturing efficiencies of $96 million.
Also, contributing to the decline was a $9.4 million
increase in restructuring and impairment charges.

Operating income at the U.S. and Mexico Plastics
segment declined $39.5 million primarily as a result of the
problem plants identified in the first six months of 2003,
higher net engineering and design related costs for significant
new program awards, the impact of sales mix and commercial items
(includes pricing and contractual arrangements) of
$21 million. Offsetting these decreases were manufacturing
efficiencies of $30 million. Included in 2003 operating
income are $9.4 million in restructuring and
$12.3 million in impairment charges compared to
$0.8 million in restructuring and $1.2 million in
impairment charges in 2002.

Operating loss at the International Plastics
segment decreased $7.6 million. The reduction was primarily
a result of material and manufacturing efficiencies of
$43 million, offset by an increase in restructuring and
impairment charges and the impact of sales mix of
$37 million. Included in 2003 operating income are
$8.9 million in restructuring and $9.2 million in
impairment charges compared to $8.5 million of
restructuring and $2.6 million in impairment charges in
2002.

The Global Soft Trim operating income decreased
$21.1 million primarily as a result of sales mix of
$13 million and commercial items (includes pricing and
contractual arrangements) of $28 million. This decrease was
partially offset by an improvement in material and manufacturing
efficiencies of $19 million. Also offsetting the decrease
was a reduced amount of restructuring and impairment charges
from 2002 to 2003. Included in 2003 operating income are
$10.7 million in restructuring and $3.6 million in
impairment charges compared to $11.2 million in
restructuring and $14.2 million in impairment charges in
2002.

Interest Expense,
Net:Net interest expense from debt
instruments increased $2.4 million to $151.3 million
for 2003. The increase is primarily due to higher average
borrowing levels during the year.

Subsidiary Preferred Stock
Requirements:In connection with the
TAC-Trim acquisition on December 20, 2001, Products issued
to Textron Inc. preferred stock with a liquidation preference of
$326.4 million and an estimated fair market value of
$146.9 million. In June 2002, Products repurchased
$133.3 million of liquidation preference Series A
preferred stock that was initially valued at $56.8 million,
along with accrued dividends of $6.9 million. The
difference between the initial recorded value and the initial
liquidation preference is being accreted over the life of the
stock using the effective interest method. During 2003, interest
expense from subsidiary preferred stock accretion and dividend
costs were $5.3 million and $32.0 million,
respectively. The 2002 preferred stock accretion and dividend
costs were $7.6 million and $30.8 million,
respectively.

Effective April 2004, the Company will, exercise
its option to convert all 20,000 shares of the
Series C Redeemable Preferred Stock to Series B
Preferred Stock on an equivalent share basis. The primary
difference between the Series C and Series B Preferred
Stock was that Series C holders are entitled to
participation in

24



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distributions of Products common equity tied to
the appreciation in the value of Products common equity
subsequent to the issuance date of the securities. Each
Series C Preferred Stock holder will receive one share of
Series B Redeemable Preferred Stock on the equivalent share
basis.


Loss on Sale of
Receivables:In connection with the
receivables sold to non-recourse facilities and through
factoring arrangements, a loss of $7.3 million was
recognized during 2003, compared to a loss of $4.2 million
in 2002. The increase is due to new non-recourse factoring
arrangements entered into during 2003.

Other Expense (Income),
Net:In 2003, other expense (income),
net primarily included $32.4 million of foreign currency
transaction gains offset by $3.5 million of losses related
to derivatives used in the Companys hedging strategies and
the minority interest share of gains in a consolidated
subsidiary of $5.6 million.

For 2002, other expense (income), net related
primarily to $12.6 million of losses related to derivatives
used in the Companys foreign currency hedging strategy
reduced by $5.9 million of foreign currency transaction
gains, $5.5 million of losses from an investment in a joint
venture, $1.9 million of losses from sale and leaseback
transactions and the minority interest share of losses of a
consolidated subsidiary of $6.5 million.

Income
Taxes:The Company recognized an
income tax benefit of $1.9 million for 2003 compared to an
income tax expense of $17.5 million in 2002. Net cash taxes
paid during 2003 were $18.4 million. The primary reasons
for the Companys effective tax rate being different from
its statutory rate are non-deductible preferred stock dividends
and accretion, foreign losses for which tax benefits are not
recorded and state taxes that do not fluctuate directly with
income, partially offset by the effect of a financing
arrangement and a tax credit.

Income from Discontinued
Operations:During 2003, the Company
recognized $2.4 million from workers compensation claims
related to discontinued operations, for which reserves were
previously charged. Of these amounts, $1.6 million was
recorded as income from discontinued operations, net of income
taxes of $0.8 million.

During the second quarter 2002, the Company
received proceeds of $15.8 million on environmental claims
previously expensed related to discontinued operations. Of these
amounts, $9.5 million was recorded as income from
discontinued operations in the second quarter of 2002, net of
income taxes of $6.3 million.

Change in Accounting
Principle:During 2003, the Company
implemented a change in the method of accounting for holiday pay
so that such pay is accrued, and expense is recognized during
the period for which the actual holiday occurs. Formerly,
certain of the Companys businesses accrued holiday pay and
recognized expense based upon an equal monthly amount within the
fiscal year. The change in method better matches holiday expense
with the period that the actual holiday occurs and the pay is
earned. As the prior method allocated costs within the fiscal
year, there is no effect on prior years. There was no effect on
the entire fiscal year as the change only impacted interim
periods.

Additionally, during 2003, the Company
implemented a change in the method of accounting for crib supply
inventories held at plants. Crib supply inventories include
small motors, replacement parts for production equipment and
other miscellaneous repair parts for building equipment and
machinery. The Company implemented a perpetual crib supply
inventory system and harmonized its policy to consistently
account for the capitalization of crib supply inventories.
Formerly, the Company had different capitalization thresholds
following the various acquisitions in late 2001 and 2002, which
ranged from not capitalizing any crib supply items to
capitalizing only items greater than two thousand dollars. The
new accounting method better matches the cost with the period
benefiting from the expenditure, as such, inventories are
charged to expense as they are placed into service and begin
generating revenue. Pro forma and the cumulative effect amounts
relating to the change in accounting for crib inventories is not
determinable as perpetual records of crib inventory were not
maintained at all the plants prior to the application of the new
method in the second quarter of 2003. For the plants that
previously had no perpetual records, the effect of the change
was $1.8 million after tax or $0.02 per share recorded
to increase inventory and reduce cost of sales in the three
months ended June 30, 2003. For the year ended
December 31, 2003, the incremental effect of the adoption
had an insignificant effect.

25



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During 2002, the Company completed its
implementation of Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other
Intangible Assets. Under SFAS No. 142, goodwill
and indefinite-lived assets are no longer amortized but are
tested for impairment. In accordance with
SFAS No. 142, the Company employed a discounted cash
flow analysis in conducting its impairment test. As a result of
the test, the Company recorded an impairment loss of
$11.7 million relating to the UK Plastics business in the
International Plastics segment.

Net Loss Attributable to
Common Shareholders:In June 2002,
$100.0 million of proceeds from a 16 million share
common stock offering was used to repurchase Series A
preferred stock at a price of 75% of its liquidation preference
of $133.3 million. The redeemed Series A preferred
stock had a carrying value of $63.7 million. In accordance
with generally accepted accounting principles, the difference
between the $63.7 million in carrying value and the
$100.0 million cash payment was excluded from net income
and recorded directly to equity in the Companys
accumulated deficit account. Although this $36.3 million
equity charge is excluded from net income, the charge is
included in the computation of earnings (loss) per share and is
included in the net loss attributable to common shareholders.

2002
Compared to 2001

Net
Sales:Net sales for 2002 increased
113.1% to $3,885.8 million up $2,062.5 million from
2001. The increase in net sales was primarily driven by the
acquisitions of TAC-Trim, Becker, Joan and Southwest Laminates
(SWL), which contributed approximately $2,090 million.
Sales for 2002 increased approximately $400.6 million or
11.5% over pro forma 2001 sales of $3,485.2 million. New
programs, increased content, a higher North American build rate
and the 2002 acquisition of SWL drove this sales increase. In
North America the build rate increased about 6.0%. Pro forma
2001 sales are based on previous filings with the Securities and
Exchange Commission and include TAC-Trim, Becker and Joan for
the full year.

Excluding the impact of the acquisitions, net
sales decreased 1.5% from 2001. The decrease is due primarily to
$31 million of discontinued non-automotive and low margin
business and $42 million of commercial items offset by a
$35 million increase in new business and a $10 million
strengthening of foreign currencies.

Net sales for the U.S. and Mexico Plastics
segment increased $1,304.2 million to $1,512.2 million
from 2001. Excluding the impact of the TAC-Trim and Becker
acquisitions totaling approximately $1,317 million, net
sales for U.S. and Mexico Plastics decreased 6.3%. This
reduction is primarily due to shutdowns of customer assembly
plants.

Net sales for the International Plastics segment
increased 241.7% to $899.0 million from 2001. Without the
benefit of TAC-Trim sales totaling approximately
$669 million, sales decreased 12.5%. The decrease was
primarily due to customer price reductions.

Net sales for the Global Soft Trim segment
increased 9.1% to $1,474.6 million compared to 2001.
Excluding the acquisition of Joan and SWL, which contributed
approximately $103 million to net sales, sales increased
1.4%. The increase is primarily due to increased production
volumes and impact from continuing business, as well as a
$10 million impact from strengthening European currencies,
offset by the weaker Canadian currency and commercial items.

Gross
Profit:For 2002, gross profit
increased to 13.3% from 12.0% in 2001. Excluding the favorable
impact on gross profit from the Tac-Trim and Becker
acquisitions, the increase in gross profit was mainly
attributable to the Global Soft Trim segment. The Global Soft
Trim segments increase resulted from approximately
$65 million in material and manufacturing efficiencies,
partially offset by $31 million of commercial items and
rebates and $10 million of product launch and plant
consolidation cost.

Selling, General and
Administrative Expenses:Selling,
general and administrative expenses for 2002 were
$293.5 million compared to $164.4 million in 2001. The
increase is due to the additional costs assumed from the
acquisitions offset by $6.1 million of goodwill
amortization expensed in 2001. Due to the elimination of
duplicate efforts, reduced headcount and reduced discretionary
spending, selling, general and administrative expenses as a
percentage of sales declined from 9.0% in 2001 to 7.6% in 2002.

26



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Restructuring and Impairment
of Long-Lived Assets Charges:During
2002, the Company undertook three restructuring programs
resulting in $38.9 million in restructuring charges and
$18.0 million in related impairment charges. The goal of
the first restructuring program that resulted in a charge of
$9.1 million in the first quarter was to de-layer
management in the North American and European operations. The
objective of the second program that resulted in a
$25.1 million restructuring charge and $8.7 million
impairment charge in the third quarter was to realign the
operations in North America. Included in the third quarter
restructuring charge was $8.9 million related to the
separation agreement with Thomas Evans, the former Chairman and
CEO. The third program resulted in a restructuring charge of
$4.8 million and impairment charge of $9.3 million in
the fourth quarter. The objective of this program was to
consolidate plant operations in Europe and to further de-layer
management in North America. The 2002 restructuring programs
resulted in the separation of over 1,100 personnel

During 2001, the Company undertook two
restructuring programs resulting in charges totaling
$18.8 million. The goal of the first quarter 2001
restructuring program which, resulted in a charge of
$9.2 million, was to de-layer management in the North
American and European operations. The second program resulted in
a fourth quarter charge of $9.6 million. The objective of
this program was to downsize three facilities in North America
via better utilization of manufacturing and warehouse floor
space (including associated headcount reductions) and to reduce
headcount in our Mexican operations. The $18.8 million
charge includes $11.2 million of severance and other exit
costs and $7.6 million of asset impairment charges.

Operating
Income:Operating income increased
$132.1 million from 2001. The majority of the increase was
due to the acquisitions. However, material and manufacturing
efficiencies also contributed to the increase, partially offset
by commercial items, product launch and plant consolidations
costs and an increase in restructuring charges.

The U.S. and Mexico Plastics segment results
reflect a $111.5 million improvement in operating
performance. After considering the approximate $111 million
impact of acquisitions, the U.S. and Mexico Plastics business
operating income remained unchanged. Negative effects on
operating income included a decrease in sales volumes and
resulting inefficiencies associated primarily with certain GM
models, $11 million of product launch and plant
consolidation costs, $2 million related to the decline in
plastic sales due to the shutdown of customer assembly plants
and commercial items. These decreases were offset by purchasing
and spending savings and reductions in administrative expenses.

The International Plastics operating performance
was adversely impacted by commercial items and operating
inefficiencies, as well as $11 million due to restructuring
charges. These reductions were offset by spending and purchase
savings.

Global Soft Trim operating income increased
$112.9 million primarily the result of $70 million of
improved material and manufacturing efficiencies,
$17 million of sales growth resulting from an increase in
light vehicle build, $8 million of reductions in
administrative expense, and approximately $19 million from
the impact of the acquisitions. These increases were partially
offset by $30 million of commercial items and
$10 million of operating inefficiencies due to launch costs
associated with the BMW Mini program.

Interest Expense,
Net:Net interest expense increased
$64.6 million to $148.9 million for 2002. The increase
in interest expense is primarily attributed to higher average
debt balances and increased amortization of debt issue costs
resulting from the TAC-Trim acquisition, partially offset by the
benefit of working capital reductions.

Subsidiary Preferred Stock
Requirements:In connection with the
TAC-Trim acquisition on December 20, 2001, Products issued
to Textron preferred stock with a liquidation preference of
$326.4 million and an estimated fair market value of
$146.9 million. In June 2002, Products repurchased
$133.3 million of liquidation preference Series A
preferred stock that was initially valued at $56.8 million,
along with accrued dividends of $6.9 million. The
difference between the initial recorded value and the initial
liquidation preference will be accreted over the life of the
stock using the effective interest method. The 2002 preferred
stock accretion and dividend costs were $7.6 million and
$30.8 million, respectively. The 2001 preferred stock
accretion and dividend costs were $0.9 million and
$1.5 million, respectively.

27



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Loss on Sale of
Receivables:The Company has the
ability to sell, through its Carcorp subsidiary, interests in a
pool of accounts receivable. In connection with the receivable
sales, a loss of $4.2 million was recognized during 2002,
compared to a loss of $10.8 million for 2001. In December
2001, the Company entered into a new larger receivable facility
in connection with the TAC-Trim acquisition, resulting in
up-front fees of $5.6 million.

Other Expense (Income),
Net:In 2002, other expense (income),
net primarily included $12.6 million of losses related to
derivatives used in the Companys foreign currency hedging
strategy offset by $5.9 million of foreign currency
transaction gains, $5.5 million of losses related to
investments in joint ventures, $1.9 million of losses from
sale and leaseback transactions and the minority interest share
of losses of a consolidated subsidiary of $6.5 million.

In 2001, other expense (income), net primarily
included a $8.0 million loss on early extinguishment of
debt and $7.8 million of foreign currency transaction
losses offset by $5.0 million of derivatives gains and a
$6.2 million gain related to a stock demutualization. The
Company adopted SFAS 145 during 2003 and reclassified
$8.0 million loss on the early extinguishment of debt
recorded for the year ended December 31, 2001 to other
expense (income), net from an extraordinary item in the amount
of $5.3 million (net of income taxes of $2.7 million).

Income
Taxes:The Company recognized an
income tax expense of $17.5 million for 2002 compared to an
income tax benefit of $21.3 million in 2001. Net cash taxes
paid during the period were $12.8 million. The primary
reasons for the Companys relatively high effective tax
rate are non-deductible preferred stock dividends and accretion,
foreign losses for which tax benefits are not allowed and
certain taxes that do not fluctuate directly with income.

Discontinued
Operations:During 2002 and 2001, the
Company received payment on environmental claims related to
discontinued operations, for which reserves were previously
charged, and received proceeds of $15.8 million and
$14.5 million, respectively. Of these amounts,
$9.5 million and $8.8 million were recorded as income
from discontinued operations in 2002 and 2001, respectively, net
of income taxes of $6.3 million and $5.7 million,
respectively.

Cumulative Effect of Change in
Accounting Principle:During 2002, the
Company completed its implementation of SFAS 142, Goodwill
and Other Intangible Assets. Under SFAS 142 goodwill and
indefinite-lived assets are no longer amortized but are tested
for impairment. In accordance with SFAS 142, the Company
employed a discounted cash flow analysis in conducting its
impairment test. As a result of the test, the Company recorded
an impairment loss of $11.7 million relating to the UK
Plastics business in the International Plastics segment.

Net Loss Attributable to
Common Shareholders:In June 2002,
$100.0 million of proceeds from a 16 million share
common stock offering was used to repurchase Series A
preferred stock at a price of 75% of its liquidation preference
of $133.3 million. The redeemed Series A preferred
stock had a carrying value of $63.7 million. In accordance
with generally accepted accounting principles, the difference
between the $63.7 million in carrying value and the
$100.0 million cash payment was excluded from net income
and recorded directly to equity in the Companys
accumulated deficit account. Although this $36.3 million
equity charge is excluded from net income, the charge is
included in the computation of earnings (loss) per share and is
included in the net loss attributable to common shareholders.

LIQUIDITY AND CAPITAL
RESOURCES

The Company and its subsidiaries had cash and
cash equivalents totaling $13.2 million and
$81.3 million at December 31, 2003 and
December 31, 2002, respectively. The Companys ability
to utilize availability under its various credit arrangements
and receivables facility is limited, in accordance with
covenants established under the senior secured credit facility.
However, at December 31, 2003, there were no restrictions
and the Company had $149.7 million in aggregate of
unutilized availability.

The total availability at December 31, 2003
was comprised of $9.1 million under the Companys
receivables facility, $119.5 million under the
Companys revolving credit facility and approximately
$21.1 million under

28



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uncommitted bank facilities in foreign locations.
The numbers indicated above under the revolving credit facility
were further reduced by outstanding letters of credit of
$49.2 million as of December 31, 2003. Funding
limitations are based on the Companys financial
performance and target levels established by the covenants. At
December 31, 2003, there were no funding limitations.


In October 2003, the Company entered into third
and fourth amendments to the Senior Secured Credit Facilities
Credit Agreement. The principal changes resulting from these
amendments were to permit the add-back of certain restructuring
charges for covenant calculation purposes, to increase the
maximum permitted leverage ratio for periods beginning with the
third quarter of 2003 and make adjustments to the interest
coverage ratio. Previously, in the second quarter, the Company
executed a second amendment to the senior secured credit
agreement. The principal changes were modifications of certain
covenants, including an increase in the maximum permitted
leverage covenant and a decrease in the minimum interest
coverage ratio. The amendment is effective for periods following
the first quarter 2003. Other modifications were made to the
credit agreement and are detailed in Note 7 Long-Term
Debt and Capital Lease Obligations as well as in the copy
of the amendments, which are filed as an exhibit to this
Form 10-K.

In February 2004, the Company entered into the
fifth amendment to the Senior Secured Credit Facilities Credit
Agreement which allowed the establishment of a new
$100 million supplemental Revolving Credit Facility and the
$185 million Tranch A-1 Term Loan. In connection with these
new expanded facilities, $181.5 million was used to prepay
existing Tranche A and Tranche B Term Loans in direct
order of maturity.

The Companys principal sources of funds are
cash generated from operating activities and borrowings under
its revolving credit facilities, receivables arrangements and
sales leaseback arrangements. In addition, to facilitate the
collection of funds from operating activities, the Company has
sold receivables under its receivables facility and has also
entered into an accelerated payment collection program with two
of its larger customers. If those additional liquidity sources
were to become unavailable or limited by customer concentration
or credit quality or otherwise, the Company would require
additional capital, access to which is not assured. During 2002,
the Company issued common stock, although such issuances are not
likely to be a source of financing in the near-term. The Company
continues to seek means to generate additional cash for debt
reduction and its growth strategy. Among its potential cash
generation projects, the Company seeks to further improve
working capital management (including factoring of receivables)
and to continue to utilize lease financings.

Operating
Activities

Net cash provided by the continuing operating
activities of the Company was $122.9 million for the year
ended December 31, 2003, compared to $189.4 million
for the year ended December 31, 2002. The 2003 decrease is
primarily the result of increases in other asset balances,
offset by increases in proceeds from non-recourse factoring
facilities, increases in proceeds from participating interests
in accounts receivable, reductions in accrued expenses and other
liabilities, decreases in inventories and other positive working
capital changes.

Investing
Activities

Net cash used in investing activities of the
Company was $189.9 million for 2003, compared to net cash
used of $186.1 million for 2002. The increased use of cash
was primarily the result of a $27.2 million increase in
capital expenditures. The increased use of cash was offset by
the Company spending $12.5 million less in the payment of
acquisition costs for acquiring businesses, spending
$5.9 million less on investments in joint ventures and
receiving $5.0 million more in proceeds from the sale of
property, plant and equipment.

Financing
Activities

Net cash used from financing activities for 2003
was $4.8 million compared to net cash provided from
financing activities for 2002 of $4.0 million. This
increase in cash used from financing activities is the result of
$150.6 million decrease in proceeds from the issuance of
stock offset by $100.0 million used for the repurchase of
preferred stock in 2002 and a $41.8 million decrease in
cash used for net borrowings.

29



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At December 31, 2003, the Company had total
outstanding indebtedness of $1,285.2 million at a weighted
average interest rate of 10.1% per annum. Comparatively, at
December 31, 2002, the Company had total indebtedness of
$1,289.2 million.

During 2001, Heartland, and certain other
investors, acquired 22.8 million shares of common stock
from the Company at a price of $12.50 per share,
representing a cash investment in the Company of
$285.0 million before fees and expenses. Net proceeds paid
to the Company from the equity transactions were
$264.3 million. A portion of the proceeds were used to pay
$10.7 million in transaction related costs, including
change in control consents, fees related to term loan
facilities, and other amendments to credit agreement facilities.
The remaining proceeds of $253.6 million were used to pay
down a revolving credit facility and to fund part of the
TAC-Trim acquisition.

The senior secured credit facility consists of a
revolving credit facility and tranche A and tranche B
term loan facilities. The revolving credit facility provides for
revolving loans and extensions of credit up to a maximum
principal amount of $175.0 million. A portion of the
revolving credit facility will be available to Canadian
subsidiaries in Canadian dollars and a portion of the revolving
credit facility will be available in the form of letters of
credit. The revolving credit facility, the tranche A term
loan and the tranche B term loan mature in December 2005.
Borrowings under the senior credit facilities bear interest at
variable rates based on a spread to the adjusted LIBOR or a base
rate, at the Companys option. The Company had
$350.1 million and $377.6 million in term loans
outstanding under this facility at December 31, 2003 and
2002, respectively. See discussion on additional changes in
February 2004 on Senior Secured Credit Facilities discussion
under Liquidity and Capital Resources section
previously.

On an ongoing basis, the Company has entered into
an agreement to sell trade accounts receivable of certain
business operations to a bankruptcy-remote, special purpose
subsidiary, wholly owned by the Company. The Companys
receivables subsidiary will, subject to certain conditions, from
time to time, sell an undivided fractional ownership interest in
a pool of domestic and certain Canadian receivables, up to a
balance of $250 million, to bank-sponsored multi-seller
commercial paper conduits under a committed facility. As of
December 31, 2003, the Company had $73.7 million
outstanding and $9.1 million undrawn under the receivables
facility. As of December 31, 2002, utilization of the
receivables facility was $66.0 million and an additional
$93.2 million of funding was available but unutilized.

New receivables will be added to the pool as
collections reduce previously sold receivables. The Company
expects to service, administer and collect the receivables on
behalf of the receivables subsidiary and the conduits. The
proceeds of sale will be less than the face amount of accounts
receivable sold by an amount that approximates the
purchasers financing costs. In September 2002, the Company
amended the receivables facility lengthening its term to expire
in December 2004. The receivables facility is an important
source of ongoing liquidity to the Company.

In December 2001, Products issued
182,700 shares of its Series A Redeemable Preferred
Stock, 123,700 shares of Series B Redeemable Preferred
Stock and 20,000 shares of Series C Redeemable
Preferred Stock. The Preferred Stock was recorded at estimated
fair value of $146.9 million, which was less than the
liquidation value of $1,000 per share or
$326.4 million. The estimated fair value was based on
market prices for securities with similar terms, maturities and
risk characteristics, and included a liquidation discount to
reflect market conditions and was agreed to by the Company and
Textron as part of the TAC-Trim purchase agreement. The
difference between the initial recorded value and the
liquidation value is being accreted over the 11 year terms
of the securities. The results for 2003 and 2002 included
subsidiary preferred stock requirements calculated using the
effective interest method of $37.3 million and
$38.4 million, respectively. The preferred stock
requirement includes both accretion and dividend costs of
$5.3 million and $32.0 million, respectively, for 2003
and $7.6 million and $30.8 million, respectively, for
2002. The carrying value of the Redeemable Preferred Stock
includes accretion and accrued dividends.

Products issued $500 million of
10 3/4% Senior Notes due in 2011 in connection with
the TAC-Trim acquisition. The Company also amended the existing
$400 million of 11 1/2% senior subordinated notes
due in 2006 to make each subsidiary guarantor of the Senior
Notes a senior subordinated guarantor of the existing notes.

30



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The following table sets forth the ratings as of
December 31, 2003 for securities issued by the Company and
its subsidiaries:

|             |                                                 |            |  |    |         |  |  |    | 
|------------ | ----------------------------------------------- | ---------- |  | -- | ------- |  |  | -- | 
|             |                                                 | Standard & |  |    |        
|             |                                                 | Poors      |  |    | Moodys | 
|             |                                                 |            |  |    |         | 
|Public Debt: |                                                 |            |  |    |         |  |  |   
|             | 11 1/2% Senior Subordinated Notes, due
    2006 |            |  | B- |         |  |  | B3 | 
|             | 10 3/4% Senior Notes, due 2011                  |            |  | B- |         |  |  | B2 | 

OUTLOOK

To further enhance North American automotive
revenues, OEMs and transplants are continuing to offer
incentives in 2004 that should enable production schedules to
remain consistent with 2003 levels. The European market is
expected to remain relatively soft, and that market has the
potential for continuing declines in production compared to
prior year levels. However, the Company remains cautiously
optimistic that 2004 North American vehicle production and
inventory levels will remain consistent with 2003 levels.

The Companys principal uses of funds from
operating activities and borrowings for the next several years
are expected to fund interest and principal payments on its
indebtedness, growth related working capital increases, capital
expenditures, product launches and lease expense. Consistent
with the automotive supply industry, the Company continues to
experience significant competitive pressure and expects to face
continued downward cost pressure from vehicle manufacturers. The
Company has an ongoing aggressive plan to improve the various
operating performance at all of its facilities. While
improvements are being made, further work remains to have all
plants profitable on a continuing basis. In addition, the
Company recently confirmed its strategy for new business, which
involves pursuing sales growth based on criteria intended to
more effectively allocate the Companys resources to the
most promising new business opportunities. As part of this
strategy, the Company reviewed its parts profitability for each
plant and program worldwide. As a result, the Company concluded
that a certain future business award is inconsistent with its
criteria and is therefore in the process of cooperating in the
transition of this award to another supplier.

Management believes cash flow from operations,
together with its revolving credit facility, receivables
arrangements, and sale and leaseback arrangements will provide
adequate sources of liquidity for the Company to fund its
operations. However, the Companys sources of liquidity may
be inadequate if economic conditions worsen or if the Company is
unable to meet financial or operating covenants as a result of
the foregoing, and the Company will need to seek financing to
refinance maturing debt. In addition, matters affecting the
credit quality of our significant customers could adversely
impact the availability of our receivables arrangements and our
liquidity. The Company continues to explore other sources of
liquidity, including additional debt, but existing debt
instruments may limit the Companys ability to incur
additional debt, and the Company may be unable to secure equity
or other financing.

At the end of the second quarter, the Company
received notice from one of its customers, DaimlerChrysler
Corporation, of an issue regarding the calculation methods for
determining the current year valuation of price givebacks.
Discussions on this issue, as well as various aspects of the
broader relationship, are continuing. While the Company seeks to
improve the profitability of its programs with this and all of
its customers, there can be no assurance that the Company will
not lose desirable programs over time. While the Company
continues to believe that all of these issues will be resolved
to the mutual satisfaction of the parties, there can be no
assurances that such a resolution is imminent or that actions by
the customer with respect to the broader relationship will not
have a material adverse impact on the Company.

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Contractual
Obligations

Below is the table that identifies the
Companys significant contractual obligations. Following
the table is a more detailed description of these obligations.

|                                             |  |                       |         |           |        |   |       |       |  |     |       |  |  |               |      |  |  |   |       | 
|-------------------------------------------- |  | --------------------- | ------- | --------- | ------ | - | ----- | ----- |  | --- | ----- |  |  | ------------- | ---- |  |  | - | ----- | 
|                                             |  |                      
|                                             |  | Payment due by Period |        
|                                             |  |                       |        
|                                             |  |                       |         | Less than |        |   | 1-3   |       |  | 4-5 |       |  | 
|                                             |  | Total                 |         |           | 1 Year |   |       | Years |  |     | Years |  |  | After 5 Years |     
|                                             |  |                       |         |           |        |   |       |       |  |     |       |  |  |               |     
|                                             |  |                      
|                                             |  | (In millions)         |        
|Short-term borrowings                        |  | $                     | 16.0    |           |        | $ | 16.0  |       |  | $   |      |  |  | $             |     |  |  | $ |      | 
|Long-term debt and capital lease obligations |  |                       | 1,269.2 |           |        |   | 31.5  |       |  |     | 736.0 |  |  |               | 1.7  |  |  |   | 500.0 | 
|Preferred stock(a)                           |  |                       | 161.2   |           |        |   |      |       |  |     |      |  |  |               |     |  |  |   | 161.2 | 
|Operating leases(b)                          |  |                       | 357.9   |           |        |   | 55.0  |       |  |     | 113.1 |  |  |               | 78.4 |  |  |   | 111.4 | 
|Environmental reserves                       |  |                       | 51.2    |           |        |   | 7.6   |       |  |     | 21.5  |  |  |               | 8.5  |  |  |   | 13.6  | 
|Capital expenditures                         |  |                       | 30.3    |           |        |   | 30.3  |       |  |     |      |  |  |               |     |  |  |   |      | 
|                                             |  |                       |         |           |        |   |       |       |  |     |       |  |  |               |     
|Total obligations                            |  | $                     | 1,885.8 |           |        | $ | 140.4 |       |  | $   | 870.6 |  |  | $             | 88.6 |  |  | $ | 786.2 | 
|                                             |  |                       |         |           |        |   |       |       |  |     |       |  |  |               |     



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Mandatorily Redeemable Preferred Stock of
    Subsidiary                                                                                                                                                                                                                                                                                                                                                                   
|(b) | Includes operating leases related to
    restructuring charges. See Note 15,
    Restructuring. In addition to the operating lease
    obligations, at the end of the Textron Leasing Transaction for
    certain equipment leases (including the expiration of all
    renewal options), the Company is required to guarantee a minimum
    value of the equipment to the lessor of up to approximately
    $21 million.

Senior
Secured Credit Facilities

General:The Companys senior secured credit facility allowed
funding in the aggregate of up to $525.0 million at
December 31, 2003. Borrowings under the credit facility are
secured by all the assets of the Company and Products and
certain of its subsidiaries, and are unconditionally and
irrevocably guaranteed jointly and severally by the Company and
each existing and subsequently acquired or organized domestic
subsidiaries (other than by the Companys receivables
subsidiary). Available funding under this credit facility is
reduced if the program size or commitment level under the
Companys receivable facility (discussed below) exceeds
$250.0 million.

Interest Rates and
Fees:At December 31, 2003,
borrowings bear interest, at the Companys option, at
either (a) adjusted LIBOR plus a 4.00% margin in the case
of the revolving credit and tranche A term loan facilities
and 4.75% margin in the case of the tranche B term loan
facility, in all cases subject to a minimum LIBOR of 3.00% or
(b) the highest of (i) JPMorgan Chase Banks
prime rate, (ii) the federal funds effective rate plus 1/2
of 1.00% and (iii) the base CD rate plus 1.00% plus a 3.00%
margin in the case of the revolving credit and tranche A
term loan facilities and 3.75% margin in the case of the
tranche B term loan facility. A commitment fee on any
unused commitments under the revolving portion of the credit
facility equal to 1.00% per annum is payable quarterly in
arrears and is subject to adjustment based on attaining certain
performance targets.

In February 2004, the Company entered into the
fifth amendment to the Senior Secured Credit Facilities Credit
Agreement which allowed the establishment of a new
$100 million Supplemental Revolving Credit Facility and the
$185 million Tranche A-1 Term Loan. In connection with
these new facilities, $181.5 million was used to prepay
existing Tranch A and Tranch B Term Loans in direct
order of maturity. Applicable interest rates on the new
facilities are, at the Companys option, either
(a) adjusted LIBOR plus a 4.00% margin, subject to a
minimum LIBOR of 2.00%, or (b) the highest of
(i) JPMorgan Chase Banks prime rate, (ii) the
federal funds effective rate plus 1/2 of 1.00% and
(iii) the base CD rate plus 1.00% plus 3.00% margin. There
are no commitment fees on these new facilities.

Covenants:The credit facility requires that the Company meet certain
financial tests, including, without limitation, the following
tests: a maximum leverage ratio, a minimum interest coverage
ratio and certain

32



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prescribed limitations on capital expenditures at
levels to be agreed upon between the Company and the agents. The
credit facility also contains covenants and restrictions,
including, among others, limitations or prohibitions on
declaring dividends and other distributions, redeeming and
repurchasing capital stock, prepaying, redeeming and
repurchasing other indebtedness, loans and investments,
additional indebtedness, liens, sale-leaseback transactions,
preferred stock, capital expenditures, recapitalizations,
mergers, acquisitions, asset sales and transactions with
affiliates.


Events of
Default:The credit facility contains
certain customary events of default, including, among others
cross-default and cross-acceleration to other indebtedness
(including the receivables facility).

11 1/2% Senior
Subordinated Notes due 2006 and 10 3/4% Senior Notes
due 2011

Products has outstanding $400 million in
principal amount of 11 1/2% Senior Subordinated Notes
due 2006. The Company and substantially all domestic
subsidiaries of Products have guaranteed these notes on a senior
subordinated basis. The indenture governing these notes contains
restrictive covenants (including, among others, limitations on
indebtedness, restricted payments, liens, asset dispositions,
change of control and transactions with affiliates) that are
customary for such securities.

Products has issued $500 million principal
amount of 10 3/4% senior notes due 2011. The Company
and substantially all domestic subsidiaries of Products have
guaranteed these notes on an unsecured senior basis. The
indenture governing these notes contains restrictive covenants
(including, among others, limitations on indebtedness,
restricted payments, liens, asset dispositions, change of
control and transactions with affiliates) that are customary for
such securities.

Mandatorily
Redeemable Preferred Stock of Subsidiary

General:As part of the consideration paid to Textron for the TAC-Trim
acquisition, Products issued mandatorily redeemable preferred
stock to Textron with an estimated fair market value of
$146.9 million and a liquidation value of
$326.4 million.

Dividends:Holders of this preferred stock are entitled to receive
dividends accruing as detailed in the table that follows:

|                            |  |                 |    |   |                 |  |    |                 |  |  |    |  
|--------------------------- |  | --------------- | -- | - | --------------- |  | -- | --------------- |  |  | -- | -
|                            |  | Series A        |    |   | Series B        |  |    | Series C        | 
|Dividend Periods Ending     |  | Preferred Stock |    |   | Preferred Stock |  |    | Preferred Stock | 
|                            |  |                 |    |   |                 |  |    |                 | 
|On or prior to July 1, 2003 |  |                 | 11 | % |                 |  | 12 | %               |  |  | 12 | %
|After July 1, 2003          |  |                 | 15 | % |                 |  | 16 | %               |  |  | 16 | %

In each case the dividends are payable quarterly
in arrears, commencing on April 1, 2002 and accumulating
from the date of issuance. Products may, at its option, elect to
accrue up to an amount equivalent to 7% per annum of the
dividends on the Series A Preferred Stock, an amount
equivalent to 8% per annum of the dividends on the
Series B Preferred Stock and an amount equivalent to
8% per annum of the dividends on the Series C
Preferred Stock in lieu of cash payment of such dividends and,
in each case, any accrued dividends will be added to the
liquidation preference of the applicable series of preferred
stock. Products may at its option through January 1, 2004
accrue up to the full amount of all dividends in lieu of cash
payment of such dividends. Thereafter, Products may at its
option elect to accrue dividends of up to 7% of the liquidation
value annually on Series A Preferred Stock and up to 8% of
the liquidation value on Series B and C Preferred Stock.
Accrued dividends will be added to the liquidation preference of
the applicable series of Preferred Stock.

Repurchase:In June 2002, $100.0 million of proceeds from the
16 million share common stock offering was used to
repurchase preferred stock from Textron at a price of 75% of its
liquidation preference of 133.0 million. The redeemed
Series A Preferred Stock had a carrying value of
$63.7 million.

Liquidation
Preference:Upon any voluntary or
involuntary liquidation, dissolution or winding-up of Products,
holders of the preferred stock will be entitled to be paid out
of the assets of Products available for distribution to
stockholders in the amount of $1,000 per share plus the
aggregate amount of accrued dividends prior to any distribution
to any holders of equity securities which rank junior to the
preferred stock. In

33



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addition, upon any voluntary or involuntary
liquidation, dissolution or winding-up of Products, the holders
of Series C Preferred Stock will be entitled to a
participation in distributions to Products common equity
tied to any appreciation in the value of Products common
equity subsequent the issuance date, not to exceed an aggregate
of $2 million for all Series C Preferred Stock
outstanding.


Mandatory
Redemption:Products is required to
redeem all of the Series A Preferred Stock and
Series B Preferred Stock outstanding on January 1,
2013 at a redemption price equal to 100% of the liquidation
preference thereof, plus accrued and unpaid dividends to the
date of redemption. Products is also required to redeem all of
the series C preferred stock outstanding on February 1,
2022 at a redemption price equal to 100% of the liquidation
preference thereof, plus accrued and unpaid dividends to the
date of redemption, plus common equity participation.

Operating
Leases

During 2003, the Company received net proceeds
(after fees) of approximately $10.2 million from the sale
and leasebacks of real property and equipment. The total minimum
lease commitments under these leases will be $16.1 million,
$0.5 million relates to 2003.

During 2002, the Company received net proceeds
(after fees) of approximately $14.8 million from sale and
leasebacks of real property and equipment. The total minimum
lease commitments under these leases will be $18.8 million,
$2.6 million of which relates to both 2003 and 2002.

During 2001, Products entered into sale and
leaseback transactions for certain manufacturing equipment and
non-manufacturing properties. The transactions resulted in the
recognition of a $4.4 million net deferred loss that is
being amortized over the lease term, and the recognition of an
$8.7 million loss.

During 2001, the Company received net proceeds
(after fees) of approximately $86.2 million from sale and
leasebacks of real property and equipment, which it used to
reduce outstanding debt. The aggregate lease expenses associated
with these leases will be $88.8 million, $12.5 million
of which relates to 2002. As part of these sale-leaseback
transactions, Products sold and contemporaneously leased back
real property from unrelated third parties, and received net
proceeds (after fees) of $46.4 million.

The Company also has other equipment lease
agreements with several lessors that, subject to specific
approval, provide availability of funding for operating leases
and sale and leasebacks as allowed in its other financing
agreements. To the extent permitted by the credit facility, the
Company may enter into additional similar leasing arrangements
from time to time.

See  Other
Information  Effects of Certain Transactions with
Related Parties for additional information. Refer to
Note 12, Operating Leases of the financial
statements included in this report for information regarding
future minimum lease payments.

Capital
Expenditures

The Company incurs capital expenditures on a
recurring basis for replacements and improvements. During 2003,
the Company had approximately $175.1 million in capital
expenditures for continuing operations. Capital expenditures
will materially increase with the expanded book of business in
2004, and in future years will depend upon demand for the
Companys products and changes in technology. Estimates for
capital expenditures in 2004 range from approximately $145 to
$155 million. A portion of capital expenditures may be
financed through leasing arrangements.

34



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Sources
of Liquidity

The table below identifies the Companys
significant sources of liquidity:

|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |   |  |  |   |   | 
|---------------------------- |  | ------------- | ----- |  | ---------------------------------- | - | ---- | --------- |  | ----- | --------- |  | ------- | - | - |  |  | - | - | 
|                             |  | December 31,  |       |  |                                   
|                             |  | 2003          |       |  | Availability Expiration Per Period
|                             |  |               |       |  |                                   
|                             |  | Maximum       |       |  | Less                               |   |      |          
|                             |  | Amount        |       |  | than                               |   |      |           |  | After
|                             |  | Available     |       |  | 1 Year                             |   |      | 1-3 Years |  |       | 4-5 Years |  | 5 Years
|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |        
|                             |  |              
|                             |  | (In millions)
|Receivable Facility(1)       |  | $             | 9.1   |  |                                    | $ | 9.1  |           |  | $     |          |  |         | $ |  |  |  | $ |  | 
|Revolving Credit Facility(2) |  |               | 119.5 |  |                                    |   |     |           |  |       | 119.5     |  |         |   |  |  |  |   |  | 
|Short-term borrowings        |  |               | 21.1  |  |                                    |   | 21.1 |           |  |       |          |  |         |   |  |  |  |   |  | 
|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |  
|Total Available              |  | $             | 149.7 |  |                                    | $ | 30.2 |           |  | $     | 119.5     |  |         | $ |  |  |  | $ |  | 
|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |  



---



|    |                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total commitment under the facility is
    $250 million.                                                                                              
|   
|(2) | At December 31, 2003, $49.2 million of
    outstanding letters of credit reduced the maximum amount
    available under the Revolving Credit Facility.

The proforma table below identifies the
Companys significant sources of liquidity adjusted to
reflect the supplemental revolving credit facility:

|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |   |  |  |   |   | 
|---------------------------- |  | ------------- | ----- |  | ---------------------------------- | - | ---- | --------- |  | ----- | --------- |  | ------- | - | - |  |  | - | - | 
|                             |  | December 31,  |       |  |                                   
|                             |  | 2003          |       |  | Availability Expiration Per Period
|                             |  |               |       |  |                                   
|                             |  | Maximum       |       |  | Less                               |   |      |          
|                             |  | Amount        |       |  | than                               |   |      |           |  | After
|                             |  | Available     |       |  | 1 Year                             |   |      | 1-3 Years |  |       | 4-5 Years |  | 5 Years
|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |        
|                             |  |              
|                             |  | (In millions)
|Receivable Facility(1)       |  | $             | 9.1   |  |                                    | $ | 9.1  |           |  | $     |          |  |         | $ |  |  |  | $ |  | 
|Revolving Credit Facility(2) |  |               | 168.7 |  |                                    |   |     |           |  |       | 168.7     |  |         |   |  |  |  |   |  | 
|Supplemental Revolving       |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |   |  |  |   |   | 
|Credit Facility(3)           |  |               | 50.8  |  |                                    |   |     |           |  |       | 50.8      |  |         |   |  |  |  |   |  | 
|Short-term borrowings        |  |               | 21.1  |  |                                    |   | 21.1 |           |  |       |          |  |         |   |  |  |  |   |  | 
|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |  
|Total Available              |  | $             | 249.7 |  |                                    | $ | 30.2 |           |  | $     | 219.5     |  |         | $ |  |  |  | $ |  | 
|                             |  |               |       |  |                                    |   |      |           |  |       |           |  |         |   |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total commitment under the facility is
    $250 million.                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | Subsequent to entering into the Supplemental
    Revolving Credit Facility there were no outstanding letters of
    credit reducing the maximum amount available under the Revolving
    Credit Facility.                                                                                                                                                                                                                             
|   
|(3) | The $100 million Supplemental Revolving
    Credit Facility allows for up to $50 million of cash
    advances and up to $50 million for letters of credit. At
    December 31, 2003, $50 million was available for cash
    advances and $0.8 million for additional letters of credit,
    after adjusting for the transfer of $49.2 million of
    outstanding letters of credit transferred from the Revolving
    Credit Facility.

Receivables
Facility

General:The Company has an agreement to sell, on an ongoing basis, the
trade accounts receivable of certain business operations to a
bankruptcy-remote, special purpose subsidiary, wholly owned and
consolidated by the Company. The receivables subsidiary
(Carcorp) will, subject to certain conditions, from time to
time, sell an undivided fractional ownership interest in a pool
of domestic and certain Canadian receivables, up to
$250 million, to various multi-seller commercial paper
conduits supported by a committed liquidity facility. Upon sale
to the conduit, Carcorp will hold a subordinated retained
interest in the receivables. Under the terms of the agreement,
new receivables are added to the pool as collections reduce
previously sold receivables. The Company expects to service,
administer and collect the receivables on behalf of Carcorp and
the conduit. The proceeds of sale will be less than the face
amount of accounts receivable sold by an amount

35



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that approximates the purchasers financing
costs. In September 2002, the Company amended the receivables
facility lengthening its term to expire in December 2004.


Restrictions:This receivables facility contains certain restrictions on
Carcorp (including maintenance of $60.0 million net worth)
and on the sellers (including limitations on liens on
receivables, modifications of the terms of receivables, and
changes in credit and collection practices) which are customary
for facilities of this type. The commitments under the
receivables facility are subject to termination prior to their
term upon the occurrence of certain events, including payment
defaults, breach of covenants, including defined interest
coverage and leverage ratios, bankruptcy, default by the Company
in servicing the receivables and failure of the receivables to
satisfy certain performance criteria.

Commercial
Commitments

Put and Call
Arrangement:The Company previously
entered into a put and call arrangement with respect to the
acquisition of the initial 50% interest in the Italian joint
venture. In January 2003, the Company acquired the remaining 50%
interest in the Italian joint venture for $15 million,
which also terminated the put and call arrangement. The
arrangement, which was exercisable in December 2004, permitted
Textron to require the Company to purchase Textrons
interests in the joint venture for an aggregate of approximately
$28 million.

Stock
Options

As a result of repricing the Companys stock
options during 2002, the repriced options were treated as
variable-based awards in accordance with APB No. 25.
Subsequent to December 31, 2002, the Company approved the
repricing of approximately 3.6 million options with an
exercise price of $10.00 to a new exercise price of $8.00.
Because these options are considered to be variable-based
awards, the Company will incur future compensation expense if
the stock price exceeds the new exercise price of $8.00.

OTHER
INFORMATION

Off-balance Sheet
Arrangements

Prior to the TAC Trim acquisition, TAC-Trim
entered into an $86.9 million sale and leaseback
transaction (the Textron Leasing Transaction) with
two separate single purpose affiliates of Textron Financial
Corporation, as lessor and purchaser, with respect to a
portfolio of manufacturing equipment situated in different
locations throughout the United States and Canada. Payments
under the Textron leasing transaction are guaranteed by Products
and secured by a first perfected mortgage lien over certain real
property with a value equal to $25 million. At the end of
the Textron Leasing Transaction for certain equipment leases
(including the expiration of all renewal options), the Company
is required to guarantee a minimum value of the equipment to the
lessor of up to approximately $21 million. Each lease is
for an initial term of three years with three one-year renewal
options. See  Other Information 
Effects of Certain Transactions with Related Parties for
additional information.

In November 2002, the Financial Accounting
Standards Board (FASB) issued FIN 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. FIN 45 requires a guarantor
to recognize, at the inception of a qualified guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee. In conjunction with divestitures and
other transactions, the Company has provided indemnifications
relating to legal and environmental issues, including product
liability. The Company does not believe that any pending or
threatened litigation or claims related to any such retained
liabilities of discontinued operations are likely to result in
any material loss.

Certain Transactions with
Related Parties

Heartland
Transactions

Heartland is a private equity firm established in
1999 for the purpose of acquiring and expanding industrial
companies operating in various sectors of the North American
economy that are well positioned for

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global consolidation and growth. The managing
general partner of Heartland is Heartland Industrial Associates,
L.L.C. Certain directors and officers of the Company are members
of the general partner, specifically Messrs. Stockman (a
Director and our Chairman and Chief Executive Officer), Stepp (a
Director and our Vice Chairman and Chief Financial Officer) and
Tredwell, Leuliette, McConnell and Valenti (each Directors).
Other of our directors or their affiliates, specifically
Messrs. Becker and McCallum, are limited partners in
Heartland with interests representing less than 5% of the
commitments in Heartland. Heartland has informed us that its
limited partners include many financial institutions, private
and government employee pension funds and corporations, among
other types of investors. The Company may, in the ordinary
course of business, have on a normal, customary and arms
length basis relationships with certain of Heartlands
limited partners, including banking, insurance and other
relationships.


The Company is a party to a Services Agreement
with Heartland under which Heartland provides advisory and
consulting services, including services with respect to
developments in the automotive industry and supply markets,
advice on financial and strategic plans and alternatives and
other matters as it may reasonably request and are within
Heartlands expertise. The Services Agreement terminates on
the earlier of its tenth anniversary or the date upon which
Heartland ceases to own Company shares equivalent to 25% of that
owned by them on February 23, 2001.

Under the Services Agreement, the Company is
obligated to pay to Heartland a $4.0 million annual
advisory fee payable in quarterly installments and reimburse its
out-of-pocket expenses related to the services it provides. The
Company has also agreed to pay a fee of 1% of the total
enterprise value of certain acquisitions and dispositions.
During 2003, 2002 and 2001 the Company recorded total fees of
$4.0 million, $5.7 million and $24.5 million,
respectively.

The Services Agreement with Heartland
contemplates that the Company may pay additional fees to
Heartland for services rendered in connection with a range of
financing transactions. In March 2004, the Companys Board
of Directors, including the disinterested and independent
directors of the Board, approved a fee of $1 million to
Heartland for its services rendered in connection with the 2004
amendments to the Companys credit facility to add
synthetic revolving and letter of credit facilities.

Charles
E. Becker Transactions

On March 27, 2003, the Company entered into
a termination agreement and release to buyout the non-compete
agreement between the Company and Charles E. Becker, a member of
the Companys Board of Directors and a limited partner in
Heartland. The Company paid $11.3 million in April 2003 as
part of the termination agreement and release. The non-compete
agreement, which was entered into as part of the Becker
acquisition, required the Company to make periodic payments. As
a result of this transaction, the Company incurred a loss of
$10.4 million, which is primarily due to the write-off of
intangible assets initially recorded in conjunction with the
Becker acquisition.

During 2002, the Company engaged Mr. Becker
to serve as Vice Chairman and assist the Company with strategic
planning activities, such as developing sales strategies,
managing key customer relationships and recruiting senior
management for the Companys European operations. The
Company paid Mr. Becker $300,000 for such services.
Mr. Beckers consulting arrangement and position as
Vice Chairman ended in 2002.

The Company entered into a lease agreement with
Becker Ventures L.L.C. (Becker Ventures), an entity
controlled by Mr. Becker, for the Companys
headquarters at 250 Stephenson Highway, Troy, Michigan with the
effective date of the lease being January 1, 2002. In March
2002, the Company entered into lease agreements with Becker
Ventures, effective January 1, 2002, for 150 Stephenson
Highway and 350 Stephenson Highway, Troy, Michigan. The base
rent for all three premises is $13.25 per sq. ft.,
subject to annual CPI adjustments. Total square footage for all
three locations is approximately 286,000. The leases have
20-year terms, and the Company has two five-year renewal
options. The 2004 base rent for the facilities will be
approximately $4.0 million. In 2004, these leases were
amended to provide that the Company would assume responsibility
for property management with a corresponding elimination of
certain aspects of the property management fees. In addition,
the Company is also party to a lease with Becker Ventures for
five

37



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manufacturing facilities totaling
884,000 square feet. In 2002, the Company extended the
lease term an additional ten years to expire in 2021, with the
base rent for these facilities totaling $3.6 million per
year.


In June 2001, Products sold and contemporaneously
leased back real property located in Troy, Michigan and
Plymouth, Michigan from New King, L.L.C. and Anchor Court,
L.L.C., respectively, which are affiliates of Becker Ventures,
for net proceeds of $15.1 million in aggregate. The initial
lease term in each transaction is 20 years and each lease
has two successive ten year renewal options. The basic rent for
the Troy, Michigan property is $1.3 million per year, and
the basic rent for the Plymouth, Michigan property is
$0.5 million per year. The rental rates in each case are
subject to adjustment after expiration of the initial term.

Elkin
McCallum Transactions

In the first quarter of 2003, the Company
purchased equipment from Joan Fabrics Corporation
(Joan Fabrics), and entered into a supply agreement
with Joan Fabrics to supply certain types of fabrics. Elkin
McCallum, a director of the Company, controls Joan Fabrics
and is a limited partner in Heartland. Under the supply
agreement, the Company supplies fabric to Joan Fabrics and
Joan Fabrics is responsible for all marketing, design,
customer service, distribution and sales functions related to
these fabrics. The Company paid Joan Fabrics
$4.7 million of consideration for these transactions, a
portion of which the Company has allocated to the purchased
equipment (based on its appraised value) and the remainder of
which it is amortizing over the five-year term of the supply
agreement.

On December 31, 2002, the Company acquired
an air jet texturing business from Dutton Yarns (an affiliate of
Mr. McCallum) for approximately $4.2 million. The
purchased assets included equipment, inventory and intellectual
property. The Company had preliminarily accounted for this
transaction as an acquisition of assets, but finalized its
accounting during the first quarter of 2003, and recorded the
transaction as a purchase of a business.

On April 12, 2002, the Company signed and
closed on a merger agreement with Mr. McCallum and a
lamination company wholly owned by Mr. McCallum pursuant to
which the acquired company was merged into a wholly owned
subsidiary of the Company. As consideration in the transaction,
Mr. McCallum received 400,000 shares of Common Stock
and was repaid $2.5 million in cash as reimbursement for
amounts previously invested to fund the lamination
companys working capital needs. Subsequent to the merger,
debt owing to Mr. McCallum of $6.7 million was repaid.
The Company acquired the lamination business to optimize the
supply chain on certain of its fabric products and provide low
cost lamination products and services to Tier-1 customers. As
part of this acquisition, the Company inherited a lease pursuant
to which it leases from an entity controlled by
Mr. McCallum, a portion of a manufacturing facility in
El Paso, Texas. The Company continues to occupy these
premises pursuant to such lease.

In April 2002, the Company amended the merger
agreement with Joan Automotive to clarify ownership of
certain equipment listed in a schedule attached to that
agreement. The original merger agreement schedule included a
list of approximately 84 looms that ultimately exceeded the
Companys manufacturing requirements and facility capacity.
Upon determining that the excess looms would have been
uneconomically expensive to relocate and store, the Company
declined to take possession of 48 of these looms, which were
left in place at Joan Fabrics Hickory, North Carolina
plant. The amendment clarifies that these looms are owned by
Joan Fabrics.

In September 2001, the Company completed the
acquisition of Joan Automotive Industries, a leading
supplier of bodycloth to the automotive industry, and all of the
operating assets of Joans affiliated yarn dying operation,
Western Avenue Dyers, L.P. As a result of the Joan acquisition,
Joan Fabrics became a principal stockholder of the Company.
Upon completion of the Joan acquisition, Mr. McCallum
became a member of the Companys Board of Directors. As
part of this acquisition, the Company inherited a lease pursuant
to which it leases from an entity controlled by
Mr. McCallum, a technical center in Lowell, Massachusetts.
The operations formerly conducted in these premises have been
moved to other company facilities, however the Company remains
obligated for the related lease.

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In connection with the Joan acquisition, the
Company entered into a Supply Agreement dated September 21,
2001 (the Supply Agreement) with Main Street
Textiles, L.P. (Main Street), which is controlled by
Mr. McCallum, and a Transition Services Agreement dated
September 21, 2001 (the Transition Agreement)
with Joan Fabrics. Under the Supply Agreement, which was
mutually terminated effective as of January 1, 2004, the
Company agreed to purchase all of its requirements for flat
woven automotive fabric from Main Street for a five-year period
beginning on the date of the Supply Agreement. The prices which
the Company agreed to pay for fabric under the agreement equaled
the costs of the raw materials plus an amount representing Main
Streets standard labor and overhead costs incurred in
manufacturing fabric for us. Under the Transition Agreement,
Joan Fabrics provided Products transitional and support services
for a period not to exceed twelve months in order to support the
continued and uninterrupted operation of the businesses acquired
by Products in the Joan acquisition. As a part of these
services, pending the Companys disassembly and removal of
machinery and equipment purchased from Joan Fabrics, Joan
Fabrics was permitted to continue to use that machinery and
equipment to manufacture for us all of our requirements for some
types of knitted and woven automotive fabrics. The terms of the
Companys agreement with respect to this fabric production
are substantially similar to those under the Supply Agreement.
Actual prices paid by the Company for fabric under the Supply
Agreement and Transition Agreement were subject to the rebates
described below.

In 2002 and 2003, the Company engaged in ordinary
course transactions with entities controlled by
Mr. McCallum for the purchase and sale of goods and
services as part of ongoing business relationships. The Company
recorded purchases from entities controlled by
Mr. McCallum, of $17.8 million (net of
$1.2 million of rebates) in 2003, and $47.3 million
(net of $10.5 million of rebates) in 2002 for goods and
services purchased. These rebates received from
Mr. McCallum relate to knit and woven automotive fabrics
provided by entities controlled by Mr. McCallum under the
Supply Agreement and Transition Agreement executed in connection
with the 2001 Joan acquisition, which are described above.
Supplier rebates such as these are common in the automotive
industry as part of ongoing price negotiations and adjustments.
These rebates from Mr. McCallum totaled $14.7 million
over the duration of the agreements. In addition, the Company
recorded sales to entities controlled by Mr. McCallum, of
$6.4 million in 2003 and $31.8 million in 2002.

The following table summarizes the balances
outstanding from entities controlled by Mr. McCallum (in
millions):

|                    |  |              |     |  |      |   |     | 
|------------------- |  | ------------ | --- |  | ---- | - | --- | 
|                    |  |             
|                    |  | As of        |    
|                    |  | December 31, |    
|                    |  |              |    
|                    |  | 2003         |     |  | 2002 |  
|                    |  |              |     |  |      |  
|Accounts Receivable |  | $            | 2.7 |  |      | $ | 5.9 | 
|Accounts Payable    |  | $            | 1.0 |  |      | $ | 8.0 | 

Textron
Transactions

As discussed above under
 Mandatorily Redeemable Preferred Stock of
Subsidiary, Item 1 Business 
Technology and Intellectual Property, Item 1
Business  Joint Ventures and
 Commercial Commitments  Put and
Call Arrangement the Company is a party to various
agreements and transactions with Textron. Textron became a
related party as a result of its receipt of the consideration in
the 2001 TAC-Trim acquisition. In May 2002, as part of the
finalization of the purchase price and related working capital
adjustments of the TAC-Trim acquisition, the Company paid
Textron $15.5 million in cash.

Prior to the TAC-Trim acquisition, TAC-Trim
entered into an $86.9 million sale and leaseback
transaction (the Textron Leasing Transaction) with
two separate single purpose affiliates of Textron Financial
Corporation, as lessor and purchaser, with respect to a
portfolio of manufacturing equipment situated in different
locations throughout the United States and Canada. In January
2003, the FASB issued FASB Interpretation No. (FIN)
46, Consolidation of Variable Interest Entities
(VIE), an interpretation of Accounting Research
Bulletin No. 51, Consolidated Financial
Statements (see Note 2 Summary of Significant
Accounting Policies for further information on
FIN 46). As part of the Companys implementation of
FIN 46,

39



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##### 



it determined that one of the single purpose
affiliates was a VIE. The Company and Textron agreed to have the
lease restructured so it was required to be consolidated by the
other party and not accounted for as a VIE. As consideration for
this lease restructuring, the Company agreed to pay Textron
Financial $150,000.


Payments under the Textron leasing transaction
are guaranteed by Products and secured by a first perfected
mortgage lien over certain real property with a value equal to
$25 million. Each lease is for an initial term of three
years with three one-year renewal options. At the end of the
leases (including the expiration of all renewal options), there
is the option of either purchasing all of the equipment for
approximately $26 million or returning the equipment to the
lessor. In the event the equipment is returned, arrangements
will be made for the disposition of the equipment. The Company
is required to guarantee a minimum value to the lessor of up to
approximately $21 million upon expiration of the leases. As
is customary, the documentation for the Textron leasing
transaction incorporates covenants by reference, from the
Companys credit facility, that may be amended or waived by
the senior lenders, and also contain events of default.

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 licenses back
to Textron certain intellectual property that was acquired in
the transaction. In the third agreement, the Company licenses
from Textron other intellectual property that was not acquired
in the transaction. In addition, under the TAC-Trim acquisition
agreement, the Company is permitted to use the
Textron name for 18 months in exchange for
payments of $13.0 million on December 15, 2002 and
$6.5 million on December 15, 2003.

Discontinued
Operations

The Company recognized in 2003 $2.4 million
from discontinued operations and $15.8 million of proceeds,
respectively, representing recoveries, net of cash outflows.
However, the Company has significant obligations related to
post-retirement, casualty, environmental, product liability,
lease and other liabilities of discontinued operations. The
nature of many of these contingent liabilities is such that they
are difficult to quantify and uncertain in terms of amount. The
Company has accrued $21.5 million for post retirement costs
and $36.7 million for environmental and product liability
costs. Based upon the information available to management and
the Companys experience to date, the Company believes that
these liabilities will not have a material effect on its
financial condition, results of operations or cash flows. In
addition, the Company has primary, excess and umbrella insurance
coverage for various periods that the Company expects to cover
certain of these liabilities. However, there can be no
assurances that contingent liabilities will not arise or that
known contingent liabilities or related claims will not exceed
the Companys expectations or that insurance will be
available to cover these liabilities. Because the cash
requirements of the Companys operations are substantially
a function of these contingencies, it is possible that actual
net cash requirements could differ materially from the
Companys estimates.

Recent and Future
Reorganization Plans

The Company has been restructuring its operations
in order to rightsize its overhead structure, reduce salaried
headcount and strengthen and streamline the senior management
team on a worldwide basis. While the Company believes that the
majority of restructuring activities have already been
undertaken, the Company is continually evaluating the business
and may elect to implement additional restructuring activities
as opportunities to achieve cost savings arise in future
periods. Refer to Results of Operations above and
Note 15 Restructuring for additional
information.

Stock Repurchase
Plan

At December 31, 2003, approximately
$1.0 million remained authorized by the Companys
Board of Directors to repurchase shares of the Companys
common stock at managements discretion. The Company
believes it has sufficient liquidity under its existing credit
arrangements to effect the repurchase program. The Company made
no repurchases for the years ended 2003 and 2002.

40



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##### 



Critical Accounting
Estimates

A summary of the Companys accounting
policies is described in Note 2, Summary of
Significant Accounting Policies, of the consolidated
financial statements. Critical accounting policies are those
that are most important to the portrayal of the Companys
financial condition and results. The preparation of consolidated
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Considerable
judgment is often involved in making these determinations, the
use of different assumptions could result in significantly
different results. Management believes its assumptions and
estimates are reasonable and appropriate, however actual results
could differ from those estimates. Certain of the Companys
more critical accounting estimates are described below.

Goodwill and
Intangibles:During the second quarter
of 2002, the Company completed the implementation of
SFAS 142, Goodwill and Other Intangible Assets.
Under SFAS 142, goodwill is no longer amortized. Instead,
goodwill and indefinite-lived intangible assets are tested for
impairment in accordance with the provisions of SFAS 142.
The Company employed a discounted cash flow analysis and a
market comparable approach in conducting its impairment tests.
The Company completed its initial impairment test in the second
quarter of 2002 and recorded an impairment loss of
$11.7 million (having no tax impact), or $0.15 per average
basic and diluted share relating to the UK Plastics
business in the former European and Rest of World Automotive
Systems segment. The impairment loss was reported as a
cumulative effect of a change in accounting principle and,
therefore, is accounted for as if it occurred on January 1,
2002. The Company completed its annual impairment test on
November 1, 2002 indicating that the fair value of the
reporting units exceeded the carrying values.

The Companys first quarter 2003 results
were below the forecasts utilized in testing for the goodwill
impairment for the year ended December 31, 2002. The
conditions in the markets in which the Company operates
continued to deteriorate and customer production schedules
continued to decline, and therefore, the Company reduced its
operating and financial plans for 2003. As a result, the Company
initiated an impairment test (outside of the annual testing date
of November 1) during the second quarter 2003. During the
second quarter, the Company carefully reviewed all of its
assumptions regarding revenue growth, improved operating margins
and planned capital expenditures. This analysis by each
reporting unit focused on new business awards, implementation of
strategic business initiatives such as restructuring, material
savings, plant efficiencies, revenue growth and additional
product/ process technology applications. While the Company is
aggressively attacking its overall cost structure, the U.S. and
Mexico Plastics reporting unit had even more definitive
objectives initiated after the 2003 first quarter performance on
a specific plant basis. As a result of these well-defined
programs, the Company, utilizing an independent outside
evaluator, completed the first step of the goodwill impairment
test in the second quarter of 2003 which indicated that the fair
value of the reporting units exceeded the carrying values, and
therefore no additional impairment testing was necessary. The
Company again, completed the annual impairment test as of
November 1, 2003 indicating fair value of the reporting
units exceeded the carrying values.

Fair value for all tests was determined based
upon the discounted cash flows of the reporting units using
discount rates ranging from 11.5% to 14.0% dependent on the
reporting unit and a residual growth rate of 2%. The market
comparable approach consisted of earnings multiples ranging from
5.2 to 6.5 times current year and forecasted Earnings
Before Interest, Taxes, Depreciation and Amortization
(EBITDA) (operating income less depreciation and
amortization) and a control premium on equity. Future cash flows
and EBITDA are affected by future operating performance, which
will be impacted by economic conditions, car builds, financial,
business and other factors, many of which are beyond the
Companys control. The U.S. and Mexico Plastics reporting
unit can be significantly impacted by an adverse change in
assumptions. Considerable judgment is often involved in making
these determinations, the use of different assumptions could
result in significantly different results. An approximate 50
basis point change in discount rates or an approximate 4%
reduction in profit would result in a further goodwill
impairment analysis as required by SFAS 142.

41



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##### 



Management believes its assumptions and estimates
are reasonable and appropriate, however actual results could
differ from those estimates.


Realization of Deferred Tax
Assets:Assessing the need for and
amount of a valuation allowance for deferred tax assets requires
significant judgment. The fact that a benefit may be expected
for a portion but not all of a deferred tax asset increases the
judgmental complexity. Future realization of deferred tax assets
ultimately depends on the existence of sufficient taxable income
of the appropriate character in either the carryback or
carryforward period under the tax law.

During 2001, Heartland acquired approximately
60 percent of the outstanding shares of the Company. This
constituted a change in control that results in
annual limitations on the Companys use of its Net
Operating Loss (NOLs) and unused tax credits. This
annual limitation on the use of NOLs and tax credits depends on
the value of the equity of the Company and the amount of
built-in gain or built-in loss in the
Companys assets at the date of the change in
control. Based on the expiration dates of the NOLs and tax
credits, as well as anticipated levels of domestic income,
management does not believe that the transaction will have a
material impact on these deferred tax assets. Management has
reviewed the Companys operating results for recent years
as well as the outlook for its continuing operations and
concluded that it is more likely than not that the net deferred
tax assets of $203.3 million at December 31, 2003 will
be realized.

Management took into consideration, among other
factors, the impact of recent restructuring plans, the timing of
the reversal of its temporary differences, certain tax planning
strategies and the expiration date of its NOLs. The
Companys ability to generate future taxable income is
dependent on numerous factors, including general economic
conditions, the state of the automotive industry and other
factors beyond managements control. Therefore, there can
be no assurance that the Company will meet its expectation of
future taxable income.

Pension and Postretirement
Benefits Other than Pensions:Annual
net periodic expense and benefit liabilities under our defined
benefit plans are determined on an actuarial basis. Assumptions
used in the actuarial calculations have a significant impact on
plan obligations and expense. Each September, the Company
reviews the actual experience compared to the more significant
assumptions used and makes adjustments to the assumptions, if
warranted. The healthcare trend rates are reviewed with the
actuaries based upon the results of their review of claims
experience. Discount rates are based upon an expected benefit
payments duration analysis and the equivalent average yield rate
for high-quality fixed-income investments. Pension benefits are
funded through deposits with trustees and the expected long-term
rate of return on fund assets is based upon actual historical
returns modified for known changes in the market and any
expected change in investment policy. Postretirement benefits
are not funded and our policy is to pay these benefits as they
become due.

The following table highlights the sensitivity of
our pension obligations and expense to changes in assumptions
(in millions):

|                                                    |  |                 |      |   |           |  |       |  
|--------------------------------------------------- |  | --------------- | ---- | - | --------- |  | ----- | -
|                                                    |  | Impact on       |      |   | Impact on | 
|Change in Assumption                                |  | Pension Expense |      |   | PBO       | 
|                                                    |  |                 |      |   |           | 
|25 basis point (bp) decrease in
    discount rate |  |                 | 1.5  |   |           |  | 15.6  |  
|25 bp increase in discount rate                     |  |                 | (1.5 | ) |           |  | (15.1 | )
|25 bp decrease in long-term return on assets        |  |                 | 0.8  |   |           |  |      |  
|25 bp increase in long-term return on assets        |  |                 | (0.8 | ) |           |  |      |  

Certain accounting guidance, including the
guidance applicable to pensions, does not require immediate
recognition of the effects of a deviation between actual and
assumed experience or the revision of an estimate. This approach
allows the favorable and unfavorable effects that fall within an
acceptable range to be netted. Although this netting occurs
outside the basic financial statements, disclosure of the net
amount is disclosed as an unrecognized gain or loss in the
footnotes to our financial statements. The Company expects to
incur approximately $18.8 million of pension expense in
2004. See Note 13 Employee Benefit Plans for
additional discussion.

42



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Environmental
Contingencies:The Company is subject
to federal, state, local and foreign environmental, and health
and safety, laws and regulations that (i) affect 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 the Company has 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 the Companys
various businesses. Environmental compliance costs for
continuing businesses are accounted for as normal operating
expenses or capital expenditures, except for certain costs
incurred at acquired locations. 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 known
to it, such environmental compliance and remediation costs will
not have a material adverse effect on the Companys
business, consolidated financial condition or future results of
operations.

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
notified that it is a potentially responsible party
(PRP) under the federal Superfund law or similar
state laws. Other sites at which we may be responsible for
contamination may be identified in the future, including with
respect to divested and acquired businesses.

The Company is currently engaged in investigating
or remediating certain sites as discussed below. In estimating
the cost of investigation and remediation, the Company has
considered, among other things, prior experience in remediating
contaminated sites, remediation efforts 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
identified PRPs will have the financial resources to fulfill
their obligations at sites where they and the Company may be
jointly and severally liable. It is difficult 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 the Companys 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.                                                                                                                 

Revenue
Recognition:The Company recognizes
revenue from product sales when it has shipped the goods.
Products are shipped FOB shipping point using customer
designated transportation companies with title passing at that
time. Significant retroactive price adjustments are recognized
in the period when such amounts become probable. Sales are
recognized based upon the gross amount billed to a customer for
those products in which the Companys customer has directed
the sourcing of certain materials or components used in the
manufacture of the final product. The Company generally allows
its customers the right of return only in the case of defective
products. The Company provides a reserve for estimated defective
product costs at the time of the sale of the products.

43



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##### 



Allowance for uncollectible
accounts:The allowance for
uncollectible accounts provides for losses believed to be
inherent within the Companys Accounts and Other
Receivables, (primarily trade receivables and the retained
interest in the receivables facility). Management evaluates both
the creditworthiness of specific customers and the overall
probability of losses based upon an analysis of the overall
aging of receivables, past collection trends and general
economic conditions. Management believes, based on its review,
that the allowance for uncollectible accounts is adequate to
cover potential losses. Actual results may vary as a result of
unforeseen economic events and the impact those events could
have on our customers.

Item 7A.     Quantitative
and Qualitative Disclosures About Market Risk

MARKET RISK
SENSITIVITY

In the normal course of business, the Company is
exposed to market risk associated with fluctuations in foreign
exchange rates and interest rates. The Company manages these
risks through the use of derivative financial instruments in
accordance with managements guidelines. The Company enters
into all hedging transactions for periods consistent with the
underlying exposures. We do not enter into derivative
instruments for speculative or trading purposes.

Foreign Currency

Operating results may be impacted by the Company
buying, selling and financing in currencies other than the
functional currency of our operating companies
(transactional exposure). The Company mitigates this
risk by entering into foreign currency forward, swap and option
contracts. The foreign currency contracts are executed with
banks that the Company believes are creditworthy.

The Companys most significant foreign
currency transactional exposures relate to Mexico, Canada and
the European Monetary Union. As of December 31, 2003,
foreign currency contracts representing $50 million of
notional amount were outstanding with maturities of less than
one year. The fair value of these foreign exchange contracts as
of December 31, 2003 was approximately $44 thousand. The
table below provides a summary of the foreign exchange contracts
that are outstanding as of December 31, 2003. The
instruments actual cash flows are denominated in U.S.
dollars (dollar amounts in millions).

|           |  |          |     |  |           |  |     |                   |  |   |                  |  |  |             |     |  |  |   |   | 
|---------- |  | -------- | --- |  | --------- |  | --- | ----------------- |  | - | ---------------- |  |  | ----------- | --- |  |  | - | - | 
|           |  |          |     |  |           |  |     | Weighted Average  |  |   |                 
|Derivative |  | Currency |     |  | Currency  |  |     | USD Equivalent of |  |   | Contract Rate    |  |  | Unrealized 
|Type       |  | Sold     |     |  | Purchased |  |     | Notional Amount   |  |   | (per Convention) |  |  | Gain/(Loss)
|           |  |          |     |  |           |  |     |                   |  |   |                  |  |  |            
|Options    |  |          | CAD |  |           |  | USD |                   |  | $ | 50.0             |  |  |             | 1.5 |  |  | $ |  | 

In addition to the transactional exposures, our
operating results are impacted by the translation of our foreign
operating income into U.S. dollars (translation
exposure). We do not enter into foreign currency contracts
to mitigate this exposure.

Interest Rate

As of December 31, 2003 approximately 71% of
the Companys borrowings were on a fixed rate basis. The
remainder of the Companys borrowings were on a variable
rate basis and sensitive to changes in interest rates. While the
Company has used interest rate swaps and other interest rate
protection agreements to modify its exposure to interest rate
movements and to reduce borrowing rates, no such agreements were
in place at December 31, 2003. Because approximately
$356.4 million of the Companys borrowings were
subject to a minimum LIBOR floor of 3.00%, a 1.00% unfavorable
increase in interest rates would not materially impact pre-tax
earnings and cash flow.



|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and
    Supplementary Data

See the Consolidated Financial Statements of
Collins & Aikman Corporation and subsidiaries included
herein and listed on the Index to Financial Statements set forth
in Item 15 (a) of this Form 10-K report.

44



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|        |                                                                                             
|------- | --------------------------------------------------------------------------------------------
|Item 9. | Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure

On June 20, 2003, the Audit Committee of the
Board of Directors of Collins & Aikman Corporation approved
the appointment of KPMG LLP as the Companys independent
accountants for the year ending December 31, 2003 and the
dismissal of PricewaterhouseCoopers LLP (PwC), which
had previously served in this capacity.

During the years ended December 31, 2002 and
2001 and through June 20, 2003, KPMG LLP had not been
engaged as an independent accountant to audit either the
financial statements of the Company or any of its subsidiaries,
nor had it been consulted regarding the application of
accounting principles to any specified transaction, either
completed or proposed, or the type of audit opinion that might
be rendered on the Companys financial statements, or any
matter that was the subject of a disagreement or reportable
event.

PwC communicated in its February 2003 report to
the Audit Committee that disagreements with respect to potential
changes in measurement date and asset valuation methods for the
Companys pension plans were resolved. In connection with
its 2003 budgeting process, the Company had engaged an actuarial
consultant to develop and evaluate prospective alternatives for
its pension measurement date and asset valuation methods. These
alternatives were reviewed with PwC in order to obtain their
views on the appropriate accounting measurement dates and
valuation methodologies. After full discussion with PwC, the
Companys senior officers and PwC agreed to continue
employing in 2003 the pension valuation and measurement
methodologies the Company had employed in 2002. There were no
other disagreements with PwC during the years ended
December 31, 2002 and 2001 on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the
satisfaction of PwC, would have caused it to make reference to
the subject matter of such disagreement in their reports on the
financial statements for the year.

The reports of PwC on the financial statements
for the years ended December 31, 2002 and 2001, did not
include any adverse opinion or disclaimer of opinion, or any
qualification or modification as to uncertainty, audit scope or
accounting principles.

During the years ended December 31, 2002 and
2001 and through June 20, 2003, PwC reported no material
weaknesses in the Companys internal control systems and
there were no other reportable events as defined in
Regulation S-K Item 304(a)(1)(v), other than those
described in the next paragraph.

In connection with its 2001 audit, PwC
communicated to the Audit Committee and to management reportable
conditions in the Companys internal control systems,
attributable primarily to integration issues from an acquisition
completed during the third quarter of 2001, personnel turnover
at the corporate and plant level and failure of two
manufacturing facilities to follow Company procedures related to
account reconciliations. Corrective actions were implemented in
2002. In connection with its 2002 audit, PwC communicated to the
Audit Committee and to management reportable conditions in the
Companys internal control system related to timely
preparation of cash account reconciliations, review of
non-standard journal entries, revenue accounting and currency
translation at foreign locations and compliance with established
Company accounting policies and procedures. These conditions
were attributable primarily to computer systems, process
harmonization and personnel integration issues from the
December 20, 2001, TAC-Trim acquisition. Corrective actions
have been developed and are being implemented to eliminate or
reduce to an acceptable level the financial reporting risks
associated with the conditions noted. PwC is not in a position
to comment on the adequacy of these corrective actions. The
Company believes that it has corrected all these conditions
during 2003. PwC did not modify its report on the Companys
2001 and 2002 audited financial statements as a consequence of
these reportable conditions.

The Company requested that PwC furnish it with a
letter addressed to the Securities and Exchange Commission
stating whether or not it agrees with the above statements. A
copy of such letter, dated June 24, 2003, is filed as an
Exhibit on Form 8-K filed with the Securities and Exchange
Commission on June 26, 2003.

45



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Item 9A.     Controls
and Procedures

a. Evaluation of disclosure
controls and procedures:

As of the end of the period covered by this
report, the Companys Chief Executive Officer and the
Companys Chief Financial Officer, the Certifying
Officers, evaluated the effectiveness of the design and
operation of the Companys disclosure controls and
procedures (as defined in the Securities Exchange Act of
1934). Based on that evaluation, the Certifying Officers have
concluded that the Companys disclosure controls and
procedures are effective to ensure that information required to
be disclosed by the Company in the reports that it files and
submits under the Exchange Act is recorded, processed,
summarized and reported as and when required, and are effective
to ensure that such information is accumulated and communicated
to the Companys management, including its Certifying
Officers, as appropriate to allow timely decisions regarding
required disclosure. In addition, the Certifying Officers also
disclosed to the Companys auditors and the audit committee
of the Board of Directors all significant deficiencies in the
design or operation of internal controls that could adversely
affect the Companys ability to record, process, summarize
and report financial data. A summary of the key items disclosed
and the changes in internal controls resulting from corrective
actions are discussed below.

b. Changes in internal
controls:

An evaluation of internal controls was conducted
for the year ended December 31, 2003. The following
paragraphs detail managements significant areas of focus
to further enhance internal controls:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company has implemented certain enhancements,
    or is in the process of enhancing, internal controls relating to
    data quality and process efficiency with respect to its current
    consolidation system and preparation of consolidated financial
    statements. Recent actions relate to improving the systematic
    roll-up of both financial and non-financial information that is
    reported in the Companys financial reports filed with the
    Securities & Exchange Commission. These actions have
    primarily focused on improving: (1) the entity structure
    utilized by the consolidation tool, (2) the collection and
    compilation of financial and non-financial data and (3) the
    ability to identify and eliminate intercompany transactions and
    balances in a more efficient manner. The Company is currently
    making these changes to its existing consolidation system and is
    in the process of implementing a new consolidation system. As
    part of the new system implementation process, the Company is
    examining additional means to improve its internal controls. The
    Company is also enhancing its procedures with respect to
    ensuring timely and adequate review of non-standard journal
    entries and account reconciliations and adherence to existing
    corporate accounting policies and accounting principles
    generally accepted in the United States of America.

Other than the above, there were no significant
changes in the Companys internal controls or in other
factors that could significantly affect internal controls. The
Company also intends to refine its internal control procedures
on an ongoing basis as deemed appropriate with a view towards
making improvements.

46



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##### 



PART III



Item 10.     Directors
and Executive Officers of the Registrant


The Restated Certificate of Incorporation of the
Company provides that the Board of Directors of the Company is
divided into three classes serving staggered three-year terms.
Set forth below, as of March 1, 2004, are the name, age and
principal occupation or employment during the last five years of
each of the current directors of the Company. None of the
directors is related to any executive officer or other director
of the Company by blood, marriage or adoption. The affiliations
between the Company and Heartland, Blackstone Partners, Charles
E. Becker, Becker Ventures, Elkin McCallum, Joan Fabrics and
Textron (as such terms are defined herein) are set forth under
Item 12, Security Ownership of Certain Beneficial
Owners and Management and Item 13, Certain
Relationships and Related Transactions.

Directors Whose Terms Expire
at the 2004 Annual Meeting  Class I
Directors



|                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Timothy D. Leuliette |  | Age 54. Mr. Leuliette was elected as a
    director of the Company in February 2001 and has been a director
    of Metaldyne Corporation (Metaldyne) since November
    2000 and a director of Trimas Corporation (Trimas)
    since 2002. He is currently Chairman, President and Chief
    Executive Officer of Metaldyne. He is a senior managing director
    and one of the co-founders of Heartland. Prior to joining
    Heartland, Mr. Leuliette joined the Penske Corporation as
    President and Chief Operating Officer in 1996. From 1991 to 1996
    Mr. Leuliette served as President and Chief Executive Officer of
    ITT Automotive, an automotive company. He also serves on a
    number of corporate and charitable boards, and served as
    chairman of the Board of Directors of The Federal Reserve Bank
    of Chicago, Detroit Branch.
|                    
|Elkin McCallum       |  | Age 60. Mr. McCallum was elected as a
    director of the Company in September 2001. Mr. McCallum has
    been the Chairman of the Board and Chief Executive Officer of
    Joan Fabrics since 1989 and was Chairman and Chief Executive
    Officer of Tyng Textiles L.L.C. from 1996 to 2003.
    Mr. McCallum is currently Chairman of the Board of Trustees
    of Bentley College.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                    
|W. Gerald McConnell  |  | Age 40. Mr. McConnell was elected as a
    director of the Company in February 2001 and has been a senior
    managing director of Heartland since its founding.
    Mr. McConnell was formerly a managing director at Deutsche
    Bank Alex. Brown (formerly Bankers Trust Co.) from 1997 until
    1999. From 1991 until 1999, Mr. McConnell specialized in
    leveraged finance and financial sponsor coverage at Deutsche
    Bank Alex. Brown. Mr. McConnell also serves on the boards
    of directors of Springs Industries, Inc. (Springs)
    and Trimas.                                                                                                                                                                                                                                                                                                
|                    
|J. Michael Stepp     |  | Age 59. Mr. Stepp has been a director of the
    Company since February 2001. Mr. Stepp is currently Vice
    Chairman of the Board of Directors and Chief Financial Officer
    of the Company. He was previously Executive Vice President and
    Chief Financial Officer of the Company from May 2002 through
    July 2002 (after serving as interim Chief Financial Officer from
    January 2002 through April 2002) and from April 1995 through
    December 1999. Mr. Stepp was a consultant to the Company
    and was an independent mergers and acquisitions advisor from
    January 2000 through February                                                                                                                                                                                                                                                

47



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##### 



| |  |                                                                                                                                                                                              
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 2001. Since March 2001, Mr. Stepp has been a
    senior managing director of Heartland but has not been an
    employee of Heartland since April 2002. He is also a director of
    Products.

Directors Whose Terms Expire
at the 2005 Annual Meeting  Class II
Directors



|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Warren B. Rudman    |  | Age 73. Mr. Rudman has been a director of
    the Company since June 1995. Mr. Rudman was a partner in
    the law firm of Paul, Weiss, Rifkind, Wharton & Garrison
    from 1993 through 2002, and since January 2003 Mr. Rudman
    has been of counsel to the law firm. Mr. Rudman served as a
    United States Senator from New Hampshire from 1980 through 1992
    and as Attorney General of New Hampshire from 1970 until 1976.
    Mr. Rudman is also a director of the Chubb Corporation
    (which term will expire in April, 2004), Allied Waste, Boston
    Scientific, the Raytheon Company and an independent trustee of
    several mutual funds of the Dreyfus Corporation.
|                   
|Cynthia L. Hess     |  | Age 47. Ms. Hess is the owner and Chief
    Executive Officer of Hess Group, LLC. Prior to forming Hess
    Group in 2002, Ms. Hess was a senior managing director of
    Heartland. She was formerly Vice President of Corporate Quality
    for DaimlerChrysler, where she led the corporate strategy for
    quality improvement and facilitated quality plan execution. In
    her 22 years with DaimlerChrysler, Ms. Hess held
    various engineering, manufacturing and procurement supply
    positions. Ms. Hess is also a director of Metaldyne.                                                                                                                                   
|                   
|Samuel Valenti, III |  | Age 58. Mr. Valenti has been a director of
    the Company since February 2001. He is a senior managing
    director of Heartland, chairman of Valenti Capital LLC, has been
    a director of Metaldyne since January 2001, and is Chairman of
    the Board of Directors of Trimas. Mr. Valenti is a director of
    Masco Capital Corporation and has been its President since 1988.
    Mr. Valenti was formerly Vice President 
    Investments of Masco Corporation, a home improvement and
    building products company, from May 1974 to October 1998.                                                                                                                             
|                   
|David C. Dauch      |  | Age 39. Mr. Dauch has been Senior Vice
    President of Sales, Marketing and Manufacturing 
    Driveline Division of American Axle & Manufacturing since
    2003, a company he joined in 1995 as Manager, Sales
    Administration. In 1996, he became Director of Sales, GM Full
    Size Truck Programs and was named Vice President of Sales and
    Marketing in 1998. In 2001, he became Vice President of
    Manufacturing  Driveline Division. From 1987 to 1995,
    Mr. Dauch was employed by Products where he held positions
    of product manager, account executive, and Director of Ford
    Sales and Marketing for the Automotive Carpet and Fabric Groups.            
|                   
|Marshall A. Cohen   |  | Age 69. Mr. Cohen has been a director of the
    Company since April 2001. Mr. Cohen has been Counsel at
    Cassels Brock and Blackwell, a Canadian law firm, since October
    1996. Mr. Cohen is also a director of The Toronto-Dominion
    Financial Group, Barrick Gold Corporation, American
    International Group, Inc., Lafarge Corporation N.A., The
    Goldfarb Corporation, Premcor Inc.,                                                                                                                                                                                                                                                                                     

48



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##### 



| |  |                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------
| |  | Metaldyne, and Golf Town Canada Inc.
    Mr. Cohen serves on the Advisory Boards of the Blackstone
    Group and Heartland.

Directors Whose Terms Expire
at the 2006 Annual Meeting  Class III
Directors



|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Charles E. Becker  |  | Age 56. Mr. Becker has been a director since
    July 2001. He was Vice Chairman of the Board from July 2001
    until July 2002. For over 25 years, through 1998,
    Mr. Becker was the Chief Executive Officer and co-owner of
    Becker Group, Inc., a global automotive interior components
    supplier. Mr. Becker is the owner and Chairman of Becker
    Ventures, which was established in 1998 to invest in a variety
    of business ventures, including the manufacturing, real estate
    and service industries. Mr. Becker is also a director of
    Metaldyne and Trimas.                                                                                                                         
|                  
|Robert C. Clark    |  | Age 60. Mr. Clark has been a director of the
    Company since October 1994. Mr. Clark is a Harvard
    University Distinguished Service Professor, Harvard Law School.
    Mr. Clark joined Harvard Law School in 1979 after four
    years at Yale Law School, where he was a tenured professor, and
    served as Dean of the Harvard Law School from 1989 to 2003.
    Mr. Clark is a corporate law specialist and author of
    numerous texts and legal articles. Prior to his association with
    academia, he was in private practice with Ropes & Gray.
    Mr. Clark is also a director of Omnicom Group, Inc., Time
    Warner Inc., and a trustee of Teachers Insurance Annuity
    Association (TIAA).
|                  
|David A. Stockman  |  | Age 57. Mr. Stockman has been a director of
    the Company since February 2001 and has been Chairman of the
    Board of the Company since August 2002. Mr. Stockman is
    also a director of Metaldyne, Springs and Trimas. He is a senior
    managing director and the founder of Heartland. Prior to
    founding Heartland, he was a senior managing director of The
    Blackstone Group L.P. (Blackstone) and had been with
    Blackstone since 1988. Mr. Stockman also served as the
    director of the Office of Management and Budget in the Reagan
    Administration, and represented a district in southern Michigan
    in the U.S. House of Representatives from 1976 to 1981.                 
|                  
|Daniel P. Tredwell |  | Age 45. Mr. Tredwell has been a director of
    the Company since February 2001. Mr. Tredwell is also a
    director of Metaldyne, Trimas and Springs. He is a senior
    managing director and a co-founder of Heartland. He has two
    decades of leveraged financing and buyout experience.
    Mr. Tredwell served as a Managing Director at Chase
    Securities Inc. and had been with Chase Securities since 1985.                                                                                                                                                                                                                                                                                          

Arrangements Regarding
Election of Directors

See Item 12, Security Ownership of
Management and Principal Stockholders  Voting
of this Report.

49



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##### 



EXECUTIVE OFFICERS OF THE
COMPANY

The following is a list of the names and ages, as
of March 1, 2004, of the executive officers of the Company
and a description of all positions and offices with the Company
held by each such person and each such persons principal
occupations and employment during the past five years. All
executive officers hold office at the pleasure of the
Companys Board of Directors.

|                    |  |     |    |  |          |                                                           
|------------------- |  | --- | -- |  | -------- | ----------------------------------------------------------
|Name                |  | Age |    |  | Position
|                    |  |     |    |  |         
|David A. Stockman   |  |     | 57 |  |          | Chairman of the Board and Chief Executive Officer         
|J. Michael Stepp    |  |     | 59 |  |          | Vice Chairman of the Board and Chief Financial
    Officer
|Wallace W. Creek    |  |     | 65 |  |          | Senior Vice President-Finance                             
|Millard L. King, Jr |  |     | 59 |  |          | President, Global Soft Trim                               
|Robert A. Krause    |  |     | 47 |  |          | Vice President and Treasurer                              
|L. Gregory Tinnell  |  |     | 43 |  |          | Senior Vice President, Human Resources                    
|Michael G. Torakis  |  |     | 47 |  |          | President, International Plastics                         
|Eric J. White       |  |     | 48 |  |          | President, U.S. and Mexico Plastics                       

David A. Stockmanhas been a director of the Company
since February 2001 and has been Chairman of the Board of the
Company since August 2002. Mr. Stockman has been Chief Executive
Officer of the Company since August 2003. Mr. Stockman is
also a director of Metaldyne, Springs and Trimas. He is a senior
managing director and the founder of Heartland. Prior to
founding Heartland, he was a senior managing director of
Blackstone and had been with Blackstone since 1988.
Mr. Stockman also served as director of the Office of
Management and Budget in the Reagan Administration, and
represented a district in southern Michigan in the U.S. House of
Representatives from 1976 to 1981.

J. Michael Stepphas
been a director of the Company since February 2001.
Mr. Stepp is currently Vice Chairman of the Board of
Directors and Chief Financial Officer of the Company. He was
previously Executive Vice President and Chief Financial Officer
of the Company from May 2002 through July 2002 (after serving as
interim Chief Financial Officer from January 2002 through April
2002), and from April 1995 through December 1999. Mr. Stepp
was a consultant to the Company and was an independent mergers
and acquisitions advisor from January 2000 through February
2001. Since March 2001, Mr. Stepp has been a senior
managing director of Heartland but has not been an employee of
Heartland since April 2002. He is also a director of Products.

Wallace W. Creekhas
been Senior Vice President  Finance since December 2002,
and an executive officer of the Company since December 2002.
Before joining the Company in 2002, Mr. Creek was corporate
comptroller for General Motors. Mr. Creek is a director of
Columbus McKinnon Corp.

Millard L. King, Jr.has been President, Global Soft Trim
since August 2003 and an executive officer of the Company since
March 2002. From November 2001 to March 2002, he was Executive
Vice President of Global Manufacturing Operations, Carpet and
Acoustics Systems. Mr. King joined the Company in 1971.
Prior to November 2001, Mr. King held the positions of
Senior Vice President of Operations for Automotive Knit Fabrics
and Chief Operating Officer of the U.S. automotive carpet
systems and of automotive knit and woven operations.

Robert A. Krausehas
been Vice President and Treasurer since October 2002, and an
executive officer of the Company since December 2002. Before
joining the Company, Mr. Krause was associated with
American Axle & Manufacturing Holdings, Inc., where he was
Vice President and Treasurer from 1999 to August 2002, and Vice
President  Investor Relations from August 2002 to
October 2002, Treasurer and Acting Interim Chief Financial
Officer during 1999, and Treasurer from 1998 to 1999.

L. Gregory Tinnellhas been Senior Vice President of
Human Resources and an executive officer since April 2000.
Previously, he was Vice President of Human Resources for the
Companys southern and Mexican operations, as well as Vice
President of Global Compensation & Benefits.
Mr. Tinnell joined the Company in 1995. Prior to joining
the Company, he served in various management positions with Sara
Lee Corporation,

50



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##### 



Nabisco Foods Group and North American
Refractories Company. Mr. Tinnell serves on the National
Association of Manufacturers Human Resources Steering Committee.


Michael G. Torakishas been President, International
Plastics since August 2003 and an executive officer of the
Company since March 2004. Mr. Torakis joined the Company in
August 2003. Prior to joining the Company, Mr. Torakis was
President of Venture Holdings Company, LLC and Chief Executive
Officer of Peguform GmbH. On or about March 28, 2003,
Venture Holdings Company, LLC and certain of its affiliates
filed a petition for protection under the United States
Bankruptcy Code. Mr. Torakis was President of Venture
Holdings Company, LLC at the time of the bankruptcy filing. In
addition, on or about May 28, 2002, Peguform GmbH, a
subsidiary of Venture Holdings Company, LLC, filed for
bankruptcy in Germany. Mr. Torakis was Chief Executive
Officer of Peguform GmbH at the time of the filing.

Eric J. Whitehas
been President, U.S. and Mexico Plastics since August 2003 and
an executive officer of the Company since August 2002. From
August 2002 to August 2003, he was Executive Vice President of
Global Manufacturing, Interior Trim & Cockpit Systems. Prior
to August 2002, Mr. White held the positions of Vice
President Operations  Plastics with responsibility
for multiple plant operations, and Vice President Operations for
two operations with Textron Automotive Company, Inc.

See Executive Compensation 
Employment Agreements for a description of the
Companys employment agreements with Messrs. Stepp,
King, Torakis and White. Additionally, Mr. Tinnell has a
written employment agreement.

Mr. Stockman does not receive any
compensation for his service to the Company as Chief Executive
Officer. Mr. Stockmans services are provided to the
Company by Heartland pursuant to a services agreement that is
more fully described in Item 13, Certain
Relationships and Related Transactions of this Report. The
assumption by Mr. Stockman of the office of Chief Executive
Officer did not change the compensation due Heartland under the
services agreement.

Section 16(a) Beneficial
Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act
of 1934 requires the Companys officers and directors, and
persons who own more than ten percent of a registered class of
the Companys equity securities, to file reports of
ownership and changes in ownership with the Securities and
Exchange Commission (the SEC). Officers, directors
and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on review of
the copies of such reports furnished to the Company during or
with respect to fiscal 2003, or written representations that no
Forms 5 were required, the Company believes that during the
fiscal year ended December 31, 2003, all persons subject to
the Section 16(a) filing requirements filed the required
reports on a timely basis.

Code of Ethics

Products has a code of ethics entitled
Collins & Aikman Products Co. Code of Business
Conduct which is applicable to all employees, consultants
and contractors of Products, its subsidiaries and affiliates,
including the Company. The above-referenced Code of Business
Conduct is also applicable to the Companys principal
executive officer, principal financial officer, principal
accounting officer or controller and persons performing similar
functions for the Company (Senior Officers).

The Code of Business Conduct is available on the
Companys website at www.collinsaikman.com. All amendments
to the Code of Business Conduct will also be made available on
the Companys website, along with all waivers of the Code
of Business Conduct involving Senior Officers of the Company.

Audit Committee Financial
Expert

The Board of Directors of the Company has
determined that none of the current members of the Audit
Committee is an audit committee financial expert, as
the Board interprets that requirement in its business judgment.
However, each member of the Audit Committee is financially
literate, and each member of the Audit Committee satisfies the
heightened independence requirements of
Sections 303.01(B)(2)(a) and

51



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##### 



303.01(B)(7) of the New York Stock
Exchanges listing standards, to which all members of the
Audit Committee are subject. In addition, the Board re-affirms
its confidence in each of the members of the Audit Committee,
who the Board has determined are independent under applicable
rules and regulations and have considerable qualifications and
extensive experience with the Company and other public and
private entities, and have demonstrated unique leadership
capabilities, to serve as members of the Companys Audit
Committee.


Item 11.     Executive
Compensation

The following table sets forth information
concerning the compensation for services rendered to the Company
and its subsidiaries by (i) both individuals serving as the
Companys Chief Executive Officer during 2003,
(ii) the Companys four most highly compensated
executive officers (other than the Chief Executive Officer)
whose total annual salary and bonus exceeded $100,000 and who
were serving as executive officers at the end of the fiscal year
ended December 31, 2003 and (iii) one of the
Companys former executive officers whose compensation
would have been reported herein if they had been serving as
executive officers of the Company at the end of the fiscal year
(the individuals named in clauses (i), (ii) and
(iii) being referred to herein as the Named Executive
Officers). All compensation shown has been paid by
Products or by a subsidiary of Products (although any options
shown as awarded are for Common Stock of the Company). The
Company does not separately compensate its executive officers
for their duties as officers of the Company (except for any such
options).

Summary Compensation Table

|                            |                           |                     |      |       |            |  |              |         |  |            |                    |         |           |            |        |        |                 |  |         |         |  |  |         |        | 
|--------------------------- | ------------------------- | ------------------- | ---- | ----- | ---------- |  | ------------ | ------- |  | ---------- | ------------------ | ------- | --------- | ---------- | ------ | ------ | --------------- |  | ------- | ------- |  |  | ------- | ------ | 
|                            |                           |                     |      |       |            | 
|                            |                           | Annual Compensation |      |       |            |  |             
|                            |                           |                     |      |       | Securities |  |              |        
|                            |                           |                     |      | Bonus |            |  | Other Annual |         |  | Underlying |                    |         | All Other |           
|Name and Principal Position |                           | Year                |      |       | Salary($)  |  |              | ($)     |  |            | Compensation($)(1) |         |           | Options(#) |        |        | Compensation($) | 
|                            |                           |                     |      |       |            |  |              |         |  |            |                    |         |           |            |        |        |                 | 
|David A. Stockman           |                           |                     | 2003 |       |            |  | 0            |         |  |            | 0                  |         |           |            | 0      |        |                 |  | 0       |         |  |  | 0       |       
|                            | Chairman and Chief        |                     |      | 2002  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|                            | Executive Officer(2)      |                     |      | 2001  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|J. Michael Stepp            |                           |                     | 2003 |       |            |  | 484,176      |         |  |            | 112,500            | (3)     |           |            | 14,699 |        |                 |  | 0       |         |  |  | 3,319   | (4)   
|                            | Vice Chairman of the      |                     |      | 2002  |            |  |              | 300,000 |  |            |                    | 262,500 |           |            |        | 35,897 |                 |  |         | 440,000 |  |  |         | 5,047  | 
|                            | Board and Chief           |                     |      | 2001  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|                            | Financial Officer         |                     |      |       |            |  |              |         |  |            |                    |         |           |            |        |        |                 |  |         |         |  |  |         |        | 
|Millard L. King, Jr.        |                           |                     | 2003 |       |            |  | 341,667      |         |  |            | 37,500             | (3)     |           |            | 10,780 |        |                 |  | 0       |         |  |  | 2,325   | (6)   
|                            | President, Global         |                     |      | 2002  |            |  |              | 250,000 |  |            |                    | 140,873 |           |            |        | 11,058 |                 |  |         | 376,321 |  |  |         | 2,390  | 
|                            | Soft Trim(5)              |                     |      | 2001  |            |  |              | 209,917 |  |            |                    | 66,627  |           |            |        | 4,080  |                 |  |         | 0       |  |  |         | 11,216 | 
|Eric White                  |                           |                     | 2003 |       |            |  | 307,917      |         |  |            | 25,000             | (3)     |           |            | 11,954 |        |                 |  | 200,000 |         |  |  | 9,584   | (8)   
|                            | President, US &           |                     |      | 2002  |            |  |              | 199,590 |  |            |                    | 25,000  |           |            |        | 3,822  |                 |  |         | 40,000  |  |  |         | 1,062  | 
|                            | Mexico Plastics(7)        |                     |      | 2001  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|Michael G. Torakis          |                           |                     | 2003 |       |            |  | 194,423      |         |  |            | 76,932             |         |           |            | 4,228  |        |                 |  | 0       |         |  |  | 1,236   | (10)  
|                            | President, International  |                     |      | 2002  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|                            | Plastics(9)               |                     |      | 2001  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|Wallace W. Creek            |                           |                     | 2003 |       |            |  | 256,562      |         |  |            | 150,000            |         |           |            | 10,108 |        |                 |  | 100,000 |         |  |  | 1,746   | (12)  
|                            | Senior Vice               |                     |      | 2002  |            |  |              | 20,833  |  |            |                    | N/A     |           |            |        | 1,054  |                 |  |         | 0       |  |  |         | 0      | 
|                            | President-Finance(11)     |                     |      | 2001  |            |  |              | N/A     |  |            |                    |         |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|Jerry L. Mosingo            |                           |                     | 2003 |       |            |  | 459,677      | (14)    |  |            | 0                  |         |           |            | 5,963  |        |                 |  | 210,000 |         |  |  | 840,211 | (15)  
|                            | Former President and      |                     |      | 2002  |            |  |              | 475,833 |  |            |                    | 0       |           |            |        | 9,652  |                 |  |         | 440,000 |  |  |         | 2,379  | 
|                            | Chief Executive           |                     |      | 2001  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 
|                            | Officer(13)               |                     |      |       |            |  |              |         |  |            |                    |         |           |            |        |        |                 |  |         |         |  |  |         |        | 
|Michael A. Mitchell         |                           |                     | 2003 |       |            |  | 400,000      |         |  |            | 50,000             | (3)     |           |            | 14,789 |        |                 |  | 0       |         |  |  | 2,637   | (17)  
|                            | Former President Global   |                     |      | 2002  |            |  |              | 320,833 |  |            |                    | 50,000  |           |            |        | 14,477 |                 |  |         | 360,000 |  |  |         | 2,165  | 
|                            | Commercial Operations(16) |                     |      | 2001  |            |  |              | N/A     |  |            |                    | N/A     |           |            |        | N/A    |                 |  |         | N/A     |  |  |         | N/A    | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total perquisites for each Named Executive
    Officer were less than the lesser of $50,000 or 10% of annual
    salary and bonus and, accordingly, the dollar value of such
    perquisites is not shown. The numbers shown for each Named
    Executive Officer reflect gross-ups for incremental federal and
    state income taxes related to such perquisites or relocation
    reimbursements. Perquisites for each Named Executive

52



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##### 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Officer may, but do not necessarily, include
    reimbursement for any of the following expenses: car; financial
    planning; executive fitness; executive physicals and medical;
    clubs and entertainment; and personal use of Company aircraft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) | Mr. Stockman became Chief Executive Officer
    of the Company in August 2003. He has been a director of the
    Company since February 2001 and Chairman of the Board of the
    Company since August 2002. Mr. Stockman does not receive
    any compensation for his services as Chief Executive Officer.
    Mr. Stockmans services are provided by Heartland
    under a services agreement. See Item 7,
    Managements Discussion and Analysis 
    Effects of Certain Transactions with Related Parties and
    Item 13, Certain Relationships and Related
    Transactions for descriptions of the services agreement
    between the Company and Heartland. Heartlands compensation
    under the services agreement did not increase as a result of
    Mr. Stockman becoming Chief Executive Officer of the
    Company.
|   
|(3) | Certain officers and key executives received a
    special recognition bonus in 2003. The bonus payments to Stepp,
    King, Mitchell and White were $112,500, $37,500, $50,000 and
    $25,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(4) | Amount for 2003 for Mr. Stepp consists of
    premiums in the amounts of $3,010 and $309 paid for basic term
    life insurance and accidental death and dismemberment
    (AD&D) insurance, respectively, under group life
    insurance policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) | Mr. King assumed the position of President
    Global Soft Trim in August of 2003. Previously he was Executive
    Vice President Global Manufacturing Operations, Carpet &
    Acoustics Systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(6) | Amount for 2003 for Mr. King consists of
    premiums in the amount of $2,124 and $201 paid for basic term
    life insurance and AD&D insurance, respectively, under group
    life insurance policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(7) | Mr. White became President of US &
    Mexico Plastics in August of 2003. He formerly held the position
    of Executive Vice President Global Manufacturing Operations
    Interior Trim & Cockpit Systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(8) | Amount for 2003 for Mr. White consists of
    premiums in the amounts of $1,864 and $176 paid for basic term
    life insurance and AD&D insurance, respectively, under group
    life insurance policies and (ii) and relocation expenses of
    $7,544.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(9) | Mr. Torakis joined Collins & Aikman in
    July 2003 as President, International Plastics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



|     |                                                                                                                                                                                                                                                                                                                                                                                                             
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Amount for 2003 for Mr. Torakis consists of
    premiums in the amounts of $1,166 and $70 paid for basic term
    life insurance and AD&D insurance, respectively, under group
    life insurance policies.                                                                                                                                                                                                 
|    
|(11) | Mr. Creek joined Collins & Aikman in
    December of 2002 as Senior Vice President of Finance.                                                                                                                                                                                                                                                                                                              
|    
|(12) | Amount for 2003 for Mr. Creek consists of
    premiums in the amounts of $1,595 and $151 paid for basic term
    life insurance and AD&D insurance, respectively, under group
    life insurance policies.                                                                                                                                                                                                  
|    
|(13) | In August 2003, Mr. Mosingo resigned his
    positions as a director and as President and Chief Executive
    Officer of the Company.                                                                                                                                                                                                                                                                       
|    
|(14) | Amount represents Mr. Mosingos base
    salary for January through his resignation date.                                                                                                                                                                                                                                                                                                                   
|    
|(15) | Amount for 2003 for Mr. Mosingo consists of
    premiums in the amount of $4,662 and $441 paid for basic term
    life insurance and AD&D, respectively, under group life
    insurance policies, (ii) $290,333 in salary continuation,
    (iii) $17,970 of his perquisite allowance (pro-rata portion
    for termination period), (iv) $50,000 for legal fees, and
    (v) a $476,805 settlement payment.
|    
|(16) | Mr. Mitchell retired from the Company
    effective February 29, 2004.                                                                                                                                                                                                                                                                                                                                      
|    
|(17) | Amount for 2003 for Mr. Mitchell consists of
    premiums in the amount of $2,409 and $228 paid for basic term
    life insurance and AD&D insurance, respectively, under group
    life insurance policies.                                                                                                                                                                                                

53



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Option Grants in Last Fiscal Year

Shown below is information on grants of new stock
options made during the fiscal year ended December 31, 2003
to the Named Executive Officers.

|                    |  |                   |         |     |                    |  |     |                |  |   |            |  |  |                    |          |  |  |  |         | 
|------------------- |  | ----------------- | ------- | --- | ------------------ |  | --- | -------------- |  | - | ---------- |  |  | ------------------ | -------- |  |  |  | ------- | 
|                    |  |                   |         |    
|                    |  | Individual Grants |         |     |                   
|                    |  |                   |         |     |                   
|                    |  | Number of         |         |     |                    |  |    
|                    |  | Securities        |         |     | % of Total Options |  |     |                |  |  
|                    |  | Underlying        |         |     | Granted to         |  |     | Exercise Price |  |   | Expiration |  |  | Grant Date Present |         
|Name                |  | Options Granted   |         |     | Employees in 2002  |  |     | ($/sh)         |  |   | Date       |  |  | Value($)(1)        |         
|                    |  |                   |         |     |                    |  |     |                |  |   |            |  |  |                    |         
|David A. Stockman   |  |                   | 0       |     |                    |  | 0%  |                |  |   | N/A        |  |  |                    | N/A      |  |  |  | N/A     | 
|J. Michael Stepp    |  |                   | 0       |     |                    |  | 0%  |                |  |   | N/A        |  |  |                    | N/A      |  |  |  | N/A     | 
|Millard L. King, Jr |  |                   | 0       |     |                    |  | 0%  |                |  |   | N/A        |  |  |                    | N/A      |  |  |  | N/A     | 
|Michael G. Torakis  |  |                   | 0       |     |                    |  | 0   |                |  |   | N/A        |  |  |                    | N/A      |  |  |  | N/A     | 
|Eric White          |  |                   | 200,000 |     |                    |  | 12% |                |  | $ | 8.00       |  |  |                    | 4/7/2013 |  |  |  | 554,000 | 
|Wallace Creek       |  |                   | 100,000 |     |                    |  | 6%  |                |  | $ | 8.00       |  |  |                    | 4/7/2013 |  |  |  | 277,000 | 
|Jerry Mosingo       |  |                   | 210,000 | (2) |                    |  | 12% |                |  | $ | 8.00       |  |  |                    | 4/7/2013 |  |  |  | 581,700 | 
|Michael A. Mitchell |  |                   | 0       |     |                    |  | 0%  |                |  |   | N/A        |  |  |                    | N/A      |  |  |  | N/A     | 



---



|    |                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The fair value of each option grant was estimated
    using the Black-Scholes option pricing model. The assumptions
    used in the model were weighted average expected volatility of
    77.5% weighted average, risk-free interest rate of return of
    3.72%, dividend yield of 0% and expected life of seven years.
|   
|(2) | 2003 option grants expired in November 2003,
    ninety days after Mr. Mosingos resignation in August
    2003.                                                                                                                                                                                                         

Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year End Option Values

Shown below is information with respect to the
exercise of stock options during the last fiscal year and the
year-end value of unexercised options to purchase Common Stock
granted to the Named Executive Officers and held by them as of
December 31, 2003.

|                     |  |             |   |  |             |                       |                            |                          |                             |                |               |  |  |             |         |  |               |  |   |  |  |  |   | 
|-------------------- |  | ----------- | - |  | ----------- | --------------------- | -------------------------- | ------------------------ | --------------------------- | -------------- | ------------- |  |  | ----------- | ------- |  | ------------- |  | - |  |  |  | - | 
|                     |  |             |   |  |             |                       |                            |                          |                             |               
|                     |  |             |   |  |             |                       |                            | Value of Unexercised In- |                            
|                     |  |             |   |  |             | Number of Unexercised |                            |                          | the-Money Options at Fiscal |               
|                     |  | Shares      |   |  |             |                       | Options at Fiscal Year-End |                          |                             | Year-End($)(1) |              
|                     |  | Acquired on |   |  | Value       |                       |                            |                          |                             |                |               | 
|Name                 |  | Exercise(#) |   |  | Realized($) |                       |                            | Exercisable              |                             |                | Unexercisable |  |  | Exercisable |         |  | Unexercisable | 
|                     |  |             |   |  |             |                       |                            |                          |                             |                |               |  |  |             |         |  |               | 
|David A. Stockman    |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 0             |  |  |             | 0       |  |               |  | 0 |  |  |  | 0 | 
|J. Michael Stepp     |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 88,000        |  |  |             | 352,000 |  |               |  | 0 |  |  |  | 0 | 
|Millard L. King, Jr. |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 98,944        |  |  |             | 301,056 |  |               |  | 0 |  |  |  | 0 | 
|Eric White           |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 8,000         |  |  |             | 232,000 |  |               |  | 0 |  |  |  | 0 | 
|Michael G. Torakis   |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 0             |  |  |             | 0       |  |               |  | 0 |  |  |  | 0 | 
|Wallace Creek        |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 0             |  |  |             | 100,000 |  |               |  | 0 |  |  |  | 0 | 
|Jerry L. Mosingo     |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 0             |  |  |             | 0       |  |               |  | 0 |  |  |  | 0 | 
|Michael A. Mitchell  |  |             | 0 |  |             |                       | 0                          |                          |                             |                | 72,000        |  |  |             | 288,000 |  |               |  | 0 |  |  |  | 0 | 



---



|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | No options were in the money at fiscal year-end
    because the exercise price of such options exceeded the closing
    price of the Common Stock on the New York Stock Exchange on
    December 31, 2003.

2003 Option Cancellation/
Repricing Program

On March 24, 2003, the Company cancelled
3,559,256 outstanding, variously priced options, and replaced
them with options exercisable at $8.00 per share. The Company
repriced these options in an effort to continue
their effectiveness as a component of our overall compensation
strategy. The following table provides additional details
regarding the 2003 repricing of options for each person who was
an executive officer of the Company on March 24, 2003, or
who has since become an executive officer and had options
repriced on March 24, 2003.

54



---



##### 



10-Year Option/ SAR Repricing Table

|                     |                                                                                                            |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|-------------------- | ---------------------------------------------------------------------------------------------------------- | -------- |  | ------------ | ------- | ------- | ------------ |  | ---- | ------------ |  | --------- | -------- | ------ | --------- | ------------ | ---- |  |  |  | -------- | -------- | 
|                     |                                                                                                            |          |  |              |         |         |              |  |      |              |  | Length of |         
|                     |                                                                                                            |          |  |              |         |         |              |  |      |              |  | Original  |         
|                     |                                                                                                            |          |  | Number of    |         |         | Market       |  |      |              |  |           |          | Option |          
|                     |                                                                                                            |          |  | Securities   |         |         | Price of     |  |      | Exercise     |  |           |          |        | Term      |             
|                     |                                                                                                            |          |  | Underlying   |         |         | Stock at     |  |      | Price at     |  |           |          |        | Remaining |             
|                     |                                                                                                            |          |  | Options/SARs |         |         | Time of      |  |      | Time of      |  |           | New      |        |           | at Date of   |     
|                     |                                                                                                            |          |  | Repriced or  |         |         | Repricing or |  |      | Repricing or |  |           | Exercise |        |           | Repricing or |     
|                     |                                                                                                            |          |  | Amended      |         |         | Amendment    |  |      | Amendment    |  |           | Price    |        |           | Amendment    |     
|Name                 |                                                                                                            | Date     |  | (#)(1)       |         |         | ($)(2)       |  |      | ($)(1)(3)    |  |           | ($)(2)   |        |           | (4)          |     
|                     |                                                                                                            |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |     
|Gerald E. Jones      |                                                                                                            | 03/24/03 |  |              | 6,000   |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 07/05/05 |         
|                     | Executive Vice President                                                                                   |          |  |              |         | 2,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 3/22/10  | 
|                     | Global Manufacturing                                                                                       |          |  |              |         | 172,000 |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 1/15/12  | 
|                     | Operations, Fabric                                                                                         |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|Millard L. King, Jr. |                                                                                                            | 03/24/03 |  |              | 2,000   |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 01/20/09 |         
|                     | President                                                                                                  |          |  |              |         | 2,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 12/01/09 | 
|                     | Global Soft Trim                                                                                           |          |  |              |         | 6,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 03/22/10 | 
|                     |                                                                                                            |          |  |              | 13,679  |         |              |  |      |              |  |           | 9.97     |        |           |              |      |  |  |  | 01/28/04 |         
|                     |                                                                                                            |          |  |              | 376,321 |         |              |  |      |              |  |           | 10.00    |        |           |              |      |  |  |  | 1/15/12  |         
|Dianne E. Kokkinos   |                                                                                                            | 3/24/03  |  |              | 4,000   |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 1/15/12  |         
|                     | Senior Vice President                                                                                      |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|                     | Global Supply Chain                                                                                        |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|                     | Management                                                                                                 |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|Dana Leavitt         |                                                                                                            | 3/24/03  |  |              | 40,000  |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 1/15/12  |         
|                     | Former Executive Vice President
    Global Manufacturing Operations, Interior Trim and Cockpit
    Systems |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|Michael M. Mitchell  |                                                                                                            | 3/24/03  |  |              | 360,000 |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 1/15/12  |         
|                     | Former President
    Global Commercial Operations                                                          |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|Jeffrey A. Rose      |                                                                                                            | 3/24/03  |  |              | 180,000 |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 1/15/12  |         
|                     | Senior Vice President
    Global Product Development and Technology                                        |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|J. Michael Stepp     |                                                                                                            | 3/24/03  |  |              | 440,000 |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 1/15/12  |         
|                     | Vice Chairman of the Board and Chief Financial
    Officer                                                 |          |  |              |         |         |              |  |      |              |  |           |          |        |           |              |      |  |  |  |          |          | 
|L. Gregory Tinnell   |                                                                                                            | 3/24/03  |  |              | 4,000   |         |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 7/5/05   |         
|                     | Senior Vice President                                                                                      |          |  |              |         | 2,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 2/19/07  | 
|                     | Human Resources                                                                                            |          |  |              |         | 6,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 8/31/09  | 
|                     |                                                                                                            |          |  |              |         | 8,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 03/22/10 | 
|                     |                                                                                                            |          |  |              |         | 140,000 |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 1/15/12  | 
|Reed A. White        |                                                                                                            | 3/24/03  |  |              | 13,353  |         |              |  | 4.26 |              |  |           | 9.9750   |        |           |              | 8.00 |  |  |  | 1/28/04  |         
|                     | President of Collins &                                                                                     |          |  |              |         | 8,000   |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 3/22/10  | 
|                     | Aikman Dura Convertible                                                                                    |          |  |              |         | 27,357  |              |  |      |              |  |           |          | 9.9750 |           |              |      |  |  |  |          | 1/28/04  | 
|                     | Systems                                                                                                    |          |  |              |         | 101,290 |              |  |      |              |  |           |          | 10.00  |           |              |      |  |  |  |          | 1/15/12  | 

55



---



##### 



|           |                                        |         |  |              |        |  |              |  |      |              |  |           |          |        |           |              |      |  |  |  |         |  | 
|---------- | -------------------------------------- | ------- |  | ------------ | ------ |  | ------------ |  | ---- | ------------ |  | --------- | -------- | ------ | --------- | ------------ | ---- |  |  |  | ------- |  | 
|           |                                        |         |  |              |        |  |              |  |      |              |  | Length of |         
|           |                                        |         |  |              |        |  |              |  |      |              |  | Original  |         
|           |                                        |         |  | Number of    |        |  | Market       |  |      |              |  |           |          | Option |          
|           |                                        |         |  | Securities   |        |  | Price of     |  |      | Exercise     |  |           |          |        | Term      |             
|           |                                        |         |  | Underlying   |        |  | Stock at     |  |      | Price at     |  |           |          |        | Remaining |             
|           |                                        |         |  | Options/SARs |        |  | Time of      |  |      | Time of      |  |           | New      |        |           | at Date of   |     
|           |                                        |         |  | Repriced or  |        |  | Repricing or |  |      | Repricing or |  |           | Exercise |        |           | Repricing or |     
|           |                                        |         |  | Amended      |        |  | Amendment    |  |      | Amendment    |  |           | Price    |        |           | Amendment    |     
|Name       |                                        | Date    |  | (#)(1)       |        |  | ($)(2)       |  |      | ($)(1)(3)    |  |           | ($)(2)   |        |           | (4)          |     
|           |                                        |         |  |              |        |  |              |  |      |              |  |           |          |        |           |              |     
|Eric White |                                        | 3/24/03 |  |              | 40,000 |  |              |  | 4.26 |              |  |           | 10.00    |        |           |              | 8.00 |  |  |  | 1/15/12 | 
|           | President
    U.S. and Mexico Plastics |         |  |              |        |  |              |  |      |              |  |           |          |        |           |              |      |  |  |  |         |  | 



---



|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These numbers have been adjusted to reflect our
    12.5 reverse stock split on May 28, 2002.                                                                             
|   
|(2) | The public offering price of the offering of our
    Common Stock which occurred on March 22, 2003 was used to
    establish the exercise price of the replacement options.
|   
|(3) | These numbers are the exercise prices of the
    options cancelled in connection with the grant of replacement
    options.                                                
|   
|(4) | These are the expiration dates of both the
    cancelled and replacement options on March 24, 2003.                                                                        

Defined Benefit or Actuarial
Plan Disclosure

C&A Co.
Plan.Provided certain eligibility
requirements are met, at the end of each calendar month, pay
credits are applied to a participants account under the
Collins & Aikman Corporation Employees Pension
Account Plan (the C&A Co. Plan) based on
the participants length of credited service and
compensation (as defined) during that month. For participants
age 50 or older, the monthly pay credit is based on either
credited service and compensation or age and compensation,
whichever results in the higher amount.

The following chart sets forth how pay credits
are determined under the C&A Co. Plan:

|                         |              |                       |               |  |              |                                    |  |  |                |  |  |      |      |  |  |  |       | 
|------------------------ | ------------ | --------------------- | ------------- |  | ------------ | ---------------------------------- |  |  | -------------- |  |  | ---- | ---- |  |  |  | ----- | 
|                         |              |                       |               |  |              |                                   
|                         |              |                       |               |  |              | Percentage of Compensation Used to | 
|                         |              | Determine Pay Credits |              
|Eligibility Requirements |              |                       |               | 
|                         |              |                       |               |  | Over  1/3 of |                                   
|Years of                 |              |                       | Up to  1/3 of |  |              | the                                | 
|Credited                 |              |                       | the           |  |              | S.S. Wage                          | 
|Service                  |              |                       | -or-          |  |              | Age                                |  |  | S.S. Wage Base |  |  | Base |     
|                         |              |                       |               |  |              |                                    |  |  |                |  |  |      |     
|                         | Less than 10 |                       |               |  |              |                                    |  |  | Less than 50   |  |  |      | 2.5% |  |  |  | 4.5%  | 
|                         | 10  14      |                       |               |  |              |                                    |  |  | 50  54        |  |  |      | 3.0% |  |  |  | 5.5%  | 
|                         | 15  19      |                       |               |  |              |                                    |  |  | 55  59        |  |  |      | 4.0% |  |  |  | 6.5%  | 
|                         | 20  24      |                       |               |  |              |                                    |  |  | 60  64        |  |  |      | 5.0% |  |  |  | 8.0%  | 
|                         | 25 or more   |                       |               |  |              |                                    |  |  | 65 or more     |  |  |      | 6.0% |  |  |  | 10.0% | 

The dollar amounts that result from these
percentages are added together and the total is the pay credit
for the month.

In addition, interest credits are applied each
month to the account balance. Participants make no contributions
to the C&A Co. Plan. Employer contributions are 100%
vested after five years of service or at age 65, whichever is
earlier, and may vest under certain other circumstances as set
forth in the C&A Co. Plan. The estimated annual
benefits payable upon retirement at normal retirement age under
the C&A Co. Plan for Messrs. Stepp, King, Eric
White, Creek and Torakis, assuming they use their account
balances to purchase a single life annuity, are $11,931,
$39,681, $64,452, $2,021 and $1,264, respectively. Participants
in the C&A Co. Plan have the option, however, of
receiving the value of their vested account in a lump sum
following termination of employment. Mr. Stockman does not
participate in the C&A Co. Plan.

C&A Co. Excess
Plan.The excess benefit plan
(SRP) of Collins & Aikman Corporation works
in conjunction with the C&A Co. Plan and provides to
the employee any benefit which the C&A Co. Plan would
have provided except for certain legal limitations under the
Employee Retirement Income Security Act of 1974 and Internal
Revenue Service regulations. The pay credits and interest
credits are determined as

56



---



##### 



described with respect to the C&A Co.
Plan as if no legal limitations existed, and then this plan
provides any benefit which is in excess of the benefit provided
under the C&A Co. Plan. The estimated annual benefits
payable upon retirement at normal retirement age under the SRP
for Messrs. Stepp, King, Eric White and Creek are $37,158,
$16,834, $3,795 and $897, respectively. Mr. Stockman does
not participate in the SRP. Mr. Torakis did not participate in
the SRP in 2003. The balances in the SRP accounts of
Messrs. Mosingo and Mitchell as of December 31, 2003
were $46,365 and $42,489, respectively.


C&A Co.
SRIP.Participation in the
Collins & Aikman Corporation Supplemental Retirement
Income Plan (the C&A Co. SRIP) is solely at
the discretion of the Board of Directors of Products and is
extended to a select group of key executives. The plan, which
may be discontinued on a prospective basis at any time, provides
a participating employee with a retirement benefit at or after
age 62 or between ages 55 and 61 on an actuarially
reduced basis. A target benefit is first calculated for each
employee based on Total Annual Compensation (final base salary
plus the average of the bonuses paid for the last three fiscal
years) and years of service at retirement. The benefit payable
from the C&A Co. SRIP is determined as the excess of
the target benefit over any pension benefits payable from Social
Security and any other retirement plans sponsored by the
Company. An employee does not become vested in a benefit until
(i) reaching age 55 and completing 10 years of
service or (ii) reaching age 62.

The following table shows, for specified
compensation and years of service classifications, the
hypothetical annual target benefits under the C&A Co.
SRIP for employees retiring at age 65, assuming that the
retiring participant elects a single life annuity.

Pension Plan Table

|             |           |                  |    |   |         |    |  |   |         |  |  |    |         |  |    |   |         |    |  |   |         |  |  |   |         | 
|------------ | --------- | ---------------- | -- | - | ------- | -- |  | - | ------- |  |  | -- | ------- |  | -- | - | ------- | -- |  | - | ------- |  |  | - | ------- | 
|             |           |                 
|             |           | Years of Service |   
|Total Annual |           |                  |    |  
|Compensation |           |                  | 10 |   |         | 15 |  |   | 20      |  |  | 25 |         |  | 30 |   |         | 35 | 
|             |           |                  |    |   |         |    |  |   |         |  |  |    |         |  |    |   |         |    | 
|$            | 100,000   |                  |    | $ | 42,000  |    |  | $ | 51,000  |  |  | $  | 60,000  |  |    | $ | 60,000  |    |  | $ | 60,000  |  |  | $ | 60,000  | 
|             | 125,000   |                  |    |   | 52,500  |    |  |   | 63,750  |  |  |    | 75,000  |  |    |   | 75,000  |    |  |   | 75,000  |  |  |   | 75,000  | 
|             | 150,000   |                  |    |   | 63,000  |    |  |   | 76,500  |  |  |    | 90,000  |  |    |   | 90,000  |    |  |   | 90,000  |  |  |   | 90,000  | 
|             | 175,000   |                  |    |   | 73,500  |    |  |   | 89,250  |  |  |    | 105,000 |  |    |   | 105,000 |    |  |   | 105,000 |  |  |   | 105,000 | 
|             | 200,000   |                  |    |   | 84,000  |    |  |   | 102,000 |  |  |    | 120,000 |  |    |   | 120,000 |    |  |   | 120,000 |  |  |   | 120,000 | 
|             | 225,000   |                  |    |   | 94,500  |    |  |   | 114,750 |  |  |    | 135,000 |  |    |   | 135,000 |    |  |   | 135,000 |  |  |   | 135,000 | 
|             | 250,000   |                  |    |   | 105,000 |    |  |   | 127,500 |  |  |    | 150,000 |  |    |   | 150,000 |    |  |   | 150,000 |  |  |   | 150,000 | 
|             | 275,000   |                  |    |   | 115,500 |    |  |   | 140,250 |  |  |    | 165,000 |  |    |   | 165,000 |    |  |   | 165,000 |  |  |   | 165,000 | 
|             | 300,000   |                  |    |   | 126,000 |    |  |   | 153,000 |  |  |    | 180,000 |  |    |   | 180,000 |    |  |   | 180,000 |  |  |   | 180,000 | 
|             | 350,000   |                  |    |   | 147,000 |    |  |   | 178,500 |  |  |    | 210,000 |  |    |   | 210,000 |    |  |   | 210,000 |  |  |   | 210,000 | 
|             | 400,000   |                  |    |   | 168,000 |    |  |   | 204,000 |  |  |    | 240,000 |  |    |   | 240,000 |    |  |   | 240,000 |  |  |   | 240,000 | 
|             | 450,000   |                  |    |   | 189,000 |    |  |   | 229,500 |  |  |    | 270,000 |  |    |   | 270,000 |    |  |   | 270,000 |  |  |   | 270,000 | 
|             | 500,000   |                  |    |   | 210,000 |    |  |   | 255,000 |  |  |    | 300,000 |  |    |   | 300,000 |    |  |   | 300,000 |  |  |   | 300,000 | 
|             | 600,000   |                  |    |   | 252,000 |    |  |   | 306,000 |  |  |    | 360,000 |  |    |   | 360,000 |    |  |   | 360,000 |  |  |   | 360,000 | 
|             | 700,000   |                  |    |   | 294,000 |    |  |   | 357,000 |  |  |    | 420,000 |  |    |   | 420,000 |    |  |   | 420,000 |  |  |   | 420,000 | 
|             | 800,000   |                  |    |   | 336,000 |    |  |   | 408,000 |  |  |    | 480,000 |  |    |   | 480,000 |    |  |   | 480,000 |  |  |   | 480,000 | 
|             | 900,000   |                  |    |   | 378,000 |    |  |   | 459,000 |  |  |    | 540,000 |  |    |   | 540,000 |    |  |   | 540,000 |  |  |   | 540,000 | 
|             | 1,000,000 |                  |    |   | 420,000 |    |  |   | 510,000 |  |  |    | 600,000 |  |    |   | 600,000 |    |  |   | 600,000 |  |  |   | 600,000 | 
|             | 1,100,000 |                  |    |   | 462,000 |    |  |   | 561,000 |  |  |    | 660,000 |  |    |   | 660,000 |    |  |   | 660,000 |  |  |   | 660,000 | 
|             | 1,200,000 |                  |    |   | 504,000 |    |  |   | 612,000 |  |  |    | 720,000 |  |    |   | 720,000 |    |  |   | 720,000 |  |  |   | 720,000 | 
|             | 1,300,000 |                  |    |   | 546,000 |    |  |   | 663,000 |  |  |    | 780,000 |  |    |   | 780,000 |    |  |   | 780,000 |  |  |   | 780,000 | 
|             | 1,400,000 |                  |    |   | 588,000 |    |  |   | 714,000 |  |  |    | 840,000 |  |    |   | 840,000 |    |  |   | 840,000 |  |  |   | 840,000 | 
|             | 1,500,000 |                  |    |   | 630,000 |    |  |   | 765,000 |  |  |    | 900,000 |  |    |   | 900,000 |    |  |   | 900,000 |  |  |   | 900,000 | 
|             | 1,600,000 |                  |    |   | 672,000 |    |  |   | 816,000 |  |  |    | 960,000 |  |    |   | 960,000 |    |  |   | 960,000 |  |  |   | 960,000 | 

57



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##### 



|             |           |                  |    |   |           |    |  |   |           |  |  |    |           |  |    |   |           |    |  |   |           |  |  |   |           | 
|------------ | --------- | ---------------- | -- | - | --------- | -- |  | - | --------- |  |  | -- | --------- |  | -- | - | --------- | -- |  | - | --------- |  |  | - | --------- | 
|             |           |                 
|             |           | Years of Service |   
|Total Annual |           |                  |    |  
|Compensation |           |                  | 10 |   |           | 15 |  |   | 20        |  |  | 25 |           |  | 30 |   |           | 35 | 
|             |           |                  |    |   |           |    |  |   |           |  |  |    |           |  |    |   |           |    | 
|             | 1,700,000 |                  |    |   | 714,000   |    |  |   | 867,000   |  |  |    | 1,020,000 |  |    |   | 1,020,000 |    |  |   | 1,020,000 |  |  |   | 1,020,000 | 
|             | 1,800,000 |                  |    |   | 756,000   |    |  |   | 918,000   |  |  |    | 1,080,000 |  |    |   | 1,080,000 |    |  |   | 1,080,000 |  |  |   | 1,080,000 | 
|             | 1,900,000 |                  |    |   | 798,000   |    |  |   | 969,000   |  |  |    | 1,140,000 |  |    |   | 1,140,000 |    |  |   | 1,140,000 |  |  |   | 1,140,000 | 
|             | 2,000,000 |                  |    |   | 840,000   |    |  |   | 1,020,000 |  |  |    | 1,200,000 |  |    |   | 1,200,000 |    |  |   | 1,200,000 |  |  |   | 1,200,000 | 
|             | 2,100,000 |                  |    |   | 882,000   |    |  |   | 1,071,000 |  |  |    | 1,260,000 |  |    |   | 1,260,000 |    |  |   | 1,260,000 |  |  |   | 1,260,000 | 
|             | 2,200,000 |                  |    |   | 924,000   |    |  |   | 1,122,000 |  |  |    | 1,320,000 |  |    |   | 1,320,000 |    |  |   | 1,320,000 |  |  |   | 1,320,000 | 
|             | 2,300,000 |                  |    |   | 966,000   |    |  |   | 1,173,000 |  |  |    | 1,380,000 |  |    |   | 1,380,000 |    |  |   | 1,380,000 |  |  |   | 1,380,000 | 
|             | 2,400,000 |                  |    |   | 1,008,000 |    |  |   | 1,224,000 |  |  |    | 1,440,000 |  |    |   | 1,440,000 |    |  |   | 1,440,000 |  |  |   | 1,440,000 | 
|$            | 2,500,000 |                  |    | $ | 1,050,000 |    |  | $ | 1,275,000 |  |  | $  | 1,500,000 |  |    | $ | 1,500,000 |    |  | $ | 1,500,000 |  |  | $ | 1,500,000 | 

All the Named Executive Officers except
Messrs. Stockman and Creek participated in the
C&A Co. SRIP in 2003. As of December 31, 2003,
Mr. Stepp had 9 years, 0 months of plan service,
and at age 65 he will have had an estimated 12 years,
0 months of plan service. As of December 31, 2003, Mr.
King has had 33 years, 0 months of plan service, and
at age 65, he will have had an estimated 38 years,
11 months of plan service. As of December 31, 2003,
Mr. Eric White has had 2 years, 3 months of plan
service, and at age 65, he will have had an estimated
18 years, 8 months of plan service. Mr. Torakis did
not participate in the plan in 2003. As of December 31,
2003, Mr. Mosingo had 5 years, 0 months of plan
service and was vested under the plan pursuant to the terms of
his August 2003 separation agreement with the Company, described
below under Employment Agreements. As of
December 31, 2003, Mr. Mitchell had two years,
3 months of plan service.

EMPLOYMENT
AGREEMENTS

J. Michael
Stepp.In January 2004, Products
entered into an employment agreement with Mr. Stepp for a
period of three years subject to the terms and conditions of the
agreement. The agreement provides for an initial base salary of
$600,000 per year. Mr. Stepp target bonus under
the annual executive incentive compensation plan is set at 100%
of his base salary. The agreement provides for employee benefits
and such other fringe benefits as are available to executives of
the Company, including a perquisite allowance of
$30,000 grossed up for income taxes. This allowance must be
used for the lease/purchase of a company automobile, automobile
insurance and maintenance, country club dues, financial planning
or income tax preparation. In the event Mr. Stepps
employment is terminated by Products without cause or by
Mr. Stepp due to constructive termination prior
to the expiration of the term of the agreement, Mr. Stepp
shall receive (i) his base salary for 24 months based
on the rate in effect immediately preceding termination date,
(ii) an amount equal to the amount determined by
multiplying Mr. Stepps average actual annual bonus
for the prior three years by a fraction, where the numerator is
the number of whole months of service worked during the year of
the when the termination occurs and the denominator is 12,
and (iii) an amount equal to his target bonus for the year
in which such termination occurs. He will also continue to
participate in the benefit plans, programs and arrangements
during the severance period (with the exception of the executive
physical program, long-term disability plan, and the
supplemental retirement income plan) unless comparable benefit
plans, programs or arrangements are offered to Mr. Stepp
through another employer during the severance period. The salary
continuation is to be paid in accordance with the Companys
normal pay practice and the bonus would be payable in a lump sum
upon the expiration of the severance period. In such event, all
outstanding stock options will immediately vest and remain
exercisable until the earlier of 90 days after termination
or the original expiration date of said options. The agreement
also provides that all of Mr. Stepps outstanding
options immediately vest upon a Change of Control
(as defined in the agreement). In addition, the Company has
agreed to credit Mr. Stepp under the Companys
Supplemental Retirement Income Plan with all of his years of
service that preceded his break of service, and to deem him to
have satisfied vesting requirements under such plan under
certain circumstances.

Millard L. King,
Jr.In August 2003, Products entered
into an employment agreement with Mr. King for a period of
three years subject to the terms and conditions of the
agreement. The agreement provides for an initial base salary of
$450,000 per year. Mr. Kings target bonus under the
annual executive incentive

58



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##### 



compensation plan is set at 40% of his base
salary. The agreement provides for employee benefits and such
other fringe benefits as are available to executives of the
Company, including a perquisite allowance of $20,000 grossed up
for income taxes. This allowance must be used for the
lease/purchase of a company automobile, automobile insurance and
maintenance, country club dues, financial planning or income tax
preparation. In the event Mr. Kings employment is
terminated by Products without cause or by Mr. King due to
constructive termination prior to the expiration of
the term of the agreement, Mr. King shall receive his base
salary for 24 months based on the rate in effect
immediately preceding termination date, an amount equal to the
amount determined by multiplying Mr. Kings average
actual, annual bonus for the prior three years by a fraction,
where the numerator is the number of whole months of service
worked during the year of the when the termination occurs and
the denominator is 12. He will also continue to participate in
the benefit plans, programs and arrangements during the
severance period (with the exception of the executive physical
program, long-term disability plan, and the supplemental
retirement income plan) unless Mr. King is offered
comparable benefits plans, programs, or arrangements with
another employer during the severance period. The salary
continuation is to be paid in accordance with the Companys
normal pay practice and the bonus would be payable in a lump sum
upon the expiration of the severance period. In such event, all
outstanding stock options will immediately vest and remain
exercisable until the earlier of 90 days after termination
or the original expiration date of said options.


Eric
White.In August 2003, Products
entered into an employment agreement with Mr. White for a
period of three years subject to the terms and conditions of the
agreement. The agreement provides for an initial base salary of
$400,000 per year. Mr. Whites target bonus under the
annual executive incentive compensation plan is set at 40% of
his base salary. The agreement provides for employee benefits
and such other fringe benefits as are available to executives of
the Company, including a perquisite allowance of $20,000 grossed
up for income taxes. This allowance must be used for the
lease/purchase of a company automobile, automobile insurance and
maintenance, country club dues, financial planning or income tax
preparation. In the event Mr. Whites employment is
terminated by Products without cause or by Mr. White due to
constructive termination prior to the expiration of
the term of the agreement, Mr. White shall receive his base
salary for 24 months based on the rate in effect
immediately preceding termination date, an amount equal to the
amount determined by multiplying Mr. Whites average
actual annual bonus for the prior three years by a fraction,
where the numerator is the number of whole months of service
worked during the year of the when the termination occurs and
the denominator is 12. He will also continue to participate in
the benefit plans, programs and arrangements during the
severance period (with the exception of the executive physical
program, long-term disability plan, and the supplemental
retirement income plan) unless comparable benefit plans,
programs or arrangements are offered to Mr. White through
another employer during the severance period. The salary
continuation is to be paid in accordance with the Companys
normal pay practice and the bonus would be payable in a lump sum
upon the expiration of the severance period. In such event, all
outstanding stock options will immediately vest and remain
exercisable until the earlier of 90 days after termination or
the original expiration date of said options.

Michael G.
Torakis.In August 2003, Products
entered into an employment agreement with Mr. Torakis for a
period of three years subject to the terms and conditions of the
agreement. The agreement provides for an initial base salary of
$450,000 per year. Mr. Torakis target bonus
under the annual executive incentive compensation plan is set at
40% of his base salary, with such bonus guaranteed for 2003 (on
a proportionate basis, based on the portion of 2003 in which
Mr. Torakis was employed by the Company) and 2004. The
agreement provides for employee benefits and such other fringe
benefits as are available to executives of the Company,
including a perquisite allowance of $20,000 grossed up for
income taxes. This allowance must be used for the lease/purchase
of a company automobile, automobile insurance and maintenance,
country club dues, financial planning or income tax preparation.
In the event Mr. Torakis employment is terminated by
Products without cause or by Mr. Torakis due to
constructive termination prior to the expiration of
the term of the agreement, Mr. Torakis shall receive his
base salary for 24 months based on the rate in effect
immediately preceding termination date, an amount equal to the
amount determined by multiplying Mr. Torakis average
actual annual bonus for the prior three years by a fraction,
where the numerator is the number of whole months of service
worked during the year of the when the termination occurs and
the denominator is 12. He will also continue to participate
in the benefit plans, programs and arrangements during

59



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##### 



the severance period (with the exception of the
executive physical program, long-term disability plan, and the
supplemental retirement income plan) unless comparable benefit
plans, programs or arrangements are offered to Mr. Torakis
through another employer during the severance period. The salary
continuation is to be paid in accordance with the Companys
normal pay practice and the bonus would be payable in a lump sum
upon the expiration of the severance period. In such event, all
outstanding stock options will immediately vest and remain
exercisable until the earlier of 90 days after termination
or the original expiration date of said options. The Company
also committed to grant Mr. Torakis options to purchase
240,000 shares of the Companys common stock.


Jerry L.
Mosingo.In August 2003, at the time
of his resignation from the Company, Mr. Mosingo entered
into a separation agreement with the Company. As part of this
agreement, Mr. Mosingos pre-existing employment
agreement and a separate pre-existing letter agreement with the
Company were terminated. Pursuant to the August 2003 separation
agreement, Mr. Mosingo received a cash payment of $400,000,
a bonus settlement of $76,805 and attorney fees of $50,000
payable upon execution of the agreement. The Company agreed to
pay Mr. Mosingo his salary of $750,000 per year for
eighteen months from the termination date. Further, it was
agreed that he will receive a perquisite allowance of $30,000
per year grossed up for income taxes during the salary
continuation period and be provided with continued use of the
company car and all maintenance and insurance costs associated
therewith. All outstanding options immediately vested and
continued to be fully exercisable for 90 days.
Mr. Mosingo will continue to participate in the benefit
plans, programs, and arrangement of the Employer for executive
employees until the earlier of the end of the salary
continuation period or eligibility to receive benefits of
another employer. Collins & Aikman will pay a benefit
under the C&A Co. SRIP as if Mr. Mosingo were
eligible for retirement at the end of the salary continuation
period with 5 years of service credit and without reduction
for early commencement.

Michael
Mitchell.Mr. Mitchells
employment relationship with Collins & Aikman ended
upon his retirement from the Company in February 2004. He
entered into a separation agreement with Collins &
Aikman on February 29, 2004. This agreement replaced
Mr. Mitchells pre-existing employment agreement,
which was terminated. He is to receive 24 months of salary
continuation at a rate of $34,375 per month in addition to
continuation of his perquisite allowance in the amount of
$30,000 per year grossed up for income taxes. He received a
$75,000 lump sum payment upon execution of the agreement and
will receive a $225,000 incentive payment equal to his target
bonus for services during 2003. It is payable in accordance with
normal incentive plan payments. Further, all vested stock
options will remain exercisable for 180 days following the
termination date.

Other Named
Executives.The Company does not have
employment agreements with Messrs. Stockman or Creek.

60



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##### 



PERFORMANCE
GRAPH

The following graph compares the percentage
change in the cumulative total stockholder return on the
Companys Common Stock during the period beginning on
December 24, 1998 and ending on December 31, 2003 with
the cumulative total return of a peer group and the
Standard & Poors 500 composite index.

5-YEAR CUMULATIVE TOTAL RETURN

AMONG COLLINS & AIKMAN
CORPORATION,


S&P 500 INDEX AND PEER GROUP
INDICES


LOGO

|                                |  |          |        |  |          |  |        |          |  |  |          |  |  |          |        |  |          |  |       |  |  |  |        | 
|------------------------------- |  | -------- | ------ |  | -------- |  | ------ | -------- |  |  | -------- |  |  | -------- | ------ |  | -------- |  | ----- |  |  |  | ------ | 
|Company/Market/Index            |  | 12/24/98 |        |  | 12/29/99 |  |        | 12/29/00 |  |  | 12/31/01 |  |  | 12/31/02 |        |  | 12/31/03 | 
|                                |  |          |        |  |          |  |        |          |  |  |          |  |  |          |        |  |          | 
|Collins & Aikman Corporation(1) |  |          | 100.00 |  |          |  | 130.45 |          |  |  | 95.01    |  |  |          | 174.69 |  |          |  | 40.38 |  |  |  | 39.29  | 
|Peer Group(2)                   |  |          | 100.00 |  |          |  | 83.82  |          |  |  | 62.46    |  |  |          | 84.46  |  |          |  | 67.66 |  |  |  | 102.53 | 
|S&P 500 Index(3)                |  |          | 100.00 |  |          |  | 121.04 |          |  |  | 110.02   |  |  |          | 96.95  |  |          |  | 75.52 |  |  |  | 97.18  | 



---

Notes to Table



|    |                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Collins & Aikman Corporation.*                                                                                                                                                                                                                                                                                         
|   
|(2) | The peer group consists of the following
    companies: American Axle & Manufacturing, Arvinmeritor
    Inc., Borg Warner Inc., Dana Corporation, Delphi Corporation,
    Dura Automotive Systems, Intier Automotive, Johnson Controls,
    Inc., Lear Corporation, Tower Automotive Inc. and Visteon
    Corporation.*
|   
|(3) | S&P 500  Standard &
    Poors 500 Total Return Index.*                                                                                                                                                                                                                                                               



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| | * | As compiled by Media General Financial Services
    of Richmond, Virginia.

61



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##### 



COMPENSATION OF
DIRECTORS

Under the 1994 Directors Plan, each non-employee
director of the Company who is not affiliated with a major
stockholder, and was not affiliated with a major stockholder at
the time of his or her election to the Board of Directors,
received an annual automatic grant of ten-year options for 4,000
shares of Common Stock (since reverse split of Common Stock)
each November. The options have a per share exercise price equal
to $8.00 and are exercisable six months and one day after the
date of grant. Any options not exercisable prior to a
termination of the directorship are canceled. Such non-employee
directors may be granted options on the same schedule pursuant
to the 2002 Stock Option Plan (2002 Plan). Effective
September 12, 2002, members of the Audit Committee
additionally receive $5,000 per meeting of the Committee.
Currently, only Messrs. Clark, Rudman, Dauch and Cohen are
eligible to receive future grants under the 2002 Plan. Each such
director also receives a fee of $80,000 per year, payable
quarterly.

COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION

Since April 1, 2002, the Compensation
Committee has been composed of Messrs. Stockman, Tredwell
and Cohen. Neither Mr. Cohen nor Mr. Tredwell is or
has been an employee of the Company or any of its subsidiaries,
including Products, or is or has been separately compensated for
serving as an officer of the Company or any of its subsidiaries,
including Products. Mr. Stockman became Chief Executive
Officer of the Company on August 2003, but does not receive any
compensation for such service. (See Summary Compensation Table
above and Item 13, Certain Relationships and Related
Transactions for more information regarding compensation
arrangements for Mr. Stockmans service to the Company
as Chief Executive Officer.) None of the executive officers who
are separately compensated for serving as executive officers (or
who received options) serve on the Compensation Committee.
Mr. Stockman also serves on the Compensation Committee of
Metaldyne. Mr. Leuliette, a director of the Company, is
Chairman, President and Chief Executive Officer of Metaldyne.

Messrs. Stockman and Tredwell are senior
managing directors of Heartland. See Item 12,
Security Ownership of Management and Principal
Stockholders and Item 13, Certain Relationships
and Related Transactions Mr. Cohen is Counsel at the
Canadian law firm of Cassels Brock and Blackwell.

62



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##### 





|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of
    Certain Beneficial Owners and Management

Set forth in the table below is certain
information as of March 1, 2004 regarding the beneficial
ownership of equity securities of the Company (including
securities authorized for issuance under the Companys
equity compensation plans) by (i) persons who are known to
the Company to own beneficially more than five percent (5%) of
the Companys voting stock, (ii) directors of the
Company, (iii) the executive officers of the Company named
in the Summary Compensation Table set forth in Item 11,
Executive Compensation of this Report (and referred
to herein as the Named Executive Officers) and
(iv) the directors and executive officers of the Company as
a group. Unless otherwise indicated, the beneficial owner has
sole voting power and sole investment power over the securities
shown below.

|                                            |  |                                                                              |  |                   |            |         |          |  |      |  
|------------------------------------------- |  | ---------------------------------------------------------------------------- |  | ----------------- | ---------- | ------- | -------- |  | ---- | -
|                                            |  |                                                                              |  | Amount and Nature |            |         |         
|                                            |  |                                                                              |  | of                |            |         |         
|                                            |  |                                                                              |  | Beneficial        |            |         | Percent  | 
|Title of Class                              |  | Name of Beneficial Owner                                                     |  | Ownership         |            |         | of Class | 
|                                            |  |                                                                              |  |                   |            |         |          | 
|Common Stock, par value
    $0.01 per share |  | Blackstone Capital Partners L.P.
    345 Park Avenue
    New York, NY        |  |                   | 4,515,229  | (1)     |          |  | 5.4  | %
|                                            |  | Charles E. Becker                                                            |  |                   | 7,539,262  | (2)     |          |  | 9.0  | %
|                                            |  | Robert C. Clark                                                              |  |                   | 36,000     | (3)     |          |  | *    |  
|                                            |  | Marshall A. Cohen                                                            |  |                   | 8,000      | (3)     |          |  | *    |  
|                                            |  | Wallace W. Creek                                                             |  |                   | 200,000    | (4)     |          |  | *    |  
|                                            |  | David C. Dauch                                                               |  |                   | 4,000      | (4)     |          |  | *    |  
|                                            |  | Heartland Industrial Partners, L.P.
    55 Railroad Avenue
    Greenwich, CT |  |                   | 31,272,397 | (5)     |          |  | 37.4 | %
|                                            |  | Cynthia L. Hess                                                              |  |                   | 0          | (10)    |          |  |      |  
|                                            |  | Joan Fabrics Corporation
    100 Vesper Executive Park
    Tyngsboro, MA     |  |                   | 5,104,000  | (6)     |          |  | 6.1  | %
|                                            |  | Millard L. King, Jr.                                                         |  |                   | 400,762    | (7)     |          |  | *    |  
|                                            |  | Timothy D. Leuliette                                                         |  |                   | 0          | (10)    |          |  |      |  
|                                            |  | Elkin McCallum                                                               |  |                   | 5,534,000  | (6)     |          |  | 6.6  | %
|                                            |  | W. Gerald McConnell                                                          |  |                   | 0          | (10)    |          |  |      |  
|                                            |  | Jerry L. Mosingo                                                             |  |                   | 0          | (8)     |          |  |      |  
|                                            |  | Michael A. Mitchell                                                          |  |                   | 72,000     | (4)     |          |  | *    |  
|                                            |  | Warren B. Rudman                                                             |  |                   | 32,000     | (3)     |          |  | *    |  
|                                            |  | J. Michael Stepp                                                             |  |                   | 118,067    | (9)(10) |          |  | *    |  
|                                            |  | David A. Stockman                                                            |  |                   | 0          | (10)    |          |  |      |  
|                                            |  | Daniel P. Tredwell                                                           |  |                   | 0          | (10)    |          |  |      |  
|                                            |  | Samuel Valenti, III                                                          |  |                   | 0          | (10)    |          |  |      |  
|                                            |  | Eric J. White                                                                |  |                   | 56,000     | (4)     |          |  | *    |  
|                                            |  | Michael G. Torakis                                                           |  |                   | 0          |         |          |  | *    |  
|                                            |  | Executive officers and directors as a Group
    (19 persons)                 |  |                   | 14,020,951 | (11)    |          |  | 16.8 | %



---



| |   |                                                                 
| | - | ----------------------------------------------------------------
| | * | Less than one percent of shares of Common Stock
    outstanding.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Of these shares (i) 3,554,579 shares are
    held directly by Blackstone Capital Partners L.P., a
    Delaware limited partnership (Blackstone Partners),
    the sole general partner of which is Blackstone Management
    Associates L.P. (Blackstone Associates),
    (ii) 183,410 shares are held directly by Blackstone Family
    Investment Partnership I L.P., a Delaware limited
    partnership (BFIP), the sole general

63



---



##### 



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | partner of which is Blackstone Management
    Associates I L.L.C., (iii) 16,107 shares are held
    directly by Blackstone Advisory Directors Partnership L.P., a
    Delaware limited partnership (BADP), the sole
    general partner of which is Blackstone Associates, and
    (iv) 761,133 shares are held directly by Blackstone Capital
    Company II L.L.C., a Delaware limited liability company,
    all the ownership interest of which is owned directly and
    indirectly by Blackstone Partners, BFIP and BADP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (2) | Such shares represent (a) 5,440,000 shares
    acquired by Mr. Becker as consideration for the acquisition
    of Becker Group L.L.C., (Becker), (b) 339,262
    shares acquired by Mr. Becker immediately following the
    closing of the Becker acquisition from one of the other former
    Becker shareholders, (c) 160,000 shares subject to
    presently exercisable warrants to purchase such Common Stock at
    $5.00 per share acquired by Mr. Becker as consideration for
    the Becker acquisition and (d) 1,600,000 shares acquired by
    Becker Ventures LLC (Becker Ventures) as part of the
    financing for the Companys acquisition of Textron
    Automotive Companys trim division (TAC-Trim).
    Mr. Becker is the managing member of and holds a
    controlling interest in Becker Ventures. Mr. Becker became
    a Company director upon completion of the Becker acquisition and
    was Vice Chairman of the Board from July 2001 until July 2002.
    Mr. Becker is a limited partner of Heartland and disclaims
    beneficial ownership of all shares held by Heartland.
|
| | (3) | Represents shares underlying options granted
    under the 1994 Directors Stock Option Plan (the 1994
    Directors Plan) and the 2002 Plan which either are vested
    or will vest within 60 days unless the director ceases to
    be a director prior to that time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | (4) | Represents shares underlying options granted
    under the 2002 Plan which are vested or will vest within
    60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (5) | The 31,272,397 shares beneficially owned are
    indirectly owned by Heartland Industrial Associates L.L.C. as
    the general partner of each of the following limited
    partnerships, which hold the indicated shares directly:
    (a) 378,887 shares are held directly by Heartland
    Industrial Partners (FF), L.P., a Delaware limited
    partnership, (b) 528,336 shares are held directly by
    Heartland Industrial Partners (E1), L.P., a Delaware
    limited partnership, (c) 245,746 shares are held directly
    by Heartland Industrial Partners (K1), L.P., a Delaware
    limited partnership, (d) 73,719 shares are held directly by
    Heartland Industrial Partners (C1), L.P., a Delaware
    limited partnership, and (e) 30,045,709 shares are held
    directly by Heartland.                                                                                                                                                                                                                                                                                                        
|
| | (6) | Of these shares (a) 5,104,000 shares are
    held by Joan Fabrics Corporation (Joan Fabrics) as a
    part of the consideration for the sale of Joan Automotive
    Industries, Inc. (Joan Automotive) to a Company
    subsidiary and (b) 430,000 shares are held by
    Mr. McCallum and his spouse. The sole stockholder of Joan
    Fabrics is JFC Holding Trust, in which Mr. McCallum is the
    trustee and has a 75% beneficial interest and his spouse, Donna
    McCallum, owns the balance. Mr. McCallum became a director
    of the Company upon the consummation of the Joan acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (7) | Of these shares, (i) 762 shares are held
    indirectly in the Stock Fund of the 401(k) Plan and the
    non-qualified Shadow Retirement Income Plan (the
    SRIP) and (ii) 400,000 represent shares
    underlying options granted under the 2002 Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (8) | All shares underlying options previously granted
    to Mr. Mosingo under the 2002 Plan expired in November 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (9) | Of these shares, (i) 26,000 are held
    directly, (ii) 4,067 are held indirectly in the Stock Fund
    of the 401(k) Plan and the SRP, and (iii) 88,000 represent
    shares underlying options granted under the 2002 Plan which are
    vested or will vest within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | As described under (5) above, 31,272,397
    shares are beneficially owned by Heartland Industrial
    Associates, L.L.C. Mr. Stockman is the Managing Member of
    Heartland Industrial Associates, L.L.C., but disclaims
    beneficial ownership of such shares. Messrs. Leuliette,
    McConnell, Stepp, Tredwell and Valenti and Ms. Hess are
    also members of Heartland Industrial Associates, L.L.C. and also
    disclaim beneficial ownership of the shares.

64



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##### 





|     |                                                                                                                                                                                                                                                                                      
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | Excludes shares held by entities owning more than
    5% of the Companys voting stock, except Joan Fabrics,
    which are included in the holdings of Mr. McCallum. Also
    excludes shares held by Mr. Mitchell, who is no longer
    employed by the Company as of March 1, 2004.

VOTING

As of March 1, 2004, Heartland, Blackstone
Partners, Charles E. Becker, Elkin McCallum and their
affiliates (collectively, the Investors)
beneficially own or have the right to vote in the aggregate
approximately 58.4% of the outstanding Common Stock. See table
above and Item 13, Certain Relationships and Related
Transactions.

SECURITIES AUTHORIZED FOR
ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table indicates as of
December 31, 2003, for each of our existing equity
compensation plans under which any of our equity securities are
authorized for issuance (including the 2002 Plan), the number of
shares of our Common Stock issuable upon the exercise of
outstanding options, the weighted average exercise price of such
options and the number of additional shares of our Common Stock
still authorized for issuance under such plans. We have no
individual compensation arrangements under which any of our
equity securities are authorized for issuance apart from these
plans, and none of our subsidiaries or affiliates have any such
plans or arrangements pursuant to which any or our equity
securities authorized for issuance. All of our existing equity
compensation plans have been approved by our stockholders.

|                                                               |                     |                         |  |           |                           |                                |  |                               |        |  |  |           |           | 
|-------------------------------------------------------------- | ------------------- | ----------------------- |  | --------- | ------------------------- | ------------------------------ |  | ----------------------------- | ------ |  |  | --------- | --------- | 
|                                                               |                     |                         |  |           |                           | Number of securities remaining | 
|                                                               |                     | Number of securities to |  |           | Weighted-average exercise |                                |  | available for future issuance |       
|                                                               |                     | be issued upon exercise |  |           | price of outstanding      |                                |  | under equity compensation     |       
|                                                               |                     | of outstanding options, |  |           | options, warrants and     |                                |  | plans (excluding securities   |       
|Plan Category                                                  |                     | warrants and rights     |  |           | rights                    |                                |  | reflected in column (a))      |       
|                                                               |                     |                         |  |           |                           |                                |  |                               |       
|                                                               |                     | (a)                     |  |           | (b)                       |                                |  | (c)                           |       
|Equity compensation plans approved by security
    holders:    |                     |                         |  |           |                           |                                |  |                               |        |  |  |          
|                                                               | 1993 Plan           |                         |  | 77,245    |                           |                                |  | 8.0000                        |        |  |  | 188,309   |          
|                                                               | 1994 Directors Plan |                         |  | 64,000    |                           |                                |  | 17.1039                       |        |  |  | 0         |          
|                                                               | 1994 Plan           |                         |  | 671,267   |                           |                                |  | 9.5016                        |        |  |  | 743,757   |          
|                                                               | 2002 Plan           |                         |  | 4,190,811 |                           |                                |  | 8.0076                        |        |  |  | 2,409,189 |          
|                                                              
|Equity compensation plans not approved by
    security holders |                     |                         |  |           |                           |                                |  |                               |        |  |  |          
|                                                               | N/A                 |                         |  |           |                           |                                |  |                               |        |  |  |           |          
|                                                               |                     |                         |  |           |                           |                                |  |                               |       
|                                                               |                     | Total                   |  |           | 5,003,323                 |                                |  |                               | 8.3243 |  |  |           | 3,341,255 | 
|                                                               |                     |                         |  |           |                           |                                |  |                               |       



|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and
    Related Transactions

Heartland

Heartland is a private equity firm established in
1999 for the purpose of acquiring and expanding industrial
companies operating in various industrial sectors of the
American manufacturing economy that are well positioned for
global consolidation and growth. Three of the Companys
directors, Messrs. Stockman, Tredwell and McConnell, are also
employed by Heartland. Mr. Valenti is a consultant to
Heartland. Messrs. Leuliette and Stepp are senior managing
directors of Heartland (although they are not employees of
Heartland). As of March 18, 2003, Heartland beneficially
owned approximately 37% of the outstanding Common Stock.

In addition to the stockholders agreements
described below, the Company is engaged in transactions with
Heartland that are described in Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Certain Transactions with Related
Parties and in Note 19 Related Party
Transactions of the Financial Statements included in this
Report.

65



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##### 



Charles
E. Becker

In July 2001, the Company completed the
acquisition of Becker. As a result of the Becker acquisition and
a purchase of Common Stock immediately afterwards, Charles
Becker became one of the Companys principal stockholders.
Charles Becker became a member of the Companys Board of
Directors upon closing of the Becker acquisition and was Vice
Chairman of the Board from July 2001 until July 2002. In
addition, Becker Ventures, an affiliate of Mr. Becker, acquired
additional shares of Common Stock as part of the financings in
connection with the acquisition of TAC-Trim at a price of $5.00
per share. See Item 12, Security Ownership of Certain
Beneficial Owners and Management for a discussion of
Mr. Beckers beneficial ownership of Common Stock.

In addition to the stockholders agreements
described below, the Company in engaged in transactions with Mr.
Becker and his affiliates that are described in
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Certain
Transactions with Related Parties and in Note 19
Related Party Transactions of the Financial
Statements included in this Report.

Elkin
McCallum

In September 2001, the Company completed the
acquisition of Joan Automotive, a leading supplier of body cloth
to the automotive industry, and all of the operating assets of
Joan Automotives affiliated yarn dying operation, Western
Avenue Dyers, L.P. As a result of the Joan acquisition, Joan
Fabrics, a company controlled by Elkin McCallum, became a
principal stockholder of the Company. Upon completion of the
Joan acquisition, Mr. McCallum because a member of the
Companys Board of Directors. See Item 12,
Security Ownership of Certain Beneficial Owners and
Management for a discussion of Joan Fabrics and
Mr. McCallums beneficial ownership of Common Stock.

In addition to the stockholders agreements
described below, the Company is engaged in transactions with Mr.
McCallum and his affiliates that are described in
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Certain
Transactions with Related Parties and in Note 19
Related Party Transactions of the Financial
Statements included in this Report.

Blackstone

Blackstone Partners is a Delaware limited
partnership formed in 1987 for the purpose of, among other
things, (i) committing capital to facilitate corporate
restructurings, leveraged buyouts, bridge financings and other
investments and (ii) capitalizing affiliates that will
engage in investment and merchant banking activities. The sole
general partner of Blackstone Partners is Blackstone Associates,
a Delaware limited partnership. At present, the business of
Blackstone Associates consists of performing the function of,
and serving as, the general partner of certain limited
partnerships, including Blackstone Partners. Blackstone
Management Partners L.L.C. is the general partner of
Blackstone Management Partners L.P. (Blackstone
Management), and Blackstone Associates, which is the
general partner of BFIP.

Certain Agreements and
Transactions

Blackstone/
Wasserstein/ Heartland Stockholders
Agreement

The Company is a party to a stockholders
agreement (the Initial Stockholders Agreement) with
Heartland and certain of its affiliates (the Heartland
parties), Blackstone and certain of its affiliates (the
Blackstone parties) and Wasserstein L.L.C. and
certain of its affiliates (the Wasserstein parties).
The Initial Stockholders Agreement contains (i) rights of
first refusal on private sales of Common Stock by the Blackstone
parties and the Wasserstein parties in favor of the Heartland
parties, (ii) tag-along rights in favor of the Blackstone
parties and the Wasserstein parties in the event of certain
transfers of Common Stock by Heartland and (iii) for so
long as Heartland has a right to designate directors, a
drag-along right enabling Heartland to cause the Blackstone
parties and Wasserstein parties to sell all of their Common
Stock with Heartland when Heartland is selling all of its Common
Stock to a third party (including by merger). The Initial
Stockholders Agreement further provides that the stockholder
parties thereto will vote their Common

66



---



##### 



Stock to ensure that seven members of the
Companys board will be designated by Heartland, one by the
Wasserstein parties and one by the Blackstone parties
(Blackstone and Wasserstein waived their right to each name a
member of the board on March 15, 2002), in each case so
long as each of Heartland, the Wasserstein parties and the
Blackstone parties (in each case, together with its affiliates)
continue to beneficially own at least 25% of the Common Stock
owned by them as of February 23, 2001. In addition, there
must be at least three independent directors not otherwise
affiliated with the Company, the Blackstone parties, the
Wasserstein parties or Heartland. The Companys chief
executive officer will also serve as a director. Certain rights
inure to the benefit of, and certain obligations bind,
subsequent transferees of Common Stock, but none of the rights
or obligations apply to public sales, whether under
Rule 144 or under a registration statement.


The Initial Stockholders Agreement also contains
certain restrictions on the Companys ability to enter into
transactions with Heartland and its affiliates. The Company and
its subsidiaries may not enter into any such transaction or
series of related transactions involving payments or other
consideration in excess of $500,000 without the consent of
(i) each of the Blackstone parties and the Wasserstein
parties, so long as each holds at least 25% of the Common Stock
held by it as of February 23, 2001, for so long as
Heartland and its affiliates directly or indirectly beneficially
own at least 50% of the outstanding Common Stock and (ii) a
majority of the members of the board who are disinterested with
respect to the particular transaction and were not designated
for election by Heartland so long as Heartland and its
affiliates own at least 25% of the Common Stock owned by them on
the date of the Initial Stockholders Agreement. The restrictions
described above will not apply to (i) an advisory fee on
certain acquisitions and divestitures by the Company in an
amount not exceeding 1% of the enterprise value thereof and
related out-of-pocket fees and expenses, (ii) transactions
involving the sale, purchase or lease of goods and services in
the ordinary course of business and on an arms-length basis
between the Company and portfolio companies of Heartland in an
amount involving not more than $1.25 million in any
transaction, and (iii) certain other transactions.

In July 2003, Wasserstein Management and its
affiliates distributed all of their shares of the Companys
Common Stock to the partners of WP Partners, pro-rata to their
respective interests in WP Partners. As a result of this
distribution, the Wasserstein parties are no longer parties to
the Initial Stockholders Agreement.

Becker/
Joan/ Heartland Stockholders Agreement

There is also a stockholders agreement (the
Becker/ Joan Stockholders Agreement) among
Charles E. Becker, Michael E. McInerney and Jens
Höhnel (the Becker parties), Joan Fabrics, JFC
Holdings Trust, Mr. Elkin McCallum and Donna McCallum (the
Joan parties), the Heartland parties and the
Company. The Becker/ Joan Stockholders Agreement contains
(i) rights of first refusal on private sales of Common
Stock by the Becker parties and the Joan parties in favor of the
Heartland parties, (ii) tag-along rights in favor of the
Becker parties and the Joan parties in the event of certain
transfers of Common Stock by Heartland and (iii) for so
long as Heartland has a right to designate directors, a
drag-along right enabling Heartland to cause the Becker parties
and Joan parties to sell all of their Common Stock with
Heartland when Heartland is selling all of its Common Stock to a
third party (including by merger).

The Becker/ Joan Stockholders Agreement further
provides that the Becker parties, the Joan parties and Heartland
will each vote their Common Stock to ensure that Charles E.
Becker and Elkin McCallum are each members of the Companys
Board of Directors, so long as the Becker parties and the Joan
parties, respectively, continue to hold shares representing 25%
of the Common Stock originally acquired by them. The Becker/
Joan Stockholders Agreement also provides that the Becker
parties will vote their shares in favor of the election of
Heartlands designees to the Companys Board of
Directors. Certain rights inure to the benefit of, and certain
obligations bind, subsequent transferees of Common Stock, but
none of the rights or obligations apply to public sales, whether
under Rule 144 or under a registration statement.

Additional
Transactions

During 2003, the Company also engaged in various
transactions with Textron, Inc. and its affiliates (formerly the
beneficial owners of 6% of the Companys outstanding Common
Stock). Textron, Inc. and its affiliates sold all of their
remaining shares of Common Stock of the Company in open market
transactions in

67



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##### 



January 2004. See Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Effects of
Certain Transactions with Related Parties, and
Note 19 Related Party Transactions of the
Financial Statements included in this report for additional
discussion of related party transactions.




|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accounting Fees
    and Services

A.     Audit
Fees

KPMG
LLP

On June 20, 2003, the Audit Committee of the
Companys Board of Directors appointed KPMG LLP as the
Companys independent accountants for the year ending
December 31, 2003.

2003
Fees:Fees for all services provided
by KPMG for the year ended December 31, 2003 were as
follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Audit
    Fees:Aggregate
    fees for professional services rendered by KPMG LLP in
    connection with its audit of the Companys consolidated
    financial statements as of and for the year ended
    December 31, 2003, and its limited reviews of the
    Companys unaudited consolidated interim financial
    statements as of and for the year ended December 31, 2003
    and its limited reviews of the Companys unaudited
    consolidated interim financial statements were $1.1 million.
|
| |  | All Other
    Fees:In
    addition to the fees described above, aggregate fees of
    $0.3 million (a) were billed by KPMG LLP during the
    year ended December 31, 2003, primarily for the following
    professional services (in millions):                                                                                                                                                                                                                                                        

|                                               |  |   |     | 
|---------------------------------------------- |  | - | --- | 
|Audit-related services(b)                      |  | $ | 0.1 | 
|                                              
|Income tax compliance and related tax services |  | $ |    | 
|                                              
|All other products and services(c)             |  | $ | 0.2 | 



---



|    |                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | 0% of these fees were covered by the de
    minimus safe harbor exception from Audit Committee
    pre-approval set forth in Rule 2-01(c)7(ii)(C) of the
    Securities and Exchange Commissions Regulation S-X
    (17 CFR 210.2-1(c)(7)(C)).
|   
|(b) | Audit-related fees primarily include fees for
    audits of the Companys employee benefit plans.                                                                                                                                              
|   
|(c) | ISO compliance.                                                                                                                                                                                                                                

2002
Fees:During the year ended
December 31, 2002, KPMG LLP was not engaged as an
independent accountant to audit either the financial statements
of the Company or any of its subsidiaries, nor was it consulted
regarding the application of accounting principles to any
specific transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Companys
financial statements, or any matter that was the subject of a
disagreement or reportable event.

PricewaterhouseCoopers
LLP

PricewaterhouseCoopers LLP
(PricewaterhouseCoopers) served as the
Companys independent accountants during the year ended
December 31, 2002.

2002
Fees:Fees for all services provided
by PricewaterhouseCoopers for the year ended December 31,
2002 were as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Audit
    Fees:Aggregate
    fees for professional services rendered by
    PricewaterhouseCoopers in connection with its audit of the
    Companys consolidated financial statements as of and for
    the year ended December 31, 2002 and its limited reviews of the
    Companys unaudited consolidated interim financial
    statements were $1.4 million.

68



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##### 





| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Financial Information Systems
    Design and Implementation Fees:During the year ended
    December 31, 2002, PricewaterhouseCoopers rendered no
    professional services to the Company in connection with the
    design and implementation of financial information systems.
|
| |  | All Other
    Fees:In
    addition to the fees described above, aggregate fees of
    $5.0 million were billed by PricewaterhouseCoopers during
    the year ended December 31, 2002, primarily for the
    following professional services (in millions):                      

|                                               |  |   |     | 
|---------------------------------------------- |  | - | --- | 
|Audit-related services(e)                      |  | $ | 3.4 | 
|                                              
|Income tax compliance and related tax services |  | $ | 1.6 | 
|                                              
|All other products and services                |  | $ |    | 



---



|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) | Audit-related fees include fees include fees for
    acquisition support activities, issuance of comfort letters and
    audits of the Companys employee benefit plans.



|    |                                                                           
|--- | --------------------------------------------------------------------------
|(f) | These fees consist of tax consulting services and
    compliance services.

B.     Audit
Committees Pre-Approval Policies for Auditor
Services

The Audit Committees policies permit the
Companys independent accountants (KPMG LLP) to provide
audit-related services, tax services and non-audit services to
the Company during 2003, subject to the following conditions:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) KPMG LLP will not be engaged to provide
    any services that may compromise its independence under
    applicable laws and regulations, including rules and regulations
    of the Securities and Exchange Commission, the Public Company
    Accounting Oversight Board, and the New York Stock Exchange;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (2) KPMG LLP and the Company will enter into
    engagement letters authorizing the specific audit-related tax or
    non-audit services and setting forth the cost of such services;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (3) The Company is authorized, without
    additional Audit Committee Approval, to engage KPMG LLP to
    provide (a) Audit-related and tax services, including due
    diligence and tax planning related to acquisitions where KPMG
    LLP does not audit the target company, to the extent that the
    cost of such engagement does not exceed $250,000, (b) due
    diligence and tax planning related to acquisitions where KPMG
    LLP audits the target company, to the extent the cost of such
    engagement does not exceed $20,000, and (c) services not
    otherwise covered by (a) or (b) above to the extent
    the cost of such engagements does not exceed $150,000; provided,
    however, that the aggregate amount of all such engagements
    under (a), (b) and (c) may not exceed $350,000 in any
    calendar quarter;
|
| | (4) The Chairman of the Audit Committee will
    be promptly notified of each engagement, and the Audit Committee
    will be updated quarterly on all engagements, including fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

69



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##### 



PART IV



Item 15.Exhibits,
Financial Statement Schedules and Reports on
Form 8-K


(a)(1) Financial Statements:

|                                                                                                                              |  |        |     | 
|----------------------------------------------------------------------------------------------------------------------------- |  | ------ | --- | 
|                                                                                                                              |  | Page   |    
|                                                                                                                              |  | Number |    
|                                                                                                                              |  |        |    
|Independent Auditors Report                                                                                                  |  |        | F-1 | 
|Report of Independent Accountants                                                                                             |  |        | F-2 | 
|Consolidated Statements of Operations for the
    years ended December 31, 2003, 2002 and 2001                                |  |        | F-3 | 
|Consolidated Balance Sheets at December 31,
    2003 and 2002                                                                 |  |        | F-4 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001                                |  |        | F-5 | 
|Consolidated Statements of Common
    Stockholders Equity (Deficit) for the years ended
    December 31, 2003, 2002 and 2001 |  |        | F-6 | 
|Notes to Consolidated Financial Statements                                                                                    |  |        | F-7 | 

(a)(2) Financial Schedules:

The following financial statement schedules of
Collins & Aikman Corporation for the years ended
December 31, 2003, 2002, and 2001 are filed as part of this
Report and should be read in conjunction with the Consolidated
Financial Statements of Collins & Aikman Corporation.

|                                                               |  |        |     | 
|-------------------------------------------------------------- |  | ------ | --- | 
|                                                               |  | Page   |    
|                                                               |  | Number |    
|                                                               |  |        |    
|Schedule I  Condensed Financial
    Information of Registrant |  |        | S-1 | 
|Schedule II  Valuation and
    Qualifying Accounts            |  |        | S-1 | 

All other schedules, for which provision is made
in the applicable accounting regulations of the Securities and
Exchange Commission are omitted because they are not required,
are inapplicable or the information is included in the
Consolidated Financial Statements or Notes thereto.

(a)(3) Exhibits:

Please note that in the following description
of exhibits, the title of any document entered into, or filing
made, prior to July 7, 1994 reflects the name of the
entity, a party thereto or filing, as the case may be, at such
time. Accordingly, documents and filings described below may
refer to Collins & Aikman Holdings Corporation,
Collins & Aikman Group, Inc. or Wickes
Companies, Inc., if such documents and filings were made
prior to July 7, 1994.

|        |     |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | --- |  | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |  |            
|Number  |     |  | Description
|        |     |  |            
|        | 2.1 |  |             | Agreement and Plan of Merger dated May 14,
    2001 by and among Collins & Aikman Corporation,
    Collins & Aikman Products Co., Becker Group, L.L.C., CE
    Becker Inc., ME McInerney Inc., J Hoehnel Inc. and the
    individuals party thereto as sellers is hereby incorporated by
    reference to Exhibit 2.1 of Collins & Aikman
    Corporations Current Report on Form 8-K dated and filed
    July 13, 2001.                                       
|        | 2.2 |  |             | Agreement and Plan of Merger dated as of
    August 17, 2001 by and among Collins & Aikman
    Corporation, Collins & Aikman Products Co., JAII
    Acquisition Co., Elkin McCallum, Joan Fabrics Corporation
    and Joan Automotive Industries, Inc is hereby
    incorporated by reference to Exhibit 2.1 of
    Collins & Aikman Corporations Current Report on
    Form 8-K dated September 21, 2001 and filed
    October 10, 2001.                      
|        | 2.3 |  |             | First Amendment to Agreement and Plan of Merger
    by and among Collins & Aikman Corporation,
    Collins & Aikman Products Co., JAII Acquisition Co.,
    Elkin McCallum, Joan Fabrics Corporation and
    Joan Automotive Industries, Inc dated as of
    September 21, 2001 is hereby incorporated by reference to
    Exhibit 2.2 of Collins & Aikman Corporations
    Current Report on Form 8-K dated September 21, 2001 and
    filed October 10, 2001.

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|        |     |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | --- |  | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |  |            
|Number  |     |  | Description
|        |     |  |            
|        | 2.4 |  |             | Second Amendment to the Receivables Transfer
    Agreement among Collins & Aikman Products Co.,
    Carcorp, Inc., the conduit purchasers party thereto from
    time to time, the committed purchasers party thereto from time
    to time, the funding agents party thereto from time to time and
    JPMorgan Chase Bank, as administrative agent, dated as of
    December 18, 2003 to the Receivables Transfer Agreement,
    dated December 20, 2001, as amended and restated as of
    September 24, 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 2.5 |  |             | Purchase Agreement dated as of August 7,
    2001, as amended and restated as of November 30, 2001, by
    and among Textron Inc., Collins & Aikman Corporation
    and Collins & Aikman Products Co., including
    Exhibit 1 (Certificate of Designation of the 15%
    Series A Redeemable Preferred Stock, the 16% Series B
    Redeemable Preferred Stock and the 16% Series C Redeemable
    Preferred Stock) and Exhibit 7 (Asset Purchase Agreement
    dated as of August 7 by and between Textron Automotive Exteriors
    Inc. and JPS Automotive, Inc.), which is incorporated by
    reference to Collins and Aikman Corporation Current Report on
    Form 8-k dated December 20, 2001 and filed on
    January 4, 2002. The Table of Contents of the Purchase
    Agreement listed as Exhibit 2.4 contains a list briefly
    identifying the contents of all omitted schedules and exhibits.
    Collins & Aikman Corporation will supplementally
    furnish a copy of any omitted schedule or Exhibit to the
    Commission upon request.
|        | 2.6 |  |             | Asset Purchase Agreement dated as of
    August 7, 2001, as amended and restated as of
    November 30, 2001, by and between Textron Automotive
    Exteriors Inc. and JPS Automotive, Inc., which is
    incorporated herein by reference to Exhibit 2.2 of
    Collins & Aikman Corporations Current Report on
    Form 8-K dated December 20, 2001 and filed on
    January 4, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 2.7 |  |             | Asset Purchase Agreement dated as of
    August 17, 2001 by and among Collins & Aikman
    Products Co., Western Avenue Dyers, L.P., Elkin McCallum, Kerry
    McCallum, Penny Richards and Tyng Textiles LLC, which is
    incorporated by reference to Exhibit 2.3 to
    Collins & Aikman Corporations Current Report on
    Form 8-K filed on October 4, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 2.8 |  |             | First Amendment to Asset Purchase Agreement dated
    as of September 21, 2001, which is incorporated by
    reference to Exhibit 2.4 to Collins & Aikman
    Corporations Current Report on Form 8-K filed on
    October 4, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.1 |  |             | Restated Certificate of Incorporation of
    Collins & Aikman Corporation is hereby incorporated by
    reference to Exhibit 3.1 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended June 26, 1999 and filed August 10, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.2 |  |             | Certificate of Amendment to the Restated
    Certificate of Incorporation of Collins & Aikman
    Corporation, which is incorporated by reference to
    Exhibit 3.2 of Collins & Aikman Corporations
    Annual Report on Form 10-K for the fiscal year ended
    December 31, 2000 and filed April 2, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 3.3 |  |             | Certificate of Amendment of Amended and Restated
    Certificate of Incorporation is hereby incorporated by reference
    to Exhibit 3.5 of Collins & Aikman
    Corporations Current Report on Form 8-K filed May 29,
    2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.4 |  |             | By-laws of Collins & Aikman Corporation,
    as amended, are hereby incorporated by reference to
    Exhibit 3.2 of Collins & Aikman Corporations
    Report on Form 10-K for the fiscal year ended January 27,
    1996 and filed April 22, 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 3.5 |  |             | Certificate of Elimination of Cumulative
    Exchangeable Redeemable Preferred Stock of Collins &
    Aikman Corporation is hereby incorporated by reference to
    Exhibit 3.3 of Collins & Aikman Corporations
    Report on Form 10-Q for the fiscal quarter ended
    October 28, 1995 and filed December 8, 1995.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 4.1 |  |             | Specimen Stock Certificate for the Common Stock
    is hereby incorporated by reference to Exhibit 4.3 of
    Amendment No. 3 to Collins & Aikman Holdings
    Corporations Registration Statement on Form S-2
    (Registration No. 33-53179) filed June 21, 1994.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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|        |      |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ---- |  | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |            
|Number  |      |  | Description
|        |      |  |            
|        | 4.2  |  |             | Indenture, dated as of June 1, 1996, between
    Collins & Aikman Products Co., Collins &
    Aikman Corporation and First Union National Bank of North
    Carolina, as Trustee, is hereby incorporated by reference to
    Exhibit 4.2 of Collins & Aikman Corporations
    Report on Form 10-Q for the fiscal quarter ended April 27,
    1996 and filed June 11, 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4.3  |  |             | First Supplemental Indenture dated as of
    June 1, 1996, between Collins & Aikman Products
    Co., Collins & Aikman Corporation and First Union
    National Bank of North Carolina, as Trustee, is hereby
    incorporated by reference to Exhibit 4.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the fiscal quarter ended April 27, 1996 and filed
    June 11, 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 4.4  |  |             | Second Supplemental Indenture, dated as of
    February 8, 2001, by and among Collins & Aikman
    Products Co., as Issuer, Collins & Aikman Corporation,
    as Guarantor, and First Union National Bank, as Trustee, which
    is incorporated by reference to Exhibit 4.11 of
    Collins & Aikman Corporations Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 and
    filed April 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4.5  |  |             | Form of Warrant is hereby incorporated by
    reference to Exhibit 4.1 of Collins & Aikman
    Corporations Current Report on Form 8-K dated and filed
    July 13, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 4.6  |  |             | Certificate of Designation of Series A
    Redeemable Preferred Stock, Series B Redeemable Preferred
    Stock and Series C Redeemable Preferred Stock, which is
    incorporated herein by reference to Exhibit 4.1 of
    Collins & Aikman Corporations Current Report of
    Form 8-K dated December 20, 2001 and filed on
    January 4, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 4.7  |  |             | Indenture dated as of December 20, 2001 by
    and among Collins & Aikman Products Co., as Issuer, the
    Guarantors parties thereto, and BNY Midwest Trust Company, as
    Trustee, which is incorporated herein by reference to
    Exhibit 4.2 of Collins & Aikman Corporations
    Current Report on Form 8-K dated December 20, 2001 and
    filed on January 4, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4.8  |  |             | Receivables Transfer Agreement dated as of
    December 20, 2001 by and among Carcorp, Inc., as
    Transferor, Collins & Aikman Products Co., individually
    and as Collection Agent, the persons parties thereto, as CP
    Conduit Purchasers, Committed Purchasers and Funding Agents and
    JPMorgan Chase Bank, as Administrative Agent, which is
    incorporated herein by reference to Exhibit 4.3 of
    Collins & Aikman Corporations Current Report on
    Form 8-K dated December 20, 2001 and filed on
    January 4, 2002.                                                                                                                                                                                                                                                                                                                       
|        | 4.9  |  |             | Amended and Restated Receivables Purchase
    Agreement dated as of December 20, 2001 among
    Collins & Aikman Products Co. and its wholly-owned
    direct and indirect subsidiaries named therein, as Sellers, and
    Carcorp, Inc., as Purchaser, and the other Sellers from
    time to time named therein, which is incorporated herein by
    reference to Exhibit 4.4 of Collins & Aikman
    Corporations Current Report on Form 8-K dated
    December 20, 2001 and filed on January 4, 2002.                                                                                                                                                                                                                                                                                                                                                          
|        | 4.10 |  |             | Credit Agreement dated as of December 20,
    2001 among Collins & Aikman Products Co., as Borrower,
    Collins & Aikman Canada Inc., as a Canadian Borrower,
    Collins & Aikman Plastics, Ltd., as a Canadian
    Borrower, Collins & Aikman Corporation, the Lenders
    named therein, Deutsche Banc Alex. Brown Inc. and Merrill Lynch
    Capital Corporation, as Co-Documentation Agents, Credit Suisse
    First Boston Corporation, as Syndication Agent, JPMorgan Chase
    Bank, as Administrative Agent, and J.P.Morgan Bank Canada, as
    Canadian Administrative Agent, which is incorporated herein by
    reference to Exhibit 4.5 of Collins & Aikman
    Corporations Current Report on Form 8-K dated
    December 20, 2001 and filed on January 4, 2002.                                                                                    
|        | 4.11 |  |             | First Amendment dated as of December 13,
    2002, to the Credit Agreement dated as of December 20, 2001
    among Collins & Aikman Products Co., as Borrower,
    Collins & Aikman Canada Inc., as a Canadian Borrower,
    Collins & Aikman Plastics, Ltd., as a Canadian
    Borrower, Collins & Aikman Corporation, the Lenders
    named therein, Credit Suisse First Boston Corporation, as
    Syndication Agent, Deutsche Bank Securities Inc. (formerly known
    as Deutsche Banc Alex. Brown Inc.) and Merrill Lynch Capital
    Corporation, as Co-Documentation Agents, JPMorgan Chase Bank, as
    Administrative Agent, and J.P. Morgan Bank Canada, as
    Canadian Administrative Agent is hereby incorporated by
    reference to Exhibit 4.17 of Collins & Aikman
    Corporations report on Form 10-K for the year ended
    December 31, 2002.

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|        |      |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ---- |  | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |            
|Number  |      |  | Description
|        |      |  |            
|        | 4.12 |  |             | Second Amendment dated May 2, 2003 to the
    Credit Agreement dated December 20, 2001 which is
    incorporated herein by reference to Exhibit 10.1 of
    Collins & Aikman Corporations Report on Form 10-Q
    dated March 31, 2003 and filed on May 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4.13 |  |             | Third Amendment dated September 23, 2003 to
    the Credit Agreement dated December 20, 2001 which is
    incorporated herein by reference to Exhibit 4.2 of
    Collins & Aikman Corporations Report on Form 10-Q
    dated September 30, 2003 and filed on November 11,
    2003.                                                                                                                                                                                                                                                                                                                                                                                
|        | 4.14 |  |             | Fourth Amendment dated October 7, 2003 to
    the Credit Agreement dated December 20, 2001 which is
    incorporated herein by reference to Exhibit 4.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    dated September 30, 2003 and filed on November 11,
    2003.                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4.15 |  |             | Fifth Amendment dated February 13, 2004 to
    the Credit Agreement dated December 20, 2001.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4.16 |  |             | Guarantee and Collateral Agreement dated as of
    December 20, 2001 by and among Collins & Aikman
    Corporation, Collins & Aikman Products Co. and certain
    of their subsidiaries and JPMorgan Chase Bank, as Collateral
    Agent, which is incorporated herein by reference to
    Exhibit 4.6 of Collins & Aikman Corporations
    Current Report on Form 8-K dated December 20, 2001 and
    filed on January 4, 2002.                                                                                                                                                                                                                                   
|        | 4.17 |  |             | Third Supplemental Indenture, dated as of
    December 20, 2001, among Collins & Aikman Products
    Co., Collins & Aikman Corporation, the Subsidiary
    Guarantors listed on the signature page thereto, and First Union
    National Bank (as successor in interest to First Union National
    Bank of North Carolina), which is incorporated herein by
    reference to Exhibit 4.7 of Collins & Aikman
    Corporations Current Report on Form 8-K dated
    December 20, 2001 and filed on January 4, 2002.                                                                                                                                                
|        | 4.18 |  |             | Amendment and Waiver, dated August 26, 2003
    to the Receivables Transfer Agreement dated December 21,
    2001 which is incorporated herein by reference to
    Exhibit 4.1 of Collins & Aikman Corporations
    Report on Form 10-Q dated September 30, 2003 and filed on
    November 11, 2003.                                                                                                                                                                                                                                                                                                                                                               
|        | 4.19 |  |             | Registration Rights Agreement, dated
    February 23, 2001, by and among Collins & Aikman
    Corporation, Heartland Industrial Partners, L.P. and the other
    investor stockholders listed on Schedule 1 thereto, Blackstone
    Capital Company II, L.L.C., Blackstone Family Investment
    Partnership I L.P., Blackstone Advisory Directors
    Partnership L.P., Blackstone Capital Partners, L.P. and
    Wasserstein/C&A Holdings, L.L.C., incorporated by reference
    to Annex D to Exhibit 10.1 to Collins &
    Aikman Corporations Current Report on Form 8-K dated
    January 12, 2001 and filed January 16, 2001.                               
|        | 4.20 |  |             | Stockholders Agreement dated July 3, 2001,
    by and among Collins & Aikman Corporation, Heartland
    Industrial Partners, L.P. and the other Heartland Entities named
    therein, the Becker Stockholders party thereto and the Joan
    Stockholders party thereto is hereby incorporated by reference
    to Exhibit 10.85 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                        
|        | 4.21 |  |             | Registration Rights Agreement, dated
    December 20, 2001, by and among Collins & Aikman
    Products Co., Collins & Aikman Corporation, and each of
    the subsidiaries listed on the signature pages thereof, and
    J.P. Morgan Securities Inc., Credit Suisse First Boston
    Corporation, Deutsche Banc Alex. Brown Inc. and Merrill Lynch,
    Pierce, Fenner & Smith Incorporated and the other
    several initial purchasers parties to the Purchase Agreement is
    hereby incorporated by reference to Exhibit 10.89 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.
|        | 4.22 |  |             | Registration Rights Agreement dated as of
    December 20, 2001 by and among Becker Ventures, LLC,
    Dresdner Kleinwort Capital Partners 2001 LP, Masco Capital
    Corporation, ML IBK Positions, Inc. and Collins &
    Aikman Corporation is hereby incorporated by reference to
    Exhibit 10.90 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                                                 

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|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----- |  | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |            
|Number  |       |  | Description
|        |       |  |            
|        | 4.23  |  |             | Registration Rights Agreement, dated
    December 20, 2001, by and between Collins & Aikman
    Corporation, Textron Inc., and Textron Holdco Inc is hereby
    incorporated by reference to Exhibit 10.91 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.                                                                                                                                                                                                                            
|        | 4.24  |  |             | Preferred Stock Registration and Other Rights
    Agreement, dated as of December 20, 2001, by and among
    Collins & Aikman Products Co. and Textron Inc is hereby
    incorporated by reference to Exhibit 10.92 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.                                                                                                                                                                                                                   
|        | 10.1  |  |             | Employment Agreement, dated as of April 1,
    2000, between Collins & Aikman Products Co. and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.3 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended July 1, 2000.                                                                                                                                                                                                                                                                              
|        | 10.2  |  |             | 1993 Employee Stock Option Plan, as amended and
    restated, is hereby incorporated by reference to
    Exhibit 10.13 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended April 29, 1995.                                                                                                                                                                                                                                                                                                                                     
|        | 10.3  |  |             | 1994 Employee Stock Option Plan, as amended
    through February 7, 1997, is hereby incorporated by
    reference to Exhibit 10.12 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended March 29, 1997.                                                                                                                                                                                                                                                                                                                         
|        | 10.4  |  |             | 2000 Employee Stock Option Plan is hereby
    incorporated by reference to Exhibit 10.6 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the fiscal quarter ended July 1, 2000.                                                                                                                                                                                                                                                                                                                                                                      
|        | 10.5  |  |             | 1994 Directors Stock Option Plan as amended and
    restated is hereby incorporated by reference to
    Exhibit 10.15 to Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 26, 1998.                                                                                                                                                                                                                                                                                                                                             
|        | 10.6  |  |             | 1994 Employee Stock Option Plan, as amended and
    restated through June 3, 1999 is hereby incorporated by
    reference to Exhibit 10.2 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended June 26, 1999.                                                                                                                                                                                                                                                                                                                   
|        | 10.7  |  |             | Change in Control Agreement, dated March 17,
    1998, between Collins & Aikman Corporation and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.22 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended March 28, 1998.                                                                                                                                                                                                                                                                          
|        | 10.8  |  |             | Change in Control Agreement, dated March 17,
    1998, between Collins & Aikman Corporation and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.29 of Collins & Aikman
    Corporations Report on Form 10-K for the fiscal year ended
    December 25, 1999.                                                                                                                                                                                                                                                                          
|        | 10.9  |  |             | Change in Control Agreement, dated as of
    April 1, 2000, between Collins & Aikman Products
    Co. and an executive officer is hereby incorporated by reference
    to Exhibit 10.4 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended July 1, 2000.                                                                                                                                                                                                                                                                       
|        | 10.10 |  |             | Stockholders Agreement, dated February 23,
    2001, by and among Collins & Aikman Corporation,
    Heartland Industrial Partners, L.P. and other investor
    stockholders listed on Schedule 1 thereto, Blackstone Capital
    Company II, L.L.C., Blackstone Family Investment
    Partnership I L.P., Blackstone Capital Partners L.P., and
    Wasserstein/C&A Holdings, L.L.C., incorporated by reference
    to Annex E to Exhibit 10.1 to Collins &
    Aikman Corporations Current Report on form 8-K dated
    January 12, 2001 and filed January 16, 2001.
|        | 10.11 |  |             | Share Purchase Agreement, dated as of
    January 12, 2001, between Collins & Aikman
    Corporation and Heartland Industrial Partners, L.P., is hereby
    incorporated by reference to Exhibit 10.1 of
    Collins & Aikman Corporations Report on Form 8-K
    dated January 12, 2001, incorporated by reference to
    Exhibit 10.1 to Collins & Aikman
    Corporations Current Report on Form 8-K dated
    January 12, 2001 and filed January 16, 2001.                                                                                                      
|        | 10.12 |  |             | Services Agreement, dated as of February 23,
    2001, by and among Collins & Aikman Corporation,
    Collins & Aikman Products Co. and Heartland Industrial
    Partners, L.P is hereby incorporated by reference to
    Exhibit 10.59 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                   

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|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ----- |  | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |            
|Number  |       |  | Description
|        |       |  |            
|        | 10.13 |  |             | Profit Participation Interest Agreement, dated as
    of February 23, 2001, by and among Heartland Industrial
    Partners, L.P. and the other investor stockholders listed on
    Schedule 1 thereto and each of Collins & Aikman
    Corporation, Blackstone Capital Company II, L.L.C. and
    Wasserstein/C&A Holdings, L.L.C., incorporated by reference
    to Annex B to Exhibit 10.1 to Collins &
    Aikman Corporations Current Report on Form 8-K dated
    January 12, 2001 and filed January 16, 2001.
|        | 10.14 |  |             | Severance Benefit Agreement dated August 9,
    1999 between Collins & Aikman Corporation and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.32 of Collins & Aikman
    Corporations Report on Form 10-K for the fiscal year ended
    December 25, 1999.                                                                                                                                                                                                                          
|        | 10.15 |  |             | Employment Agreement dated December 1, 2000
    between Collins & Aikman Products Co. and an executive
    officer, which is incorporated by reference to
    Exhibit 10.75 of Collins & Aikman
    Corporations Annual Report on Form 10-K for the fiscal
    year ended December 31, 2000.                                                                                                                                                                                                                       
|        | 10.16 |  |             | Employment Agreement dated as of April 1,
    2000, between Collins & Aikman Products Co. and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.3 of Collins & Aikman
    Corporations Report on Form 10-Q for the quarter ended
    July 1, 2000.                                                                                                                                                                                                                                    
|        | 10.17 |  |             | Service Contract between Collins &
    Aikman Products GmbH and an executive officer, which is
    incorporated by reference to Exhibit 10.5 of
    Collins & Aikman Corporations Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2001 and filed
    August 14, 2001.                                                                                                                                                                                                                             
|        | 10.18 |  |             | Lease Agreement, dated as of June 29, 2001,
    between New King, L.L.C., as landlord, and Collins &
    Aikman Products Co., as tenant is hereby incorporated by
    reference to Exhibit 10.82 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                        
|        | 10.19 |  |             | Lease Agreement, dated as of June 29, 2001,
    between Anchor Court, L.L.C., as landlord and Collins &
    Aikman Products Co., as tenant is hereby incorporated by
    reference to Exhibit 10.84 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                     
|        | 10.20 |  |             | Registration Rights Agreement, dated July 3,
    2001, by and among Collins & Aikman Corporation,
    Charles E. Becker, Michael E. McInerney and Jens Höhnel
    and, together with the Joan Investors (as defined therein) is
    hereby incorporated by reference to Exhibit 10.86 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.                                                                                               
|        | 10.21 |  |             | First Amendment to Services Agreement, dated as
    of August 7, 2001, among Collins & Aikman
    Corporation, Collins & Aikman Products Co. and
    Heartland Industrial Partners, L.P is hereby incorporated by
    reference to Exhibit 10.87 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                        
|        | 10.22 |  |             | Equipment Lease, dated as of December 18,
    2001, among Textron Automotive Exteriors Inc. and Textron
    Automotive Interiors Inc., collectively as lessee, and IAC
    TAX V, LLC, as lessor is hereby incorporated by reference
    to Exhibit 10.88 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                               
|        | 10.23 |  |             | Intellimold Technology License and Support
    Agreement, dated as of December 20, 2001, by and between
    Textron, Inc. and Collins & Aikman Corporation and
    Collins & Aikman Products Co is hereby incorporated by
    reference to Exhibit 10.93 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                
|        | 10.24 |  |             | Technology License Agreement (Retained IP), dated
    as of December 20, 2001, by and between Textron, Inc.
    and Collins & Aikman Corporation and Collins &
    Aikman Products Co is hereby incorporated by reference to
    Exhibit 10.94 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                          
|        | 10.25 |  |             | Technology License Agreement (Licensed-Back IP),
    dated as of December 20, 2001, by and between
    Textron, Inc. and Collins & Aikman Corporation and
    Collins & Aikman Products Co is hereby incorporated by
    reference to Exhibit 10.95 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                     

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##### 



|        |       |  |             |                                                                                                                                                                                                                                                                                                                  
|------- | ----- |  | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |            
|Number  |       |  | Description
|        |       |  |            
|        | 10.26 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of November 1, 2001 is
    hereby incorporated by reference to Exhibit 10.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                      
|        | 10.27 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of November 1, 2001 is
    hereby incorporated by reference to Exhibit 10.4 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                      
|        | 10.28 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of December 20, 2001 is
    hereby incorporated by reference to Exhibit 10.5 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                     
|        | 10.29 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of December 20, 2001 is
    hereby incorporated by reference to Exhibit 10.6 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                     
|        | 10.30 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of December 20, 2001 is
    hereby incorporated by reference to Exhibit 10.7 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                     
|        | 10.31 |  |             | Separation and Consultancy Agreement dated
    July 31, 2002 is hereby incorporated by reference to
    Exhibit 10.1 to Collins & Aikman
    Corporations Current report on Form 8-K filed
    August 2, 2002.                                                                                                  
|        | 10.32 |  |             | Severance Benefit Agreement between Collins and
    Aikman Corporation and an officer of the Company dated
    April 5, 2002 is hereby incorporated by reference to
    Exhibit 10.2 of Collins & Aikman
    Corporations Report on Form 10-Q for the quarter ended
    June 30, 2002 and filed August 14, 2002.
|        | 10.33 |  |             | Employment and Consulting Agreement between
    Collins and Aikman Corporation and an Employee dated July 2002
    is hereby incorporated by reference to Exhibit 10.1 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended September 30, 2002 and filed
    November 14, 2002.   
|        | 10.34 |  |             | Separation Agreement between Collins and Aikman
    Corporation and an officer of the Company dated October 2002 is
    hereby incorporated by reference to Exhibit 10.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended September 30, 2002 and filed
    November 14, 2002. 
|        | 10.35 |  |             | Employment Agreement between Collins &
    Aikman Corporation and an officer of the Company dated
    January 25, 2004.                                                                                                                                                                                          
|        | 10.36 |  |             | Amendment to Employment Agreement between
    Collins & Aikman Corporation and an officer of the
    Company dated January 25, 2004.                                                                                                                                                                             
|        | 10.37 |  |             | Separation Agreement between Collins &
    Aikman Corporation and an officer of the Company dated
    February 29, 2004.                                                                                                                                                                                         
|        | 11    |  |             | Computation of Earnings Per Share.*                                                                                                                                                                                                                                                                              
|        | 12.1  |  |             | Computation of Ratio of Earnings to Fixed
    Charges.*                                                                                                                                                                                                                                                          
|        | 21    |  |             | Subsidiaries of the Registrant.*                                                                                                                                                                                                                                                                                 
|        | 23.1  |  |             | Consent of KPMG.*                                                                                                                                                                                                                                                                                                
|        | 23.2  |  |             | Consent of PricewaterhouseCoopers.*                                                                                                                                                                                                                                                                              
|        | 24.1  |  |             | Powers of Attorney.*                                                                                                                                                                                                                                                                                             
|        | 31.1  |  |             | Certification Pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                        
|        | 31.2  |  |             | Certification Pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                        

76



---



##### 



|        |      |  |             |                                                                                                                                                                                                                                                                                                                         
|------- | ---- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |            
|Number  |      |  | Description
|        |      |  |            
|        | 32.1 |  |             | Certification Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 (Chapter 63,
    Title 18 U.S.C. 1350(a) and (b)).*                                                                                                                                                                                         
|        | 99   |  |             | Voting Agreement between Blackstone Capital
    Partners L.P. and Wasserstein Perella Partners, L.P. is hereby
    incorporated by reference to Exhibit 99 of Amendment
    No. 4 to Collins & Aikman Holdings
    Corporations Registration Statement on Form S-2
    (Registration No. 33-53179) filed June 27, 1994.



---



|  |                                   
|- | ----------------------------------
|* | Indicates document filed herewith.

(b) Reports on Form 8-K

The Company filed the following Reports on
Form 8-K covering the following items:

|                      |  |                                                                                              
|--------------------- |  | ---------------------------------------------------------------------------------------------
|November 13,
    2003 |  | Item 9 Regulation FD Disclosure and Item 12
    Results of Operations and Financial Condition

77



---



##### 





SIGNATURES


Pursuant to the requirements of Section 13
or 15(d) of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the
16th day of March 2004.



| |                             
| | ----------------------------
| | COLLINS & AIKMAN CORPORATION



| |     |                      
| | --- | ---------------------
| | BY: | /s/ DAVID A. STOCKMAN

| |                                                    
| | ---------------------------------------------------
| |                                                    
| | David A. Stockman                                  
| | Chairman of the
    Board & Chief Executive Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

|                                           |  |                                                                             |  |               
|------------------------------------------ |  | --------------------------------------------------------------------------- |  | --------------
|Signature                                  |  | Title                                                                       |  | Date          
|                                           |  |                                                                             |  |               
|/s/ DAVID A. STOCKMANDavid A.
    Stockman |  | Chairman of the Board & Chief Executive
    Officer                         |  | March 16, 2004
|                                          
|/s/ J. MICHAEL STEPPJ. Michael
    Stepp   |  | Vice Chairman and Chief Financial Officer
    (Principal Financial Officer) |  | March 16, 2004
|                                          
|*Charles E.
    Becker                     |  | Director                                                                    |  | March 16, 2004
|                                          
|*Robert C.
    Clark                       |  | Director                                                                    |  | March 16, 2004
|                                          
|*Marshall A.
    Cohen                     |  | Director                                                                    |  | March 16, 2004
|                                          
|*David C. Dauch                            |  | Director                                                                    |  | March 16, 2004
|                                          
|*Cynthia Hess                              |  | Director                                                                    |  | March 16, 2004
|                                          
|*Timothy D.
    Leuliette                  |  | Director                                                                    |  | March 16, 2004
|                                          
|*Elkin McCallum                            |  | Director                                                                    |  | March 16, 2004
|                                          
|*W. Gerald
    McConnell                   |  | Director                                                                    |  | March 16, 2004
|                                          
|*Warren B.
    Rudman                      |  | Director                                                                    |  | March 16, 2004
|                                          
|*Daniel P.
    Tredwell                    |  | Director                                                                    |  | March 16, 2004
|                                          
|*Samuel Valenti                            |  | Director                                                                    |  | March 16, 2004
|                                          
|*By: /s/ JAY KNOLLJay KnollGeneral Counsel |  |                                                                             |  |               

78



---



##### 





INDEPENDENT AUDITORS
REPORT


The Board of Directors and Stockholders

Collins & Aikman Corporation:


We have audited the 2003 consolidated financial
statements of Collins & Aikman Corporation and subsidiaries
as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on
our audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Collins & Aikman
Corporation and subsidiaries as of December 31, 2003, and
the results of their operations and their cash flows for the
year then ended, in conformity with accounting principles
generally accepted in the United States of America. Also in our
opinion, the related 2003 financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in a material
respects, the information set forth herein.

As discussed in Note 2 to the financial
statements, the Company changed its method of accounting for
crib supply inventories in 2003.



| |             
| | ------------
| | /s/ KPMG LLP

Detroit, Michigan

March 15, 2004


F-1



---



##### 



REPORT OF INDEPENDENT
ACCOUNTANTS

To the Board of Directors and Shareholders

of Collins & Aikman Corporation:


In our opinion, the consolidated balance sheet as
of December 31, 2002 and the related consolidated
statements of operations, cash flows and common
stockholders equity(deficit) listed in the index appearing
under Item 15(a)(1) for each of the two years in the period
ended December 31, 2002 present fairly, in all material
respects, the financial position, results of operations and cash
flows of Collins & Aikman Corporation and its subsidiaries
at December 31, 2002 and for each of the two years in the
period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under Item 15(a)(2)
present fairly, in all material respects, the 2002 and 2001
information set forth therein when read in conjunction with the
related consolidated financial statements. These financial
statements and financial statement schedules are the
responsibility of the Companys management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated
financial statements, effective January 1, 2002, the
Company changed its method of accounting for goodwill (and other
intangible assets) in accordance with the adoption of Statement
of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets.

Effective January 1, 2003, the Company
reclassified the 2001 extraordinary loss on retirement of debt
to other expense (income), net, upon the adoption of Statement
of Financial Accounting Standards No. 145, Rescission
of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections as of April
2002.



| |                           
| | --------------------------
| | /s/ PricewaterhouseCoopers

Detroit, Michigan

February 18, 2003


F-2



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF
OPERATIONS


(in millions, except per share
data)


|                                                                                                                            |                                                           |              |         |       |              |   |         |              |   |   |         |       |  
|--------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------ | ------- | ----- | ------------ | - | ------- | ------------ | - | - | ------- | ----- | -
|                                                                                                                            |                                                           |             
|                                                                                                                            |                                                           | Year Ended   |        
|                                                                                                                            |                                                           |              |        
|                                                                                                                            |                                                           | December 31, |         |       | December 31, |   |         | December 31, |  
|                                                                                                                            |                                                           | 2003         |         |       | 2002         |   |         | 2001         |  
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Net sales                                                                                                                   |                                                           | $            | 3,983.7 |       |              | $ | 3,885.8 |              |   | $ | 1,823.3 |      
|Cost of goods sold                                                                                                          |                                                           |              | 3,539.5 |       |              |   | 3,367.7 |              |   |   | 1,604.5 |      
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Gross profit                                                                                                                |                                                           |              | 444.2   |       |              |   | 518.1   |              |   |   | 218.8   |      
|Selling, general and administrative expenses                                                                                |                                                           |              | 273.2   |       |              |   | 293.5   |              |   |   | 164.4   |      
|Restructuring charges                                                                                                       |                                                           |              | 40.6    |       |              |   | 38.9    |              |   |   | 11.2    |      
|Impairment of long-lived assets                                                                                             |                                                           |              | 28.4    |       |              |   | 18.0    |              |   |   | 7.6     |      
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Operating income                                                                                                            |                                                           |              | 102.0   |       |              |   | 167.7   |              |   |   | 35.6    |      
|Interest expense, net of interest income of $0.7,
    $1.4 and $2.0                                                         |                                                           |              | 151.3   |       |              |   | 148.9   |              |   |   | 84.3    |      
|Interest expense from subsidiary preferred stock
    dividends                                                              |                                                           |              | 32.0    |       |              |   |        |              |   |   |        |      
|Interest expense from subsidiary preferred stock
    accretion                                                              |                                                           |              | 5.3     |       |              |   |        |              |   |   |        |      
|Subsidiary preferred stock dividends                                                                                        |                                                           |              |        |       |              |   | 30.8    |              |   |   | 1.5     |      
|Subsidiary preferred stock accretion                                                                                        |                                                           |              |        |       |              |   | 7.6     |              |   |   | 0.9     |      
|Loss on sale of receivables                                                                                                 |                                                           |              | 7.3     |       |              |   | 4.2     |              |   |   | 10.8    |      
|Other expense (income), net                                                                                                 |                                                           |              | (32.9   | )     |              |   | 10.0    |              |   |   | 14.4    |      
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Loss from continuing operations before income
    taxes                                                                     |                                                           |              | (61.0   | )     |              |   | (33.8   | )            |   |   | (76.3   | )    
|Income tax expense (benefit)                                                                                                |                                                           |              | (1.9    | )     |              |   | 17.5    |              |   |   | (21.3   | )    
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Loss from continuing operations before
    extraordinary loss and cumulative effect of a change in
    accounting principle |                                                           |              | (59.1   | )     |              |   | (51.3   | )            |   |   | (55.0   | )    
|Income from discontinued operations, net of
    income taxes of $0.8, $6.3 and $5.7                                         |                                                           |              | 1.6     |       |              |   | 9.5     |              |   |   | 8.8     |      
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Loss before cumulative effect of change in
    accounting principle                                                         |                                                           |              | (57.5   | )     |              |   | (41.8   | )            |   |   | (46.2   | )    
|Cumulative effect of a change in accounting
    principle, net of income taxes of $0                                        |                                                           |              |        |       |              |   | (11.7   | )            |   |   |        |      
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|                                                                                                                            | Net loss                                                  |              | $       | (57.5 | )            |   | $       | (53.5        | ) |   | $       | (46.2 | )
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Earnings per share data:                                                                                                    |                                                           |              |         |       |              |   |         |              |   |   |         |      
|                                                                                                                            | Net loss                                                  |              | $       | (57.5 | )            |   | $       | (53.5        | ) |   | $       | (46.2 | )
|                                                                                                                            | Loss on redemption of subsidiary preferred stock          |              |         |      |              |   |         | (36.3        | ) |   |         |      |  
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|                                                                                                                            | Net loss attributable to common shareholders              |              | $       | (57.5 | )            |   | $       | (89.8        | ) |   | $       | (46.2 | )
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Net income (loss) per basic and diluted
    common share:                                                                   |                                                           |              |         |       |              |   |         |              |   |   |         |      
|                                                                                                                            | Continuing operations                                     |              | $       | (0.71 | )            |   | $       | (1.15        | ) |   | $       | (1.42 | )
|                                                                                                                            | Discontinued operations                                   |              |         | 0.02  |              |   |         | 0.12         |   |   |         | 0.23  |  
|                                                                                                                            | Cumulative effect of a change in accounting
    principle |              |         |      |              |   |         | (0.15        | ) |   |         |      |  
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|                                                                                                                            | Net loss attributable to common shareholders              |              | $       | (0.69 | )            |   | $       | (1.18        | ) |   | $       | (1.19 | )
|                                                                                                                            |                                                           |              |         |       |              |   |         |              |  
|Average common shares outstanding:                                                                                          |                                                           |              |         |       |              |   |         |              |   |   |         |      
|                                                                                                                            | Basic and diluted                                         |              |         | 83.6  |              |   |         | 76.3         |   |   |         | 38.9  |  

The Notes to Consolidated Financial Statements
are an integral

part of these consolidated financial statements.


F-3



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



CONSOLIDATED BALANCE
SHEETS


(in millions)


|                                                                                                                                 |                                                                         |                           |         |       |              |   |         |       |         | 
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------- | ------- | ----- | ------------ | - | ------- | ----- | ------- | 
|                                                                                                                                 |                                                                         | December 31,              |         |       | December 31, |  
|                                                                                                                                 |                                                                         | 2003                      |         |       | 2002         |  
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|ASSETS                                                                                                                           |                                                                         |                           |         |       |              |   |         |      
|Current Assets:                                                                                                                  |                                                                         |                           |         |       |              |   |         |      
|                                                                                                                                 | Cash and cash equivalents                                               |                           | $       | 13.2  |              |   | $       | 81.3  |        
|                                                                                                                                 | Accounts and other receivables, net of allowances
    of $9.2 and $18.6 |                           |         | 257.3 |              |   |         | 373.0 |        
|                                                                                                                                 | Inventories                                                             |                           |         | 169.4 |              |   |         | 171.6 |        
|                                                                                                                                 | Other                                                                   |                           |         | 216.0 |              |   |         | 177.4 |        
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|                                                                                                                                 |                                                                         | Total current assets      |         |       | 655.9        |   |         |       | 803.3   | 
|Property, plant and equipment, net                                                                                               |                                                                         |                           | 825.9   |       |              |   | 737.8   |      
|Deferred tax assets                                                                                                              |                                                                         |                           | 178.1   |       |              |   | 165.0   |      
|Goodwill                                                                                                                         |                                                                         |                           | 1,363.1 |       |              |   | 1,265.5 |      
|Intangible assets, net                                                                                                           |                                                                         |                           | 66.9    |       |              |   | 85.3    |      
|Other assets                                                                                                                     |                                                                         |                           | 101.3   |       |              |   | 100.2   |      
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|                                                                                                                                 |                                                                         | $                         | 3,191.2 |       |              | $ | 3,157.1 |      
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|LIABILITIES AND COMMON
    STOCKHOLDERS EQUITY                                                                                  |                                                                         |                           |         |       |              |   |         |      
|Current Liabilities:                                                                                                             |                                                                         |                           |         |       |              |   |         |      
|                                                                                                                                 | Short-term borrowings                                                   |                           | $       | 16.0  |              |   | $       | 10.5  |        
|                                                                                                                                 | Current maturities of long-term debt and capital
    lease obligations  |                           |         | 31.5  |              |   |         | 23.5  |        
|                                                                                                                                 | Accounts payable                                                        |                           |         | 638.9 |              |   |         | 595.5 |        
|                                                                                                                                 | Accrued expenses                                                        |                           |         | 238.9 |              |   |         | 299.9 |        
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|                                                                                                                                 |                                                                         | Total current liabilities |         |       | 925.3        |   |         |       | 929.4   | 
|Long-term debt and capital lease obligations                                                                                     |                                                                         |                           | 1,237.7 |       |              |   | 1,255.2 |      
|Mandatorily redeemable preferred stock of
    subsidiary                                                                         |                                                                         |                           | 161.2   |       |              |   |        |      
|Other, including pensions and post-retirement
    benefit obligations                                                            |                                                                         |                           | 423.4   |       |              |   | 438.4   |      
|Commitments and contingencies                                                                                                    |                                                                         |                           |         |       |              |   |         |      
|Minority interest in consolidated subsidiary                                                                                     |                                                                         |                           | 3.3     |       |              |   | 12.7    |      
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|                                                                                                                                 |                                                                         | Total liabilities         |         |       | 2,750.9      |   |         |       | 2,635.7 | 
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|Mandatorily redeemable preferred stock of
    subsidiary                                                                         |                                                                         |                           |        |       |              |   | 123.9   |      
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|Common stock ($.01 par value, 300.0 shares
    authorized, 83.6 shares issued and outstanding at
    December 31, 2003 and 2002) |                                                                         |                           | 0.8     |       |              |   | 0.8     |      
|Other paid-in capital                                                                                                            |                                                                         |                           | 1,282.3 |       |              |   | 1,282.3 |      
|Accumulated deficit                                                                                                              |                                                                         |                           | (830.1  | )     |              |   | (772.6  | )    
|Accumulated other comprehensive loss                                                                                             |                                                                         |                           | (12.7   | )     |              |   | (113.0  | )    
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|                                                                                                                                 | Total common stockholders equity                                       |                           |         | 440.3 |              |   |         | 397.5 |        
|                                                                                                                                 |                                                                         |                           |         |       |              |  
|                                                                                                                                 |                                                                         | $                         | 3,191.2 |       |              | $ | 3,157.1 |      
|                                                                                                                                 |                                                                         |                           |         |       |              |  

The Notes to Consolidated Financial Statements
are an integral

part of these consolidated financial statements.


F-4



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF
CASH FLOWS


(in millions)


|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |       |        |   |        |       |        |  
|-------------------------- | ------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------------ | ------ | - | ------------ | ----- | ------ | - | ------ | ----- | ------ | -
|                           |                                                                          |                                                                                                    
|                           |                                                                          | Year Ended                                                                                          |                                                        
|                           |                                                                          |                                                                                                     |                                                        
|                           |                                                                          | December 31,                                                                                        |                                                         |        | December 31, |        |   | December 31, |      
|                           |                                                                          | 2003                                                                                                |                                                         |        | 2002         |        |   | 2001         |      
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|OPERATING ACTIVITIES       |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |       |        |   |       
|                           | Net loss                                                                 |                                                                                                     | $                                                       | (57.5  | )            |        | $ | (53.5        | )     |        | $ | (46.2  | )    
|                           | Adjustments to derive cash flow operating
    activities:                |                                                                                                     |                                                         |        |              |        |   |              |       |        |   |        |      
|                           |                                                                          | Impairment of goodwill                                                                              |                                                         |        |             |        |   |              | 11.7  |        |   |        |      |       
|                           |                                                                          | Impairment of long-lived assets                                                                     |                                                         |        | 28.4         |        |   |              | 19.3  |        |   |        | 7.6   |       
|                           |                                                                          | Deferred income tax benefit                                                                         |                                                         |        | (8.7         | )      |   |              | (3.6  | )      |   |        | (26.0 | )     
|                           |                                                                          | Subsidiary preferred stock requirements                                                             |                                                         |        | 37.3         |        |   |              | 38.4  |        |   |        | 2.4   |       
|                           |                                                                          | Depreciation                                                                                        |                                                         |        | 113.8        |        |   |              | 97.0  |        |   |        | 64.2  |       
|                           |                                                                          | Goodwill amortization                                                                               |                                                         |        |             |        |   |              |      |        |   |        | 7.1   |       
|                           |                                                                          | Amortization of other assets                                                                        |                                                         |        | 26.4         |        |   |              | 20.0  |        |   |        | 10.5  |       
|                           |                                                                          | Loss (gain) on sale of property, plant and
    equipment                                            |                                                         |        | (3.5         | )      |   |              | 3.4   |        |   |        | 8.7   |       
|                           |                                                                          | Decrease in accounts and other receivables                                                          |                                                         |        | 32.5         |        |   |              | 23.7  |        |   |        | 135.0 |       
|                           |                                                                          | Proceeds from (reduction of) participating
    interests in accounts receivable, net of redemptions |                                                         |        | 7.8          |        |   |              | (13.9 | )      |   |        | (2.6  | )     
|                           |                                                                          | Proceeds from non-recourse factoring facilities                                                     |                                                         |        | 88.5         |        |   |              |      |        |   |        |      |       
|                           |                                                                          | Decrease (increase) in inventories                                                                  |                                                         |        | 4.6          |        |   |              | (26.6 | )      |   |        | 53.4  |       
|                           |                                                                          | Increase (decrease) in accounts payable                                                             |                                                         |        | 32.3         |        |   |              | 50.1  |        |   |        | (31.9 | )     
|                           |                                                                          | Undistributed equity in earnings of joint ventures                                                  |                                                         |        |             |        |   |              | 5.5   |        |   |        |      |       
|                           |                                                                          | Increase (decrease) in interest payable                                                             |                                                         |        | 2.8          |        |   |              | (4.0  | )      |   |        | (4.1  | )     
|                           |                                                                          | Changes in other assets                                                                             |                                                         |        | (196.2       | )      |   |              | 62.4  |        |   |        | (6.5  | )     
|                           |                                                                          | Changes in other liabilities                                                                        |                                                         |        | 14.4         |        |   |              | (40.5 | )      |   |        | (34.5 | )     
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|                           |                                                                          |                                                                                                     | Net cash provided by operating activities               |        |              | 122.9  |   |              |       | 189.4  |   |        |       | 137.1  |  
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|INVESTING ACTIVITIES       |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |       |        |   |       
|                           | Additions to property, plant, and other
    non-current assets equipment |                                                                                                     |                                                         | (175.1 | )            |        |   | (147.9       | )     |        |   | (54.5  | )    
|                           | Sales of property, plant and equipment                                   |                                                                                                     |                                                         | 18.3   |              |        |   | 13.3         |       |        |   | 88.1   |      
|                           | Additional investment in joint venture                                   |                                                                                                     |                                                         |       |              |        |   | (5.9         | )     |        |   |       |      
|                           | Payments for acquisitions and related costs, net
    of cash acquired    |                                                                                                     |                                                         | (33.1  | )            |        |   | (45.6        | )     |        |   | (760.9 | )    
|                           | Sale of business                                                         |                                                                                                     |                                                         |       |              |        |   |             |       |        |   | 3.5    |      
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|                           |                                                                          |                                                                                                     | Net cash used in investing activities                   |        |              | (189.9 | ) |              |       | (186.1 | ) |        |       | (723.8 | )
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|FINANCING ACTIVITIES       |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |       |        |   |       
|                           | Issuance of long-term debt                                               |                                                                                                     |                                                         | 13.1   |              |        |   |             |       |        |   | 950.0  |      
|                           | Debt issuance costs                                                      |                                                                                                     |                                                         |       |              |        |   |             |       |        |   | (59.4  | )    
|                           | Repayment of long-term debt                                              |                                                                                                     |                                                         | (28.9  | )            |        |   | (23.9        | )     |        |   | (383.2 | )    
|                           | Repurchase of preferred stock                                            |                                                                                                     |                                                         |       |              |        |   | (100.0       | )     |        |   |       |      
|                           | Increase (decrease) in short-term borrowings                             |                                                                                                     |                                                         | 4.7    |              |        |   | (16.0        | )     |        |   | 10.1   |      
|                           | Net borrowings (repayments) on revolving
    credit facilities           |                                                                                                     |                                                         | 6.3    |              |        |   |             |       |        |   | (150.2 | )    
|                           | Net proceeds from issuance of common stock                               |                                                                                                     |                                                         |       |              |        |   | 150.6        |       |        |   | 207.2  |      
|                           | Reissue of treasury stock, net                                           |                                                                                                     |                                                         |       |              |        |   |             |       |        |   | 61.3   |      
|                           | Repayment of debt assumed in acquisition                                 |                                                                                                     |                                                         |       |              |        |   | (6.7         | )     |        |   |       |      
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|                           |                                                                          |                                                                                                     | Net cash provided by (used in) financing
    activities |        |              | (4.8   | ) |              |       | 4.0    |   |        |       | 635.8  |  
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|                           |                                                                          | Effect of exchange rate changes on cash                                                             |                                                         |        | 3.7          |        |   |              | 0.1   |        |   |        | 3.9   |       
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|                           | Increase (decrease) in cash and cash
    equivalents                     |                                                                                                     |                                                         | (68.1  | )            |        |   | 7.4          |       |        |   | 53.0   |      
|                           | Cash and cash equivalents at beginning of year                           |                                                                                                     |                                                         | 81.3   |              |        |   | 73.9         |       |        |   | 20.9   |      
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|                           | Cash and cash equivalents at end of year                                 |                                                                                                     | $                                                       | 13.2   |              |        | $ | 81.3         |       |        | $ | 73.9   |      
|                           |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |      
|Supplementary information: |                                                                          |                                                                                                     |                                                         |        |              |        |   |              |       |        |   |       
|                           | Debt assumed in acquisition                                              |                                                                                                     | $                                                       |       |              |        | $ | 6.7          |       |        | $ |       |      
|                           | Taxes paid                                                               |                                                                                                     | $                                                       | 18.4   |              |        | $ | 12.8         |       |        | $ | 15.5   |      
|                           | Interest paid                                                            |                                                                                                     | $                                                       | 135.4  |              |        | $ | 139.9        |       |        | $ | 76.3   |      

The Notes to Consolidated Financial Statements
are an integral

part of these consolidated financial statements.


F-5



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF
COMMON STOCKHOLDERS EQUITY (DEFICIT)


(in millions)


|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |   |  | 
|------------------------------------------------ | ---------------------------------------- | -------------------------- | ------ | ----------- | ------- | ------------- | ------ | --------- | - | ------ | ------ | ----- | ------- | ------- | --- | -------- | ----- | - | ------- | - |  | - | ----- | - |  | 
|                                                 |                                          |                            |        |             |         | Accumulated   |        |           |   |        |        |       |        
|                                                 |                                          |                            |        |             |         | Other         |        |           |   |        |        |       |        
|                                                 |                                          |                            |        |             |         | Comprehensive |        |           |   |        | Other  |       |         |        
|                                                 |                                          |                            |        | Accumulated |         |               | Income |           |   | Common |        |       | Paid-in |         |     | Treasury |      
|                                                 |                                          | Total                      |        |             | Deficit |               |        | (loss)(a) |   |        | Stock  |       |         | Capital |     |          | Stock |  
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|Balance at January 1, 2001                       |                                          | $                          | (154.9 | )           |         | $             | (636.6 | )         |   | $      | (42.9  | )     |         | $       | 0.3 |          |       | $ | 585.9   |   |  | $ | (61.6 | )
|Comprehensive income (loss):                     |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |  
|                                                 | Net loss                                 |                            |        | (46.2       | )       |               |        | (46.2     | ) |        |        |      |         |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 | Foreign currency translation adjustments |                            |        | (9.0        | )       |               |        |          |   |        |        | (9.0  | )       |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 | Pension equity adjustment, net of tax(b) |                            |        | (15.4       | )       |               |        |          |   |        |        | (15.4 | )       |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|                                                 |                                          | Total comprehensive loss   |        |             | (70.6   | )             |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |   |  | 
|Compensation expense                             |                                          |                            | 1.2    |             |         |               |       |           |   |        |       |       |         |         |    |          |       |   | 1.2     |   |  |   |      |  
|Issuance of common stock                         |                                          |                            | 533.0  |             |         |               |       |           |   |        |       |       |         |         | 0.4 |          |       |   | 532.6   |   |  |   |      |  
|Reissue of treasury stock (8.5 shares)           |                                          |                            | 61.3   |             |         |               |       |           |   |        |       |       |         |         |    |          |       |   | (0.3    | ) |  |   | 61.6  |  
|Exercise of stock options (1.1 shares)           |                                          |                            | 4.7    |             |         |               |       |           |   |        |       |       |         |         |    |          |       |   | 4.7     |   |  |   |      |  
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|Balance at December 31, 2001                     |                                          |                            | 374.7  |             |         |               | (682.8 | )         |   |        | (67.3  | )     |         |         | 0.7 |          |       |   | 1,124.1 |   |  |   |      |  
|Comprehensive income (loss):                     |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |  
|                                                 | Net loss                                 |                            |        | (53.5       | )       |               |        | (53.5     | ) |        |        |      |         |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 | Foreign currency translation adjustments |                            |        | 10.7        |         |               |        |          |   |        |        | 10.7  |         |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 | Pension equity adjustment, net of tax(b) |                            |        | (56.4       | )       |               |        |          |   |        |        | (56.4 | )       |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|                                                 |                                          | Total comprehensive loss   |        |             | (99.2   | )             |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |   |  | 
|Loss on redemption of subsidiary preferred stock |                                          |                            | (36.3  | )           |         |               | (36.3  | )         |   |        |       |       |         |         |    |          |       |   |        |   |  |   |      |  
|Issuance of common stock                         |                                          |                            | 157.2  |             |         |               |       |           |   |        |       |       |         |         | 0.1 |          |       |   | 157.1   |   |  |   |      |  
|Exercise of stock options (0.1 shares)           |                                          |                            | 1.1    |             |         |               |       |           |   |        |       |       |         |         |    |          |       |   | 1.1     |   |  |   |      |  
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|Balance at December 31, 2002                     |                                          |                            | 397.5  |             |         |               | (772.6 | )         |   |        | (113.0 | )     |         |         | 0.8 |          |       |   | 1,282.3 |   |  |   |      |  
|Comprehensive income (loss):                     |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |  
|                                                 | Net loss                                 |                            |        | (57.5       | )       |               |        | (57.5     | ) |        |        |      |         |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 | Foreign currency translation adjustment  |                            |        | 110.9       |         |               |        |          |   |        |        | 110.9 |         |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 | Pension equity adjustment, net of tax(b) |                            |        | (10.6       | )       |               |        |          |   |        |        | (10.6 | )       |         |     |         |       |   |         |  |  |   |       |  | 
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|                                                 |                                          | Total comprehensive income |        |             | 42.8    |               |        |           |   |        |        |       |         |         |     |          |       |   |         |   |  |   |       |   |  | 
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  
|Balance at December 31,
    2003                 |                                          | $                          | 440.3  |             |         | $             | (830.1 | )         |   | $      | (12.7  | )     |         | $       | 0.8 |          |       | $ | 1,282.3 |   |  | $ |      |  
|                                                 |                                          |                            |        |             |         |               |        |           |   |        |        |       |         |         |     |          |       |  



---



|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The components of Accumulated Other Comprehensive
    Income (Loss) are $70.0 million of foreign currency translation
    adjustment and $(82.7) million of pension equity adjustment as
    of December 31, 2003.



|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(b) | For 2003, 2002 and 2001, the tax effect of the
    pension equity adjustment is $6.0 million,
    $42.6 million and $3.2 million, respectively.

The Notes to Consolidated Financial Statements
are an integral part

of these consolidated financial statements.


F-6



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


1.     Organization

Collins & Aikman Corporation (the
Company) is a Delaware corporation, headquartered in
Troy, Michigan. The Company conducts all of its operating
activities through its wholly owned Collins & Aikman
Products Co. (Products) subsidiary. The Company is a
global leader in design, engineering and manufacturing of
automotive interior components, including instrument panels,
fully assembled cockpit modules, floor and acoustic systems,
automotive fabric, interior trim and convertible top systems.
The Company changed the composition of its reportable segments
on January 1, 2003 and further redefined the segments
July 1, 2003 to reflect organizational changes and restated
prior period segment data to be comparable. The Company operates
through three segments: U.S. and Mexico Plastics, International
Plastics and Global Soft Trim.

During February 2001, Heartland Industrial
Partners, L.P. and its affiliates (Heartland)
acquired a controlling interest equal to approximately 60% of
the Company through a purchase of 10 million shares of
common stock from the Company and a purchase of
10.8 million shares from Blackstone Partners and WP
Partners. As a result of the sale of shares, the Company
received gross proceeds of $125.0 million, or approximately
$94.6 million after fees and expenses associated with the
transactions. The Company also received a profit participation
right that it shares with Blackstone Partners and WP Partners on
future common stock sales by Heartland to non-permitted
transferees subject to a limit, in the case of the Company, of
approximately $6.25 million. As a result of the above
transactions (Heartland Transaction), Heartland is
entitled to designate a majority of the Companys Board of
Directors.

The Company completed its acquisition of Becker
Group, LLC, a supplier of plastic components to the automotive
industry, the automotive fabric operations of Joan Fabrics and
an affiliate in July and September 2001, respectively. The
acquisitions included the issuance of approximately
12 million shares of common stock with a market value of
$169.3 million.

In December 2001, the Company completed its
acquisition of Textron Automotive Companys
(Textrons) automotive trim division
(TAC-Trim) for $940 million. The purchase price
consisted primarily of: $632.2 million in cash and assumed
debt; 7.2 million shares of common stock, with a market
value of $160.9 million; and preferred stock of Products
with an aggregate liquidation preference of $326.4 million,
valued at $146.9 million. The cash purchase price was
financed through a combination of the sale of an additional
12.8 million shares of common stock, valued at
$160.0 million, to Heartland and debt financing.

On December 31, 2003, Heartland owned
approximately 37% of the outstanding shares; Blackstone
Partners and WP Partners owned approximately 11%;
Joan Fabrics Corp., Mr. Elkin McCallum and associates owned
approximately 6%; Mr. Charles E. Becker owned approximately 9%
and Textron, Inc. owned approximately 6% (which it has
subsequently sold).

2.     Summary
of Significant Accounting Policies

Basis of
Presentation:The consolidated financial
statements include the accounts of the Company and its
consolidated subsidiaries and in the opinion of management,
contain all adjustments, including adjustments of a normal and
recurring nature, necessary for a fair presentation of financial
position and results of operations. All significant intercompany
items have been eliminated in the preparation of the
consolidated financial statements. Certain prior year items have
been reclassified to conform to the fiscal 2003 presentation.

Investments in entities in which the Company has
control are consolidated. Investments in 50% or less owned
entities in which the Company has significant influence have
been accounted for under the equity method. In connection with
the 2001 TAC-Trim acquisition, the Company acquired a 50%
interest in Textron Automotive Holdings (Italy) S.r.L., an
Italian joint venture, of which Textron indirectly owned the
other 50% interest. The Company accounted for this investment
under the equity method for the years ended December 31,
2002 and 2001. The Company did not control the joint venture
prior to December 31, 2002 but was required to provide
certain administrative, technical and engineering services and
to license certain

F-7



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

patents and other know how to the Italian joint
venture. The Company recorded certain fees and reimbursement of
certain expenses in providing these services and licensing these
rights. In December 2002, the Company signed a letter-of-intent
to purchase the remaining 50% and began consolidating the joint
venture as of December 31, 2002. In January 2003, the
Company acquired from Textron the remaining 50% interest in the
Italian joint venture.

Reverse Stock
Split:On May 28, 2002, the Company
effected a one-for-2.5 reverse stock split of the Companys
common stock. All shares and per share data have been adjusted
retroactively for all periods presented to reflect the stock
split.

Use of
Estimates:The preparation of consolidated
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Management
believes its assumptions and estimates are reasonable and
appropriate, however actual results could differ from those
estimates.

Employee Stock
Options:Statement of Financial Accounting
Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure
amended SFAS No. 123, Accounting for Stock-Based
Compensation provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock based employee compensation and amends the
required disclosures. SFAS No. 123 encourages companies to
adopt the fair value method for compensation expense recognition
related to employee stock options. The accounting requirements
of Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees use the
intrinsic value method in determining compensation expense,
which represents the excess of the market price of the stock
over the exercise price on the measurement date. The Company has
elected to continue to utilize the accounting provisions of APB
No. 25 for stock options and is required to provide pro
forma disclosures of net income and earnings per share had the
Company adopted the fair value method for recognition purposes.
The following tabular information is presented as if the Company
had adopted SFAS No. 123 and restated its results: (in
millions, except per share amounts).

|                                              |                                                                                                                             |                     |   |       |              |   |   |              |       |   |   |       |       |  
|--------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------------- | - | ----- | ------------ | - | - | ------------ | ----- | - | - | ----- | ----- | -
|                                              |                                                                                                                             |                    
|                                              |                                                                                                                             | Fiscal Year Ended   |  
|                                              |                                                                                                                             |                     |  
|                                              |                                                                                                                             | December 31,        |   |       | December 31, |   |   | December 31, |      
|                                              |                                                                                                                             | 2003                |   |       | 2002         |   |   | 2001         |      
|                                              |                                                                                                                             |                     |   |       |              |   |   |              |      
|Net loss attributable to common shareholders: |                                                                                                                             |                     |   |       |              |   |   |              |       |   |   |      
|                                              | As reported                                                                                                                 |                     | $ | (57.5 | )            |   | $ | (89.8        | )     |   | $ | (46.2 | )    
|                                              | Total employee stock based compensation expense
    determined under fair value based method for all awards, net of
    tax |                     |   | (4.2  | )            |   |   | (3.4         | )     |   |   | (2.4  | )    
|                                              |                                                                                                                             |                     |   |       |              |   |   |              |      
|                                              |                                                                                                                             | Pro forma, net loss |   |       | (61.7        | ) |   |              | (93.2 | ) |   |       | (48.6 | )
|                                              |                                                                                                                             |                     |   |       |              |   |   |              |      
|Basic and Diluted EPS:                        |                                                                                                                             |                     |   |       |              |   |   |              |       |   |   |      
|                                              | As reported                                                                                                                 |                     | $ | (0.69 | )            |   | $ | (1.18        | )     |   | $ | (1.19 | )    
|                                              | Pro forma                                                                                                                   |                     |   | (0.74 | )            |   |   | (1.22        | )     |   |   | (1.25 | )    

F-8



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

For the above information, the fair value of each
option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following
assumptions used for grants:

|                                                                                |  |      |         |  |      |   |             |      |  |   |             | 
|------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ----------- | ---- |  | - | ----------- | 
|                                                                                |  | 2003 |         |  | 2002 |   |             | 2001 | 
|                                                                                |  |      |         |  |      |   |             |      | 
|Weighted average expected volatility                                            |  |      | 77.5%   |  |      |   | 72.0%       |      |  |   | 99.0%       | 
|Expected lives                                                                  |  |      | 7 years |  |      |   | 6 years     |      |  |   | 10 years    | 
|Weighted average risk free interest rate                                        |  |      | 3.72%   |  |      |   | 4.24%-7.32% |      |  |   | 4.24%-7.32% | 
|Expected dividend rate                                                          |  |      |        |  |      |   |            |      |  |   |            | 
|Weighted average grant date fair value of an
    option granted during the year |  | $    | 2.77    |  |      | $ | 6.71        |      |  | $ | 5.22        | 

Earnings Per
Share:Basic earnings per share is based
on income attributable to common shareholders divided by the
weighted average number of common shares outstanding. Diluted
earnings per share is based on income attributable to common
shareholders divided by the sum of the weighted average number
of common shares outstanding and all potentially dilutive common
shares. Potentially dilutive common shares include shares which
may be issued upon the assumed exercise of employee stock
options less the number of treasury shares assumed to be
purchased from the proceeds, including applicable compensation
expense attributable to future service see Note 16
Common Stockholders Equity and Earnings Per
Share for additional disclosure.

Cash and Cash
Equivalents:Cash and cash equivalents
include all cash balances and highly liquid investments with an
original maturity of three months or less.

Accounts and Other
Receivables:Accounts and other
receivables consist primarily of the Companys trade
receivables and the retained interest in the Receivables
Facility. See Note 11 Receivables Facility and
Non-Recourse Factoring Facilities for additional
disclosure. The Company has provided an allowance against
uncollectible accounts.

Inventories:Inventories are valued at the lower of cost or market, but not
in excess of net realizable value. Cost is determined on the
first-in, first-out basis.

Property, Plant and
Equipment:Property, plant and equipment
are stated at cost. Normal repairs and maintenance are expensed
as incurred. Provisions for depreciation are primarily computed
on a straight-line basis over the estimated useful lives as
follows: 15 years for land improvements, 35 years for
buildings, and 3-20 years for machinery and equipment.
Leasehold improvements are amortized over the lesser of the
lease term or the estimated useful lives of the improvements.

Long-Lived
Assets:In August 2001, the Financial
Accounting Standards Board (FASB) issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets which supersedes both SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of and the accounting and
reporting provisions of APB No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the
disposal of a segment of a business (as previously defined in
that Opinion). SFAS No. 144 retains the fundamental
provisions in SFAS No. 121 for recognizing and measuring
impairment losses on long-lived assets held for use and
long-lived assets to be disposed of by sale, while also
resolving significant implementation issues associated with SFAS
No. 121. For example, SFAS No. 144 provides guidance
on how a long-lived asset that is used as part of a group should
be evaluated for impairment, establishes criteria for when a
long-lived asset is held for sale and prescribes the accounting
for a long-lived asset that will be disposed of other than by
sale. SFAS No. 144 retains the basic provisions of APB
No. 30 on how to present discontinued operations in the
income statement but broadens that presentation to include a
component of an entity (rather than a segment of a business).

F-9



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

During 2003, the Company incurred asset
impairment charges of $28.4 million of which $10.4 million
related to the impairment of the Becker non-compete agreement,
$7.5 million related to the initial interest acquired in an
Italian joint venture, $7.8 million related to
restructuring programs and $2.7 million related to other
intangible assets. During 2002, the Company incurred asset
impairment charges of $18.0 million recognized as part of
restructuring programs (Note 15). In addition, during fiscal
2001, the Company incurred a charge of $7.6 million
relating to asset impairments recognized in the Reorganization
(See Note 15).

Goodwill and
Intangibles:During the second quarter
of 2002, the Company completed the implementation of
SFAS 142, Goodwill and Other Intangible Assets.
Under SFAS 142, goodwill is no longer amortized. Instead,
goodwill and indefinite-lived intangible assets are tested for
impairment in accordance with the provisions of SFAS 142.
The Company employed a discounted cash flow analysis and a
market comparable approach in conducting its impairment tests.
The Company completed its initial impairment test in the second
quarter of 2002 and recorded an impairment loss of
$11.7 million (having no tax impact), or $0.15 per average
basic and diluted share relating to the UK Plastics
business in the former European and Rest of World Automotive
Systems segment. The impairment loss was reported as a
cumulative effect of a change in accounting principle and,
therefore, is accounted for as if it occurred on January 1,
2002. The Company completed its annual impairment test on
November 1, 2002 indicating that the fair value of the
reporting units exceeded the carrying values.

The Companys first quarter 2003 results
were below the forecasts utilized in testing for the goodwill
impairment for the year ended December 31, 2002. The
conditions in the markets in which the Company operates
continued to deteriorate and customer production schedules
continued to decline, and therefore, the Company reduced its
operating and financial plans for 2003. As a result, the Company
initiated an impairment test (outside of the annual testing date
of November 1) during the second quarter 2003. During the
second quarter, the Company carefully reviewed all of its
assumptions regarding revenue growth, improved operating margins
and planned capital expenditures. This analysis by each
reporting unit focused on new business awards, implementation of
strategic business initiatives such as restructuring, material
savings, plant efficiencies, revenue growth and additional
product/ process technology applications. While the Company is
aggressively attacking its overall cost structure, the U.S. and
Mexico Plastics reporting unit had even more definitive
objectives initiated after the 2003 first quarter performance on
a specific plant basis. As a result of these well-defined
programs, the Company, utilizing an independent outside
evaluator, completed the first step of the goodwill impairment
test in the second quarter of 2003 which indicated that the fair
value of the reporting units exceeded the carrying values, and
therefore no additional impairment testing was necessary. The
Company again completed the annual impairment test as of
November 1, 2003 indicating fair value of the reporting
units exceeded the carrying values.

Fair value for all tests was determined based
upon the discounted cash flows of the reporting units using
discount rates ranging from 11.5% to 14.0% dependent on the
reporting unit and a residual growth rate of 2%. The market
comparable approach consisted of earnings multiples ranging from
5.2 to 6.5 times current year and forecasted Earnings
Before Interest, Taxes, Depreciation and Amortization
(EBITDA) (operating income less depreciation and
amortization) and a control premium on equity. Future cash flows
and EBITDA are affected by future operating performance, which
will be impacted by economic conditions, car builds, financial,
business and other factors, many of which are beyond the
Companys control. The U.S. and Mexico Plastics reporting
unit can be significantly impacted by an adverse change in
assumptions. Considerable judgment is often involved in making
these determinations, the use of different assumptions could
result in significantly different results. An approximate 50
basis point change in discount rates or an approximate 4%
reduction in profit would result in a further goodwill
impairment analysis as required by SFAS 142. Management
believes its assumptions and estimates are reasonable and
appropriate, however actual results could differ from those
estimates.

F-10



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Pension and Postretirement
Benefits Other than Pensions:Annual net
periodic expense and benefit liabilities under our defined
benefit plans are determined on an actuarial basis. Assumptions
used in the actuarial calculations have a significant impact on
plan obligations and expense. Each September, the Company
reviews the actual experience compared to the more significant
assumptions used and makes adjustments to the assumptions, if
warranted. The healthcare trend rates are reviewed with the
actuaries based upon the results of their review of claims
experience. Discount rates are based upon an expected benefit
payments duration analysis and the equivalent average yield rate
for high-quality fixed-income investments. Pension benefits are
funded through deposits with trustees and the expected long-term
rate of return on fund assets is based upon actual historical
returns modified for known changes in the market and any
expected change in investment policy. Postretirement benefits
are not funded and our policy is to pay these benefits as they
become due.

Certain accounting guidance, including the
guidance applicable to pensions, does not require immediate
recognition of the effects of a deviation between actual and
assumed experience or the revision of an estimate. This approach
allows the favorable and unfavorable effects that fall within an
acceptable range to be netted. Although this netting occurs
outside the basic financial statements, disclosure of the net
amount is disclosed as an unrecognized gain or loss in the
footnotes to our financial statements. Considerable judgment is
often involved in making these determinations, the use of
different assumptions could result in significantly different
results. Management believes its assumptions and estimates are
reasonable and appropriate, however actual results could differ
from those estimates.

Revenue
Recognition:The Company recognizes
revenue from product sales when it has shipped the goods.
Products are shipped FOB shipping point using customer
designated transportation companies with title passing at that
time. Significant retroactive price adjustments are recognized
in the period when such amounts become probable. Sales are
recognized based upon the gross amount billed to a customer for
those products in which the Companys customer has directed
the sourcing of certain materials or components used in the
manufacture of the final product. The Company generally allows
its customers the right of return only in the case of defective
products. The Company provides a reserve for estimated defective
product costs at the time of the sale of the products.

Cost of Goods Sold and Selling,
General and Administrative Costs:Cost of
goods sold is comprised of direct material, direct labor and
manufacturing overhead. Manufacturing overhead consists of
indirect labor, depreciation, amortization and other
manufacturing expenses. Selling, general and administrative
costs consist of selling, research and development, engineering
and administrative expenses.

Other Expense (Income),
net:In 2003, other expense (income), net
primarily included $32.4 million of foreign currency
transaction gains offset by $3.5 million of losses related
to derivatives used in the Companys hedging strategies and
minority interest share of losses in a consolidated subsidiary
of $5.6 million. In 2002, other expense (income), net
primarily included $12.6 million of losses related to
derivatives used in the Companys foreign currency hedging
strategy offset by $5.9 million of foreign currency
transaction gains, $5.5 million of losses related to
investments in joint ventures and $1.9 million of losses from
sale and leaseback transactions and minority interest share of
losses of a consolidated subsidiary of $6.5 million. In
2001, other expense (income), net primarily included a
$8.0 million loss on early extinguishment of debt and
$7.8 million of foreign currency transaction losses offset
by $5.0 million of derivatives gains and a
$6.2 million gain related to a stock demutualization. The
Company adopted SFAS 145 during 2003 and reclassified
$8.0 million loss on the early extinguishment of debt
recorded for the year ended December 31, 2001 to other
expense (income), net from an extraordinary item in the amount
of $5.3 million (net of income taxes of $2.7 million).

Customer Engineering and
Tooling:Engineering and tooling balances
represent tools, dies and other items used in the manufacturing
of customer components. Amounts included in the consolidated
balance sheets include Company-owned tools and costs incurred on
customer-owned tools which are subject to reimbursement,
pursuant to the terms of a customer contract. Company-owned
tools are amortized over the

F-11



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

tools expected life or the life of the
related vehicle program, whichever is shorter. Engineering,
testing and other costs incurred in the design and development
of production parts are expensed as incurred, unless the costs
are reimbursable, as specified in a customer contract.

Emerging Issue Task Force (EITF)
Issue No. 99-5, Accounting for Pre-Production Costs
Related to Long-Term Supply Arrangements requires that
design and development costs for products to be sold under
long-term supply arrangements be expensed as incurred and costs
incurred for molds, dies and other tools that will be used in
producing the products under long-term supply arrangements be
capitalized and amortized over the shorter of the expected
useful life of the assets or the term of the supply arrangement.

The Company had assets of approximately
$6.8 million and $8.4 million recognized pursuant to
agreements that provide for contractual reimbursement of
pre-production design and development costs, at
December 31, 2003 and 2002, respectively. The Company also
has assets of $124.9 million and $77.1 million
representing the costs for molds, dies and other tools, at
December 31, 2003 and 2002, respectively, that are
reimbursable by customers. In addition, the Company had
$10.0 million and $11.0 million at December 31,
2003 and 2002, respectively, for molds, dies and other tools
that the Company owns.

Derivative Financial
Instruments:All derivatives are
recognized on the consolidated balance sheet at fair value as
required by SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities. Gains and losses on
the changes in fair value of the derivatives that qualify as
hedges under SFAS No. 133 are recorded on the balance sheet
as a component of Accumulated other comprehensive
loss to the extent that the hedges are effective and
documented, until the underlying transactions are recognized in
earnings. As of December 31, 2003 and 2002, the Company had
no derivatives designated as hedges under SFAS No. 133. The
Company uses derivatives to hedge economic risks even though
these derivatives may not be designated as hedges in accordance
with SFAS No. 133. These derivative instruments are marked
to fair market value and reported on the balance sheet. Gains
and losses on these instruments are reported in Other
expense (income), net on the Consolidated Statements of
Operations. The gains and losses are intended to offset economic
risk of foreign currency transaction losses or gains. The
Company does not enter into derivative transactions for
speculative purposes.

Foreign Currency
Translation:Assets and liabilities of the
Companys non-U.S. businesses are translated to U.S.
Dollars at end-of-period exchange rates. The effects of the
translations are reported as a component of Accumulated
other comprehensive loss. Remeasurement of assets and
liabilities of the Companys non-U.S. businesses that use
the U.S. Dollar as functional currency are included in the
Consolidated Statements of Operations as Other expense
(income), net. The Statement of Operations of the
Companys non-U.S. businesses are translated to U.S.
dollars at average exchange rates and are recognized as part of
revenues, costs and expenses. Also included in Other
expense (income), net, are gains and losses arising from
transactions denominated in a currency other than the functional
currency of the business involved.

Environmental:The Company records an estimated loss when it is probable that
an environmental liability has been incurred and the amount of
the loss can be reasonably estimated. The Company reviews all
environmental claims from time to time and adjusts the reserves
accordingly. Accruals for environmental liabilities are
generally included in the consolidated balance sheet as other
non-current liabilities at undiscounted amounts and exclude
claims for recoveries from insurance or other third parties.
Accruals for insurance or other third party recoveries for
environmental liabilities are recorded when it is probable that
the claim will be realized.

New Accounting
Pronouncements:In January 2003, the FASB
issued FASB Interpretation No. (FIN) 46,
Consolidation of Variable Interest Entities
(VIE), an interpretation of Accounting Research
Bulletin No. 51, Consolidated Financial Statements.
This interpretation provides guidance on the identification of
VIEs, some of which may require consolidation based on factors
beyond a majority voting interest. A

F-12



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

VIE is defined in FIN 46 as an entity in which
either the equity investors (if any) do not have a controlling
financial interest or the equity investment at risk is
insufficient to finance that entitys activities without
receiving additional subordinated financial support from other
parties. FIN 46 applies immediately to VIEs created after
January 31, 2003, and in the first fiscal year or interim
period beginning after December 15, 2003, to VIEs in which
an enterprise holds a variable interest that it acquired before
February 1, 2003. In 2003, the Company and Textron agreed
to have an entity that the Company held a variable interest in
restructured so it was required to be consolidated by Textron
and not accounted for as a VIE. The entity was part of the
Textron Leasing Transaction with the maximum potential loss
related to certain equipment leases that is limited to the
amount of the residual value guarantee as discussed in Note 11
Receivables Facility and Non-Recourse Factoring
Facilities. There have been no VIEs created after
January 31, 2003. For the period prior to January 31,
2003, the Company has not identified any other entities that
would currently qualify as a VIE.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This statement amends SFAS
No. 133, Accounting for Derivative Instruments and
Hedging Activities, and clarifies the accounting for
derivative instruments and hedging activities. This statement is
effective for contracts entered into or modified after June 30,
2003 (with exceptions) and for hedging relationships designated
after June 30, 2003. SFAS No. 149 did not have a material
effect on the Companys earnings or financial position.

In December 2003, the FASB issued SFAS
No. 132 (Revised 2003) Employers Disclosures
about Pensions and Other Postretirement Benefits an amendment of
FASB Statements No. 87, 88, and 106. This Statement
revises employers disclosures about pension plans and
other postretirement benefit plans. It does not change the
measurement or recognition of those plans required by other FASB
Statements. This Statement retains the disclosure requirements
contained in the original SFAS No. 132,
Employers Disclosures about Pensions and Other
Postretirement Benefits, which it replaced and requires
additional disclosures about the assets, obligations, cash flows
and net periodic benefit cost of defined benefit pension plans
and other defined benefit postretirement plans. This Statement
is effective for financial statements with fiscal years ending
after December 15, 2003, except for certain provisions
related to foreign plans which are effective for fiscal years
ending after June 15, 2004. The Company adopted the revised
disclosure requirement of this Statement for all of its U.S.
plans and will adopt the requirements for its foreign plans as
required in 2004.

The following table highlights the sensitivity of
our pension obligations and expense to changes in assumptions
(in millions):

|                                                    |  |                 |      |   |           |  |       |  
|--------------------------------------------------- |  | --------------- | ---- | - | --------- |  | ----- | -
|                                                    |  | Impact on       |      |   | Impact on | 
|Change in Assumption                                |  | Pension Expense |      |   | PBO       | 
|                                                    |  |                 |      |   |           | 
|25 basis point (bp) decrease in
    discount rate |  |                 | 1.5  |   |           |  | 15.6  |  
|25 bp increase in discount rate                     |  |                 | (1.5 | ) |           |  | (15.1 | )
|25 bp decrease in long-term return on assets        |  |                 | 0.8  |   |           |  |      |  
|25 bp increase in long-term return on assets        |  |                 | (0.8 | ) |           |  |      |  

Changes in Accounting
Principles:In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. With the rescission of SFAS
No. 4 and 64, only gains and losses from extinguishments of
debt that meet the criteria of APB Opinion No. 30 would be
classified as extraordinary items. This statement amends SFAS
No. 13, Accounting for Leases, to eliminate the
inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease
modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other
existing authoritative pronouncements to make various technical
corrections, clarify meanings or describe their applicability
under changed conditions. SFAS No. 145 is effective for
fiscal years beginning after May 15, 2002. The Company

F-13



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

adopted SFAS 145 and reclassified $8.0 million
loss on the early extinguishment of debt recorded for the year
ended December 31, 2001 to other expense (income), net from
an extraordinary item in the amount of $5.3 million (net of
income taxes of $2.7 million).

In June 2002, the FASB issued SFAS No. 146
Accounting for Costs Associated with Exit or Disposal
Activities. This statement nullifies EITF No. 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). This statement is
effective for all exit or disposal activities initiated after
December 31, 2002. This statement requires that a liability
for a cost associated with an exit or disposal activity be
recognized when the liability is incurred rather than the date
of an entitys commitment to an exit plan. The Company
implemented SFAS No. 146 on January 1, 2003.

In the third quarter, the Company adopted the
FASB Staff Position No. FAS 146-1 Determining
Whether a One-Time Termination Benefit Offered in Connection
with an Exit or Disposal Activity Is, in Substance, an
Enhancement to an Ongoing Benefit Arrangement. The effect
from adopting FAS 146-1 was to defer recording
$1.2 million of restructure expense to later periods. The
effect on prior quarters and at December 31, 2003 for the
portion of the restructuring activities deferred was not
significant.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS
No. 150 establishes standards to require issuers to
classify certain financial instruments with characteristics of
both liabilities and equity. This Statement is effective for
financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003.
The Company has adopted this Statement by reclassifying the
mandatorily redeemable preferred stock of subsidiary as a
liability and reclassifying preferred stock dividends and
accretion as interest expense effective with the quarter ending
September 30, 2003.

During the second quarter 2003, the Company
implemented a change in the method of accounting for holiday pay
for interim periods so that such pay is accrued, and expense is
recognized during the period in which the actual holiday occurs.
The change in method better matches holiday expense with the
period that the actual holiday occurs and the pay is earned.
Previously, certain of the Companys businesses accrued
holiday pay and recognized expense based upon an equal monthly
amount within the fiscal year. As the prior method allocated
costs within the fiscal year, there was no effect on prior
years. There was no effect on the entire fiscal year as the
change only affected interim periods. See Note 22
Quarterly Financial Data for additional information.

Additionally, during the second quarter of 2003,
the Company implemented a change in the method of accounting for
crib supply inventories held at plants. Crib supply inventories
include small motors, replacement parts for production equipment
and other miscellaneous repair parts for buildings, equipment
and machinery. In the second quarter the Company implemented a
perpetual crib supply inventory system and harmonized its policy
to consistently account for the capitalization of crib supply
inventories. The new accounting method better matches the
expenditure with the period benefited, as such inventories are
charged to expense when placed into service. Previously, the
Company had different capitalization thresholds following the
various acquisitions in late 2001 and 2002, which ranged from
not capitalizing any crib supply items to capitalizing only
items greater than two thousand dollars. Pro forma and the
cumulative effect amounts relating to the change in accounting
for crib inventories is not determinable as perpetual records of
crib inventory were not maintained at all the plants prior to
the application of the new method in the second quarter of 2003.
For the plants that previously had no perpetual records, the
effect of the change was $1.8 million after tax or $0.02
per share recorded to increase inventory and reduce cost of
sales in the three months ended June 30, 2003. For the year
ended December 31, 2003, the incremental effect of the adoption
had an insignificant effect.

F-14



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

3.     Acquisitions
and Goodwill

a.     Acquisitions

On January 2, 2003, the Company acquired
Delphi Corporations plastic injection molding plant and
related equipment in Logroño, Spain for $18 million. The
300,000 square foot Logroño facility includes 24 injection
molding machines and one Class-A paint line.

On January 17, 2003, the Company acquired
the remaining 50% interest in an Italian automotive joint
venture from Textron Inc., a related party, for $15 million,
which also terminated a $28 million put-option by Textron
Inc., that was exercisable in December 2004. The Company
incurred fixed asset impairments of $7.5 million relating
to the 50% interest owned previously.

The Company completed its acquisitions of Textron
Automotive Companys automotive trim division
(TAC-Trim) in December 2001, the automotive fabric
operations of Joan Fabrics and all of the operating assets in
Joan Fabrics affiliated yarn dying operation Western
Avenue Dyers (collectively Joan) in September 2001
and Becker Group, LLC (Becker) a supplier of plastic
components to the automotive industry in July 2001. The results
of operations of the acquired companies are included in the
Companys Consolidated Statements of Operations from the
dates of acquisition.

Appraisals for Becker and Joan were performed
during 2001, and the related allocation of purchase price was
completed. In the second quarter 2002, the Companys
external consultants completed the valuations of all TAC-Trim
acquired intangible and fixed assets. Based upon these
valuations: 1) an intangible asset of $51.0 million for
customer contracts was recorded based on the value of individual
customer contracts  this intangible asset is being
amortized over the contracts performance period, which
extends through 2012; 2) the Company revised its first
quarter estimate for patents and other specifically identifiable
intangible assets acquired as part of the TAC-Trim purchase from
$40.0 to $24.0 million (the weighted average lives
increased from 7 to 10 years); and 3) in June 2002, the
valuations resulted in a $30.1 million increase in fixed
assets and adjustment of their useful lives. In September 2002,
the Company revised its valuation resulting in a
$27.7 million increase in fixed assets and adjustment of
their useful lives, based upon revised information from external
consultants. The allocation of the purchase price for the
TAC-Trim acquisition was completed in 2002. The Becker, Joan and
TAC-Trim acquisitions are intended to solidify the
Companys position as a premier supplier of interior
components and automotive fabrics.

b.     Goodwill

Goodwill and
Intangibles:During the second quarter
of 2002, the Company completed the implementation of
SFAS 142, Goodwill and Other Intangible Assets.
Under SFAS 142, goodwill is no longer amortized. Instead,
goodwill and indefinite-lived intangible assets are tested for
impairment in accordance with the provisions of SFAS 142.
The Company employed a discounted cash flow analysis and a
market comparable approach in conducting its impairment tests.
The Company completed its initial impairment test in the second
quarter of 2002 and recorded an impairment loss of
$11.7 million (having no tax impact), or $0.15 per average
basic and diluted share relating to the UK Plastics
business in the former European and Rest of World Automotive
Systems segment. The impairment loss was reported as a
cumulative effect of a change in accounting principle and,
therefore, is accounted for as if it occurred on January 1,
2002. The Company completed its annual impairment test on
November 1, 2002 indicating that the fair value of the
reporting units exceeded the carrying values.

The Companys first quarter 2003 results
were below the forecasts utilized in testing for the goodwill
impairment for the year ended December 31, 2002. The
conditions in the markets in which the Company operates
continued to deteriorate and customer production schedules
continued to decline, and therefore, the Company reduced its
operating and financial plans for 2003. As a result, the Company
initiated an impairment test (outside of the annual testing date
of November 1) during the second quarter 2003. During the
second

F-15



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

quarter, the Company carefully reviewed all of
its assumptions regarding revenue growth, improved operating
margins and planned capital expenditures. This analysis by each
reporting unit focused on new business awards, implementation of
strategic business initiatives such as restructuring, material
savings, plant efficiencies, revenue growth and additional
product/ process technology applications. While the Company is
aggressively attacking its overall cost structure, the U.S. and
Mexico Plastics reporting unit had even more definitive
objectives initiated after the 2003 first quarter performance on
a specific plant basis. As a result of these well-defined
programs, the Company, utilizing an independent outside
evaluator, completed the first step of the goodwill impairment
test in the second quarter of 2003 which indicated that the fair
value of the reporting units exceeded the carrying values, and
therefore no additional impairment testing was necessary. The
Company again completed the annual impairment test as of
November 1, 2003 indicating fair value of the reporting
units exceeded the carrying values.

Fair value for all tests was determined based
upon the discounted cash flows of the reporting units using
discount rates ranging from 11.5% to 14.0% dependent on the
reporting unit and a residual growth rate of 2%. The market
comparable approach consisted of earnings multiples ranging from
5.2 to 6.5 times current year and forecasted Earnings
Before Interest, Taxes, Depreciation and Amortization
(EBITDA) (operating income less depreciation and
amortization) and a control premium on equity. Future cash flows
and EBITDA are affected by future operating performance, which
will be impacted by economic conditions, car builds, financial,
business and other factors, many of which are beyond the
Companys control. The U.S. and Mexico Plastics reporting
unit can be significantly impacted by an adverse change in
assumptions. Considerable judgment is often involved in making
these determinations, the use of different assumptions could
result in significantly different results. An approximate 50
basis point change in discount rates or an approximate 4%
reduction in profit would result in a further goodwill
impairment analysis as required by SFAS 142. Management
believes its assumptions and estimates are reasonable and
appropriate, however actual results could differ from those
estimates.

The changes in the carrying amounts of goodwill
for the year ended December 31, 2003 were primarily a
result of the additional acquisition of the remaining 50%
interest of an Italian joint venture and the effect of foreign
currency translation.

In accordance with the provisions of SFAS
No. 142, the Company did not amortize goodwill during 2002.
If goodwill amortization had not been recorded during 2001, the
net loss would have decreased $6.1 million to an adjusted
net loss of $40.1 million. The related loss per share for
fiscal 2001 would have decreased $0.14 per share resulting in
adjusted loss per share of $1.05.

c.     Intangible
Assets

The components of the Companys acquired and
other amortizable intangible assets as of December 31, 2003
and 2002 were as follows (in millions):

|                      |  |                   |      |             |                   |   |              |        |  |   |      |             |  |              |              |  |        |   |      |  |  |   |      | 
|--------------------- |  | ----------------- | ---- | ----------- | ----------------- | - | ------------ | ------ |  | - | ---- | ----------- |  | ------------ | ------------ |  | ------ | - | ---- |  |  | - | ---- | 
|                      |  |                   |      |            
|                      |  | December 31, 2003 |      |             | December 31, 2002 |  
|                      |  |                   |      |             |                   |  
|                      |  |                   |      | Accumulated |                   |   | Net Carrying |        |  |   |      | Accumulated |  |              | Net Carrying | 
|                      |  | Cost              |      |             | Amortization      |   |              | Amount |  |   | Cost |             |  | Amortization |              |  | Amount |  
|                      |  |                   |      |             |                   |   |              |        |  |   |      |             |  |              |              |  |        |  
|Customer contracts    |  | $                 | 51.0 |             |                   | $ | 13.1         |        |  | $ | 37.9 |             |  | $            | 51.0         |  |        | $ | 6.3  |  |  | $ | 44.7 | 
|Patents and other     |  |                   | 39.2 |             |                   |   | 10.2         |        |  |   | 29.0 |             |  |              | 31.5         |  |        |   | 3.5  |  |  |   | 28.0 | 
|Non-compete agreement |  |                   |     |             |                   |   |             |        |  |   |     |             |  |              | 18.0         |  |        |   | 5.4  |  |  |   | 12.6 | 
|                      |  |                   |      |             |                   |   |              |        |  |   |      |             |  |              |              |  |        |  
|                      |  | $                 | 90.2 |             |                   | $ | 23.3         |        |  | $ | 66.9 |             |  | $            | 100.5        |  |        | $ | 15.2 |  |  | $ | 85.3 | 
|                      |  |                   |      |             |                   |   |              |        |  |   |      |             |  |              |              |  |        |  

Amortization expense for intangible assets for
the periods ending December 31, 2004, 2005, 2006, 2007, 2008 and
thereafter will be $12.5 million, $12.6 million, $12.1 million,
$9.7 million, $6.7 million and $13.3 million, respectively. See
Related Party Transactions (Note 19).

F-16



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

4.     Inventories

Inventory balances are summarized below (in
millions):

|                |  |              |       |  |              |   |       | 
|--------------- |  | ------------ | ----- |  | ------------ | - | ----- | 
|                |  | December 31, |       |  | December 31, |  
|                |  | 2003         |       |  | 2002         |  
|                |  |              |       |  |              |  
|Raw materials   |  | $            | 95.0  |  |              | $ | 90.3  | 
|Work in process |  |              | 24.6  |  |              |   | 33.7  | 
|Finished goods  |  |              | 49.8  |  |              |   | 47.6  | 
|                |  |              |       |  |              |  
|                |  | $            | 169.4 |  |              | $ | 171.6 | 
|                |  |              |       |  |              |  

5.     Other
Current Assets

Other current asset balances are summarized below
(in millions):

|                                                                   |  |              |       |  |              |   |       | 
|------------------------------------------------------------------ |  | ------------ | ----- |  | ------------ | - | ----- | 
|                                                                   |  | December 31, |       |  | December 31, |  
|                                                                   |  | 2003         |       |  | 2002         |  
|                                                                   |  |              |       |  |              |  
|Deferred tax asset                                                 |  | $            | 25.2  |  |              | $ | 25.3  | 
|Reimbursable tooling and pre-production design
    and development |  |              | 126.5 |  |              |   | 83.0  | 
|Other                                                              |  |              | 64.3  |  |              |   | 69.1  | 
|                                                                   |  |              |       |  |              |  
|                                                                   |  | $            | 216.0 |  |              | $ | 177.4 | 
|                                                                   |  |              |       |  |              |  

6.     Property,
Plant and Equipment, Net

Property, plant and equipment, net, are
summarized below (in millions):

|                              |  |              |         |   |              |   |         |  
|----------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | -
|                              |  | December 31, |         |   | December 31, |  
|                              |  | 2003         |         |   | 2002         |  
|                              |  |              |         |   |              |  
|Land and improvements         |  | $            | 34.5    |   |              | $ | 26.1    |  
|Buildings                     |  |              | 213.9   |   |              |   | 177.8   |  
|Machinery and equipment       |  |              | 1,076.9 |   |              |   | 959.6   |  
|Leasehold improvements        |  |              | 36.0    |   |              |   | 27.4    |  
|Construction in progress      |  |              | 119.2   |   |              |   | 106.2   |  
|                              |  |              |         |   |              |  
|                              |  |              | 1,480.5 |   |              |   | 1,297.1 |  
|Less accumulated depreciation |  |              | (654.6  | ) |              |   | (559.3  | )
|                              |  |              |         |   |              |  
|                              |  | $            | 825.9   |   |              | $ | 737.8   |  
|                              |  |              |         |   |              |  

7.     Accrued
Expenses

Accrued expenses are summarized below (in
millions):

|                              |  |              |       |  |              |   |       | 
|----------------------------- |  | ------------ | ----- |  | ------------ | - | ----- | 
|                              |  | December 31, |       |  | December 31, |  
|                              |  | 2003         |       |  | 2002         |  
|                              |  |              |       |  |              |  
|Payroll and employee benefits |  | $            | 82.7  |  |              | $ | 61.7  | 
|Interest                      |  |              | 13.6  |  |              |   | 12.3  | 
|Insurance                     |  |              | 23.6  |  |              |   | 16.5  | 
|Restructuring reserves        |  |              | 30.9  |  |              |   | 28.2  | 
|Taxes payable                 |  |              | 0.4   |  |              |   | 12.0  | 
|Other                         |  |              | 87.7  |  |              |   | 169.2 | 
|                              |  |              |       |  |              |  
|                              |  | $            | 238.9 |  |              | $ | 299.9 | 
|                              |  |              |       |  |              |  

F-17



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

8.     Short-Term
Borrowings

The Company utilizes uncommitted lines of credit
to satisfy a portion of its short-term working capital
requirements of certain of its foreign affiliates. As of
December 31, 2003, the Company had lines of credit from
international credit facilities of $37.1 million, of which
$16.0 million was outstanding with $21.1 million
available. As of December 31, 2002, the Company had
unsecured lines of credit from financial institutions of
$36.5 million, of which $10.5 million was outstanding
with $26.0 million available. The weighted average interest
rate on the outstanding borrowings at December 31, 2003 and
2002 was approximately 16.0% and 8.3%, respectively.

9.     Long-Term
Debt and Capital Lease Obligations

Long-term debt and capital lease obligations are
summarized below (in millions):

|                                                                                     |                                              |              |         |       |              |   |         |       | 
|------------------------------------------------------------------------------------ | -------------------------------------------- | ------------ | ------- | ----- | ------------ | - | ------- | ----- | 
|                                                                                     |                                              | December 31, |         |       | December 31, |  
|                                                                                     |                                              | 2003         |         |       | 2002         |  
|                                                                                     |                                              |              |         |       |              |  
|Senior Secured Credit Facilities:                                                    |                                              |              |         |       |              |   |         |      
|                                                                                     | Tranche A Term Loan Facility                 |              | $       | 62.9  |              |   | $       | 83.8  | 
|                                                                                     | Tranche B Term Loan Facility                 |              |         | 287.2 |              |   |         | 293.8 | 
|                                                                                     | Revolving Credit Facility                    |              |         | 6.3   |              |   |         |      | 
|Public Debt:                                                                         |                                              |              |         |       |              |   |         |      
|                                                                                     | 11 1/2% Senior Subordinated Notes, due 2006. |              |         | 400.0 |              |   |         | 400.0 | 
|                                                                                     | 10 3/4% Senior Notes, due 2011.              |              |         | 500.0 |              |   |         | 500.0 | 
|Other (including capital lease obligations)                                          |                                              |              | 12.8    |       |              |   | 1.1     |      
|                                                                                     |                                              |              |         |       |              |  
|Total debt                                                                           |                                              |              | 1,269.2 |       |              |   | 1,278.7 |      
|Less current maturities (including current
    portion of capital lease obligations) |                                              |              | (31.5   | )     |              |   | (23.5   | )    
|                                                                                     |                                              |              |         |       |              |  
|Total Long-term debt and capital lease obligations                                   |                                              | $            | 1,237.7 |       |              | $ | 1,255.2 |      
|                                                                                     |                                              |              |         |       |              |  

Senior
Secured Credit Facilities

In December 2001, in conjunction with the
TAC-Trim acquisition, the Company entered into new Senior
Secured Credit Facilities, which refinanced its prior bank
credit facilities. The principal and interest on the prior bank
credit facilities totaled $362.5 million. The cost and
expenses associated with the refinancing of the prior bank
credit facilities totaling $25.7 million were deferred and
will be amortized over the four-year life of the term loans
described below. The Company adopted SFAS 145 during 2003 and
reclassified $8.0 million loss on the early extinguishment of
debt to other expense (income), net from an extraordinary item
in the amount of $5.3 million (net of income taxes of
$2.7 million) in connection with the retirement of the
prior bank credit facilities.

The Senior Secured Credit Facilities include a
floating rate Revolving Facility and two floating rate Term Loan
Facilities that mature on December 31, 2005. The Revolving
Facility allows the Company to borrow revolving loans up to
$175.0 million including Canadian dollars up to
$75.0 million. The facility can be utilized for letters of
credit. The Term Loan Facilities consist of a Tranche A Term
Loan with an original principal balance of $100.0 million
and a Tranche B Term Loan with an original principal balance of
$300.0 million. As required by the credit agreement, the
full amounts of the Term Loan Facilities were drawn down on the
closing date. As of December 31, 2003 the Tranche A Term
Loan and Tranche B Term Loan had principal balances of
$62.9 million and $287.2 million, respectively. Amounts
borrowed under the Term Loan Facilities that are repaid or
prepaid cannot be reborrowed. The Tranche A Term Loan Facility
is payable in quarterly

F-18



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

installments that increase in amounts each year
until maturity. The Tranche B Term Loan Facility is payable in
quarterly installments of $0.8 million for the first three
years and quarterly installments of $72.7 million during
the final year. These maturities were modified as part of the
fifth amendment completed in February 2004. See the proforma
maturity table below.

Under the Senior Secured Credit Facilities, the
interest rate on the Revolving Facility is, at the
Companys option, London Inter-Bank Offer Rate
(LIBOR) plus 4.00% or the Alternate Base Rate
(ABR) plus 3.00%. The ABR is the highest of The JP
Morgan Chase (Chases) announced prime rate,
the Federal Funds Rate plus 0.5% and Chases base
certificate of deposit rate plus 1%. A per annum fee equal to
the spread over the LIBOR accrues on the face amount of letters
of credit. Also, there is a 1.00% commitment fee on the unused
portion of the facility. The interest rates on the
Canadian-dollar denominated debt is at the Companys option
(the Canadian Prime Rate) plus 3.00% or the bill of
exchange rate (Bankers Acceptance or
BA) denominated in Canadian dollars for one, two,
three or six months plus 4.00%. The interest rate on the Tranche
A Term Loan Facility is, at the Companys option, LIBOR
plus 4.00% or the ABR plus 3.00%, subject to adjustment
quarterly, based on performance targets. The interest rate on
the Tranche B Term Loan Facility is, at the Companys
option, either LIBOR plus 4.75% or ABR plus 3.75%. On any
Tranche B Term Loans repaid whether voluntary or mandatory,
there is a prepayment premium of 1.00%. The LIBOR rate shall not
be less than 3.00% per annum. The weighted average rate of
interest on the Senior Secured Credit Facilities at
December 31, 2003 and 2002 was 7.60% and 6.94%,
respectively.

Borrowings under the Senior Secured Credit
Facility are collateralized by a first priority lien on the
assets of the Company, Products and its U.S. and Canadian
subsidiaries with certain exceptions including assets included
in the Companys receivables facility, certain scheduled
assets, and certain assets whose value relative to cost of lien
perfection was deemed too low to include, as well as a pledge of
stock of Products and its significant subsidiaries and certain
intercompany debt and guarantees from the Company and its U.S.
subsidiaries (subject to certain exceptions).

The Senior Secured Credit Facilities contain
restrictive covenants including maintenance of interest coverage
and leverage ratios and various other restrictive covenants that
are customary for such facilities. The target levels established
by these covenants limit the Companys ability to utilize
availability under its liquidity facilities, including the
Senior Secured Credit Facilities and are based on the
Companys financial performance. At December 31, 2003,
there were no funding limitations. The covenants of the Senior
Secured Credit Facilities also limit investments, dividends or
other distributions of capital stock, capital expenditures, the
purchase of subsidiary preferred stock, the prepayment of debt
other than loans under the senior facilities, liens and certain
lease transactions.

In February 2004, the Company entered into the
fifth amendment to the Senior Secured Credit Facilities Credit
Agreement which allowed the establishment of a new
$100 million Supplemental Revolving Credit Facility and the
$185 million Tranche A-1 Term Loan. In connection with
these new expanded facilities, $181.5 million was used to
prepay existing Tranche A and Tranche B Term Loans in direct
order of maturity.

In October 2003, the Company entered into
amendment numbers three and four to the Senior Secured Credit
Facilities Credit Agreement. The Third Amendment permitted the
add-back of charges related to restructuring actions taken
during the third quarter 2003 for covenant calculation purposes
and increased the maximum permitted leverage ratio at
September 30, 2003 to 4.50:1.00. The Fourth Amendment
permitted the add-back of charges up to $11 million related
to future restructuring actions for covenant calculation
purposes and increased the maximum permitted leverage ratio in
future quarters, including a leverage ratio of 5.00:1.00 at
December 31, 2003 and decreased the minimum interest
coverage ratio in future quarters, including an interest
coverage ratio of 1.85:1.00 at December 31, 2003. The two
financial covenants remain at the same level for the first
quarter 2004 and then step-down during the year to a leverage
ratio of 4.25:1.00 and an interest coverage ratio of 2.20:1.00
at December 31, 2004. In connection with the Fourth
Amendment, the Company agreed to increase its applicable

F-19



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

margin for interest rate purposes by 0.25% at
times when the Companys previously reported leverage
ratios exceeded 3.50:1.00 and to make adjustments to the
interest coverage ratio.

Previously, in the second quarter 2003, the
Company signed a second amendment to the Senior Secured Credit
Facilities Credit Agreement. The principal changes were to
increase the maximum permitted leverage ratio for periods
following the first quarter of 2003 and to decrease the minimum
permitted interest coverage ratio for periods following the
first quarter of 2003. In connection with the amendment, the
Company agreed that its applicable margin for interest rate
purposes could be increased by up to 0.50% at times when the
Companys previously reported leverage ratio exceeded
3.5:1.00. The Company paid customary fees to lenders in
connection with all of the amendments.

Effective December 2002, the Company amended its
Senior Credit Facilities to provide for the purchase of certain
assets in Spain and Portugal as well as the remaining 50%
interest in the Companys joint venture in Italy.

Public
Debt

In December 2001, Products issued 10 3/4%
Senior Notes due 2011 in a total principal amount of
$500.0 million (Notes). The Notes were not
registered under the Securities Act of 1933 and were offered
only to qualified institutional buyers. In June 2002, the
Company effected and registered an exchange offer of a new and
identical issue of 10 3/4% Senior Notes due 2011 of
Products in exchange for the outstanding Senior Notes of
Products. The exchange offer raised no new proceeds for the
Company and was made in accordance with contractual commitments
arising from the December 2001 issuance. The cost of issuing the
Notes totaling about $23.1 million was deferred and will be
amortized over 10 years.

The Notes are unconditionally guaranteed on an
unsecured senior basis by the parent and by each wholly owned
domestic subsidiary that is a guarantor of the Bank Credit
Facilities as of the issue date. This is all of the
Companys wholly owned domestic subsidiaries other than its
receivable and insurance subsidiaries. The debt evidenced by the
Notes and Parent and Subsidiary Guarantees are unsecured senior
obligations of the Company ranking senior in right of payment to
all existing and future Subordinated Debt including the Existing
Notes and related Guarantees and future unsecured and
unsubordinated Debt. The Notes are redeemable prior to
December 31, 2004 only in the event the Company receives
cash proceeds from one or more equity offerings in which case
the Company may at its option use all or a portion of such cash
proceeds to redeem up to 35% of the principal amount of the
notes. The Notes will be subject to redemption at the option of
the Company, in whole or in part at any time after
December 31, 2006 at a stated premium redemption price
expressed as a percentage in excess of the principal amount.
After December 31, 2008, the redemption price is 100%.
Within 30 days of the occurrence of a change of ownership
control, unless the Company has mailed a redemption notice with
respect to all outstanding Notes, the Company will be required
to make an offer to purchase all outstanding Notes at a purchase
price equal to 101% of their principal amount. The indenture
governing the notes limits the Companys ability to issue
more debt, pay dividends and make distributions, repurchase
stock, make investments, merge or consolidate, transfer assets,
enter into transactions with affiliates and issue stock of
subsidiaries. These restrictive covenants are customary for such
securities and are subject to a number of exceptions.

In June 1996, Products, issued at face value
$400 million principal amount of 11 1/2% Senior
Subordinated Notes due 2006 which are guaranteed by the Company.
The indenture governing the 11 1/2% Senior Subordinated
Notes generally prohibits the Company, Products and any
Restricted Subsidiary (as defined) from making certain payments
and investments unless a certain financial test is satisfied and
the aggregate amount of such payments and investments since the
issue date is less than a specified amount. The prohibition is
subject to a number of significant exceptions, including
dividends to stockholders of the Company or stock repurchases
not exceeding $10 million in any fiscal year or $20 million
in the aggregate, dividends to stockholders of the Company or
stock repurchases in the amount of the net proceeds from the
sale of the

F-20



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Companys Imperial Wallcoverings, Inc.
subsidiary (Wallcoverings) and dividends to the
Company to permit it to pay its operating and administrative
expenses. The indenture also contains other restrictive
covenants (including, among others, limitations on the
incurrence of debt, asset dispositions and transactions with
affiliates), which are customary for such securities. These
covenants are also subject to a number of significant exceptions.

The Company solicited and received consent from
holders of a sufficient amount of the outstanding principal of
the 11 1/2% Senior Subordinated Notes allowing the Change
of Control precipitated by the Heartland Transaction. A Second
Supplemental Indenture dated February 8, 2001 amended the
Senior Subordinated Notes indenture to reflect this and certain
other changes, including allowance for the incurrence of debt in
the form of the Term Loan D Facility. In connection with the
TAC-Trim acquisition, the Company further amended the indenture
governing these notes to make each subsidiary guarantor of the
new 10 3/4% Senior Notes a guarantor of these existing
notes on a senior subordinated basis.

At December 31, 2003, the scheduled annual
maturities of long-term debt and capital lease obligations are
as follows (in millions):

|            |  |   |         | 
|----------- |  | - | ------- | 
|Year Ending |  |  
|            |  |  
|2004        |  | $ | 31.5    | 
|2005        |  |   | 333.1   | 
|2006        |  |   | 402.9   | 
|2007        |  |   | 1.7     | 
|2008        |  |   |        | 
|Later years |  |   | 500.0   | 
|            |  |   |        
|            |  | $ | 1,269.2 | 
|            |  |   |        

In February 2004 the Company entered into the
fifth amendment to the Senior Secured Credit Facilities Credit
Agreement subsequent to year-end. The proforma scheduled annual
maturities of long-term debt and capital lease obligations are
as follows (in millions):

|            |  |   |         | 
|----------- |  | - | ------- | 
|Year Ending |  |  
|            |  |  
|2004(a)     |  | $ | 4.4     | 
|2005(a)     |  |   | 360.2   | 
|2006        |  |   | 402.9   | 
|2007        |  |   | 1.7     | 
|2008        |  |   |        | 
|Later years |  |   | 500.0   | 
|            |  |   |        
|            |  | $ | 1,269.2 | 
|            |  |   |        



---



|    |                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | $181.5 million of Tranche A and B loans were
    refinanced by Term Loan A-1 in February of 2004. An additional
    $3.5 million was borrowed under Term Loan A-1 during
    February 2004 to pay related fees and expenses of the offering.
    The Company will recognize approximately $1.5 million of
    loss on early extinguishment of debt related to the refinancing.

10.     Mandatorily
Redeemable Preferred Stock of Subsidiary

In December 2001, Products issued 182,700 shares
of its Series A Redeemable Preferred Stock, 123,700 shares
of Series B Redeemable Preferred Stock and 20,000 shares of
Series C Redeemable Preferred Stock. The Preferred Stock
was recorded at fair value of $146.9 million, which was
less than the liquidation value of

F-21



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

$1,000 per share or $326.4 million. The
estimated fair value was based on market prices for securities
with similar terms, maturities and risk characteristics, and
included a liquidation discount to reflect market conditions and
was agreed to by the Company and Textron as part of the TAC-Trim
purchase agreement. The difference between the initial recorded
value and the liquidation value is being accreted over the
11 year terms of the securities. The 2003 and 2002 results
included subsidiary preferred stock requirements calculated
using the effective interest method of $37.3 million and
$38.4 million, respectively. The preferred stock requirement
includes both accretion and dividend costs of $5.3 million
and $32.0 million, respectively for 2003 compared to
$7.6 million and $30.8 million, respectively for 2002.
The carrying value of the Redeemable Preferred Stock includes
accretion and accrued dividends.

In June 2002, $100.0 million of proceeds
from the 16 million share common stock offering was used to
repurchase Series A preferred stock at a price of 75% of
its liquidation preference of $133.3 million. The redeemed
Series A preferred stock had a carrying value of
$63.7 million. The difference between the
$63.7 million in carrying value and the $100.0 million
cash payment was excluded from net income and recorded as a
charge to equity in the Companys accumulated deficit
account. This $36.3 million equity charge is included in
the computation of loss per share and is included in the net
loss attributable to common shareholders.

Products is required to redeem all Series A
and B Preferred Stock outstanding on January 1, 2013 and
Series C Preferred Stock outstanding on February 1,
2022. The redemption price is equal to 100% of the liquidation
preference plus accrued and unpaid dividends plus common equity
participation for the Series C Preferred Stock. The
Series A and Series B Preferred Stock are redeemable
at Products option, in whole or in part, on or after
January 1, 2007 at a stated percent in excess of the
liquidation preference plus accrued and unpaid dividends. The
Series C Preferred Stock is not optionally redeemable.
However, Products or the holders of a majority of
outstanding shares of Series C Preferred Stock, may
exchange the Series C Preferred Stock for Series B
Preferred Stock at any time following the second anniversary of
its issuance date but prior to the third anniversary of its
issuance date.

Shareholders of Series A Preferred Stock are
entitled to receive dividends accruing annually on the
liquidation preference at a rate of 11% for dividend periods
ending on or prior to July 1, 2003, and 15% thereafter.
Holders of Series B and C Preferred Stock are entitled to
receive dividends accruing annually on the liquidation
preference at a rate of 12% for dividend periods ending on or
prior to July 1, 2003, and 16% thereafter.

Products exercised its option through
January 1, 2004 and accrued the full amount of all
dividends in lieu of cash payment of such dividends. Thereafter,
Products may at its option elect to accrue dividends of up to 7%
of the liquidation value annually on Series A Preferred
Stock and up to 8% of the liquidation value on Series B and
C Preferred Stock. Accrued dividends will be added to the
liquidation preference of the applicable series of Preferred
Stock.

Upon voluntary or involuntary liquidation,
dissolution or winding-up of Products, holders of the Preferred
Stock are entitled to be paid out of the assets of Products
available for distribution to stockholders in the amount of
$1,000 per share plus the total accrued dividends prior to any
distribution to holders of equity securities which rank junior
to the Preferred Stock. In addition, the holders of
Series C Preferred Stock are entitled to a participation in
distributions to Products common equity tied to appreciation in
the value of Products common equity subsequent to the issuance
date, not to exceed $2.0 million for all Series C
Preferred Stock outstanding.

If Products experiences a change of ownership
control, the holders of the Preferred Stock must be given the
opportunity to sell to Products their Preferred Stock at 100% of
the liquidation preference plus accrued and unpaid dividends,
plus, in the case of Series C Preferred Stock, common
equity participation. In the event that Products does not meet
or exceed certain financial criteria based on interest coverage,
the dividend rate

F-22



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

applicable solely to Series A Preferred
Stock will increase by 1.00% for the next full dividend period
and by an additional 0.50% for each dividend period thereafter
provided that the dividend rate does not exceed 20%. The
provision of the certificate of designation limits
Products ability to issue more debt, pay dividends and
make distributions, repurchase stock, make investments, merge or
consolidate, transfer assets, enter into transactions with
affiliates and issue stock of subsidiaries. These covenants are
subject to a number of important exceptions.

Effective April 2004, the Company will, exercise
its option to convert all 20,000 shares of the Series C
Redeemable Preferred Stock to Series B Preferred Stock on
an equivalent share basis. The primary difference between the
Series C and Series B Preferred Stock was that
Series C holders are entitled to participation in
distributions of Products common equity tied to the appreciation
in the value of Products common equity subsequent to the
issuance date of the securities. Each Series C Preferred
Stock holder will receive one share of Series B Redeemable
Preferred Stock on the equivalent share basis. The conversion
will have no effect on the results of operations or financial
position of the Company.

11.     Receivables
Facility and Non-Recourse Factoring Facilities

Receivables
Facility

The Company has an agreement to sell, on an
ongoing basis, the trade accounts receivable of certain business
operations to a bankruptcy-remote, special purpose subsidiary
(Carcorp), wholly owned and consolidated by the
Company. The receivables subsidiary (Carcorp) will, subject to
certain conditions, from time to time, sell an undivided
fractional ownership interest in a pool of domestic and certain
Canadian receivables, up to $250 million, to various
multi-seller commercial paper conduits supported by a committed
liquidity facility. Upon sale to the conduit, Carcorp will hold
a subordinated retained interest in the receivables. Under the
terms of the agreement, new receivables are added to the pool as
collections reduce previously sold receivables. The Company
expects to service, administer and collect the receivables on
behalf of Carcorp and the conduit. The proceeds of sale will be
less than the face amount of accounts receivable sold by an
amount that approximates the purchasers financing costs.
In September 2002, the Company amended the receivables facility
lengthening its term to expire in December 2004. The Company
plans to renew or replace the receivables facility with other
debt financings including potential borrowings under lines of
credit.

As of December 31, 2003 and
December 31, 2002, Carcorp, Inc.s total receivables
pool as defined under the receivables facility was
$165.4 million and $253.3 million, respectively. As of
December 31, 2003 the utilization of the Receivables
Facility was $73.7 million and an additional
$9.1 million was available, subject to limitations imposed
under the Senior Secured Credit Facilities (Note 9). At
December 31, 2002, utilization of the Receivables Facility
was $66.0 million and an additional $93.2 million of
funding was available but unutilized.

The Company estimates the fair value of its
retained interest by considering two key assumptions: the
payment rate, which is derived from the average life of the
accounts receivable, which is less than 60 days, and the
rate of expected credit losses. Based on the Companys
favorable collection experience and the short-term nature of its
receivables, both assumptions are highly predictable. Therefore,
the Companys estimated fair value of its retained
interests in the pool of eligible receivables is approximately
equal to the previous cost, less the associated allowance for
doubtful accounts.

The proceeds received by Carcorp from collections
on receivables, after the payment of expenses and amounts due,
are used to purchase new receivables. During 2003 and 2002,
Carcorp had net cash collections of approximately
$3.0 billion and $2.9 billion, respectively. These
funds were used to purchase new receivables from the Sellers,
under the Receivables Facility.

Restrictions:This receivables facility contains certain restrictions on
Carcorp (including maintenance of $60.0 million net worth)
and on the sellers (including limitations on liens on
receivables, modifications of the terms of receivables and
changes in credit and collection practices) customary for
facilities of this type.

F-23



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The commitments under the receivables facility
are subject to termination prior to their term upon the
occurrence of certain events, including payment defaults, breach
of covenants (including defined interest coverage and leverage
ratios), bankruptcy, default by the Company in servicing the
receivables and failure of the receivables to satisfy certain
performance criteria.

Non-Recourse
Factoring Facilities

The Company has entered into various agreements
with international lenders to sell accounts receivables of
certain international operations on a non-recourse basis. As of
December 31, 2003, the Company has utilized
$126.6 million from these commitments. The funding levels
and commitments by the lenders are based on the eligible
receivables in the Companys subsidiaries in the various
countries, including subsidiaries in Belgium, Brazil, Germany,
Italy, Mexico, Netherlands, Spain and Sweden. As of
December 31, 2003, under the agreements, approximately
$132.7 million of receivables have been sold, while the
Company had retained an interest in $6.2 million on these
sold receivables. The retained interest remains classified on
the Companys balance sheet as trade receivables. Under the
agreements, the Company usually pays a factoring fee and a
discount on the daily utilization of the facility. The expenses
related to these agreements are recorded in the loss on sale of
receivables account on the income statement.

During 2003, the loss on the sale of the
receivables totaled $7.3 million. During 2002 and 2001 the
losses on the sale of receivables totaled $4.2 million and
$10.8 million, respectively. The 2001 loss included
$5.6 million in expenses and fees to replace the prior
facility. The usage fee under the facility is 1.50%. In
addition, the Company is required to pay a fee of 0.50% on the
unused portion of the facility and a discount. The discount on
sold interests is approximately equal to the interest rate paid
by the conduits to the holders of the commercial paper plus a
usage fee. The discount rate at December 31, 2003 was 1.55%
compared to 1.45% at December 31, 2002.

12.     Operating
Leases

The Company has operating leases for land and
buildings for periods up to twenty years and transportation,
operating and administrative equipment for periods ranging from
one to twelve years. The majority of these leases contain
renewal provisions.

The Company has equipment lease agreements and
building lease agreements with several lessors which, subject to
specific approval, provide availability of funding for operating
leases and sale-leasebacks as allowed in its other financing
agreements. The Company has a purchase option on certain
equipment at the end of the lease term based on the fair market
value of the equipment or to purchase some or all of the
equipment at prices determined under the agreement. The Company
has classified the leases as operating leases.

At December 31, 2003, future minimum lease
payments under operating leases for continuing operations are as
follows (in millions):

|            |  |   |       | 
|----------- |  | - | ----- | 
|Year Ending |  |  
|            |  |  
|2004        |  | $ | 55.0  | 
|2005        |  |   | 55.0  | 
|2006        |  |   | 58.1  | 
|2007        |  |   | 54.1  | 
|2008        |  |   | 24.3  | 
|Later Years |  |   | 111.4 | 
|            |  |   |      
|            |  | $ | 357.9 | 
|            |  |   |      

F-24



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Rental expense of continuing operations under
operating leases was $63.7 million, $57.1 million and
$29.2 million, for fiscal 2003, 2002 and 2001, respectively.

During 2003, the Company received net proceeds
(after fees) of approximately $10.2 million from the sale
and leasebacks of real property and equipment. The total minimum
lease commitments under these leases will be $16.1 million,
$0.5 million relates to 2003.

During 2002, the Company received net proceeds
(after fees) of approximately $14.8 million from sale and
leasebacks of real property and equipment. The total minimum
lease commitments under these leases will be $18.8 million,
$2.6 million of which relates to both 2003 and 2002.

During 2001, Products entered into sale and
leaseback transactions for certain manufacturing equipment and
non-manufacturing properties. The transactions resulted in the
recognition of a $4.4 million net deferred loss that is
being amortized over the lease term and the recognition of an
$8.7 million loss.

During 2001, the Company received net proceeds
(after fees) of approximately $86.2 million from sale and
leasebacks of real property and equipment, which it used to
reduce outstanding debt. The aggregate lease payments associated
with these leases will be $88.8 million, $12.5 million
of which related to 2002. As part of the 2001 sale-leaseback
transactions, Products sold and contemporaneously leased back
real property from unrelated third parties and received net
proceeds (after fees) of $46.4 million. Refer to
Note 19 for a discussion regarding certain sale and
leaseback transactions that were entered into with related
parties.

13.     Employee
Benefit Plans

A.     Defined
Benefit Pension and Postretirement Benefit
Plans

Subsidiaries of the Company have defined benefit
pension plans covering substantially all employees who meet
eligibility requirements. Plan benefits are generally based on
years of service and employees compensation during their
years of employment. Funding of retirement costs for these plans
complies with the minimum funding requirements specified by the
Employee Retirement Income Security Act.

Subsidiaries of the Company have also provided
postretirement life and health coverage for certain retirees
under plans currently in effect. Many of the subsidiaries
domestic and Canadian employees may be eligible for coverage if
they reach retirement age while still employed by the Company.
Most of these plans are contributory. In general, future
increases in costs are passed on fully to the retiree. However,
future increases in costs for the Canadian divisions and limited
domestic operations are shared between the Company and the
retiree.

F-25



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following tables provide a reconciliation of
the projected benefit obligation, a reconciliation of plan
assets, the funded status of the plans and amounts recognized in
the Companys consolidated balance sheets at
December 31, 2003 and December 31, 2002 (in millions).

|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |        |        |       |   |        |        |      | 
|-------------------------------------------------------------------- | ---------------------------------------------- | --------------------- | ---------------------------------------- | ------------ | ----------------------- | ------------ | - | ------------ | ---- | ----- | ------------ | ------ | ------ | ----- | - | ------ | ------ | ---- | 
|                                                                     |                                                |                       |                                          |             
|                                                                     |                                                | Pension Benefits(a)   |                                          |              | Postretirement Benefits |             
|                                                                     |                                                | Fiscal Year Ended     |                                          |              | Fiscal Year Ended       |             
|                                                                     |                                                |                       |                                          |              |                         |             
|                                                                     |                                                | December 31,          |                                          |              | December 31,            |              |   | December 31, |      |       | December 31, |       
|                                                                     |                                                | 2003                  |                                          |              | 2002                    |              |   | 2003         |      |       | 2002         |       
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|Measurement Date                                                     |                                                | September 30          |                                          | September 30 |                         | September 30 |   | September 30
|Change in benefit obligation:                                        |                                                |                       |                                          |              |                         |              |   |              |      |       |              |        |        |       |   |       
|                                                                     | Benefit obligation at beginning of year        |                       | $                                        | 384.2        |                         |              | $ | 372.2        |      |       | $            | 93.8   |        |       | $ | 151.2  |       
|                                                                     | Service cost                                   |                       |                                          | 14.0         |                         |              |   | 11.3         |      |       |              | 1.4    |        |       |   | 1.7    |       
|                                                                     | Interest cost                                  |                       |                                          | 25.9         |                         |              |   | 23.9         |      |       |              | 5.8    |        |       |   | 6.9    |       
|                                                                     | Employee contributions                         |                       |                                          | 0.6          |                         |              |   | 0.6          |      |       |              | 0.9    |        |       |   | 0.9    |       
|                                                                     | Amendments                                     |                       |                                          | 3.9          |                         |              |   | 2.3          |      |       |              | 10.6   |        |       |   | (62.6  | )     
|                                                                     | Actuarial gain (loss)                          |                       |                                          | 25.2         |                         |              |   | 16.9         |      |       |              | (5.9   | )      |       |   | 15.0   |       
|                                                                     | Purchase Accounting                            |                       |                                          |             |                         |              |   | (26.4        | )    |       |              |       |        |       |   | (12.4  | )     
|                                                                     | Settlements                                    |                       |                                          | (0.6         | )                       |              |   |             |      |       |              |       |        |       |   |       |       
|                                                                     | Benefits paid                                  |                       |                                          | (27.8        | )                       |              |   | (19.4        | )    |       |              | (6.4   | )      |       |   | (6.4   | )     
|                                                                     | Currency adjustment                            |                       |                                          | 16.4         |                         |              |   | 2.0          |      |       |              |       |        |       |   |       |       
|                                                                     | Other                                          |                       |                                          | 2.8          |                         |              |   | 0.8          |      |       |              |       |        |       |   | (0.5   | )     
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|                                                                     |                                                |                       | Benefit obligation at end of year        |              | $                       | 444.6        |   |              | $    | 384.2 |              |        | $      | 100.2 |   |        | $      | 93.8 | 
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|Change in plan assets:                                               |                                                |                       |                                          |              |                         |              |   |              |      |       |              |        |        |       |   |       
|                                                                     | Fair value of plan assets at beginning of year |                       | $                                        | 303.0        |                         |              | $ | 338.0        |      |       | $            |       |        |       | $ |       |       
|                                                                     | Actual return (loss) on plan assets            |                       |                                          | 41.4         |                         |              |   | (34.4        | )    |       |              |       |        |       |   |       |       
|                                                                     | Employer contributions                         |                       |                                          | 8.6          |                         |              |   | 6.6          |      |       |              | 5.5    |        |       |   | 5.5    |       
|                                                                     | Employee contributions                         |                       |                                          | 0.6          |                         |              |   | 0.6          |      |       |              | 0.9    |        |       |   | 0.9    |       
|                                                                     | Benefits paid                                  |                       |                                          | (27.8        | )                       |              |   | (19.4        | )    |       |              | (6.4   | )      |       |   | (6.4   | )     
|                                                                     | Purchase Accounting Adjustments/ Acquisitions  |                       |                                          |             |                         |              |   | 11.3         |      |       |              |       |        |       |   |       |       
|                                                                     | Settlements                                    |                       |                                          | (0.6         | )                       |              |   |             |      |       |              |       |        |       |   |       |       
|                                                                     | Currency adjustment                            |                       |                                          | 12.5         |                         |              |   | 0.3          |      |       |              |       |        |       |   |       |       
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|                                                                     |                                                |                       | Fair value of plan assets at end of year |              | $                       | 337.7        |   |              | $    | 303.0 |              |        | $      |      |   |        | $      |     | 
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|Reconciliation of funded status
    to net amount recognized:        |                                                |                       |                                          |              |                         |              |   |              |      |       |              |        |        |       |   |       
|                                                                     | Funded status                                  |                       | $                                        | (106.9       | )                       |              | $ | (81.2        | )    |       | $            | (100.2 | )      |       | $ | (93.8  | )     
|                                                                     | Unrecognized net loss (gain)                   |                       |                                          | 140.1        |                         |              |   | 131.7        |      |       |              | (9.5   | )      |       |   | (5.0   | )     
|                                                                     | Unrecognized prior service cost (gain)         |                       |                                          | 9.4          |                         |              |   | 5.0          |      |       |              | (45.6  | )      |       |   | (63.4  | )     
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|                                                                     |                                                | Net amount recognized |                                          | $            | 42.6                    |              |   | $            | 55.5 |       |              | $      | (155.3 | )     |   | $      | (162.2 | )   
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|Amounts recognized in the
    consolidated balance sheet consist of: |                                                |                       |                                          |              |                         |              |   |              |      |       |              |        |        |       |   |       
|                                                                     | Prepaid benefit cost                           |                       | $                                        | 3.3          |                         |              | $ | 2.1          |      |       | $            |       |        |       | $ |       |       
|                                                                     | Accrued benefit liability                      |                       |                                          | (101.3       | )                       |              |   | (67.6        | )    |       |              | (155.3 | )      |       |   | (162.2 | )     
|                                                                     | Intangible asset                               |                       |                                          | 10.3         |                         |              |   | 6.3          |      |       |              |       |        |       |   |       |       
|                                                                     | Accumulated other comprehensive loss           |                       |                                          | 130.3        |                         |              |   | 114.7        |      |       |              |       |        |       |   |       |       
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       
|                                                                     |                                                | Net amount recognized |                                          | $            | 42.6                    |              |   | $            | 55.5 |       |              | $      | (155.3 | )     |   | $      | (162.2 | )   
|                                                                     |                                                |                       |                                          |              |                         |              |   |              |      |       |              |       



---



|    |                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Employer contributions and benefits paid in the
    above table include only those amounts contributed directly to
    or paid directly from plan assets.

F-26



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The accumulated benefit obligation at the end of
2003 and 2002 was $430.9 million and $372.8 million,
respectively.

At the end of 2003 and 2002, the projected
benefit obligation, accumulated benefit obligation and fair
value of plan assets for the U.S. pension plans, pension plans
outside the U.S. and pension plans with an accumulated benefit
obligation in excess of plan assets, were as follows:

|                               |  |            |       |          |       |  |               |               |  |               |       |  |  |      |      |  |      |  |       |  |  |  |       | 
|------------------------------ |  | ---------- | ----- | -------- | ----- |  | ------------- | ------------- |  | ------------- | ----- |  |  | ---- | ---- |  | ---- |  | ----- |  |  |  | ----- | 
|                               |  |            |       |          |       |  |               |               |  |              
|                               |  |            |       |          |       |  |               |               |  | Accumulated   |      
|                               |  |            |       |          |       |  |               |               |  | Benefit       |      
|                               |  |            |       |          |       |  |               |               |  | Obligation    |      
|                               |  |            |       |          |       |  |               |               |  | Exceeds the   |      
|                               |  |            |       |          |       |  |               |               |  | Fair Value of |      
|                               |  |            |       |          |       |  |               | Plans Assets | 
|                               |  |            |       | Non-U.S. |       |  | U.S. and Non- |              
|                               |  | U.S. Plans |       |          | Plans |  |               | U.S.          | 
|                               |  |            |       |          |       |  |               |               | 
|End of Year                    |  | 2003       |       |          | 2002  |  |               | 2003          |  |               | 2002  |  |  | 2003 |      |  | 2002 | 
|                               |  |            |       |          |       |  |               |               |  |               |       |  |  |      |      |  |      | 
|Projected benefit obligation   |  |            | 328.8 |          |       |  | 297.4         |               |  |               | 115.8 |  |  |      | 86.8 |  |      |  | 430.6 |  |  |  | 374.2 | 
|Accumulated benefit obligation |  |            | 327.2 |          |       |  | 287.8         |               |  |               | 103.7 |  |  |      | 85.0 |  |      |  | 420.5 |  |  |  | 363.9 | 
|Fair value of plan assets      |  |            | 248.9 |          |       |  | 240.3         |               |  |               | 88.8  |  |  |      | 62.7 |  |      |  | 321.1 |  |  |  | 291.1 | 

The net periodic benefit cost of continuing
operations for fiscal 2003, 2002 and 2001 includes the following
components (in millions):

|                                             |                                    |                           |   |       |              |  |   |              |     |  |   |       |     | 
|-------------------------------------------- | ---------------------------------- | ------------------------- | - | ----- | ------------ |  | - | ------------ | --- |  | - | ----- | --- | 
|                                             |                                    |                          
|                                             |                                    | Pension Benefits          |  
|                                             |                                    | Fiscal Year Ended         |  
|                                             |                                    |                           |  
|                                             |                                    | December 31,              |   |       | December 31, |  |   | December 31, |    
|                                             |                                    | 2003                      |   |       | 2002         |  |   | 2001         |    
|                                             |                                    |                           |   |       |              |  |   |              |    
|Components of net periodic
    benefit cost: |                                    |                           |   |       |              |  |   |              |     |  |   |      
|                                             | Service cost                       |                           | $ | 14.0  |              |  | $ | 11.3         |     |  | $ | 6.8   |    
|                                             | Interest cost                      |                           |   | 25.9  |              |  |   | 23.9         |     |  |   | 12.7  |    
|                                             | Expected return on plan assets     |                           |   | (27.2 | )            |  |   | (31.6        | )   |  |   | (14.6 | )  
|                                             | Amortization of prior service cost |                           |   | 0.3   |              |  |   | 0.2          |     |  |   | 0.2   |    
|                                             | Settlement gain                    |                           |   |      |              |  |   |             |     |  |   | (0.1  | )  
|                                             | Curtailment loss (a)               |                           |   |      |              |  |   | 2.0          |     |  |   |      |    
|                                             | Recognized net actuarial loss (b)  |                           |   | 9.0   |              |  |   | 0.6          |     |  |   | 0.1   |    
|                                             |                                    |                           |   |       |              |  |   |              |    
|                                             |                                    | Net periodic benefit cost |   | $     | 22.0         |  |   | $            | 6.4 |  |   | $     | 5.1 | 
|                                             |                                    |                           |   |       |              |  |   |              |    



---



|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(a) | Curtailment loss resulted from termination of
    employees that were covered under a Canadian plan.                    
|   
|(b) | Includes $2.8 million of termination
    benefits for a former executive recorded as a restructuring
    charge in 2003.

F-27



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                             |                                    |                           |   |      |              |   |   |              |     |  |   |      |     | 
|-------------------------------------------- | ---------------------------------- | ------------------------- | - | ---- | ------------ | - | - | ------------ | --- |  | - | ---- | --- | 
|                                             |                                    |                          
|                                             |                                    | Postretirement Benefits   |  
|                                             |                                    | Fiscal Year Ended         |  
|                                             |                                    |                           |  
|                                             |                                    | December 31,              |   |      | December 31, |   |   | December 31, |    
|                                             |                                    | 2003                      |   |      | 2002         |   |   | 2001         |    
|                                             |                                    |                           |   |      |              |   |   |              |    
|Components of net periodic
    benefit cost: |                                    |                           |   |      |              |   |   |              |     |  |   |     
|                                             | Service cost                       |                           | $ | 1.4  |              |   | $ | 1.7          |     |  | $ | 1.0  |    
|                                             | Interest cost                      |                           |   | 5.8  |              |   |   | 6.9          |     |  |   | 3.8  |    
|                                             | Amortization of prior service cost |                           |   | (7.5 | )            |   |   | (5.6         | )   |  |   | (1.4 | )  
|                                             | Recognized net actuarial gain      |                           |   | (1.2 | )            |   |   | (1.4         | )   |  |   | (1.7 | )  
|                                             | Curtailment gain                   |                           |   |     |              |   |   | (0.6         | )   |  |   |     |    
|                                             |                                    |                           |   |      |              |   |   |              |    
|                                             |                                    | Net periodic benefit cost |   | $    | (1.5         | ) |   | $            | 1.0 |  |   | $    | 1.7 | 
|                                             |                                    |                           |   |      |              |   |   |              |    

Weighted average assumptions end of year used to
determine benefit obligations are summarized as follows (rates
are used to compute the balances as of the end of the year and
the expense for the following year):

|                              |  |          |      |  |                |  |      |      |  |  |      |  |  |  |      | 
|----------------------------- |  | -------- | ---- |  | -------------- |  | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|                              |  |          |      | 
|                              |  | Pension  |      |  | Postretirement | 
|                              |  | Benefits |      |  | Benefits       | 
|                              |  |          |      |  |                | 
|                              |  | 2003     |      |  | 2002           |  |      | 2003 |  |  | 2002 | 
|                              |  |          |      |  |                |  |      |      |  |  |      | 
|Discount rate                 |  |          | 6.3% |  |                |  | 6.7% |      |  |  | 6.2% |  |  |  | 7.0% | 
|Rate of compensation increase |  |          | 3.2% |  |                |  | 3.1% |      |  |  | N/A  |  |  |  | N/A  | 

Weighted average assumptions at used to determine
net periodic benefit cost are summarized as follows (rates are
used to compute the balances as of the end of the year and the
expense for the following year):

|                               |  |                  |      |  |                         |  |      |      |  |  |      |  |  |      |      |  |      |  |      |  |  |  |      | 
|------------------------------ |  | ---------------- | ---- |  | ----------------------- |  | ---- | ---- |  |  | ---- |  |  | ---- | ---- |  | ---- |  | ---- |  |  |  | ---- | 
|                               |  |                  |      | 
|                               |  | Pension Benefits |      |  | Postretirement Benefits | 
|                               |  |                  |      |  |                         | 
|                               |  | 2003             |      |  | 2002                    |  |      | 2001 |  |  | 2003 |  |  | 2002 |      |  | 2001 | 
|                               |  |                  |      |  |                         |  |      |      |  |  |      |  |  |      |      |  |      | 
|Discount rate                  |  |                  | 6.7% |  |                         |  | 7.2% |      |  |  | 7.4% |  |  |      | 7.0% |  |      |  | 7.5% |  |  |  | 7.4% | 
|Expected return on plan assets |  |                  | 8.9% |  |                         |  | 9.3% |      |  |  | 9.2% |  |  |      | N/A  |  |      |  | N/A  |  |  |  | N/A  | 
|Rate of compensation increase  |  |                  | 3.1% |  |                         |  | 3.1% |      |  |  | 4.5% |  |  |      | N/A  |  |      |  | N/A  |  |  |  | N/A  | 

The discount rate is determined by using the spot
rate yield on high quality corporate bonds and the duration of
the liability of the companys own benefit programs. The
Company reduced its discount rate from September 2002 to
September 2003 to correspond to the changes in the underlying
high quality bond benchmark index.

The expected long-term rate of return for the
plans total assets is based on the expected return of each
of the above categories, weighted based on the target allocation
for each class. Equity securities are expected to return 9% to
11% over the long-term, while debt securities are expected to
return between 4% and 7%. The Investment Advisors will provide a
premium to the respective market benchmark indices.

Health care costs for domestic
plans:(1) Dura Convertible was
assumed to increase 9.5.% during 2004; the rates were assumed to
grade down by 0.5% per year to an ultimate rate of 6% and remain
at that level thereafter. (2) Wickes Engineering Materials
was assumed to increase 6% during 2004 and remain at that level
thereafter. (3) TAC-Trim was assumed to increase 10.5%
during 2004; the rates were assumed to grade down by 0.5% per
year to an ultimate rate of 6% and remain at that level
thereafter. Health care trend rates for Canadian Plans were
assumed to increase approximately 7.5% during 2004 grading down
by 0.5% per year to a constant level of 5.0% annual increase.

F-28



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Assumed health care cost trend rates may have a
significant effect on the amounts reported for postretirement
benefits. A one-percentage-point change in assumed health care
cost trend rates would have the following effects (in millions):

|                                                            |  |               |     |  |               |   |      |  
|----------------------------------------------------------- |  | ------------- | --- |  | ------------- | - | ---- | -
|                                                            |  | 1-Percentage- |     |  | 1-Percentage- |  
|                                                            |  | Point         |     |  | Point         |  
|                                                            |  | Increase      |     |  | Decrease      |  
|                                                            |  |               |     |  |               |  
|Effect on total of service and interest cost
    components |  | $             | 0.7 |  |               | $ | (0.6 | )
|Effect on postretirement benefit obligation                 |  | $             | 8.5 |  |               | $ | (7.0 | )

The asset allocation for the Companys U.S.
pension plans at the end of 2003 and 2002, and the target
allocation for 2004, by asset category, are as follows:

|                  |  |                   |         |                |      |  |      |      |  |  |      | 
|----------------- |  | ----------------- | ------- | -------------- | ---- |  | ---- | ---- |  |  | ---- | 
|                  |  |                   |         |               
|                  |  |                   |         | Percentage of  |     
|                  |  |                   |         | Plan Assets at |     
|                  |  |                   |         | Year End       |     
|                  |  | Target Allocation |         |                |      | 
|Asset Category    |  | 2004              |         |                | 2003 |  |      | 2002 | 
|                  |  |                   |         |                |      |  |      |      | 
|Equity securities |  |                   | 55%-65% |                |      |  | 62%  |      |  |  | 52%  | 
|Debt securities   |  |                   | 35%-45% |                |      |  | 37%  |      |  |  | 42%  | 
|Other             |  |                   | 0%-5%   |                |      |  | 2%   |      |  |  | 6%   | 
|                  |  |                   |         |                |      |  |      |      | 
|Total             |  |                   |         |                |      |  | 100% |      |  |  | 100% | 

US Plan Assets and Investment
Strategy:The plans expected
long-term rate of return on plan assets of 9% is primarily based
on both historical returns and expected returns of each of the
above categories, weighted based on target allocation for each
class. In addition, third party data recording expected asset
class returns and inflation has been considered. Investment
management responsibilities of plan assets are delegated to
registered investment advisers and overseen by an investment
committee comprised of members of the Companys senior
management. Written investment management agreements and
policies set forth the goals, policies and investment management
strategies of the plan with regard to permissive investments.
Review of investment performance is made quarterly. In
circumstances where market conditions cause asset allocation or
manager diversification to deviate out of tolerance, assets are
rebalanced into compliance typically within 30 days of
occurrence.

B.     Defined
Contribution Plans

Subsidiaries of the Company sponsor defined
contribution plans covering employees who meet eligibility
requirements. Subsidiary contributions are based on formulas or
are at the Companys discretion as specified in the plan
documents. Contributions were $3.5 million,
$6.2 million and $3.2 million in fiscal 2003, 2002 and
2001, respectively.

F-29



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

14.     Discontinued
Operations

During 2003, the Company recognized
$2.4 million from workers compensation claims related to
discontinued operations, for which reserves were previously
charged. During 2002 and 2001, the Company received proceeds of
$15.8 million and $14.5 million, respectively, on
environmental claims related to discontinued operations, for
which reserves were previously charged. Of these amounts,
$1.6 million, $9.5 million and $8.8 million were
recorded as income from discontinued operations in 2003, 2002
and 2001, respectively, net of income taxes of
$0.8 million, $6.3 million and $5.7 million,
respectively.

During fiscal 2000, the Company settled claims
for certain environmental matters related to discontinued
operations for a total of $20 million. Settlement proceeds
were to be paid to the Company in three installments. The first
and second installments of $7.5 million and
$7.5 million were received in June 2000 and June 2001,
respectively with the third installment of $5.0 million
received in June 2002. Of the total $20 million settlement,
the Company recorded the present value of the settlement as
$7.0 million of additional environmental reserves, based on
its assessment of potential environmental exposures and
$6.6 million, net of income taxes, as income from
discontinued operations.

The Company has significant obligations related
to post-retirement, casualty, environmental, asbestos, product
liability, lease and other liabilities of discontinued
operations. The nature of many of these contingent liabilities
is such that they are difficult to quantify and uncertain in
terms of amount. The Company has accrued $21.5 million for
postretirement costs and $36.7 million for environmental
and product liability costs.

In connection with retained operating leases of
certain discontinued operations, the Company believes that
future sublease rental receipts will equal or exceed future
minimum lease payments and accordingly, has not recorded any
liability for these leases.

15.     Restructuring

Activity related to the restructuring reserve is
as follows (in millions):

|                                |                                           |           |   |                   |                |  |   |       |   |  |   |       |  
|------------------------------- | ----------------------------------------- | --------- | - | ----------------- | -------------- |  | - | ----- | - |  | - | ----- | -
|                                |                                           |           |   | Lease Commitments |                |  |  
|                                |                                           | Severance |   |                   | and Other Exit |  |   |      
|                                |                                           | Costs     |   |                   | Costs          |  |   | Total |  
|                                |                                           |           |   |                   |                |  |   |       |  
|Restructuring reserves:         |                                           |           |   |                   |                |  |   |       |   |  |   |      
|                                | Balance at beginning of year              |           | $ | 17.5              |                |  | $ | 10.7  |   |  | $ | 28.2  |  
|                                | 2nd quarter 2003 program                  |           |   | 4.2               |                |  |   | 0.7   |   |  |   | 4.9   |  
|                                | 3rd quarter 2003 program                  |           |   | 20.4              |                |  |   | 6.8   |   |  |   | 27.2  |  
|                                | 4th quarter 2003 program                  |           |   | 7.6               |                |  |   | 1.7   |   |  |   | 9.3   |  
|                                | Adjustments to prior years expenses      |           |   |                  |                |  |   | (0.8  | ) |  |   | (0.8  | )
|                                |                                           |           |   |                   |                |  |   |       |  
|                                | Total net expense                         |           |   | 32.2              |                |  |   | 8.4   |   |  |   | 40.6  |  
|                                | Transfers to other balance sheet accounts |           |   | (2.8              | )              |  |   |      |   |  |   | (2.8  | )
|                                | Costs paid                                |           |   | (25.3             | )              |  |   | (9.8  | ) |  |   | (35.1 | )
|                                |                                           |           |   |                   |                |  |   |       |  
|                                | Ending balance                            |           | $ | 21.6              |                |  | $ | 9.3   |   |  | $ | 30.9  |  
|                                |                                           |           |   |                   |                |  |   |       |  
|3rd quarter 2003 restructuring: |                                           |           |   |                   |                |  |   |       |   |  |   |      
|                                | Costs expected                            |           |   | 21.2              |                |  |   | 6.8   |   |  |   | 28.0  |  
|                                | Costs paid in period and to date          |           |   | (7.8              | )              |  |   | (3.1  | ) |  |   | (10.9 | )
|4th quarter 2003 restructuring  |                                           |           |   |                   |                |  |   |       |   |  |   |      
|                                | Costs expected                            |           |   | 7.8               |                |  |   | 1.7   |   |  |   | 9.5   |  
|                                | Costs paid in period and to date          |           |   | (2.8              | )              |  |   |      |   |  |   | (2.8  | )

F-30



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

During the fourth quarter 2003, the Company
undertook a restructuring program to rightsize its overhead
structure, reduce salaried headcount and strengthen and
streamline the senior management team on a worldwide basis with
the primary focus on domestic operations resulting in a
restructuring charge of $9.3 million. The 2003 charge
included approximately $7.6 million of severance cost and
$1.7 million of costs related to the establishment of
accruals for lease commitments and other exit costs. The Company
restructuring plan includes severance of nearly 1,000 personnel,
with approximately 100 personnel from the Companys U.S.
and Mexico Plastics segment, approximately 500 from the
International Plastics segment and approximately 400 from Global
Soft Trim segment. Additionally, the Company recognized a
$4.6 million write down of fixed assets related to U.S. and
Mexico Plastics and Global Soft Trim locations.

|                                |                                      |                 |   |     |               |  |   |             |  |  |       |     |  |       |   |     |  |  |   |     | 
|------------------------------- | ------------------------------------ | --------------- | - | --- | ------------- |  | - | ----------- |  |  | ----- | --- |  | ----- | - | --- |  |  | - | --- | 
|                                |                                      | U.S. and Mexico |   |     | International |  |   | Global Soft |  |  |       |     | 
|                                |                                      | Plastics        |   |     | Plastics      |  |   | Trim        |  |  | Other |     |  | Total |  
|                                |                                      |                 |   |     |               |  |   |             |  |  |       |     |  |       |  
|4th Quarter 2003 Restructuring: |                                      |                 |   |     |               |  |   |             |  |  |       |     |  |       |   |     |  |  |   |    
|                                | Total costs expected                 |                 | $ | 0.9 |               |  | $ | 4.0         |  |  | $     | 3.6 |  |       | $ | 1.0 |  |  | $ | 9.5 | 
|                                | Costs incurred in period and to date |                 |   | 0.9 |               |  |   | 3.8         |  |  |       | 3.6 |  |       |   | 1.0 |  |  |   | 9.3 | 

During the third quarter 2003, the Company
undertook a restructuring program to rightsize its overhead
structure, reduce salaried headcount and strengthen and
streamline the senior management team on a worldwide basis with
the primary focus on domestic operations resulting in a
restructuring charge of $27.2 million. The 2003 charge
included approximately $20.4 million of severance cost and
$6.8 million of costs related to the establishment of
accruals for lease commitments and other exit costs. The Company
restructuring plan includes severance of nearly 1,600 personnel,
with approximately 500 personnel from the Companys U.S.
and Mexico Plastics segment, approximately 300 from the
International Plastics segment, approximately 600 from Global
Soft Trim segment and approximately 200 from the Companys
corporate locations. Additionally, the Company recognized a
$2.2 million write down of fixed assets related primarily
to International Plastics locations.

In the third quarter, the Company adopted the
FASB Staff Position No. FAS 146-1 Determining Whether
a One-Time Termination Benefit Offered in Connection with an
Exit or Disposal Activity Is, in Substance, an Enhancement to an
Ongoing Benefit Arrangement. The effect from adopting FAS
146-1 was to defer recording $1.2 million of restructure
expense to later periods. The effect on prior quarters and
December 31, 2003 for the portion of the restructuring
activities deferred was not significant.

Included in the third quarter 2003 restructuring
charge severance cost were charges related to the separation
agreement with Jerry L. Mosingo, the former President and
CEO. In August 2003, the Companys Board of Directors
appointed David Stockman as CEO, in addition to retaining his
position of Chairman. Under the terms of his separation
agreement, Mr. Mosingo received $0.6 million in the
third quarter of 2003 and will receive $0.2 million per
quarter through December 31, 2004, $0.1 million for
the quarter ending March 31, 2005 and other fringe and
retirement benefits. The resulting third quarter 2003
restructuring charge was $5.3 million that includes the
present value of future benefits of $2.8 million which is
included in pension liability.

|                                |                                      |                 |   |     |               |  |   |             |  |  |       |     |  |       |   |      |  |  |   |      | 
|------------------------------- | ------------------------------------ | --------------- | - | --- | ------------- |  | - | ----------- |  |  | ----- | --- |  | ----- | - | ---- |  |  | - | ---- | 
|                                |                                      | U.S. and Mexico |   |     | International |  |   | Global Soft |  |  |       |     | 
|                                |                                      | Plastics        |   |     | Plastics      |  |   | Trim        |  |  | Other |     |  | Total |  
|                                |                                      |                 |   |     |               |  |   |             |  |  |       |     |  |       |  
|4th Quarter 2003 Restructuring: |                                      |                 |   |     |               |  |   |             |  |  |       |     |  |       |   |      |  |  |   |     
|                                | Total costs expected                 |                 | $ | 6.3 |               |  | $ | 5.6         |  |  | $     | 5.9 |  |       | $ | 10.2 |  |  | $ | 28.0 | 
|                                | Costs incurred in period and to date |                 |   | 6.3 |               |  |   | 5.0         |  |  |       | 5.7 |  |       |   | 10.2 |  |  |   | 27.2 | 

During the second quarter 2003, the Company
undertook a restructuring program to rationalize operations on a
worldwide basis with the primary focus on U.S. and Mexico
operations resulting in a restructuring charge of
$4.9 million. The 2003 charge included approximately
$4.2 million of severance cost and $0.7 million of
costs related to the establishment of reserves for lease
commitments and other exit costs.

F-31



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The Companys restructuring plan includes
severance of over 500 personnel. Of the 500 personnel
approximately 450 were terminated in the second quarter of 2003
with approximately 170 personnel at the Companys
International Plastics segment, approximately 160 at Global Soft
Trim segment and approximately 120 at the Companys
corporate locations. Additionally, the Company recognized a
$0.8 million write down of fixed assets related to an
International Plastics location. Activity related to 2003 for
this program was $4.2 million for severance costs and
$0.6 million of lease commitment and other exit costs with
$0.1 million of severance costs remaining to be paid.

During 2003, the Company recognized a
$7.5 million write-down of fixed assets related to its 50%
interest in an Italian joint venture acquired in 2001,
$10.4 million impairment of the Becker non-compete
agreement and $2.7 million related to other intangible assets
(see Notes 3 and 19 for additional information).

Included in the 2003 charges are adjustments
related to previously established accruals which did not require
cash outlays of $0.8 million.

In the fourth quarter of 2002, the Company
undertook a restructuring program primarily to consolidate
European operations that resulted in a restructuring charge of
$14.1 million. This restructuring charge included
$4.0 million of severance costs, $0.8 million of costs
related to other contractual obligations and $9.3 million
of costs related to fixed asset impairments. The severance costs
related to over 300 personnel.

In the third quarter of 2002, the Company
undertook a restructuring program primarily to realign the
operations in North America that resulted in a restructuring
charge of $33.8 million. This restructuring charge included
$23.8 million of severance costs, $1.3 million of
costs related to the establishment of reserves for lease
commitments and lease termination fees and $8.7 million of
costs related to fixed asset impairments. The severance costs
related to over 700 personnel.

Included in the third quarter 2002 restructuring
charge severance costs were charges related to the separation
agreement with Thomas Evans the former Chairman and CEO. In
August 2002, the Companys Board of Directors appointed
Jerry L. Mosingo as President, Chief Executive Officer
(CEO) and Director of the Company. Under the terms of his
separation agreement, Mr. Evans received $5.5 million
on August 15, 2002 and will receive quarterly payments of
$0.3 million through June 30, 2004. The resulting
third quarter 2002 restructuring charge was $8.9 million.

In the first quarter 2002, the Company undertook
a restructuring program to rationalize operations in North
America and Europe resulting in a restructuring charge of
$9.1 million. This restructuring included $5.5 million
of severance costs and $3.6 million of costs related to the
establishment of reserves for lease commitments and lease
termination fees. The Company recognized severance costs for
over 100 personnel primarily at the Companys North America
and European headquarters. The reserve for lease commitments
relates to contractual obligations for the Companys former
headquarters facility, while the termination fees relate to an
aircraft lease.

During 2001, the Company undertook restructuring
programs to rationalize its formerly reported operations in
North American, European and Specialty segments resulting in a
restructuring charge aggregating $18.8 million. The charge
included $11.2 million of severance costs and
$7.6 million of asset impairments. The Company recognized
severance costs for over 900 operating personnel at the
Companys convertible tops, fabrics, carpet and acoustics
locations in North America and Specialty operations. The asset
impairments, primarily related to machinery and equipment
located at North American, European and Specialty operations
sites, are based on managements estimates of values to be
realized upon disposition of the assets.

During 2001, the Company recorded a restructuring
reserve in connection with the Becker acquisition aggregating
$5.3 million of which $1.6 million was severance and
$3.7 million for lease termination and other exit costs.

F-32



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

16.     Common
Stockholders Equity and Earnings Per Share

A.     Common
Stock

In April 2002, the Company issued 400,000 shares
of common stock as part of the purchase of a lamination company
wholly owned by a current director and shareholder of the
Company. In June 2002, the Company issued 16 million shares
of common stock for $160 million before expenses. The
Company used $100 million of the $152 million in net
proceeds to redeem $133 million of face value Series A
Redeemable Preferred Stock and the remainder for general
corporate purposes.

B.     Stock
Option Plans

The 1994 Employee Stock Option Plan (1994
Plan) was adopted as a successor to the 1993 Employee
Stock Option Plan to facilitate awards to certain key employees
and consultants. The 1994 Plan was amended in 1999 primarily to
increase the number of shares available for issuance under the
Plan by 1,000,000 shares. The 1994 Plan provides that no options
may be granted after 10 years from the effective date of
this plan. Options vest, in each case, as specified by the
Companys compensation committee, generally over three
years after issuance. At December 31, 2003, 1,592,214
shares were available for issuance under the 1994 Plan. The
Company also adopted the 1994 Directors Stock Option Plan, which
provides for the issuance of options to acquire a maximum of
240,000 shares of common stock to directors who are not part of
management and are not affiliated with a major stockholder. As
of December 31, 2003, 68,000 options had been granted. The
Company adopted the 1997 United Kingdom Scheme, which provides
for the issuance of options to key employees under the 1994
Plan. Effective January 1, 2000, the Company adopted the
2000 Employee Stock Option Plan, which provides for the issuance
of up to 2,400,000 shares to key employees and consultants. At
December 31, 2003, no options had been awarded under the
2000 plan. The Company adopted effective March 28, 2002,
the 2002 Employee Stock Option Plan, which provides for the
issuance of up to 6,600,000 shares to key employees and
consultants. Under the 2002 plan 60% of the issued options vest
and become exercisable in 20% increments in 2003, 2004 and 2005,
accordingly, based on when the option was granted. The remaining
40% vest subject to performance targets and become exercisable
during 2012 and 2013 or on an accelerated basis if performance
targets are met.

The Company issued 1,723,000 options during the
year and repriced 3,559,256 options that had an original average
exercise price of $10.00 to an exercise price of $8.00. The
weighted average exercise price was $8.87 after repricing
3,559,256 stock options in the first quarter of 2003. At
December 31, 2003, options representing 3,335,122 shares of
common stock were available for grants.

F-33



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

All shareholder plans have been approved by
stockholders. Stock option activity under the plans is as
follows:

|                              |                    |                   |            |          |                   |   |       |                   |          |  |            |   |           |           |       |  |          |  |            |   |           |   |      |  |      | 
|----------------------------- | ------------------ | ----------------- | ---------- | -------- | ----------------- | - | ----- | ----------------- | -------- |  | ---------- | - | --------- | --------- | ----- |  | -------- |  | ---------- | - | --------- | - | ---- |  | ---- | 
|                              |                    |                   |            |          |                   |  
|                              |                    | December 31, 2003 |            |          | December 31, 2002 |   |       | December 31, 2001 |         
|                              |                    |                   |            |          |                   |   |       |                   |         
|                              |                    |                   |            | Weighted |                   |   |       |                   | Weighted |  |            |   |           | Weighted  |      
|                              |                    |                   |            | Average  |                   |   |       |                   | Average  |  |            |   |           | Average   |      
|                              |                    | Number of         |            |          | Exercise          |   |       | Number of         |          |  | Exercise   |   |           | Number of |       |  | Exercise | 
|                              |                    | shares            |            |          | Price             |   |       | shares            |          |  | Price      |   |           | shares    |       |  | Price    | 
|                              |                    |                   |            |          |                   |   |       |                   |          |  |            |   |           |           |       |  |          | 
|Outstanding beginning of year |                    |                   | 4,427,248  |          |                   | $ | 10.12 |                   |          |  | 2,830,920  |   |           | $         | 5.59  |  |          |  | 4,344,432  |   |           | $ | 5.47 | 
|Impact of 2002 Stock Split    |                    |                   |           |          |                   |   |      |                   |          |  | (1,698,553 | ) |           |           |      |  |          |  |           |   |           |   |     | 
|                              |                    |                   |            |          |                   |   |       |                   |          |  |            |   |           |           |       |  |          | 
|                              | Adjusted Beginning |                   |            |          |                   |   |       |                   |          |  |            |   |           |           |       |  |          |  |            |   |           |   |      |  |     
|                              |                    | Balance           |            |          | 4,427,248         |   |       |                   | 10.12    |  |            |   | 1,132,367 |           |       |  | 13.98    |  |            |   | 4,344,432 |   |      |  | 5.47 | 
|Awarded                       |                    |                   | 1,723,000  |          |                   |   | 8.00  |                   |          |  | 5,182,929  |   |           |           | 10.00 |  |          |  | 40,000     |   |           |   | 5.76 | 
|Cancelled                     |                    |                   | (1,140,792 | )        |                   |   | 8.55  |                   |          |  | (1,819,634 | ) |           |           | 10.14 |  |          |  | (458,090   | ) |           |   | 7.48 | 
|Exercised                     |                    |                   |           |          |                   |   |      |                   |          |  | (68,414    | ) |           |           | 12.79 |  |          |  | (1,095,422 | ) |           |   | 4.31 | 
|                              |                    |                   |            |          |                   |   |       |                   |          |  |            |   |           |           |       |  |          | 
|Outstanding at end of year    |                    |                   | 5,009,456  |          |                   | $ | 8.32  |                   |          |  | 4,427,248  |   |           | $         | 10.12 |  |          |  | 2,830,920  |   |           | $ | 5.59 | 
|                              |                    |                   |            |          |                   |   |       |                   |          |  |            |   |           |           |       |  |          | 

The following table summarizes information about
stock options outstanding at December 31, 2003:

|                  |  |             |           |  |                |  |     |                |  |   |                 |  |  |                |           |  |  |   |       | 
|----------------- |  | ----------- | --------- |  | -------------- |  | --- | -------------- |  | - | --------------- |  |  | -------------- | --------- |  |  | - | ----- | 
|                  |  | Number of   |           |  | Weighted       |  |     | Weighted       |  |   | Number of Stock |  |  | Weighted       |          
|Range of Exercise |  | Shares      |           |  | Average        |  |     | Average        |  |   | Options         |  |  | Average        |          
|Price             |  | Outstanding |           |  | Remaining Life |  |     | Exercise Price |  |   | Exercisable     |  |  | Exercise Price |          
|                  |  |             |           |  |                |  |     |                |  |   |                 |  |  |                |          
|$ 8.00  $10.00.  |  |             | 4,945,456 |  |                |  | 9.9 |                |  | $ | 8.21            |  |  |                | 1,354,555 |  |  | $ | 8.75  | 
|$10.94  $25.00.  |  |             | 64,000    |  |                |  | 6.7 |                |  | $ | 17.10           |  |  |                | 64,000    |  |  | $ | 17.10 | 

The Company has elected to continue to utilize
the accounting provisions of APB No. 25 for stock options
and is required to provide pro forma disclosures of net income
and earnings per share had the Company adopted the fair value
method for recognition purposes. See Note 2, Summary of
Significant Accounting Policies  Employee Stock
Options for the tabular presentation as if the Company had
adopted SFAS No. 123 and restated its results and for
discussion related to the 2003 proforma cost related to options.

In accordance with SFAS No. 123, the
3,559,256 repriced options were revalued during 2003 to
determine additional compensation cost that resulted from the
difference in the fair value of the options prior to repricing
and subsequent to repricing. As a result of the repricing
$0.4 million of additional compensation cost, net of tax,
was incurred on a proforma basis. These options have a weighted
average expected life of approximately 6 years. The
assumptions used in valuing the repriced options are as follows:
expected volatility ranged from 77.54% to 118.309%; expected
lives ranged from 1 year to 75 1/2 years; the
risk free interest rate ranged from 1.2% to 3.72% in 2003; and a
zero expected dividend rate.

Additionally, as a result of repricing the
Companys stock options, the options are treated as
variable-based awards in accordance with APB No. 25.
Because these options are considered to be variable-based
awards, the Company will incur future compensation expense if
the stock price exceeds the $8.00 exercise price established at
the time of the repricing.

C.     Earnings
Per Share

Basic earnings per common share were computed by
dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the year. Diluted
earnings per common share were determined assuming the exercise
of the stock options issued under the Companys stock
option plans. There

F-34



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

were no reconciling items between basic earnings
per common share and diluted earnings per common share for 2003,
2002 and 2001.

In 2003, 2002 and 2001, potentially dilutive
securities have been excluded from the diluted earnings per
share calculation since their inclusion would have been
antidilutive. Below is a summary of potentially dilutive
securities (in millions, except weighted average exercise price):

|                                |  |      |       |  |      |   |       |      |  |   |      | 
|------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ---- | 
|                                |  | 2003 |       |  | 2002 |   |       | 2001 | 
|                                |  |      |       |  |      |   |       |      | 
|Stock options                   |  |      | 5.0   |  |      |   | 4.4   |      |  |   | 2.8  | 
|Weighted average exercise price |  | $    | 8.32  |  |      | $ | 10.12 |      |  | $ | 5.59 | 
|Warrants                        |  |      | 0.5   |  |      |   | 0.5   |      |  |   | 0.5  | 
|Weighted average exercise price |  | $    | 10.00 |  |      | $ | 10.00 |      |  | $ | 5.00 | 

17.     Income
Taxes

The provisions for income taxes applicable to
continuing operations for fiscal 2003, 2002 and 2001 are
summarized as follows (in millions):

|                             |         |                   |      |       |              |   |      |              |   |   |       |       |  
|---------------------------- | ------- | ----------------- | ---- | ----- | ------------ | - | ---- | ------------ | - | - | ----- | ----- | -
|                             |         |                  
|                             |         | Fiscal Year Ended |     
|                             |         |                   |     
|                             |         | December 31,      |      |       | December 31, |   |      | December 31, |  
|                             |         | 2003              |      |       | 2002         |   |      | 2001         |  
|                             |         |                   |      |       |              |   |      |              |  
|Current:                     |         |                   |      |       |              |   |      |              |   |   |       |      
|                             | Federal |                   | $    |      |              |   | $    |             |   |   | $     |      |  
|                             | State   |                   |      | 4.2   |              |   |      | 5.8          |   |   |       | 2.6   |  
|                             | Foreign |                   |      | 1.5   |              |   |      | 15.3         |   |   |       | 4.8   |  
|                             |         |                   |      |       |              |   |      |              |  
|                             |         |                   | 5.7  |       |              |   | 21.1 |              |   |   | 7.4   |      
|Deferred:                    |         |                   |      |       |              |   |      |              |   |   |       |      
|                             | Federal |                   |      | 4.9   |              |   |      | 19.6         |   |   |       | (21.7 | )
|                             | State   |                   |      | 1.0   |              |   |      | 2.1          |   |   |       | (1.3  | )
|                             | Foreign |                   |      | (13.5 | )            |   |      | (25.3        | ) |   |       | (5.7  | )
|                             |         |                   |      |       |              |   |      |              |  
|                             |         |                   | (7.6 | )     |              |   | (3.6 | )            |   |   | (28.7 | )    
|                             |         |                   |      |       |              |   |      |              |  
|Income tax expense (benefit) |         | $                 | (1.9 | )     |              | $ | 17.5 |              |   | $ | (21.3 | )    
|                             |         |                   |      |       |              |   |      |              |  

Domestic and foreign components of income
(loss) from continuing operations before income taxes are
summarized as follows (in millions):

|         |  |                   |       |   |              |   |       |              |  |   |       |  
|-------- |  | ----------------- | ----- | - | ------------ | - | ----- | ------------ |  | - | ----- | -
|         |  |                  
|         |  | Fiscal Year Ended |      
|         |  |                   |      
|         |  | December 31,      |       |   | December 31, |   |       | December 31, | 
|         |  | 2003              |       |   | 2002         |   |       | 2001         | 
|         |  |                   |       |   |              |   |       |              | 
|Domestic |  | $                 | 8.9   |   |              | $ | 45.4  |              |  | $ | (43.8 | )
|Foreign  |  |                   | (69.9 | ) |              |   | (79.2 | )            |  |   | (32.5 | )
|         |  |                   |       |   |              |   |       |              | 
|         |  | $                 | (61.0 | ) |              | $ | (33.8 | )            |  | $ | (76.3 | )
|         |  |                   |       |   |              |   |       |              | 

F-35



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

A reconciliation between income taxes computed at
the statutory U.S. Federal rate of 35% and the provisions for
income taxes applicable to continuing operations is as follows
(in millions):

|                                                   |  |                   |       |   |              |   |       |              |  |   |       |  
|-------------------------------------------------- |  | ----------------- | ----- | - | ------------ | - | ----- | ------------ |  | - | ----- | -
|                                                   |  |                  
|                                                   |  | Fiscal Year Ended |      
|                                                   |  |                   |      
|                                                   |  | December 31,      |       |   | December 31, |   |       | December 31, | 
|                                                   |  | 2003              |       |   | 2002         |   |       | 2001         | 
|                                                   |  |                   |       |   |              |   |       |              | 
|Amount at statutory Federal rate                   |  | $                 | (21.4 | ) |              | $ | (11.8 | )            |  | $ | (26.7 | )
|State taxes, net of Federal income tax             |  |                   | 3.2   |   |              |   | 5.1   |              |  |   | 1.0   |  
|Tax differential on foreign earnings               |  |                   | 4.0   |   |              |   | (0.7  | )            |  |   | 2.9   |  
|Nontaxable interest income                         |  |                   | (5.3  | ) |              |   | (3.9  | )            |  |   |      |  
|Amortization of goodwill                           |  |                   |      |   |              |   |      |              |  |   | 1.5   |  
|Subsidiary preferred stock dividends and accretion |  |                   | 13.1  |   |              |   | 13.4  |              |  |   | 0.8   |  
|Change in valuation allowance                      |  |                   | 10.8  |   |              |   | 15.9  |              |  |   | (1.2  | )
|General business tax credits                       |  |                   | (4.5  | ) |              |   | (2.5  | )            |  |   | (0.5  | )
|Other                                              |  |                   | (1.8  | ) |              |   | 2.0   |              |  |   | 0.9   |  
|                                                   |  |                   |       |   |              |   |       |              | 
|Income tax expense (benefit)                       |  | $                 | (1.9  | ) |              | $ | 17.5  |              |  | $ | (21.3 | )
|                                                   |  |                   |       |   |              |   |       |              | 

Deferred income taxes are provided for the
temporary differences between the financial reporting and tax
basis of the Companys assets and liabilities. The
components of the net deferred tax assets as of
December 31, 2003 and 2002 were as follows (in millions):

|                          |                                                          |                                |   |       |              |   |   |       |       |  
|------------------------- | -------------------------------------------------------- | ------------------------------ | - | ----- | ------------ | - | - | ----- | ----- | -
|                          |                                                          | December 31,                   |   |       | December 31, |  
|                          |                                                          | 2003                           |   |       | 2002         |  
|                          |                                                          |                                |   |       |              |  
|Deferred tax assets:      |                                                          |                                |   |       |              |   |   |      
|                          | Employee benefits, including postretirement
    benefits |                                | $ | 130.8 |              |   | $ | 124.9 |      
|                          | Net operating loss carryforwards (NOLs)                  |                                |   | 189.2 |              |   |   | 162.5 |      
|                          | General business tax credit carryforwards                |                                |   | 20.2  |              |   |   | 10.7  |      
|                          | Alternative minimum tax credit carryforwards             |                                |   | 8.9   |              |   |   | 12.2  |      
|                          | Other liabilities and reserves                           |                                |   | 21.3  |              |   |   | 33.7  |      
|                          | Valuation allowance                                      |                                |   | (89.2 | )            |   |   | (78.4 | )    
|                          |                                                          |                                |   |       |              |  
|                          |                                                          | Total deferred tax assets      |   |       | 281.2        |   |   |       | 265.6 |  
|                          |                                                          |                                |   |       |              |  
|Deferred tax liabilities: |                                                          |                                |   |       |              |   |   |      
|                          | Property, plant and equipment                            |                                |   | (70.7 | )            |   |   | (68.1 | )    
|                          | Undistributed earnings of foreign subsidiaries           |                                |   | (7.2  | )            |   |   | (7.2  | )    
|                          |                                                          |                                |   |       |              |  
|                          |                                                          | Total deferred tax liabilities |   |       | (77.9        | ) |   |       | (75.3 | )
|                          |                                                          |                                |   |       |              |  
|                          |                                                          | Net deferred tax asset         |   | $     | 203.3        |   |   | $     | 190.3 |  
|                          |                                                          |                                |   |       |              |  

The Company has net operating losses in its
foreign jurisdictions of $92 million. These losses will begin
expiring in 2005 through 2015. Additionally, the Company has
foreign net operating losses of $212 million which have no
expiration date.

The valuation allowance at December 31, 2003
and December 31, 2002 provides for certain deferred tax
assets that in managements assessment may not be realized
due to tax limitations on the use of such amounts, due to
expiration prior to utilization or that relate to tax attributes
that are subject to uncertainty due to the long-term nature of
their realization. During fiscal 2003, the valuation allowance
increased $10.8 million from fiscal 2002. This increase
resulted primarily from the increase in loss carryforwards that
may not be realized in future periods. The valuation allowance
at December 31, 2003 includes $11.8 million related to
the Textron

F-36



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

acquisition. If the deferred tax assets related
to the $11.8 million valuation allowance become realizable,
the valuation allowance offset will be to goodwill.

The above amounts have been classified in the
consolidated balance sheets as follows (in millions):

|                     |                                                                    |              |   |       |              |  |   |       | 
|-------------------- | ------------------------------------------------------------------ | ------------ | - | ----- | ------------ |  | - | ----- | 
|                     |                                                                    | December 31, |   |       | December 31, | 
|                     |                                                                    | 2003         |   |       | 2002         | 
|                     |                                                                    |              |   |       |              | 
|Deferred tax assets: |                                                                    |              |   |       |              |  |   |      
|                     | Current domestic and foreign, included in other
    current assets |              | $ | 25.2  |              |  | $ | 25.3  | 
|                     | Noncurrent domestic and foreign                                    |              |   | 178.1 |              |  |   | 165.0 | 
|                     |                                                                    |              |   |       |              | 
|                     | Net deferred tax asset                                             |              | $ | 203.3 |              |  | $ | 190.3 | 
|                     |                                                                    |              |   |       |              | 

Management has reviewed the Companys
operating results for recent years as well as the outlook for
its continuing operations and concluded that it is more likely
than not that the net deferred tax assets of $203.3 million
at December 31, 2003 will be realized. Management took into
consideration, among other factors, the impact of recent
restructuring plans, the timing of the reversal of its temporary
differences, certain tax planning strategies and the expiration
dates of its NOLs. The Companys ability to generate future
taxable income is dependent on numerous factors, including
general economic conditions, the state of the automotive
industry and other factors beyond managements control.
Considerable judgement is often involved in making these
determinations, the use of different assumptions could result in
significantly different results.

Deferred income taxes and withholding taxes have
been provided on earnings of the Companys foreign
subsidiaries to the extent it is anticipated that the earnings
will be remitted in the future as dividends. Deferred income
taxes and withholding taxes have not been provided on the
remaining undistributed earnings of foreign subsidiaries as such
amounts are deemed to be permanently reinvested. The cumulative
undistributed earnings as of December 31, 2003 on which the
Company has not provided deferred income taxes and withholding
taxes is approximately $31.9 million.

At December 31, 2003, the Company had the
following tax attribute carryforwards available for U.S. Federal
income tax purposes (in millions):

|                                                    |                                         |        |       |            |       |  |          
|--------------------------------------------------- | --------------------------------------- | ------ | ----- | ---------- | ----- |  | ---------
|                                                    |                                         |        |       | Expiration
|                                                    |                                         | Amount |       |            | Dates
|                                                    |                                         |        |       |            |      
|Net operating losses 
    regular tax:             |                                         |        |       |            |       | 
|                                                    | Preacquisition, subject to limitations  |        | $     | 103.4      |       |  | 2005-2012
|                                                    | Subject to change in control provisions |        |       | 193.1      |       |  | 2018-2021
|                                                    | Subject to change in control provisions |        |       | 27.1       |       |  | 2021     
|                                                    |                                         |        |       |            |      
|                                                    |                                         | $      | 323.6 |            |       | 
|                                                    |                                         |        |       |            |      
|Net operating losses 
    alternative minimum tax: |                                         |        |       |            |       | 
|                                                    | Preacquisition, subject to limitations  |        | $     | 67.9       |       |  | 2005-2012
|                                                    | Subject to change in control provisions |        |       | 195.0      |       |  | 2018-2021
|                                                    | Subject to change in control provisions |        |       | 14.3       |       |  | 2021     
|                                                    |                                         |        |       |            |      
|                                                    |                                         | $      | 277.2 |            |       | 
|                                                    |                                         |        |       |            |      

F-37



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

|                                |                                         |        |      |            |       |      |          
|------------------------------- | --------------------------------------- | ------ | ---- | ---------- | ----- | ---- | ---------
|                                |                                         |        |      | Expiration
|                                |                                         | Amount |      |            | Dates
|                                |                                         |        |      |            |      
|General business tax credits:   |                                         |        |      |            |       |     
|                                | Preacquisition, subject to limitations  |        | $    | 10.1       |       |      | 2004-2021
|                                | Subject to change in control provisions |        |      | 7.2        |       |      | 2021-2022
|                                |                                         |        |      |            |      
|                                |                                         | $      | 17.3 |            |       |     
|                                |                                         |        |      |            |      
|Foreign tax credits             |                                         | $      | 2.9  |            |       | 2008
|                                |                                         |        |      |            |      
|Alternative minimum tax credits |                                         | $      | 8.9  |            |       |     
|                                |                                         |        |      |            |      

As a result of the Heartland Transaction, a
change in control occurred which results in annual limitations
on the Companys use of its NOLs and unused tax credits.
This annual limitation on the use of NOLs and tax credits
depends on the value of the equity of the Company and the amount
of built-in gain or built-in loss in the
Companys assets at the date of the change in control.
Based on the expiration dates of the NOLs and tax credits as
well as anticipated levels of domestic income, management does
not believe that the transaction will have a material impact on
these deferred tax assets.

Future sales of common stock by the Company or
its principal stockholders, or changes in the composition of its
principal stockholders, could constitute a change in control
that would result in additional annual limitations on the
Companys use of its NOLs and unused tax credits.
Management cannot predict whether such a change in control will
occur.

18.     Risk
Management and Financial Instruments

Foreign
Currency and Interest Rate Risk Management

The Company operates on a global basis and is
exposed to the risk that its earnings, cash flows and
stockholders equity could be adversely impacted by
fluctuations in currency exchange rates and interest rates. To
manage the volatility relating to these exposures, the Company
aggregates the exposures on a consolidated basis to take
advantage of natural offsets. For exposures that are not offset
within its operations, the Company may enter into various
derivatives transactions pursuant to its risk management
policies. The primary purpose of the Companys foreign
currency and interest rate risk management policies and
activities is to manage these risks to acceptable levels.

To manage its risks, the Company primarily
utilizes forward exchange contracts and purchased options with
durations of generally less than 12 months. The Company has in
place forward exchange contracts and purchased options with
third parties, denominated in multiple currencies, which will
mature during fiscal 2004. The details are as follows:

|           |  |          |     |  |           |  |     |                   |  |   |                  |  |  |             |     |  |  |   |   | 
|---------- |  | -------- | --- |  | --------- |  | --- | ----------------- |  | - | ---------------- |  |  | ----------- | --- |  |  | - | - | 
|           |  |          |     |  |           |  |     | Weighted Average  |  |   |                 
|Derivative |  | Currency |     |  | Currency  |  |     | USD Equivalent of |  |   | Contract Rate    |  |  | Unrealized 
|Type       |  | Sold     |     |  | Purchased |  |     | Notional Amount   |  |   | (per Convention) |  |  | Gain (Loss)
|           |  |          |     |  |           |  |     |                   |  |   |                  |  |  |            
|Options    |  |          | CAD |  |           |  | USD |                   |  | $ | 50.0             |  |  |             | 1.5 |  |  | $ |  | 

In order to manage the interest rate risk
associated with our debt portfolio, the Company may enter into
derivative transactions to manage its exposures to changes in
global interest rates, although the Company did not have in
place any interest rate derivatives in 2003 or 2002.

Gains and losses on derivatives qualifying as
hedges under SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities are recorded on the
balance sheet as a component of Accumulated

F-38



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

other comprehensive loss to the extent that
the hedges are effective until the underlying transactions are
recognized in earnings. As of December 31, 2003, the
Company had no derivatives designated as hedges under SFAS
No. 133. Gains and losses from all derivatives that do not
qualify as hedges under SFAS No. 133, are recorded in the
income statement as required by SFAS No. 133, and the fair
value is recorded in the balance sheet.

Fair
Value of Financial Instruments, Derivatives and Hedging
Activities

The estimated fair values of the Companys
continuing operations financial instruments are summarized as
follows (in millions):

|                                                                  |  |                   |         |  |                   |   |         |          |  |   |            |  |  |   |         | 
|----------------------------------------------------------------- |  | ----------------- | ------- |  | ----------------- | - | ------- | -------- |  | - | ---------- |  |  | - | ------- | 
|                                                                  |  |                   |         | 
|                                                                  |  | December 31, 2003 |         |  | December 31, 2002 |  
|                                                                  |  |                   |         |  |                   |  
|                                                                  |  | Carrying          |         |  | Estimated         |   |         | Carrying |  |   | Estimated  | 
|                                                                  |  | Amount            |         |  | Fair Value        |   |         | Amount   |  |   | Fair Value | 
|                                                                  |  |                   |         |  |                   |   |         |          |  |   |            | 
|Short-term debt, long-term debt and capital lease
    obligations |  | $                 | 1,285.2 |  |                   | $ | 1,244.8 |          |  | $ | 1,289.2    |  |  | $ | 1,200.2 | 
|Mandatorily redeemable preferred stock of
    subsidiary          |  | $                 | 161.2   |  |                   | $ | 161.2   |          |  | $ | 123.9      |  |  | $ | 123.9   | 
|Forwards                                                          |  | $                 |        |  |                   | $ |        |          |  | $ | 0.2        |  |  | $ | 0.2     | 
|Options                                                           |  | $                 |        |  |                   | $ |        |          |  | $ | 0.3        |  |  | $ | 0.3     | 

The following methods and assumptions were used
to estimate these fair values:

The fair value of the Public Debt notes are based
upon quoted market prices. The fair value of the other
short-term and long-term debt of the Company approximates the
carrying value due to the frequent resetting of interest rates.

The fair value of the forward contracts and
purchase options are based upon quoted market prices and the
aggregated notional amount outstanding in U.S. dollar equivalent
of $50.0 million at December 31, 2003.

Carrying amounts reported in the consolidated
balance sheets for cash and cash equivalents, accounts and other
receivables, accounts payable and accrued expenses approximate
fair value due to the short-term nature of these instruments.

Concentration
of credit risk

In the normal course of business, the Company
provides credit to customers in the automotive industry,
performs credit evaluations of these customers and maintains
reserves for potential credit losses. When realized, the losses
have been within the range of managements allowance for
doubtful accounts.

Other
Concentrations of Risk

The Company invests the majority of its excess
cash in money market accounts and, where appropriate,
diversifies the concentration of cash among financial
institutions. With respect to financial institutions, the
Company has diversified its selection of counterparties and has
arranged master-netting agreements, where allowed by law, and
the Companys policies, to minimize the risk of loss.

19.     Related
Party Transactions

Heartland
Transactions

Heartland is a private equity firm established in
1999 for the purpose of acquiring and expanding industrial
companies operating in various sectors of the North American
economy that are well positioned for global consolidation and
growth. The managing general partner of Heartland is Heartland
Industrial

F-39



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Associates, L.L.C. Certain directors and officers
of the Company are members of the general partner, specifically
Messrs. Stockman (a Director and our Chairman and Chief
Executive Officer), Stepp (a Director and our Vice Chairman and
Chief Financial Officer) and Tredwell, Leuliette, McConnell and
Valenti (each Directors). Other of our directors or their
affiliates, specifically Messrs. Becker and McCallum, are
limited partners in Heartland with interests representing less
than 5% of the commitments in Heartland. Heartland has informed
us that its limited partners include many financial
institutions, private and government employee pension funds and
corporations, among other types of investors. The Company may,
in the ordinary course of business, have on a normal, customary
and arms length basis relationships with certain of
Heartlands limited partners, including banking, insurance
and other relationships.

The Company is a party to a Services Agreement
with Heartland under which Heartland provides advisory and
consulting services, including services with respect to
developments in the automotive industry and supply markets,
advice on financial and strategic plans and alternatives and
other matters as it may reasonably request and are within
Heartlands expertise. The Services Agreement terminates on
the earlier of its tenth anniversary or the date upon which
Heartland ceases to own Company shares equivalent to 25% of that
owned by them on February 23, 2001.

Under the Services Agreement, the Company is
obligated to pay to Heartland a $4.0 million annual
advisory fee payable in quarterly installments and reimburse its
out-of-pocket expenses related to the services it provides. The
Company has also agreed to pay a fee of 1% of the total
enterprise value of certain acquisitions and dispositions.
During 2003, 2002 and 2001 the Company recorded total fees of
$4.0 million, $5.7 million and $24.5 million,
respectively.

The Services Agreement with Heartland
contemplates that the Company may pay additional fees to
Heartland for services rendered in connection with a range of
financing transactions. In March 2004, the Companys Board
of Directors, including the disinterested and independent
directors of the Board, approved a fee of $1 million to
Heartland for its services rendered in connection with the 2004
amendments to the Companys credit facility to add
synthetic revolving and letter of credit facilities.

Charles
E. Becker Transactions

On March 27, 2003, the Company entered into
a termination agreement and release to buyout the non-compete
agreement between the Company and Charles E. Becker, a member of
the Companys Board of Directors and a limited partner in
Heartland. The Company paid $11.3 million in April 2003 as
part of the termination agreement and release. The non-compete
agreement, which was entered into as part of the Becker
acquisition, required the Company to make periodic payments. As
a result of this transaction, the Company incurred a loss of
$10.4 million, which is primarily due to the write-off of
intangible assets initially recorded in conjunction with the
Becker acquisition.

During 2002, the Company engaged Mr. Becker
to serve as Vice Chairman and assist the Company with strategic
planning activities, such as developing sales strategies,
managing key customer relationships and recruiting senior
management for the Companys European operations. The
Company paid Mr. Becker $300,000 for such services.
Mr. Beckers consulting arrangement and position as
Vice Chairman ended in 2002.

The Company entered into a lease agreement with
Becker Ventures L.L.C. (Becker Ventures), an entity
controlled by Mr. Becker, for the Companys
headquarters at 250 Stephenson Highway, Troy, Michigan with the
effective date of the lease being January 1, 2002. In March
2002, the Company entered into lease agreements with Becker
Ventures, effective January 1, 2002, for 150 Stephenson
Highway and 350 Stephenson Highway, Troy, Michigan. The base
rent for all three premises is $13.25 per sq. ft., subject to
annual CPI adjustments. Total square footage for all three
locations is approximately 286,000. The leases have

F-40



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

20-year terms, and the Company has two five-year
renewal options. The 2004 base rent for the facilities will be
approximately $4.0 million. In 2004, these leases were
amended to provide that the Company would assume responsibility
for property management with a corresponding elimination of
certain aspects of the property management fees. In addition,
the Company is also party to a lease with Becker Ventures for
five manufacturing facilities totaling 884,000 square feet. In
2002, the Company extended the lease term an additional ten
years to expire in 2021, with the base rent for these facilities
totaling $3.6 million per year.

In June 2001, Products sold and contemporaneously
leased back real property located in Troy, Michigan and
Plymouth, Michigan from New King, L.L.C. and Anchor Court,
L.L.C., respectively, which are affiliates of Becker Ventures,
for net proceeds of $15.1 million in aggregate. The initial
lease term in each transaction is 20 years and each lease
has two successive ten year renewal options. The basic rent for
the Troy, Michigan property is $1.3 million per year, and
the basic rent for the Plymouth, Michigan property is
$0.5 million per year. The rental rates in each case are
subject to adjustment after expiration of the initial term.

Elkin
McCallum Transactions

In the first quarter of 2003, the Company
purchased equipment from Joan Fabrics Corporation (Joan
Fabrics), and entered into a supply agreement with Joan
Fabrics to supply certain types of fabrics. Elkin McCallum, a
director of the Company, controls Joan Fabrics and is a limited
partner in Heartland. Under the supply agreement, the Company
supplies fabric to Joan Fabrics and Joan Fabrics is responsible
for all marketing, design, customer service, distribution and
sales functions related to these fabrics. The Company paid Joan
Fabrics $4.7 million of consideration for these
transactions, a portion of which the Company has allocated to
the purchased equipment (based on its appraised value) and the
remainder of which it is amortizing over the five-year term of
the supply agreement.

On December 31, 2002, the Company acquired
an air jet texturing business from Dutton Yarns (an affiliate of
Mr. McCallum) for approximately $4.2 million. The
purchased assets included equipment, inventory and intellectual
property. The Company had preliminarily accounted for this
transaction as an acquisition of assets, but finalized its
accounting during the first quarter of 2003, and recorded the
transaction as a purchase of a business.

On April 12, 2002, the Company signed and
closed on a merger agreement with Mr. McCallum and a
lamination company wholly owned by Mr. McCallum pursuant to
which the acquired company was merged into a wholly owned
subsidiary of the Company. As consideration in the transaction,
Mr. McCallum received 400,000 shares of Common Stock and
was repaid $2.5 million in cash as reimbursement for
amounts previously invested to fund the lamination
companys working capital needs. Subsequent to the merger,
debt owing to Mr. McCallum of $6.7 million was repaid.
The Company acquired the lamination business to optimize the
supply chain on certain of its fabric products and provide low
cost lamination products and services to Tier-1 customers. As
part of this acquisition, the Company inherited a lease pursuant
to which it leases from an entity controlled by
Mr. McCallum, a portion of a manufacturing facility in El
Paso, Texas. The Company continues to occupy these premises
pursuant to such lease.

In April 2002, the Company amended the merger
agreement with Joan Automotive to clarify ownership of certain
equipment listed in a schedule attached to that agreement. The
original merger agreement schedule included a list of
approximately 84 looms that ultimately exceeded the
Companys manufacturing requirements and facility capacity.
Upon determining that the excess looms would have been
uneconomically expensive to relocate and store, the Company
declined to take possession of 48 of these looms, which were
left in place at Joan Fabrics Hickory, North Carolina
plant. The amendment clarifies that these looms are owned by
Joan Fabrics.

In September 2001, the Company completed the
acquisition of Joan Automotive Industries, a leading supplier of
bodycloth to the automotive industry, and all of the operating
assets of Joans affiliated yarn dying

F-41



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

operation, Western Avenue Dyers, L.P. As a result
of the Joan acquisition, Joan Fabrics became a principal
stockholder of the Company. Upon completion of the Joan
acquisition, Mr. McCallum became a member of the
Companys Board of Directors. As part of this acquisition,
the Company inherited a lease pursuant to which it leases from
an entity controlled by Mr. McCallum, a technical center in
Lowell, Massachusetts. The operations formerly conducted in
these premises have been moved to other company facilities,
however, the Company remains obligated for the related lease.

In connection with the Joan acquisition, the
Company entered into a Supply Agreement dated September 21,
2001 (the Supply Agreement) with Main Street
Textiles, L.P. (Main Street), which is controlled by
Mr. McCallum, and a Transition Services Agreement dated
September 21, 2001 (the Transition Agreement)
with Joan Fabrics. Under the Supply Agreement, which was
mutually terminated effective as of January 1, 2004, the
Company agreed to purchase all of its requirements for flat
woven automotive fabric from Main Street for a five-year period
beginning on the date of the Supply Agreement. The prices which
the Company agreed to pay for fabric under the agreement equaled
the costs of the raw materials plus an amount representing Main
Streets standard labor and overhead costs incurred in
manufacturing fabric for us. Under the Transition Agreement,
Joan Fabrics provided Products transitional and support services
for a period not to exceed twelve months in order to support the
continued and uninterrupted operation of the businesses acquired
by Products in the Joan acquisition. As a part of these
services, pending the Companys disassembly and removal of
machinery and equipment purchased from Joan Fabrics, Joan
Fabrics was permitted to continue to use that machinery and
equipment to manufacture for us all of our requirements for some
types of knitted and woven automotive fabrics. The terms of the
Companys agreement with respect to this fabric production
are substantially similar to those under the Supply Agreement.
Actual prices paid by the Company for fabric under the Supply
Agreement and Transition Agreement were subject to the rebates
described below.

In 2002 and 2003, the Company engaged in ordinary
course transactions with entities controlled by
Mr. McCallum for the purchase and sale of goods and
services as part of ongoing business relationships. The Company
recorded purchases from entities controlled by
Mr. McCallum, of $17.8 million (net of
$1.2 million of rebates) in 2003, and $47.3 million
(net of $10.5 million of rebates) in 2002 for goods and
services purchased. These rebates received from
Mr. McCallum relate to knit and woven automotive fabrics
provided by entities controlled by Mr. McCallum under the
Supply Agreement and Transition Agreement executed in connection
with the 2001 Joan acquisition, which are described above.
Supplier rebates such as these are common in the automotive
industry as part of ongoing price negotiations and adjustments.
These rebates from Mr. McCallum totaled $14.7 million
over the duration of the agreements. In addition, the Company
recorded sales to entities controlled by Mr. McCallum, of
$6.4 million in 2003 and $31.8 million in 2002.

The following table summarizes the balances
outstanding from entities controlled by Mr. McCallum (in
millions):

|                    |  |              |     |  |      |   |     | 
|------------------- |  | ------------ | --- |  | ---- | - | --- | 
|                    |  |             
|                    |  | As of        |    
|                    |  | December 31, |    
|                    |  |              |    
|                    |  | 2003         |     |  | 2002 |  
|                    |  |              |     |  |      |  
|Accounts Receivable |  | $            | 2.7 |  |      | $ | 5.9 | 
|Accounts Payable    |  | $            | 1.0 |  |      | $ | 8.0 | 

Textron
Transactions

As discussed in Note 10 Mandatorily
Redeemable Preferred Stock of Subsidiary, and Note 12
Operating Leases, the Company is a party to various
agreements and transactions with Textron. Textron became a
related party as a result of its receipt of the consideration in
the 2001 TAC-Trim acquisition. In May 2002, as part of the
finalization of the purchase price and related working capital
adjustments of the TAC-Trim acquisition, the Company paid
Textron $15.5 million in cash.

F-42



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Prior to the TAC-Trim acquisition, TAC-Trim
entered into an $86.9 million sale and leaseback
transaction (the Textron Leasing Transaction) with
two separate single purpose affiliates of Textron Financial
Corporation, as lessor and purchaser, with respect to a
portfolio of manufacturing equipment situated in different
locations throughout the United States and Canada. In January
2003, the FASB issued FASB Interpretation No. (FIN)
46, Consolidation of Variable Interest Entities
(VIE), an interpretation of Accounting Research
Bulletin No. 51, Consolidated Financial
Statements (see Note 2 Summary of Significant
Accounting Policies for further information on
FIN 46). As part of the Companys implementation of
FIN 46, it determined that one of the single purpose
affiliates was a VIE. The Company negotiated and agreed to have
the lease restructured so it was required to be consolidated by
the other party and not accounted for as a VIE. As consideration
for this lease restructuring, the Company agreed to pay Textron
Financial $150,000.

Payments under the Textron leasing transaction
are guaranteed by Products and secured by a first perfected
mortgage lien over certain real property with a value equal to
$25 million. Each lease is for an initial term of three
years with three one-year renewal options. At the end of the
leases (including the expiration of all renewal options), there
is the option of either purchasing all of the equipment for
approximately $26 million or returning the equipment to the
lessor. In the event the equipment is returned, arrangements
will be made for the disposition of the equipment. The Company
is required to guarantee a minimum value to the lessor of up to
approximately $21 million upon expiration of the leases. As
is customary, the documentation for the Textron leasing
transaction incorporates covenants by reference, from the
Companys credit facility, that may be amended or waived by
the senior lenders, and also contain events of default.

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 licenses back
to Textron certain intellectual property that was acquired in
the transaction. In the third agreement, the Company licenses
from Textron other intellectual property that was not acquired
in the transaction. In addition, under the TAC-Trim acquisition
agreement, the Company is permitted to use the
Textron name for 18 months in exchange for
payments of $13.0 million on December 15, 2002 and
$6.5 million on December 15, 2003.

20.     Information
About the Companys Operations

In conjunction with the 2003 restructurings, the
Company changed its reportable segments to align with
organization changes and senior management responsibilities. The
Companys new reportable segments consist of U.S. and
Mexico Plastics, International Plastics and Global Soft Trim.
International Plastics includes all international plastics
operations, including Canada. The U.S. and Mexico Plastics and
International Plastics segments include interior trim components
such as door panels, instrument panels, consoles, package trays
and cargo management systems, exterior trim components such as
bumper fascias and cladding and fully assembled cockpit systems
and components thereof. The Global Soft Trim segment includes
molded non-woven and tufted carpet, alternative molded flooring,
accessory mats and acoustics systems consisting of absorbing
materials, damping materials, engine compartment noise vibration
and harshness systems, interior insulators, seat body cloth,
insert fabric, headliner fabric, convertible roof systems, hard
top retractable roof systems, tonneau covers and actuation
systems. The Company changed the composition of its reportable

F-43



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

segments on January 1, 2003 and further
redefined the segments beginning July 1, 2003 and restated
prior period segment data to be comparable.

The segments consist of dedicated facilities and
division offices focused on the manufacturing, assembly and
sequencing of the aforementioned products and systems. The other
categories consist of costs not allocated to operating segments
including selling, product development and administrative costs.

The Company evaluates performance based on
operating profit or loss. Information about the Companys
divisions is presented below (in millions):

|                                                  |  |                              |         |  |               |   |         |             |  |   |          |  |  |       |       |   |  |   |         | 
|------------------------------------------------- |  | ---------------------------- | ------- |  | ------------- | - | ------- | ----------- |  | - | -------- |  |  | ----- | ----- | - |  | - | ------- | 
|                                                  |  |                             
|                                                  |  | Year Ended December 31, 2003 |        
|                                                  |  |                              |        
|                                                  |  | U.S. and Mexico              |         |  | International |   |         | Global Soft |  |   |         
|                                                  |  | Plastics                     |         |  | Plastics      |   |         | Trim        |  |   | Other(a) |  |  | Total |      
|                                                  |  |                              |         |  |               |   |         |             |  |   |          |  |  |       |      
|External revenues                                 |  | $                            | 1,363.4 |  |               | $ | 1,258.0 |             |  | $ | 1,362.3  |  |  | $     |      |   |  | $ | 3,983.7 | 
|Inter-segment revenues                            |  |                              | 12.0    |  |               |   | 17.9    |             |  |   | 1.0      |  |  |       | (30.9 | ) |  |   |        | 
|Interest expense from preferred stock requirement |  |                              |        |  |               |   |        |             |  |   |         |  |  |       | 37.3  |   |  |   | 37.3    | 
|Depreciation and amortization                     |  |                              | 43.6    |  |               |   | 39.7    |             |  |   | 48.7     |  |  |       | 8.2   |   |  |   | 140.2   | 
|Goodwill                                          |  |                              | 761.5   |  |               |   | 327.2   |             |  |   | 274.4    |  |  |       |      |   |  |   | 1,363.1 | 
|Operating income (loss)                           |  |                              | 73.6    |  |               |   | (22.5   | )           |  |   | 140.5    |  |  |       | (89.6 | ) |  |   | 102.0   | 
|Total assets                                      |  |                              | 1,074.6 |  |               |   | 845.0   |             |  |   | 687.0    |  |  |       | 584.6 |   |  |   | 3,191.2 | 
|Capital expenditures                              |  |                              | 45.9    |  |               |   | 47.4    |             |  |   | 75.5     |  |  |       | 6.3   |   |  |   | 175.1   | 

|                              |  |                              |         |  |               |   |       |             |  |   |          |  |  |       |       |   |  |   |         | 
|----------------------------- |  | ---------------------------- | ------- |  | ------------- | - | ----- | ----------- |  | - | -------- |  |  | ----- | ----- | - |  | - | ------- | 
|                              |  |                             
|                              |  | Year Ended December 31, 2002 |        
|                              |  |                              |        
|                              |  | U.S. and Mexico              |         |  | International |   |       | Global Soft |  |   |         
|                              |  | Plastics                     |         |  | Plastics      |   |       | Trim        |  |   | Other(a) |  |  | Total |      
|                              |  |                              |         |  |               |   |       |             |  |   |          |  |  |       |      
|External revenues             |  | $                            | 1,512.2 |  |               | $ | 899.0 |             |  | $ | 1,474.6  |  |  | $     |      |   |  | $ | 3,885.8 | 
|Inter-segment revenues        |  |                              | 13.4    |  |               |   | 16.8  |             |  |   | 0.8      |  |  |       | (31.0 | ) |  |   |        | 
|Preferred stock requirement   |  |                              |        |  |               |   |      |             |  |   |         |  |  |       | 38.4  |   |  |   | 38.4    | 
|Depreciation and amortization |  |                              | 38.4    |  |               |   | 24.3  |             |  |   | 49.0     |  |  |       | 5.3   |   |  |   | 117.0   | 
|Goodwill                      |  |                              | 715.1   |  |               |   | 278.8 |             |  |   | 271.6    |  |  |       |      |   |  |   | 1,265.5 | 
|Operating income (loss)       |  |                              | 113.1   |  |               |   | (30.1 | )           |  |   | 161.6    |  |  |       | (76.9 | ) |  |   | 167.7   | 
|Total assets                  |  |                              | 1,176.1 |  |               |   | 843.5 |             |  |   | 682.8    |  |  |       | 454.7 |   |  |   | 3,157.1 | 
|Capital expenditures          |  |                              | 41.0    |  |               |   | 26.9  |             |  |   | 48.8     |  |  |       | 31.2  |   |  |   | 147.9   | 

|                              |  |                              |       |  |               |   |       |             |  |   |          |  |  |       |       |   |  |   |         | 
|----------------------------- |  | ---------------------------- | ----- |  | ------------- | - | ----- | ----------- |  | - | -------- |  |  | ----- | ----- | - |  | - | ------- | 
|                              |  |                             
|                              |  | Year Ended December 31, 2001 |      
|                              |  |                              |      
|                              |  | U.S. and Mexico              |       |  | International |   |       | Global Soft |  |   |         
|                              |  | Plastics                     |       |  | Plastics      |   |       | Trim        |  |   | Other(a) |  |  | Total |      
|                              |  |                              |       |  |               |   |       |             |  |   |          |  |  |       |      
|External revenues             |  | $                            | 208.0 |  |               | $ | 263.1 |             |  | $ | 1,352.2  |  |  | $     |      |   |  | $ | 1,823.3 | 
|Inter-segment revenues        |  |                              | 1.9   |  |               |   | 6.7   |             |  |   | 1.4      |  |  |       | (10.0 | ) |  |   |        | 
|Preferred stock requirement   |  |                              |      |  |               |   |      |             |  |   |         |  |  |       | 2.4   |   |  |   | 2.4     | 
|Depreciation and amortization |  |                              | 10.8  |  |               |   | 12.4  |             |  |   | 55.9     |  |  |       | 2.7   |   |  |   | 81.8    | 
|Goodwill                      |  |                              | 949.6 |  |               |   | 47.1  |             |  |   | 257.1    |  |  |       |      |   |  |   | 1,253.8 | 
|Operating income (loss)       |  |                              | 1.6   |  |               |   | (2.4  | )           |  |   | 48.7     |  |  |       | (12.3 | ) |  |   | 35.6    | 
|Total assets                  |  |                              | 866.3 |  |               |   | 354.6 |             |  |   | 826.8    |  |  |       | 940.2 |   |  |   | 2,987.9 | 
|Capital expenditures          |  |                              | 6.5   |  |               |   | 2.3   |             |  |   | 40.9     |  |  |       | 4.8   |   |  |   | 54.5    | 

F-44



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##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Other includes the Companys non-operating
    units (See Note 14) and the effect of eliminating entries.
    During 2003 and 2002, certain corporate costs that were
    previously included at the divisional units were included in the
    Other category. Those costs that could be attributed to a
    divisional unit were allocated back to the appropriate division.
    Operating income (loss) for the year ended December 31,
    2003 includes: $53.3 million, $74.0 million and
    $48.7 million of corporate costs allocated back to U.S. and
    Mexico Plastics, International Plastics and Global Soft Trim,
    respectively. Operating income (loss) for the year ended
    December 31, 2002 includes: $60.4 million,
    $35.5 million and $39.6 million of corporate costs
    allocated back to U.S. and Mexico Plastics, International
    Plastics and Global Soft Trim, respectively.

Direct and indirect sales to significant
customers in excess of ten percent of consolidated net sales
from continuing operations follow:

|                           |  |                   |       |  |      |  |       |      |  |  |       | 
|-------------------------- |  | ----------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                           |  |                  
|                           |  | Fiscal Year Ended |      
|                           |  |                   |      
|                           |  | 2003              |       |  | 2002 |  |       | 2001 | 
|                           |  |                   |       |  |      |  |       |      | 
|DaimlerChrysler AG         |  |                   | 28.5% |  |      |  | 31.0% |      |  |  | 18.7% | 
|General Motors Corporation |  |                   | 22.4% |  |      |  | 23.0% |      |  |  | 29.0% | 
|Ford Motor Company         |  |                   | 24.8% |  |      |  | 23.0% |      |  |  | 21.5% | 

The Company recently confirmed its strategy for
new business, which involves pursuing sales growth based on
criteria intended to more effectively allocate the
Companys resources on the most promising new business
opportunities. As part of this strategy, the Company is
reviewing its parts profitability for each plant and program
worldwide. For example, the Company has recently concluded that
a certain future business award is inconsistent with its
criteria and is therefore in the process of cooperating in the
transition of this award to another supplier.

At the end of the second quarter, the Company
received notice from one of its customers, DaimlerChrysler
Corporation, of an issue regarding the calculation methods for
determining the current year valuation of price givebacks.
Discussions on this issue, as well as various aspects of the
broader relationship, are continuing. While the Company seeks to
improve the profitability of its programs with this and all of
its customers, there can be no assurance that the Company will
not lose desirable programs over time. While the Company
continues to believe that all of these issues will be resolved
to the mutual satisfaction of the parties, there can be no
assurances that such a resolution is imminent or that actions by
the customer with respect to the broader relationship will not
have a material adverse impact on the Company.

Information about the Companys continuing
operations in different geographic areas for fiscal 2003, 2002
and 2001 is presented below (in millions):

|              |  |                   |         |            |                   |   |         |                   |            |   |         |  |  |            |         |  |        |   |         |  |  |   |         | 
|------------- |  | ----------------- | ------- | ---------- | ----------------- | - | ------- | ----------------- | ---------- | - | ------- |  |  | ---------- | ------- |  | ------ | - | ------- |  |  | - | ------- | 
|              |  |                   |         |            |                   |  
|              |  | Year Ended        |         |            | Fiscal Year Ended |   |         | Fiscal Year Ended |           
|              |  | December 31, 2003 |         |            | December 31, 2002 |   |         | December 31, 2001 |           
|              |  |                   |         |            |                   |   |         |                   |           
|              |  |                   |         | Long-Lived |                   |   |         |                   | Long-Lived |   |         |  |  | Long-Lived |        
|              |  | Net Sales         |         |            | Assets            |   |         | Net Sales         |            |   | Assets  |  |  | Net Sales  |         |  | Assets |  
|              |  |                   |         |            |                   |   |         |                   |            |   |         |  |  |            |         |  |        |  
|United States |  | $                 | 2,200.4 |            |                   | $ | 1,472.9 |                   |            | $ | 2,412.0 |  |  | $          | 1,445.3 |  |        | $ | 1,346.0 |  |  | $ | 1,545.4 | 
|Canada        |  |                   | 464.3   |            |                   |   | 432.3   |                   |            |   | 488.2   |  |  |            | 343.4   |  |        |   | 168.5   |  |  |   | 99.0    | 
|Mexico        |  |                   | 254.0   |            |                   |   | 79.1    |                   |            |   | 230.7   |  |  |            | 96.8    |  |        |   | 50.5    |  |  |   | 52.9    | 
|Europe        |  |                   | 1,001.6 |            |                   |   | 283.0   |                   |            |   | 660.5   |  |  |            | 129.4   |  |        |   | 117.3   |  |  |   | 189.0   | 
|Other         |  |                   | 63.4    |            |                   |   | 89.9    |                   |            |   | 94.4    |  |  |            | 173.9   |  |        |   | 141.0   |  |  |   | 220.6   | 
|              |  |                   |         |            |                   |   |         |                   |            |   |         |  |  |            |         |  |        |  
|Consolidated  |  | $                 | 3,983.7 |            |                   | $ | 2,357.2 |                   |            | $ | 3,885.8 |  |  | $          | 2,188.8 |  |        | $ | 1,823.3 |  |  | $ | 2,106.9 | 
|              |  |                   |         |            |                   |   |         |                   |            |   |         |  |  |            |         |  |        |  

Intersegment sales between geographic areas are
not material. For fiscal years 2003, 2002 and 2001, export sales
from the United States to foreign countries were
$408.9 million, $429.5 million and
$146.2 million, respectively.

F-45



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

21.     Commitments
and Contingencies

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) affect 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, 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 the Companys
various businesses. Environmental compliance costs for
continuing businesses are accounted for as normal operating
expenses or capital expenditures, except for certain costs
incurred at acquired locations. 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 known
to it, such environmental compliance and remediation costs will
not have a material effect on the Companys business,
consolidated financial condition, future results of operations
or cash flows.

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
notified that it is a potentially responsible party
(PRP) under the federal Superfund law or similar
state laws. Other sites at which the Company may be responsible
for contamination may be identified in the future, including
with respect to divested and acquired businesses.

The Company is currently engaged in investigating
or remediating certain sites as discussed in the paragraphs
below. In estimating the cost of investigation and remediation,
the Company considered, among other things, its prior experience
in remediating contaminated sites, remediation efforts 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 identified PRPs will have the financial resources to
fulfill their obligations at sites where they and the Company
may be jointly and severally liable. It is difficult 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 the Companys share, if any, of
    liability for such problems;
|
| |  | the ultimate selection among alternative
    approaches by governmental regulators;                                                           

F-46



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | the complexity and evolving nature of
    environmental laws, regulations and governmental directives and
|
| |  | changes in cleanup standards.                                                                            

The Company is a party to a Consent Decree with
the State of New Hampshire to remediate a former industrial
landfill known as the Cardinal Landfill in Farmington, New
Hampshire. Pursuant to that Consent Decree, the Company is
currently conducting a pilot test for a proposed remediation of
chlorinated compound contaminants in groundwater. The Consent
Decree calls for a remedy to be in place during 2004. The
Company is a defendant in two lawsuits filed by a total of 91
individual plaintiffs for alleged personal injuries arising from
Cardinal Landfill conditions. The Company will vigorously
contest these allegations. As of December 31, 2003, the
Company has accrued $13.6 million for Cardinal Landfill.

The Company is a party, as a member of a PRP
workgroup, to a Consent Decree entered with the USEPA for the
remediation of a former municipal landfill in Dover, New
Hampshire. The town of Dover, New Hampshire is also a member of
the PRP group and a party to the Consent Decree. Pursuant to the
terms of the Consent Decree, the PRP group is currently engaged
in the preparation of a remediation design. The Consent Decree
requires that a remedy for the site be in place during 2004. As
of December 31, 2003, the Company has accrued
$8.7 million for Dover.

Pursuant to a Consent Decree signed with the
USEPA, the Company is currently engaged in a full-scale
remediation for groundwater and soil contamination at the former
Stamina Mills manufacturing facility in North Smithfield, Rhode
Island. Remediation activities have been ongoing since 1998.
Another Consent Decree resolving the USEPA claim for past
oversight costs was signed during 2003, and a payment of
$7.3 million was made during the third quarter of 2003. As
of December 31, 2003, the Company has accrued
$6.6 million for Stamina Mills.

The Company is working with the Michigan
Department of Environmental Quality (MDEQ) to
investigate and remediate soil and groundwater contamination at
a former manufacturing plant in Mancelona, MI and at adjacent
owned property formerly used for the treatment and disposal of
plating waste. MDEQ is likely to require remediation of
groundwater contamination. In addition, the Company is incurring
costs in connection with the provision of alternate water
supplies to residences in the area.

The current owner of one of the Companys
former manufacturing plants located in Bowling Green, OH has
entered into an Administrative Order on Consent with the Ohio
Environmental Protection Agency (OEPA) requiring
investigation and remediation of contamination at the site. The
Company is reimbursing the current owner for costs associated
with ongoing groundwater monitoring and, following selection of
an appropriate remedy by OEPA, will assume 90% of future
remediation costs.

In the 1980s and 1990s, the
California Regional Water Quality Control Board
(CRWQCB) and other state agencies ordered a
predecessor of the Company to investigate and remediate soil and
groundwater contamination at a former lumber treatment plant in
Elmira, CA. In 1996, the Company entered into an agreement with
the State of California to conduct long-term operation and
maintenance of the remedy implemented at the site.

The Company has entered into an Administrative
Order by Consent with the USEPA requiring investigation,
delineation and removal of contamination from a vacant three
acre site in Zanesville, Ohio. The delineation report has been
submitted to USEPA for comment, and the Administrative Order by
Consent calls for the submittal and implementation of an action
plan during 2004.

In 2003, the Company signed a Consent Agreement
with the State of South Carolina Department of Health and
Environmental Control requiring soil and groundwater
investigations at a former manufacturing facility in Cowpens,
South Carolina. The Company had ceased operations at this
location in 1981. Initial investigations will delineate
potential groundwater contamination that has migrated under a
residential area. These studies are scheduled to be completed in
2004.

F-47



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The Company has established accruals for certain
contingent environmental liabilities and management believes
such reserves comply with accounting principles generally
accepted in the United States of America. The Company accrues
for environmental investigatory and non-capital remediation
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 financial impact of such outcome is
reasonably estimable. As of December 31, 2003 and 2002,
total reserves for these environmental costs are approximately
$51.2 million and $64.5 million, respectively.

In the opinion of management, based on
information presently known to it, identified environmental
costs and contingencies will not have a material effect on the
Companys consolidated financial condition, future results
of operations or cash flows. However, management can give no
assurance that they have identified or properly assessed all
potential environmental liabilities arising from the business or
properties, and those of present and former subsidiaries and
their corporate predecessors.

Litigation

The Company and its subsidiaries have lawsuits
and claims pending against them and have certain guarantees
outstanding which were made in the ordinary course of business.

As of December 31, 2003, the Company is
party to approximately 875 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 plaintiffs 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 $944,800 or
an average of less than $5,700 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
$600 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 financial condition, results of operations or
cash flows. However, it cannot assure that the Company will not
be subjected to significant 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.

As previously disclosed, a purported class action
was filed on March 24, 2003 in the United States District
Court for the Eastern District of Michigan, against the Company,
Heartland and ten current and former senior officers and/or
directors of the Company, alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated there under. Four similar
actions were subsequently filed in the United States District
Court for the Eastern District of Michigan, purportedly filed on
behalf of purchasers of the common stock of the Company between
August 7, 2001 and August 2, 2002, which are identical
to the purported class identified in the previously disclosed
lawsuit, except in one instance in which the complaint alleges a
class period beginning on July 5, 2001. On August 4,
2003, the court consolidated all five pending actions and
appointed lead plaintiffs for the purported class. The Company
believes that the claims are without merit and intends to
vigorously defend the lawsuits. The Company does not believe
that the suit will have a material impact on the Companys
financial condition, results of operations or cash flows.

F-48



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The Company is a defendant in a lawsuit involving
a sales commissions arrangement inherited from a predecessor
company and its partial ownership of an extinguished joint
venture. In September 2003, the Oakland County Circuit Court
entered a judgment by default against the Company for
$4.2 million based upon an inadvertent failure to produce a
small number of documents that were to be produced with
thousands of other documents that were delivered in the
discovery process. The Company and its counsel believes that the
default judgment was improperly entered and that damages were
improperly assessed, and it has filed an appeal of the judgment
with the Michigan Court of Appeals. The Company intends to
vigorously pursue its appeal in this matter and has posted a
letter of credit in the amount of the judgment as part of the
normal appeal process. While management believes it may have no
liability to the plaintiff, the Company has established an
appropriate reserve for this matter in an amount less than the
amount of the current judgment.

The ultimate outcome of the legal proceedings to
which the Company is a party will not, in the opinion of the
Companys management, based on the facts presently known to
it, have a material effect on the Companys consolidated
financial condition, future results of operations or cash flows.

Completion
of Audit Committee Inquiry

The Companys Audit Committee inquiry,
initiated in August 2003, into certain assertions made by two
former executives and related matters has been completed. The
Audit Committee, aided by its independent counsel, Davis Polk
& Wardwell, and by an outside accounting expert, reported
its findings and recommendations to the Companys full
Board of Directors. In general, the Audit Committees
inquiry extended into the following areas: (1) assertions
regarding the Companys accounting for revenue and tooling,
(2) a comprehensive review of related party transactions
and (3) certain corporate governance procedures. The
following summarizes the Committees principal findings and
recommendations:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Audit Committee has not become aware of any
    events that would necessitate a restatement of any previously
    issued financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | While the assertions concerning related party
    transactions were limited to certain transactions involving
    Charles Becker and Elkin McCallum and entities controlled by
    them, the Audit Committee reviewed all material transactions
    entered into between the Company and Heartland Industrial
    Partners, L.P., Mr. McCallum and Mr. Becker and their
    respective affiliates. Both Mr. Becker and
    Mr. McCallum are directors and significant shareholders of
    the Company and are, directly or indirectly, limited partners in
    Heartland, the Companys largest shareholder.

The Audit Committee concluded that each of these
transactions had a legitimate business purpose, was negotiated
fairly, and was intended to advance the interests of the Company
and not to benefit the related parties at the Companys
expense. The Audit Committee further concluded that, by and
large, these transactions were appropriately presented to and
approved by the full Board of Directors of the Company and were
properly documented and adequately disclosed.

The Audit Committee concluded that certain
related party matters referred to below had not been formally
submitted for Board approval, and that others should have been
more appropriately documented. The Audit Committee recommended
that disinterested members of the Board review those matters and
take whatever procedural action may be deemed appropriate.
Specifically, the matters to be reviewed are (1) with
respect to Mr. Becker and his affiliates: leases of two
buildings adjacent to the Companys headquarters, which was
already the subject of a Board-approved lease from an affiliate
of Mr. Becker; an amendment reducing the rent at the
Companys headquarters to the rent at these two additional
buildings; and amendments of existing plant leases with an
affiliate of Mr. Becker to extend the term and reduce the
rent for the initial term; and (2) with respect to
Mr. McCallum and his affiliates, an amendment of the
previously Board-approved Joan Automotive merger agreement
clarifying ownership of certain equipment listed in a schedule
attached to that

F-49



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

agreement; and the final terms of a supply
agreement contemplated at the time the Board approved a January
2003 purchase of certain fabrics equipment from an affiliate of
Mr. McCallum. Subsequent to the Boards initial
discussion with the Audit Committee on March 10, 2004, the
Board has held a meeting and ratified all of these actions.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Audit Committee also recommended that the
    Company review its public filings to determine whether
    disclosure of certain aspects of the related party transactions
    reviewed by the Audit Committee should be enhanced and
    additionally, it proposed a resolution for the Board that will
    require pre-approval of all future related party transactions,
    even where pre-approval of the Board is not legally required.
    The resolution also reiterates procedures for ensuring proper
    documentation and disclosure of such transactions. Subsequent to
    the Boards initial discussion with the Audit Committee on
    March 10, 2004, the Board has adopted and approved this
    resolution.

As a result of the Audit Committees
recommendations, the Company has included enhanced disclosure in
this Annual Report with respect to the following:
(1) disclosure of the Board-approved payment of $300,000 as
compensation to Mr. Becker in 2002 for his temporary
service as Vice Chairman of the Company during that year;
(2) an improved description of the 2003 fabrics and 2002
Dutton Yarns air-texturing operations transactions with Mr.
McCallum; and (3) the dollar volume of previously disclosed
ordinary course arrangements with Mr. McCallum,
specifically, from transition services, supply and rebate
arrangements.

The members of the Companys Audit Committee
are Robert C. Clark, the former Dean of the Harvard Law School,
Marshall A. Cohen, counsel at Cassels Brock and Blackwell, a
Canadian law firm, and former Senator Warren B. Rudman. The
accounting expert who advised the Audit Committee is Alex
Arcady, a retired partner from Ernst & Young LLP, who spent
the last ten years of his career in that firms national
office.

Other
Commitments

As of December 31, 2003, the Companys
continuing operations had approximately $30.3 million in
outstanding capital expenditure commitments. The majority of the
leased properties of the Companys previously divested
businesses have been assigned to third parties. Although
releases have been obtained from the lessors of certain
properties, Products remains contingently liable under most of
the leases. Products future liability for these leases, in
managements opinion, based on the facts presently known to
it, will not have a material effect on the Companys
consolidated financial condition, future results of operations
or cash flows.

In November 2002, the FASB issued FIN 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires a guarantor to recognize, at the
inception of a qualified guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee. In
conjunction with divestitures and other transactions, the
Company has provided indemnifications relating to legal and
environmental issues, including product liability. The Company
does not believe that any pending or threatened litigation or
claims related to any such retained liabilities of discontinued
operations are likely to result in any material loss.

F-50



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

22.     Quarterly
Financial Data (Unaudited)

The quarterly financial data is summarized below
(in millions, except per share amounts).

|                                             |                                                           |         |         |       |         |   |         |         |  |   |         |       |   |   |         |       |  
|-------------------------------------------- | --------------------------------------------------------- | ------- | ------- | ----- | ------- | - | ------- | ------- |  | - | ------- | ----- | - | - | ------- | ----- | -
|                                             |                                                           |        
|                                             |                                                           | 2003    |        
|                                             |                                                           |         |        
|                                             |                                                           | First   |         |       | Second  |   |         | Third   |  |   | Fourth  |      
|                                             |                                                           | Quarter |         |       | Quarter |   |         | Quarter |  |   | Quarter |      
|                                             |                                                           |         |         |       |         |   |         |         |  |   |         |      
|Net sales                                    |                                                           | $       | 1,035.1 |       |         | $ | 1,033.5 |         |  | $ | 902.2   |       |   | $ | 1,012.9 |      
|Gross profit                                 |                                                           |         | 109.4   |       |         |   | 124.7   |         |  |   | 95.5    |       |   |   | 114.6   |      
|Income (loss) from continuing operations     |                                                           |         | (26.2   | )     |         |   | 10.7    |         |  |   | (32.1   | )     |   |   | (11.5   | )    
|Income (loss) before extraordinary items     |                                                           |         | (26.2   | )     |         |   | 10.7    |         |  |   | (32.1   | )     |   |   | (11.5   | )    
|Net income (loss)                            |                                                           |         | (26.2   | )     |         |   | 10.7    |         |  |   | (32.1   | )     |   |   | (9.9    | )    
|Basic and diluted earnings (loss) per share: |                                                           |         |         |       |         |   |         |         |  |   |         |       |   |   |         |      
|                                             | Continuing operations                                     |         |         | (0.31 | )       |   |         | 0.13    |  |   |         | (0.38 | ) |   |         | (0.14 | )
|                                             | Discontinued operations                                   |         |         |      |         |   |         |        |  |   |         |      |   |   |         | 0.02  |  
|                                             | Net income (loss) attributable to common
    shareholders |         |         | (0.31 | )       |   |         | 0.13    |  |   |         | (0.38 | ) |   |         | (0.12 | )
|Common stock prices:                         |                                                           |         |         |       |         |   |         |         |  |   |         |       |   |   |         |      
|                                             | High                                                      |         |         | 4.83  |         |   |         | 4.18    |  |   |         | 3.41  |   |   |         | 4.33  |  
|                                             | Low                                                       |         |         | 3.28  |         |   |         | 2.82    |  |   |         | 2.09  |   |   |         | 2.43  |  

|                                             |                                                         |         |       |        |         |   |         |         |   |   |         |       |   |   |       |       |  
|-------------------------------------------- | ------------------------------------------------------- | ------- | ----- | ------ | ------- | - | ------- | ------- | - | - | ------- | ----- | - | - | ----- | ----- | -
|                                             |                                                         |        
|                                             |                                                         | 2002    |      
|                                             |                                                         |         |      
|                                             |                                                         | First   |       |        | Second  |   |         | Third   |   |   | Fourth  |      
|                                             |                                                         | Quarter |       |        | Quarter |   |         | Quarter |   |   | Quarter |      
|                                             |                                                         |         |       |        |         |   |         |         |   |   |         |      
|Net sales                                    |                                                         | $       | 914.8 |        |         | $ | 1,085.3 |         |   | $ | 922.5   |       |   | $ | 963.2 |      
|Gross profit                                 |                                                         |         | 131.1 |        |         |   | 158.5   |         |   |   | 100.7   |       |   |   | 127.8 |      
|Income (loss) from continuing operations     |                                                         |         | (6.7  | )      |         |   | 3.7     |         |   |   | (45.2   | )     |   |   | (3.1  | )    
|Income (loss) before extraordinary items     |                                                         |         | (6.7  | )      |         |   | 3.7     |         |   |   | (45.2   | )     |   |   | (3.1  | )    
|Net income (loss)                            |                                                         |         | (18.4 | )      |         |   | 13.2    |         |   |   | (45.2   | )     |   |   | (3.1  | )    
|Basic and diluted earnings (loss) per share: |                                                         |         |       |        |         |   |         |         |   |   |         |       |   |   |       |      
|                                             | Continuing operations                                   |         |       | (0.10  | )       |   |         | (0.46   | ) |   |         | (0.54 | ) |   |       | (0.04 | )
|                                             | Discontinued operations                                 |         |       |       |         |   |         | 0.13    |   |   |         |      |   |   |       |      |  
|                                             | Cumulative effect of change in accounting
    principle |         |       | (0.17  | )       |   |         |        |   |   |         |      |   |   |       |      |  
|                                             | Net loss attributable to common shareholders            |         |       | (0.27  | )       |   |         | (0.33   | ) |   |         | (0.54 | ) |   |       | (0.04 | )
|Common stock prices:                         |                                                         |         |       |        |         |   |         |         |   |   |         |       |   |   |       |      
|                                             | High                                                    |         |       | 25.500 |         |   |         | 28.375  |   |   |         | 9.000 |   |   |       | 4.450 |  
|                                             | Low                                                     |         |       | 16.750 |         |   |         | 9.000   |   |   |         | 2.810 |   |   |       | 2.450 |  

The Companys operations are not subject to
significant seasonal influences.

Changes in Accounting
Principles During the second
quarter 2003, the Company implemented a change in the method of
accounting for holiday pay so that such pay is accrued, and
expense is recognized during the period in which the actual
holiday occurs. Formerly, certain of the Companys
businesses accrued holiday pay and recognized expense based upon
an equal monthly amount within the fiscal year. The change in
method better matches holiday expense with the period that the
actual holiday occurs and the pay is earned.

As the prior method allocated costs within the
fiscal year, there is no effect on prior years. There will be no
effect on the entire fiscal year as the change only impacts
interim periods.

F-51



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The effect of the change on the first quarter
2003 is as follows (in millions):

|                                                        |  |                |         |   |                |   |         |  
|------------------------------------------------------- |  | -------------- | ------- | - | -------------- | - | ------- | -
|                                                        |  |               
|                                                        |  | Quarter Ended  |        
|                                                        |  |                |        
|                                                        |  | March 31, 2003 |         |   |               
|                                                        |  | (As Previously |         |   | March 31, 2003 |  
|                                                        |  | Reported)      |         |   | (Adjusted)     |  
|                                                        |  |                |         |   |                |  
|Net sales                                               |  | $              | 1,035.1 |   |                | $ | 1,035.1 |  
|Cost of goods sold                                      |  |                | 928.1   |   |                |   | 925.7   |  
|                                                        |  |                |         |   |                |  
|Gross profit                                            |  |                | 107.0   |   |                |   | 109.4   |  
|Selling, general and administrative expenses            |  |                | 71.5    |   |                |   | 71.5    |  
|Impairment of long-lived assets                         |  |                | 18.1    |   |                |   | 18.1    |  
|                                                        |  |                |         |   |                |  
|Operating income                                        |  |                | 17.4    |   |                |   | 19.8    |  
|Other, net                                              |  |                | 45.0    |   |                |   | 45.1    |  
|                                                        |  |                |         |   |                |  
|Loss from continuing operations before income
    taxes |  |                | (27.6   | ) |                |   | (25.3   | )
|Income tax expense                                      |  |                | 1.1     |   |                |   | 0.9     |  
|                                                        |  |                |         |   |                |  
|Net loss                                                |  | $              | (28.7   | ) |                | $ | (26.2   | )
|                                                        |  |                |         |   |                |  
|Earnings per share data:                                |  |                |         |   |                |   |         |  
|Loss per basic and diluted common share                 |  | $              | (0.34   | ) |                | $ | (0.31   | )
|                                                        |  |                |         |   |                |  
|Average basic and diluted common shares
    outstanding |  |                | 83.6    |   |                |   | 83.6    |  
|                                                        |  |                |         |   |                |  

The proforma amounts assuming the new method of
accounting for holiday pay is applied retroactively to prior
year periods is as follows (in millions, except per share
amounts):

|                                             |  |                |       |   |               |   |       |                    |  |   |                   |   |  |   |       |  
|-------------------------------------------- |  | -------------- | ----- | - | ------------- | - | ----- | ------------------ |  | - | ----------------- | - |  | - | ----- | -
|                                             |  | Quarter Ended  |       |   | Quarter Ended |   |       | Quarter Ended      |  |   | Quarter Ended     |  
|                                             |  | March 31, 2002 |       |   | June 30, 2002 |   |       | September 30, 2002 |  |   | December 31, 2002 |  
|                                             |  |                |       |   |               |   |       |                    |  |   |                   |  
|Net loss attributable to common shareholders |  | $              | (17.2 | ) |               | $ | (22.4 | )                  |  | $ | (44.6             | ) |  | $ | (5.6  | )
|Net loss per common share                    |  | $              | (0.26 | ) |               | $ | (0.32 | )                  |  | $ | (0.53             | ) |  | $ | (0.07 | )

Additionally, during the second quarter of 2003,
the Company implemented a change in the method of accounting for
crib supply inventories held at plants. Crib supply inventories
include small motors, replacement parts for production equipment
and other miscellaneous repair parts for buildings, equipment
and machinery. The Company implemented a perpetual crib supply
inventory system and harmonized its policy to consistently
account for the capitalization of crib supply inventories.
Formerly, the Company had different capitalization thresholds
following the various acquisitions in late 2001 and 2002, which
ranged from not capitalizing any crib supply items to
capitalizing only items greater than two thousand dollars. The
new accounting method better matches the cost with the period
benefiting from the expenditure, as such inventories are charged
to expense as they are placed into service and begin generating
revenue. Pro forma and the cumulative effect amounts relating to
the change in accounting for crib inventories is not
determinable as perpetual records of crib inventory were not
maintained at all the plants prior to the application of the new
method in the second quarter of 2003. The effect of the change
on the three months ended June 30, 2003, for the plants
that had no perpetual records was to increase inventory and
reduce cost of sales by $1.8 million after tax or $0.02 per
share. For the year ended December 31, 2003, the
incremental effect of the adoption had an insignificant effect.

23.     Consolidating
Financial Statements

Products issued Senior Notes in a total principal
amount of $500.0 million in December 2001. The Senior Notes
are guaranteed by the Company and all the Companys wholly
owned domestic Subsidiaries other than its receivable, insurance
and charitable subsidiaries (Guarantor Subsidiaries). The
following are consolidating financial statements of the Company,
Products, its guarantor and non-guarantor subsidiaries:

F-52



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS




CONSOLIDATING STATEMENT OF
OPERATIONS


|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |   |       |     |  |   |         |       |  
|---------------------------------------------------------------- | -------------------------------------------------------------- | ------------------------------------ | ----- | ---- | ------ | - | ------ | ---------- | ------------ | - | ---------- | ----- | - | ------------ | ------- | ---- | ----- | - | ----- | --- |  | - | ------- | ----- | -
|                                                                 |                                                                |                                     
|                                                                 |                                                                | For the Year Ended December 31, 2003 |      
|                                                                 |                                                                |                                      |      
|                                                                 |                                                                |                                      |       | Non- |        |   |        |            | Consolidated |  
|                                                                 |                                                                | Parent                               |       |      | Issuer |   |        | Guarantors |              |   | Guarantors |       |   | Eliminations |         |      | Total |  
|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |  
|                                                                 |                                                                |                                     
|                                                                 |                                                                | (in millions)                        |      
|Net sales                                                        |                                                                | $                                    |      |      |        | $ | 310.2  |            |              | $ | 2,098.5    |       |   | $            | 1,596.2 |      |       | $ | (21.2 | )   |  | $ | 3,983.7 |      
|Cost of goods sold                                               |                                                                |                                      |      |      |        |   | 207.5  |            |              |   | 1,850.4    |       |   |              | 1,502.8 |      |       |   | (21.2 | )   |  |   | 3,539.5 |      
|Selling, general and administrative expenses                     |                                                                |                                      | 0.1   |      |        |   | 223.1  |            |              |   | 10.2       |       |   |              | 39.8    |      |       |   |      |     |  |   | 273.2   |      
|Restructuring charge                                             |                                                                |                                      |      |      |        |   | 13.2   |            |              |   | 18.5       |       |   |              | 8.9     |      |       |   |      |     |  |   | 40.6    |      
|Impairment of long-lived assets                                  |                                                                |                                      |      |      |        |   | 4.1    |            |              |   | 12.6       |       |   |              | 11.7    |      |       |   |      |     |  |   | 28.4    |      
|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |  
|Operating income (loss)                                          |                                                                |                                      | (0.1  | )    |        |   | (137.7 | )          |              |   | 206.8      |       |   |              | 33.0    |      |       |   |      |     |  |   | 102.0   |      
|                                                                 | Interest expense, net                                          |                                      |       |     |        |   |        | 21.3       |              |   |            | 121.2 |   |              |         | 8.8  |       |   |       |    |  |   |         | 151.3 |  
|                                                                 | Interest expense from subsidiary preferred stock
    dividends |                                      |       |     |        |   |        | 32.0       |              |   |            |      |   |              |         |     |       |   |       |    |  |   |         | 32.0  |  
|                                                                 | Interest expense from subsidiary preferred stock
    accretion |                                      |       |     |        |   |        | 5.3        |              |   |            |      |   |              |         |     |       |   |       |    |  |   |         | 5.3   |  
|                                                                 | Intercompany interest expense (income)                         |                                      |       |     |        |   |        | (21.4      | )            |   |            | (17.8 | ) |              |         | 39.2 |       |   |       |    |  |   |         |      |  
|                                                                 | Loss on sale of receivables                                    |                                      |       |     |        |   |        |           |              |   |            |      |   |              |         | 7.3  |       |   |       |    |  |   |         | 7.3   |  
|                                                                 | Other expense, net                                             |                                      |       |     |        |   |        | (149.7     | )            |   |            | 115.2 |   |              |         | 0.6  |       |   |       | 1.0 |  |   |         | (32.9 | )
|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |  
|(Loss) income from continuing operations
    before income taxes |                                                                |                                      | (0.1  | )    |        |   | (25.2  | )          |              |   | (11.8      | )     |   |              | (22.9   | )    |       |   | (1.0  | )   |  |   | (61.0   | )    
|Income tax expense (benefit)                                     |                                                                |                                      |      |      |        |   | (3.7   | )          |              |   | 4.6        |       |   |              | (2.8    | )    |       |   |      |     |  |   | (1.9    | )    
|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |  
|Loss from continuing operations                                  |                                                                |                                      | (0.1  | )    |        |   | (21.5  | )          |              |   | (16.4      | )     |   |              | (20.1   | )    |       |   | (1.0  | )   |  |   | (59.1   | )    
|Income from discontinued operations                              |                                                                |                                      |      |      |        |   | 2.4    |            |              |   | (0.8       | )     |   |              |        |      |       |   |      |     |  |   | 1.6     |      
|Cumulative effect of a change in accounting
    principle        |                                                                |                                      |      |      |        |   |       |            |              |   |           |       |   |              |        |      |       |   |      |     |  |   |        |      
|Equity in net income (loss) of
    subsidiaries                  |                                                                |                                      | (57.4 | )    |        |   | (38.3  | )          |              |   | (27.0      | )     |   |              |        |      |       |   | 122.7 |     |  |   |        |      
|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |  
|NET INCOME (LOSS)                                                |                                                                | $                                    | (57.5 | )    |        | $ | (57.4  | )          |              | $ | (44.2      | )     |   | $            | (20.1   | )    |       | $ | 121.7 |     |  | $ | (57.5   | )    
|                                                                 |                                                                |                                      |       |      |        |   |        |            |              |   |            |       |   |              |         |      |       |  

|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |   |       |     |  |   |         |       | 
|---------------------------------------------------------------- | -------------------------------------- | ------------------------------------ | ----- | ---- | ------ | - | ----- | ---------- | ------------ | - | ---------- | ----- | - | ------------ | ------- | ---- | ----- | - | ----- | --- |  | - | ------- | ----- | 
|                                                                 |                                        |                                     
|                                                                 |                                        | For the Year Ended December 31, 2002 |      
|                                                                 |                                        |                                      |      
|                                                                 |                                        |                                      |       | Non- |        |   |       |            | Consolidated |  
|                                                                 |                                        | Parent                               |       |      | Issuer |   |       | Guarantors |              |   | Guarantors |       |   | Eliminations |         |      | Total |  
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |  
|                                                                 |                                        |                                     
|                                                                 |                                        | (in millions)                        |      
|Net sales                                                        |                                        | $                                    |      |      |        | $ | 289.4 |            |              | $ | 2,415.7    |       |   | $            | 1,216.9 |      |       | $ | (36.2 | )   |  | $ | 3,885.8 |      
|Cost of goods sold                                               |                                        |                                      |      |      |        |   | 181.8 |            |              |   | 2,110.0    |       |   |              | 1,112.1 |      |       |   | (36.2 | )   |  |   | 3,367.7 |      
|Selling, general and administrative expenses                     |                                        |                                      | 0.1   |      |        |   | 166.1 |            |              |   | 82.8       |       |   |              | 44.5    |      |       |   |      |     |  |   | 293.5   |      
|Restructuring charges                                            |                                        |                                      |       |      |        |   | 16.5  |            |              |   | 4.2        |       |   |              | 18.2    |      |       |   |      |     |  |   | 38.9    |      
|Impairment of long-lived assets                                  |                                        |                                      |      |      |        |   |      |            |              |   | 4.1        |       |   |              | 13.9    |      |       |   |      |     |  |   | 18.0    |      
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |  
|Operating income (loss)                                          |                                        |                                      | (0.1  | )    |        |   | (75.0 | )          |              |   | 214.6      |       |   |              | 28.2    |      |       |   |      |     |  |   | 167.7   |      
|                                                                 | Interest expense, net                  |                                      |       | (0.1 | )      |   |       | 15.4       |              |   |            | 126.2 |   |              |         | 7.4  |       |   |       |    |  |   |         | 148.9 | 
|                                                                 | Intercompany interest expense (income) |                                      |       | (6.6 | )      |   |       | (5.9       | )            |   |            | (23.8 | ) |              |         | 36.3 |       |   |       |    |  |   |         |      | 
|                                                                 | Subsidiary preferred stock dividend    |                                      |       |     |        |   |       | 30.8       |              |   |            |      |   |              |         |     |       |   |       |    |  |   |         | 30.8  | 
|                                                                 | Subsidiary preferred stock accretion   |                                      |       |     |        |   |       | 7.6        |              |   |            |      |   |              |         |     |       |   |       |    |  |   |         | 7.6   | 
|                                                                 | Loss on sale of receivables            |                                      |       |     |        |   |       | 0.6        |              |   |            |      |   |              |         | 3.6  |       |   |       |    |  |   |         | 4.2   | 
|                                                                 | Other expense (income), net            |                                      |       |     |        |   |       | (45.8      | )            |   |            | 40.4  |   |              |         | 12.5 |       |   |       | 2.9 |  |   |         | 10.0  | 
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |  
|Income (loss) from continuing operations
    before income taxes |                                        |                                      | 6.6   |      |        |   | (77.7 | )          |              |   | 71.8       |       |   |              | (31.6   | )    |       |   | (2.9  | )   |  |   | (33.8   | )    
|Income tax expense (benefit)                                     |                                        |                                      | 2.5   |      |        |   | (16.2 | )          |              |   | 42.4       |       |   |              | (11.2   | )    |       |   |      |     |  |   | 17.5    |      
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |  
|Income (loss) from continuing
    operations                     |                                        |                                      | 4.1   |      |        |   | (61.5 | )          |              |   | 29.4       |       |   |              | (20.4   | )    |       |   | (2.9  | )   |  |   | (51.3   | )    
|Income from discontinued operations                              |                                        |                                      |      |      |        |   | 9.5   |            |              |   |           |       |   |              |        |      |       |   |      |     |  |   | 9.5     |      
|Cumulative effect of a change in accounting
    principle        |                                        |                                      |      |      |        |   |      |            |              |   |           |       |   |              | (11.7   | )    |       |   |      |     |  |   | (11.7   | )    
|Equity in net income (loss) of
    subsidiaries                  |                                        |                                      | (57.6 | )    |        |   | (5.6  | )          |              |   | (60.3      | )     |   |              |        |      |       |   | 123.5 |     |  |   |        |      
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |  
|NET INCOME (LOSS)                                                |                                        | $                                    | (53.5 | )    |        | $ | (57.6 | )          |              | $ | (30.9      | )     |   | $            | (32.1   | )    |       | $ | 120.6 |     |  | $ | (53.5   | )    
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |         |      |       |  

F-53



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS



CONSOLIDATING STATEMENT OF
OPERATIONS


|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |   |       |      |   |   |         |      | 
|---------------------------------------------------------------- | -------------------------------------- | ------------------------------------ | ----- | ---- | ------ | - | ----- | ---------- | ------------ | - | ---------- | ----- | - | ------------ | ----- | --- | ----- | - | ----- | ---- | - | - | ------- | ---- | 
|                                                                 |                                        |                                     
|                                                                 |                                        | For the Year Ended December 31, 2001 |      
|                                                                 |                                        |                                      |      
|                                                                 |                                        |                                      |       | Non- |        |   |       |            | Consolidated |  
|                                                                 |                                        | Parent                               |       |      | Issuer |   |       | Guarantors |              |   | Guarantors |       |   | Eliminations |       |     | Total |  
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |  
|                                                                 |                                        |                                     
|                                                                 |                                        | (in millions)                        |      
|Net sales                                                        |                                        | $                                    |      |      |        | $ | 612.2 |            |              | $ | 676.4      |       |   | $            | 577.1 |     |       | $ | (42.4 | )    |   | $ | 1,823.3 |     
|Cost of goods sold                                               |                                        |                                      |      |      |        |   | 506.3 |            |              |   | 598.2      |       |   |              | 542.4 |     |       |   | (42.4 | )    |   |   | 1,604.5 |     
|Selling, general and administrative expenses                     |                                        |                                      | 0.1   |      |        |   | 34.9  |            |              |   | 81.1       |       |   |              | 48.3  |     |       |   |      |      |   |   | 164.4   |     
|Restructuring charge                                             |                                        |                                      |       |      |        |   | 4.7   |            |              |   | 0.2        |       |   |              | 6.3   |     |       |   |       |      |   |   | 11.2    |     
|Impairment of long-lived assets                                  |                                        |                                      |      |      |        |   | 2.6   |            |              |   | 0.7        |       |   |              | 4.3   |     |       |   |      |      |   |   | 7.6     |     
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |  
|Operating income (loss)                                          |                                        |                                      | (0.1  | )    |        |   | 63.7  |            |              |   | (3.8       | )     |   |              | (24.2 | )   |       |   |      |      |   |   | 35.6    |     
|                                                                 | Interest expense, net                  |                                      |       |     |        |   |       | 45.6       |              |   |            | 35.9  |   |              |       | 2.8 |       |   |       |     |   |   |         | 84.3 | 
|                                                                 | Intercompany interest expense (income) |                                      |       |     |        |   |       | 17.3       |              |   |            | (24.7 | ) |              |       | 7.4 |       |   |       |     |   |   |         |     | 
|                                                                 | Subsidiary preferred stock dividend    |                                      |       |     |        |   |       | 1.5        |              |   |            |      |   |              |       |    |       |   |       |     |   |   |         | 1.5  | 
|                                                                 | Subsidiary preferred stock accretion   |                                      |       |     |        |   |       | 0.9        |              |   |            |      |   |              |       |    |       |   |       |     |   |   |         | 0.9  | 
|                                                                 | Loss on sale of receivables            |                                      |       |     |        |   |       | 6.1        |              |   |            |      |   |              |       | 4.7 |       |   |       |     |   |   |         | 10.8 | 
|                                                                 | Other expense (income), net            |                                      |       |     |        |   |       | 12.5       |              |   |            | 3.4   |   |              |       | 1.8 |       |   |       | (3.3 | ) |   |         | 14.4 | 
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |  
|Income (loss) from continuing operations
    before income taxes |                                        |                                      | (0.1  | )    |        |   | (20.2 | )          |              |   | (18.4      | )     |   |              | (40.9 | )   |       |   | 3.3   |      |   |   | (76.3   | )   
|Income tax expense (benefit)                                     |                                        |                                      | 0.2   |      |        |   | (14.4 | )          |              |   | (5.8       | )     |   |              | (1.3  | )   |       |   |      |      |   |   | (21.3   | )   
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |  
|Income (loss) from continuing
    operations                     |                                        |                                      | (0.3  | )    |        |   | (5.8  | )          |              |   | (12.6      | )     |   |              | (39.6 | )   |       |   | 3.3   |      |   |   | (55.0   | )   
|Income from discontinued operations                              |                                        |                                      |      |      |        |   | 8.8   |            |              |   |           |       |   |              |      |     |       |   |      |      |   |   | 8.8     |     
|Equity in net income (loss) of
    subsidiaries                  |                                        |                                      | (45.9 | )    |        |   | (48.9 | )          |              |   | (33.5      | )     |   |              |      |     |       |   | 128.3 |      |   |   |        |     
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |  
|NET INCOME (LOSS)                                                |                                        | $                                    | (46.2 | )    |        | $ | (45.9 | )          |              | $ | (46.1      | )     |   | $            | (39.6 | )   |       | $ | 131.6 |      |   | $ | (46.2   | )   
|                                                                 |                                        |                                      |       |      |        |   |       |            |              |   |            |       |   |              |       |     |       |  

F-54



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

CONSOLIDATING BALANCE
SHEET


|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |   |          |      |   |   |         |       | 
|-------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------- | ----- | ---- | ------ | - | ------- | ---------- | ------------ | - | ---------- | ----- |  | ------------ | ------- | ----- | ----- | - | -------- | ---- | - | - | ------- | ----- | 
|                                                         |                                                                        |                  
|                                                         |                                                                        | December 31, 2003 |      
|                                                         |                                                                        |                   |      
|                                                         |                                                                        |                   |       | Non- |        |   |         |            | Consolidated |  
|                                                         |                                                                        | Parent            |       |      | Issuer |   |         | Guarantors |              |   | Guarantors |       |  | Eliminations |         |       | Total |  
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|                                                         |                                                                        |                  
|                                                         |                                                                        | (in millions)     |      
|ASSETS                                                  
|Current Assets:                                          |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |   |          |      |   |   |         |      
|                                                         | Cash and cash equivalents                                              |                   | $     |     |        |   | $       | (71.2      | )            |   | $          | 78.4  |  |              | $       | 6.0   |       |   | $        |     |   |   | $       | 13.2  | 
|                                                         | Accounts and other receivables, net                                    |                   |       |     |        |   |         | 1.1        |              |   |            | 34.4  |  |              |         | 220.4 |       |   |          | 1.4  |   |   |         | 257.3 | 
|                                                         | Inventories                                                            |                   |       |     |        |   |         | 14.2       |              |   |            | 96.2  |  |              |         | 59.0  |       |   |          |     |   |   |         | 169.4 | 
|                                                         | Other                                                                  |                   |       |     |        |   |         | 47.8       |              |   |            | 109.2 |  |              |         | 59.0  |       |   |          |     |   |   |         | 216.0 | 
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total current assets                                     |                                                                        |                   |      |      |        |   | (8.1    | )          |              |   | 318.2      |       |  |              | 344.4   |       |       |   | 1.4      |      |   |   | 655.9   |      
|Investment in subsidiaries                               |                                                                        |                   | 439.7 |      |        |   | 1,654.4 |            |              |   | (1.8       | )     |  |              |        |       |       |   | (2,092.3 | )    |   |   |        |      
|Property, plant and equipment, net                       |                                                                        |                   |      |      |        |   | 55.9    |            |              |   | 339.9      |       |  |              | 430.1   |       |       |   |         |      |   |   | 825.9   |      
|Goodwill                                                 |                                                                        |                   |      |      |        |   |        |            |              |   | 948.9      |       |  |              | 414.2   |       |       |   |         |      |   |   | 1,363.1 |      
|Other assets                                             |                                                                        |                   |      |      |        |   | 276.0   |            |              |   | 15.8       |       |  |              | 54.5    |       |       |   |         |      |   |   | 346.3   |      
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|                                                         |                                                                        | $                 | 439.7 |      |        | $ | 1,978.2 |            |              | $ | 1,621.0    |       |  | $            | 1,243.2 |       |       | $ | (2,090.9 | )    |   | $ | 3,191.2 |      
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|LIABILITIES &
    STOCKHOLDERS EQUITY (DEFICIT)        
|Current Liabilities:                                     |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |   |          |      |   |   |         |      
|                                                         | Short-term borrowings                                                  |                   |       |     |        |   |         |           |              |   |            |      |  |              |         | 16.0  |       |   |          |     |   |   |         | 16.0  | 
|                                                         | Current maturities of long-term debt and capital
    lease obligations |                   |       |     |        |   |         | 27.8       |              |   |            | 0.1   |  |              |         | 3.6   |       |   |          |     |   |   |         | 31.5  | 
|                                                         | Accounts payable                                                       |                   |       |     |        |   |         | 46.0       |              |   |            | 301.4 |  |              |         | 291.5 |       |   |          |     |   |   |         | 638.9 | 
|                                                         | Accrued expenses                                                       |                   |       |     |        |   |         | 146.9      |              |   |            | 2.2   |  |              |         | 90.4  |       |   |          | (0.6 | ) |   |         | 238.9 | 
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total current liabilities                                |                                                                        |                   |      |      |        |   | 220.7   |            |              |   | 303.7      |       |  |              | 401.5   |       |       |   | (0.6     | )    |   |   | 925.3   |      
|Long-term debt and capital lease obligations             |                                                                        |                   |      |      |        |   | 1,230.1 |            |              |   |           |       |  |              | 7.6     |       |       |   |         |      |   |   | 1,237.7 |      
|Mandatorily redeemable preferred stock of
    subsidiary |                                                                        |                   |      |      |        |   | 161.2   |            |              |   |           |       |  |              |        |       |       |   |         |      |   |   | 161.2   |      
|Intercompany payable (receivable)                        |                                                                        |                   |      |      |        |   | (317.3  | )          |              |   | (215.7     | )     |  |              | 533.0   |       |       |   |         |      |   |   |        |      
|Other noncurrent liabilities                             |                                                                        |                   |      |      |        |   | 243.8   |            |              |   | 74.9       |       |  |              | 108.0   |       |       |   |         |      |   |   | 426.7   |      
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total liabilities                                        |                                                                        |                   |      |      |        |   | 1,538.5 |            |              |   | 162.9      |       |  |              | 1,050.1 |       |       |   | (0.6     | )    |   |   | 2,750.9 |      
|Total common stockholders equity (deficit)              |                                                                        |                   | 439.7 |      |        |   | 439.7   |            |              |   | 1,458.1    |       |  |              | 193.1   |       |       |   | (2,090.3 | )    |   |   | 440.3   |      
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|                                                         |                                                                        | $                 | 439.7 |      |        | $ | 1,978.2 |            |              | $ | 1,621.0    |       |  | $            | 1,243.2 |       |       | $ | (2,090.9 | )    |   | $ | 3,191.2 |      
|                                                         |                                                                        |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  

F-55



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS



CONSOLIDATING BALANCE
SHEET


|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |   |          |     |  |   |         |       | 
|-------------------------------------------------------- | ------------------------------------ | ----------------- | ----- | ---- | ------ | - | ------- | ---------- | ------------ | - | ---------- | ----- |  | ------------ | ------- | ----- | ----- | - | -------- | --- |  | - | ------- | ----- | 
|                                                         |                                      |                  
|                                                         |                                      | December 31, 2002 |      
|                                                         |                                      |                   |      
|                                                         |                                      |                   |       | Non- |        |   |         |            | Consolidated |  
|                                                         |                                      | Parent            |       |      | Issuer |   |         | Guarantors |              |   | Guarantors |       |  | Eliminations |         |       | Total |  
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|                                                         |                                      |                  
|                                                         |                                      | (in millions)     |      
|ASSETS                                                  
|Current Assets:                                          |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |   |          |     |  |   |         |      
|                                                         | Cash and cash equivalents            |                   | $     |     |        |   | $       | 0.2        |              |   | $          | 0.3   |  |              | $       | 80.8  |       |   | $        |    |  |   | $       | 81.3  | 
|                                                         | Accounts and other receivables, net  |                   |       |     |        |   |         | 5.0        |              |   |            | 40.7  |  |              |         | 324.4 |       |   |          | 2.9 |  |   |         | 373.0 | 
|                                                         | Inventories                          |                   |       |     |        |   |         | 13.0       |              |   |            | 106.7 |  |              |         | 51.9  |       |   |          |    |  |   |         | 171.6 | 
|                                                         | Other                                |                   |       |     |        |   |         | 51.4       |              |   |            | 75.5  |  |              |         | 50.5  |       |   |          |    |  |   |         | 177.4 | 
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total current assets                                     |                                      |                   |      |      |        |   | 69.6    |            |              |   | 223.2      |       |  |              | 507.6   |       |       |   | 2.9      |     |  |   | 803.3   |      
|Investment in subsidiaries                               |                                      |                   | 397.5 |      |        |   | 1,794.5 |            |              |   | (54.8      | )     |  |              |        |       |       |   | (2,137.2 | )   |  |   |        |      
|Property, plant and equipment, net                       |                                      |                   |      |      |        |   | 51.2    |            |              |   | 316.9      |       |  |              | 370.4   |       |       |   | (0.7     | )   |  |   | 737.8   |      
|Goodwill                                                 |                                      |                   |      |      |        |   |        |            |              |   | 1,144.8    |       |  |              | 120.7   |       |       |   |         |     |  |   | 1,265.5 |      
|Other assets                                             |                                      |                   |      |      |        |   | 212.3   |            |              |   | 85.8       |       |  |              | 52.4    |       |       |   |         |     |  |   | 350.5   |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|                                                         |                                      | $                 | 397.5 |      |        | $ | 2,127.6 |            |              | $ | 1,715.9    |       |  | $            | 1,051.1 |       |       | $ | (2,135.0 | )   |  | $ | 3,157.1 |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|LIABILITIES & STOCKHOLDERS EQUITY
    (DEFICIT)        
|Current Liabilities:                                     |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |   |          |     |  |   |         |      
|                                                         | Short-term borrowings                |                   |       |     |        |   |         |           |              |   |            |      |  |              |         | 10.5  |       |   |          |    |  |   |         | 10.5  | 
|                                                         | Current maturities of long-term debt |                   |       |     |        |   |         | 22.7       |              |   |            | 0.1   |  |              |         | 0.7   |       |   |          |    |  |   |         | 23.5  | 
|                                                         | Accounts payable                     |                   |       |     |        |   |         | 73.5       |              |   |            | 269.7 |  |              |         | 252.3 |       |   |          |    |  |   |         | 595.5 | 
|                                                         | Accrued expenses                     |                   |       |     |        |   |         | 142.5      |              |   |            | 50.8  |  |              |         | 106.6 |       |   |          |    |  |   |         | 299.9 | 
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total current liabilities                                |                                      |                   |      |      |        |   | 238.7   |            |              |   | 320.6      |       |  |              | 370.1   |       |       |   |         |     |  |   | 929.4   |      
|Long-term debt                                           |                                      |                   |      |      |        |   | 1,255.0 |            |              |   | 0.1        |       |  |              | 0.1     |       |       |   |         |     |  |   | 1,255.2 |      
|Intercompany payable (receivable)                        |                                      |                   |      |      |        |   | (92.1   | )          |              |   | (359.9     | )     |  |              | 452.0   |       |       |   |         |     |  |   |        |      
|Other noncurrent liabilities                             |                                      |                   |      |      |        |   | 204.6   |            |              |   | 140.8      |       |  |              | 105.7   |       |       |   |         |     |  |   | 451.1   |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total liabilities                                        |                                      |                   |      |      |        |   | 1,606.2 |            |              |   | 101.6      |       |  |              | 927.9   |       |       |   |         |     |  |   | 2,635.7 |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Mandatorily redeemable preferred stock of
    subsidiary |                                      |                   |      |      |        |   | 123.9   |            |              |   |           |       |  |              |        |       |       |   |         |     |  |   | 123.9   |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|Total common stockholders equity (deficit)              |                                      |                   | 397.5 |      |        |   | 397.5   |            |              |   | 1,614.3    |       |  |              | 123.2   |       |       |   | (2,135.0 | )   |  |   | 397.5   |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  
|                                                         |                                      | $                 | 397.5 |      |        | $ | 2,127.6 |            |              | $ | 1,715.9    |       |  | $            | 1,051.1 |       |       | $ | (2,135.0 | )   |  | $ | 3,157.1 |      
|                                                         |                                      |                   |       |      |        |   |         |            |              |   |            |       |  |              |         |       |       |  

F-56



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

CONSOLIDATING STATEMENT OF
CASH FLOWS

|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |   |   |   |   |   |       |        |        |  
|---------------------------------------------------- | -------------------------------------------------------------- | ------------------------------------------------------- | - | ------ | - | - | ---------- | ------ | ------------ | ---------- | ---- | ------ | ------------ | - | ----- | ----- | ----- | - | - | - | - | - | ----- | ------ | ------ | -
|                                                     |                                                                |                                                        
|                                                     |                                                                | For the Year Ended December 31, 2003                    |  
|                                                     |                                                                |                                                         |  
|                                                     |                                                                |                                                         |   | Non-   |   |   |            |        | Consolidated |           
|                                                     |                                                                | Parent                                                  |   | Issuer |   |   | Guarantors |        |              | Guarantors |      |        | Eliminations |   | Total |      
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |      
|                                                     |                                                                |                                                        
|                                                     |                                                                | (in millions)                                           |  
|                                                     |                                                                |                                                        
|OPERATING ACTIVITIES                                 |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |   |   |   |   |   |       |       
|                                                     | Net cash provided by (used in) operating
    activities        |                                                         | $ |       |   |   | $          | (256.7 | )            |            | $    | 339.2  |              |   | $     | 40.4  |       |   | $ |  |   |   | $     | 122.9  |       
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |  
|INVESTING ACTIVITIES                                 |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |   |   |   |   |   |       |       
|                                                     | Additions to property, plant and equipment                     |                                                         |   |       |   |   |            | (13.8  | )            |            |      | (84.3  | )            |   |       | (77.0 | )     |   |   |  |   |   |       | (175.1 | )     
|                                                     | Sales of property, plant and equipment                         |                                                         |   |       |   |   |            |       |              |            |      | 0.6    |              |   |       | 17.7  |       |   |   |  |   |   |       | 18.3   |       
|                                                     | Payments for acquisitions and related costs                    |                                                         |   |       |   |   |            |       |              |            |      | (33.1  | )            |   |       |      |       |   |   |  |   |   |       | (33.1  | )     
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |  
|                                                     |                                                                | Net cash provided by (used in) investing
    activities |   |        |  |   |            |        | (13.8        | )          |      |        | (116.8       | ) |       |       | (59.3 | ) |   |   |  |   |       |        | (189.9 | )
|FINANCING ACTIVITIES                                 |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |   |   |   |   |   |       |       
|                                                     | Issuance of long-term debt and capital lease
    obligations   |                                                         |   |       |   |   |            | 1.8    |              |            |      |       |              |   |       | 11.3  |       |   |   |  |   |   |       | 13.1   |       
|                                                     | Repayment of long-term debt and capital lease
    obligations  |                                                         |   |       |   |   |            | (27.9  | )            |            |      | (0.1   | )            |   |       | (0.9  | )     |   |   |  |   |   |       | (28.9  | )     
|                                                     | Increase (decrease) in short-term borrowings                   |                                                         |   |       |   |   |            |       |              |            |      |       |              |   |       | 4.7   |       |   |   |  |   |   |       | 4.7    |       
|                                                     | Net borrowings (repayments) on revolving
    credit facilities |                                                         |   |       |   |   |            |       |              |            |      |       |              |   |       | 6.3   |       |   |   |  |   |   |       | 6.3    |       
|                                                     | Intercompany transfers (from) to Subsidiary                    |                                                         |   |       |   |   |            | 225.2  |              |            |      | (144.2 | )            |   |       | (81.0 | )     |   |   |  |   |   |       |       |       
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |  
|                                                     |                                                                | Net cash provided by (used in) financing
    activities |   |        |  |   |            |        | 199.1        |            |      |        | (144.3       | ) |       |       | (59.6 | ) |   |   |  |   |       |        | (4.8   | )
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |  
|                                                     |                                                                | Effect of exchange rate changes on cash                 |   |        |  |   |            |        |             |            |      |        |             |   |       |       | 3.7   |   |   |   |  |   |       |        | 3.7    |  
|Increase (decrease) in cash and cash
    equivalents |                                                                |                                                         |  |        |   |   | (71.4      | )      |              |            | 78.1 |        |              |   | (74.8 | )     |       |   |  |   |   |   | (68.1 | )     
|Cash and cash equivalents at beginning of year       |                                                                |                                                         |  |        |   |   | 0.2        |        |              |            | 0.3  |        |              |   | 80.8  |       |       |   |  |   |   |   | 81.3  |       
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |  
|Cash and cash equivalents at end of year             |                                                                | $                                                       |  |        |   | $ | (71.2      | )      |              | $          | 78.4 |        |              | $ | 6.0   |       |       | $ |  |   |   | $ | 13.2  |       
|                                                     |                                                                |                                                         |   |        |   |   |            |        |              |            |      |        |              |   |       |       |       |  

F-57



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES


SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

CONSOLIDATING STATEMENT OF
CASH FLOWS  (Continued)

|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |   |   |   |   |   |      |        |        |  
|---------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ---------- | ------------ | - | ---------- | ------ | ------ | ------------ | ---- | ------ | ------ | - | - | - | - | - | ---- | ------ | ------ | -
|                                                     |                                                         |                                                        
|                                                     |                                                         | For the Year Ended December 31, 2002                    |     
|                                                     |                                                         |                                                         |     
|                                                     |                                                         |                                                         |      | Non-   |        |   |      |            | Consolidated |  
|                                                     |                                                         | Parent                                                  |      |        | Issuer |   |      | Guarantors |              |   | Guarantors |        |        | Eliminations |      | Total  |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |       
|                                                     |                                                         |                                                        
|                                                     |                                                         | (in millions)                                           |     
|OPERATING ACTIVITIES                                 |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |   |   |   |   |   |      |       
|                                                     | Net cash provided by (used in) operating
    activities |                                                         | $    | (0.2   | )      |   | $    | 24.0       |              |   | $          | (271.3 | )      |              | $    | 436.9  |        |   | $ |  |   |   | $    | 189.4  |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |  
|INVESTING ACTIVITIES                                 |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |   |   |   |   |   |      |       
|                                                     | Additions to property, plant and equipment              |                                                         |      |       |        |   |      | (31.2      | )            |   |            | (71.9  | )      |              |      | (44.8  | )      |   |   |  |   |   |      | (147.9 | )     
|                                                     | Sales of property, plant and equipment                  |                                                         |      |       |        |   |      |           |              |   |            | 13.3   |        |              |      |       |        |   |   |  |   |   |      | 13.3   |       
|                                                     | Additional investment in joint venture                  |                                                         |      |       |        |   |      |           |              |   |            |       |        |              |      | (5.9   | )      |   |   |  |   |   |      | (5.9   | )     
|                                                     | Payment for acquisitions and related costs              |                                                         |      |       |        |   |      |           |              |   |            | (46.4  | )      |              |      | 0.8    |        |   |   |  |   |   |      | (45.6  | )     
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |  
|                                                     |                                                         | Net cash used in investing activities                   |      |        |       |   |      |            | (31.2        | ) |            |        | (105.0 | )            |      |        | (49.9  | ) |   |   |  |   |      |        | (186.1 | )
|FINANCING ACTIVITIES                                 |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |   |   |   |   |   |      |       
|                                                     | Repayment of long-term debt                             |                                                         |      |       |        |   |      | (22.4      | )            |   |            | (0.1   | )      |              |      | (1.4   | )      |   |   |  |   |   |      | (23.9  | )     
|                                                     | Repayment of preferred stock                            |                                                         |      |       |        |   |      | (100.0     | )            |   |            |       |        |              |      |       |        |   |   |  |   |   |      | (100.0 | )     
|                                                     | Decrease in short-term borrowings                       |                                                         |      |       |        |   |      |           |              |   |            |       |        |              |      | (16.0  | )      |   |   |  |   |   |      | (16.0  | )     
|                                                     | Net proceeds from issuance of common stock              |                                                         |      | 150.6  |        |   |      |           |              |   |            |       |        |              |      |       |        |   |   |  |   |   |      | 150.6  |       
|                                                     | Repayment of debt assumed in acquisition                |                                                         |      |       |        |   |      | (6.7       | )            |   |            |       |        |              |      |       |        |   |   |  |   |   |      | (6.7   | )     
|                                                     | Intercompany transfers (from) to Subsidiary             |                                                         |      | (150.6 | )      |   |      | 140.3      |              |   |            | 364.0  |        |              |      | (353.7 | )      |   |   |  |   |   |      |       |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |  
|                                                     |                                                         | Net cash provided by (used in) financing
    activities |      |        |       |   |      |            | 11.2         |   |            |        | 363.9  |              |      |        | (371.1 | ) |   |   |  |   |      |        | 4.0    |  
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |  
|                                                     |                                                         | Effect of exchange rate changes on cash                 |      |        |       |   |      |            |             |   |            |        |       |              |      |        | 0.1    |   |   |   |  |   |      |        | 0.1    |  
|Increase (decrease) in cash and cash
    equivalents |                                                         |                                                         | (0.2 | )      |        |   | 4.0  |            |              |   | (12.4      | )      |        |              | 16.0 |        |        |   |  |   |   |   | 7.4  |       
|Cash and cash equivalents at beginning of year       |                                                         |                                                         | 0.2  |        |        |   | (3.8 | )          |              |   | 12.7       |        |        |              | 64.8 |        |        |   |  |   |   |   | 73.9 |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |  
|Cash and cash equivalents at end of year             |                                                         | $                                                       |     |        |        | $ | 0.2  |            |              | $ | 0.3        |        |        | $            | 80.8 |        |        | $ |  |   |   | $ | 81.3 |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |        |        |  

F-58



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL GUARANTOR
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS



CONSOLIDATING STATEMENT OF
CASH FLOWS


|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |   |   |   |   |   |      |        |        |  
|---------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ---------- | ------------ | - | ---------- | ------ | ------ | ------------ | ---- | ----- | ------ | - | - | - | - | - | ---- | ------ | ------ | -
|                                                     |                                                         |                                                        
|                                                     |                                                         | For the Year Ended December 31, 2001                    |     
|                                                     |                                                         |                                                         |     
|                                                     |                                                         |                                                         |      | Non-   |        |   |      |            | Consolidated |  
|                                                     |                                                         | Parent                                                  |      |        | Issuer |   |      | Guarantors |              |   | Guarantors |        |        | Eliminations |      | Total |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |       
|                                                     |                                                         |                                                        
|                                                     |                                                         | (in millions)                                           |     
|OPERATING ACTIVITIES                                 |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |   |   |   |   |   |      |       
|                                                     | Net cash provided by (used in) operating
    activities |                                                         | $    | (0.3   | )      |   | $    | (266.6     | )            |   | $          | 237.6  |        |              | $    | 166.4 |        |   | $ |  |   |   | $    | 137.1  |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  
|INVESTING ACTIVITIES                                 |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |   |   |   |   |   |      |       
|                                                     | Additions to property, plant and equipment              |                                                         |      |       |        |   |      | (14.8      | )            |   |            | (14.5  | )      |              |      | (25.2 | )      |   |   |  |   |   |      | (54.5  | )     
|                                                     | Sales of property, plant and equipment                  |                                                         |      |       |        |   |      | 62.2       |              |   |            | 24.0   |        |              |      | 1.9   |        |   |   |  |   |   |      | 88.1   |       
|                                                     | Payments for acquisitions and related costs             |                                                         |      |       |        |   |      | (760.9     | )            |   |            |       |        |              |      |      |        |   |   |  |   |   |      | (760.9 | )     
|                                                     | Sale of business                                        |                                                         |      |       |        |   |      |           |              |   |            | 3.5    |        |              |      |      |        |   |   |  |   |   |      | 3.5    |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  
|                                                     |                                                         | Net cash provided by (used in) investing
    activities |      |        |       |   |      |            | (713.5       | ) |            |        | 13.0   |              |      |       | (23.3  | ) |   |   |  |   |      |        | (723.8 | )
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  
|FINANCING ACTIVITIES                                 |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |   |   |   |   |   |      |       
|                                                     | Issuance of long-term debt                              |                                                         |      |       |        |   |      | 950.0      |              |   |            |       |        |              |      |      |        |   |   |  |   |   |      | 950.0  |       
|                                                     | Debt issuance costs                                     |                                                         |      |       |        |   |      | (59.4      | )            |   |            |       |        |              |      |      |        |   |   |  |   |   |      | (59.4  | )     
|                                                     | Repayment of long-term debt                             |                                                         |      |       |        |   |      | (383.2     | )            |   |            |       |        |              |      |      |        |   |   |  |   |   |      | (383.2 | )     
|                                                     | Increase (decrease) in short-term borrowings            |                                                         |      |       |        |   |      | 9.7        |              |   |            | 2.0    |        |              |      | (1.6  | )      |   |   |  |   |   |      | 10.1   |       
|                                                     | Net repayments on revolving credit facilities           |                                                         |      |       |        |   |      | (133.4     | )            |   |            |       |        |              |      | (16.8 | )      |   |   |  |   |   |      | (150.2 | )     
|                                                     | Net proceeds from issuance of common stock              |                                                         |      | 207.2  |        |   |      |           |              |   |            |       |        |              |      |      |        |   |   |  |   |   |      | 207.2  |       
|                                                     | Reissue treasury stock, net                             |                                                         |      | 61.3   |        |   |      |           |              |   |            |       |        |              |      |      |        |   |   |  |   |   |      | 61.3   |       
|                                                     | Intercompany transfers (from) to Subsidiary             |                                                         |      | (268.5 | )      |   |      | 596.8      |              |   |            | (240.9 | )      |              |      | (87.4 | )      |   |   |  |   |   |      |       |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  
|                                                     |                                                         | Net cash provided by (used in) financing
    activities |      |        |       |   |      |            | 980.5        |   |            |        | (238.9 | )            |      |       | (105.8 | ) |   |   |  |   |      |        | 635.8  |  
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  
|                                                     |                                                         | Effect of exchange rate changes on cash                 |      |        |       |   |      |            |             |   |            |        |       |              |      |       | 3.9    |   |   |   |  |   |      |        | 3.9    |  
|Increase (decrease) in cash and cash
    equivalents |                                                         |                                                         | (0.3 | )      |        |   | 0.4  |            |              |   | 11.7       |        |        |              | 41.2 |       |        |   |  |   |   |   | 53.0 |       
|Cash and cash equivalents at beginning of year       |                                                         |                                                         | 0.5  |        |        |   | (4.2 | )          |              |   | 1.0        |        |        |              | 23.6 |       |        |   |  |   |   |   | 20.9 |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  
|Cash and cash equivalents at end of year             |                                                         | $                                                       | 0.2  |        |        | $ | (3.8 | )          |              | $ | 12.7       |        |        | $            | 64.8 |       |        | $ |  |   |   | $ | 73.9 |       
|                                                     |                                                         |                                                         |      |        |        |   |      |            |              |   |            |        |        |              |      |       |        |  

F-59



---



##### 



COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



SCHEDULE I 
CONDENSED FINANCIAL INFORMATION OF REGISTRANT


The information required under this Schedule is
included in Note 23 of the Consolidated Financial Statements.

COLLINS & AIKMAN
CORPORATION AND SUBSIDIARIES



SCHEDULE II 
VALUATION AND QUALIFYING ACCOUNTS


For the Fiscal Years Ended December 31,
2003, December 31, 2002, and December 31,
2001


|                                         |  |               |      |           |              |   |     |           |  |   |          |  |  |            |      |            |             |   |       |   |  |   |      | 
|---------------------------------------- |  | ------------- | ---- | --------- | ------------ | - | --- | --------- |  | - | -------- |  |  | ---------- | ---- | ---------- | ----------- | - | ----- | - |  | - | ---- | 
|                                         |  |               |      | Additions |              |   |     |           |  |   |          |  | 
|                                         |  | Balance At    |      |           | Resulting    |   |     | Charge to |  |   | Charged  |  |  |            |      |           
|                                         |  | Beginning     |      |           | from         |   |     | Cost and  |  |   | to Other |  |  |            |      | Balance at |            
|Description                              |  | of Year       |      |           | Acquisitions |   |     | Expenses  |  |   | Accounts |  |  | Deductions |      |            | End of Year |  
|                                         |  |               |      |           |              |   |     |           |  |   |          |  |  |            |      |            |             |  
|                                         |  |              
|                                         |  | (in millions) |     
|Fiscal Year Ended
    December 31, 2003: |  |               |      |           |              |   |     |           |  |   |          |  |  |            |      |            |             |   |       |   |  |   |      | 
|Allowance for doubtful accounts          |  | $             | 18.6 |           |              | $ |    |           |  | $ | 1.5      |  |  | $          |     |            |             | $ | (10.9 | ) |  | $ | 9.2  | 
|Fiscal Year Ended December 31,
    2002: |  |               |      |           |              |   |     |           |  |   |          |  |  |            |      |            |             |   |       |   |  |   |      | 
|Allowance for doubtful accounts          |  | $             | 14.6 |           |              | $ |    |           |  | $ | 2.5      |  |  | $          | 4.8  |            |             | $ | (3.3  | ) |  | $ | 18.6 | 
|Fiscal Year Ended December 31,
    2001: |  |               |      |           |              |   |     |           |  |   |          |  |  |            |      |            |             |   |       |   |  |   |      | 
|Allowance for doubtful accounts          |  | $             | 8.1  |           |              | $ | 6.8 |           |  | $ | 6.6      |  |  | $          | (0.3 | )(a)       |             | $ | (6.6  | ) |  | $ | 14.6 | 



---



|    |                                                                         
|--- | ------------------------------------------------------------------------
|(a) | Reclassifications and collection of accounts
    previously written off.

S-1



---



##### 



Exhibit Index

|        |     |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | --- |  | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |  |            
|Number  |     |  | Description
|        |     |  |            
|        | 2.1 |  |             | Agreement and Plan of Merger dated May 14,
    2001 by and among Collins & Aikman Corporation,
    Collins & Aikman Products Co., Becker Group, L.L.C., CE
    Becker Inc., ME McInerney Inc., J Hoehnel Inc. and the
    individuals party thereto as sellers is hereby incorporated by
    reference to Exhibit 2.1 of Collins & Aikman
    Corporations Current Report on Form 8-K dated and filed
    July 13, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 2.2 |  |             | Agreement and Plan of Merger dated as of
    August 17, 2001 by and among Collins & Aikman
    Corporation, Collins & Aikman Products Co., JAII
    Acquisition Co., Elkin McCallum, Joan Fabrics Corporation
    and Joan Automotive Industries, Inc is hereby
    incorporated by reference to Exhibit 2.1 of
    Collins & Aikman Corporations Current Report on
    Form 8-K dated September 21, 2001 and filed
    October 10, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 2.3 |  |             | First Amendment to Agreement and Plan of Merger
    by and among Collins & Aikman Corporation,
    Collins & Aikman Products Co., JAII Acquisition Co.,
    Elkin McCallum, Joan Fabrics Corporation and
    Joan Automotive Industries, Inc dated as of
    September 21, 2001 is hereby incorporated by reference to
    Exhibit 2.2 of Collins & Aikman Corporations
    Current Report on Form 8-K dated September 21, 2001 and
    filed October 10, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 2.4 |  |             | Second Amendment to the Receivables Transfer
    Agreement among Collins & Aikman Products Co.,
    Carcorp, Inc., the conduit purchasers party thereto from
    time to time, the committed purchasers party thereto from time
    to time, the funding agents party thereto from time to time and
    JPMorgan Chase Bank, as administrative agent, dated as of
    December 18, 2003 to the Receivables Transfer Agreement,
    dated December 20, 2001, as amended and restated as of
    September 24, 2002.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 2.5 |  |             | Purchase Agreement dated as of August 7,
    2001, as amended and restated as of November 30, 2001, by
    and among Textron Inc., Collins & Aikman Corporation
    and Collins & Aikman Products Co., including
    Exhibit 1 (Certificate of Designation of the 15%
    Series A Redeemable Preferred Stock, the 16% Series B
    Redeemable Preferred Stock and the 16% Series C Redeemable
    Preferred Stock) and Exhibit 7 (Asset Purchase Agreement
    dated as of August 7 by and between Textron Automotive Exteriors
    Inc. and JPS Automotive, Inc.), which is incorporated by
    reference to Collins and Aikman Corporation Current Report on
    Form 8-k dated December 20, 2001 and filed on
    January 4, 2002. The Table of Contents of the Purchase
    Agreement listed as Exhibit 2.4 contains a list briefly
    identifying the contents of all omitted schedules and exhibits.
    Collins & Aikman Corporation will supplementally
    furnish a copy of any omitted schedule or Exhibit to the
    Commission upon request.
|        | 2.6 |  |             | Asset Purchase Agreement dated as of
    August 7, 2001, as amended and restated as of
    November 30, 2001, by and between Textron Automotive
    Exteriors Inc. and JPS Automotive, Inc., which is
    incorporated herein by reference to Exhibit 2.2 of
    Collins & Aikman Corporations Current Report on
    Form 8-K dated December 20, 2001 and filed on
    January 4, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 2.7 |  |             | Asset Purchase Agreement dated as of
    August 17, 2001 by and among Collins & Aikman
    Products Co., Western Avenue Dyers, L.P., Elkin McCallum, Kerry
    McCallum, Penny Richards and Tyng Textiles LLC, which is
    incorporated by reference to Exhibit 2.3 to
    Collins & Aikman Corporations Current Report on
    Form 8-K filed on October 4, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 2.8 |  |             | First Amendment to Asset Purchase Agreement dated
    as of September 21, 2001, which is incorporated by
    reference to Exhibit 2.4 to Collins & Aikman
    Corporations Current Report on Form 8-K filed on
    October 4, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.1 |  |             | Restated Certificate of Incorporation of
    Collins & Aikman Corporation is hereby incorporated by
    reference to Exhibit 3.1 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended June 26, 1999 and filed August 10, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 3.2 |  |             | Certificate of Amendment to the Restated
    Certificate of Incorporation of Collins & Aikman
    Corporation, which is incorporated by reference to
    Exhibit 3.2 of Collins & Aikman Corporations
    Annual Report on Form 10-K for the fiscal year ended
    December 31, 2000 and filed April 2, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

S-2



---



##### 



|        |     |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | --- |  | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |  |            
|Number  |     |  | Description
|        |     |  |            
|        | 3.3 |  |             | Certificate of Amendment of Amended and Restated
    Certificate of Incorporation is hereby incorporated by reference
    to Exhibit 3.5 of Collins & Aikman
    Corporations Current Report on Form 8-K filed May 29,
    2002.                                                                                                                                                                                                                                                                                                            
|        | 3.4 |  |             | By-laws of Collins & Aikman Corporation,
    as amended, are hereby incorporated by reference to
    Exhibit 3.2 of Collins & Aikman Corporations
    Report on Form 10-K for the fiscal year ended January 27,
    1996 and filed April 22, 1996.                                                                                                                                                                                                                                                                                          
|        | 3.5 |  |             | Certificate of Elimination of Cumulative
    Exchangeable Redeemable Preferred Stock of Collins &
    Aikman Corporation is hereby incorporated by reference to
    Exhibit 3.3 of Collins & Aikman Corporations
    Report on Form 10-Q for the fiscal quarter ended
    October 28, 1995 and filed December 8, 1995.                                                                                                                                                                                                                      
|        | 4.1 |  |             | Specimen Stock Certificate for the Common Stock
    is hereby incorporated by reference to Exhibit 4.3 of
    Amendment No. 3 to Collins & Aikman Holdings
    Corporations Registration Statement on Form S-2
    (Registration No. 33-53179) filed June 21, 1994.                                                                                                                                                                                                                                                                         
|        | 4.2 |  |             | Indenture, dated as of June 1, 1996, between
    Collins & Aikman Products Co., Collins &
    Aikman Corporation and First Union National Bank of North
    Carolina, as Trustee, is hereby incorporated by reference to
    Exhibit 4.2 of Collins & Aikman Corporations
    Report on Form 10-Q for the fiscal quarter ended April 27,
    1996 and filed June 11, 1996.                                                                                                                                                                  
|        | 4.3 |  |             | First Supplemental Indenture dated as of
    June 1, 1996, between Collins & Aikman Products
    Co., Collins & Aikman Corporation and First Union
    National Bank of North Carolina, as Trustee, is hereby
    incorporated by reference to Exhibit 4.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the fiscal quarter ended April 27, 1996 and filed
    June 11, 1996.                                                                                                                                            
|        | 4.4 |  |             | Second Supplemental Indenture, dated as of
    February 8, 2001, by and among Collins & Aikman
    Products Co., as Issuer, Collins & Aikman Corporation,
    as Guarantor, and First Union National Bank, as Trustee, which
    is incorporated by reference to Exhibit 4.11 of
    Collins & Aikman Corporations Annual Report on
    Form 10-K for the fiscal year ended December 31, 2000 and
    filed April 1, 2002.                                                                                                                  
|        | 4.5 |  |             | Form of Warrant is hereby incorporated by
    reference to Exhibit 4.1 of Collins & Aikman
    Corporations Current Report on Form 8-K dated and filed
    July 13, 2001.                                                                                                                                                                                                                                                                                                                                                                   
|        | 4.6 |  |             | Certificate of Designation of Series A
    Redeemable Preferred Stock, Series B Redeemable Preferred
    Stock and Series C Redeemable Preferred Stock, which is
    incorporated herein by reference to Exhibit 4.1 of
    Collins & Aikman Corporations Current Report of
    Form 8-K dated December 20, 2001 and filed on
    January 4, 2002.                                                                                                                                                                                          
|        | 4.7 |  |             | Indenture dated as of December 20, 2001 by
    and among Collins & Aikman Products Co., as Issuer, the
    Guarantors parties thereto, and BNY Midwest Trust Company, as
    Trustee, which is incorporated herein by reference to
    Exhibit 4.2 of Collins & Aikman Corporations
    Current Report on Form 8-K dated December 20, 2001 and
    filed on January 4, 2002.                                                                                                                                                                
|        | 4.8 |  |             | Receivables Transfer Agreement dated as of
    December 20, 2001 by and among Carcorp, Inc., as
    Transferor, Collins & Aikman Products Co., individually
    and as Collection Agent, the persons parties thereto, as CP
    Conduit Purchasers, Committed Purchasers and Funding Agents and
    JPMorgan Chase Bank, as Administrative Agent, which is
    incorporated herein by reference to Exhibit 4.3 of
    Collins & Aikman Corporations Current Report on
    Form 8-K dated December 20, 2001 and filed on
    January 4, 2002.
|        | 4.9 |  |             | Amended and Restated Receivables Purchase
    Agreement dated as of December 20, 2001 among
    Collins & Aikman Products Co. and its wholly-owned
    direct and indirect subsidiaries named therein, as Sellers, and
    Carcorp, Inc., as Purchaser, and the other Sellers from
    time to time named therein, which is incorporated herein by
    reference to Exhibit 4.4 of Collins & Aikman
    Corporations Current Report on Form 8-K dated
    December 20, 2001 and filed on January 4, 2002.                                   

S-3



---



##### 



|        |      |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ---- |  | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |            
|Number  |      |  | Description
|        |      |  |            
|        | 4.10 |  |             | Credit Agreement dated as of December 20,
    2001 among Collins & Aikman Products Co., as Borrower,
    Collins & Aikman Canada Inc., as a Canadian Borrower,
    Collins & Aikman Plastics, Ltd., as a Canadian
    Borrower, Collins & Aikman Corporation, the Lenders
    named therein, Deutsche Banc Alex. Brown Inc. and Merrill Lynch
    Capital Corporation, as Co-Documentation Agents, Credit Suisse
    First Boston Corporation, as Syndication Agent, JPMorgan Chase
    Bank, as Administrative Agent, and J.P.Morgan Bank Canada, as
    Canadian Administrative Agent, which is incorporated herein by
    reference to Exhibit 4.5 of Collins & Aikman
    Corporations Current Report on Form 8-K dated
    December 20, 2001 and filed on January 4, 2002.                                                                                    
|        | 4.11 |  |             | First Amendment dated as of December 13,
    2002, to the Credit Agreement dated as of December 20, 2001
    among Collins & Aikman Products Co., as Borrower,
    Collins & Aikman Canada Inc., as a Canadian Borrower,
    Collins & Aikman Plastics, Ltd., as a Canadian
    Borrower, Collins & Aikman Corporation, the Lenders
    named therein, Credit Suisse First Boston Corporation, as
    Syndication Agent, Deutsche Bank Securities Inc. (formerly known
    as Deutsche Banc Alex. Brown Inc.) and Merrill Lynch Capital
    Corporation, as Co-Documentation Agents, JPMorgan Chase Bank, as
    Administrative Agent, and J.P. Morgan Bank Canada, as
    Canadian Administrative Agent is hereby incorporated by
    reference to Exhibit 4.17 of Collins & Aikman
    Corporations report on Form 10-K for the year ended
    December 31, 2002.
|        | 4.12 |  |             | Second Amendment dated May 2, 2003 to the
    Credit Agreement dated December 20, 2001 which is
    incorporated herein by reference to Exhibit 10.1 of
    Collins & Aikman Corporations Report on Form 10-Q
    dated March 31, 2003 and filed on May 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4.13 |  |             | Third Amendment dated September 23, 2003 to
    the Credit Agreement dated December 20, 2001 which is
    incorporated herein by reference to Exhibit 4.2 of
    Collins & Aikman Corporations Report on Form 10-Q
    dated September 30, 2003 and filed on November 11,
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4.14 |  |             | Fourth Amendment dated October 7, 2003 to
    the Credit Agreement dated December 20, 2001 which is
    incorporated herein by reference to Exhibit 4.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    dated September 30, 2003 and filed on November 11,
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4.15 |  |             | Fifth Amendment dated February 13, 2004 to
    the Credit Agreement dated December 20, 2001.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4.16 |  |             | Guarantee and Collateral Agreement dated as of
    December 20, 2001 by and among Collins & Aikman
    Corporation, Collins & Aikman Products Co. and certain
    of their subsidiaries and JPMorgan Chase Bank, as Collateral
    Agent, which is incorporated herein by reference to
    Exhibit 4.6 of Collins & Aikman Corporations
    Current Report on Form 8-K dated December 20, 2001 and
    filed on January 4, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 4.17 |  |             | Third Supplemental Indenture, dated as of
    December 20, 2001, among Collins & Aikman Products
    Co., Collins & Aikman Corporation, the Subsidiary
    Guarantors listed on the signature page thereto, and First Union
    National Bank (as successor in interest to First Union National
    Bank of North Carolina), which is incorporated herein by
    reference to Exhibit 4.7 of Collins & Aikman
    Corporations Current Report on Form 8-K dated
    December 20, 2001 and filed on January 4, 2002.                                                                                                                                                                                                                                                                                                                                                
|        | 4.18 |  |             | Amendment and Waiver, dated August 26, 2003
    to the Receivables Transfer Agreement dated December 21,
    2001 which is incorporated herein by reference to
    Exhibit 4.1 of Collins & Aikman Corporations
    Report on Form 10-Q dated September 30, 2003 and filed on
    November 11, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 4.19 |  |             | Registration Rights Agreement, dated
    February 23, 2001, by and among Collins & Aikman
    Corporation, Heartland Industrial Partners, L.P. and the other
    investor stockholders listed on Schedule 1 thereto, Blackstone
    Capital Company II, L.L.C., Blackstone Family Investment
    Partnership I L.P., Blackstone Advisory Directors
    Partnership L.P., Blackstone Capital Partners, L.P. and
    Wasserstein/C&A Holdings, L.L.C., incorporated by reference
    to Annex D to Exhibit 10.1 to Collins &
    Aikman Corporations Current Report on Form 8-K dated
    January 12, 2001 and filed January 16, 2001.                                                                                                                                                                                                                               

S-4



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##### 



|        |      |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ---- |  | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |            
|Number  |      |  | Description
|        |      |  |            
|        | 4.20 |  |             | Stockholders Agreement dated July 3, 2001,
    by and among Collins & Aikman Corporation, Heartland
    Industrial Partners, L.P. and the other Heartland Entities named
    therein, the Becker Stockholders party thereto and the Joan
    Stockholders party thereto is hereby incorporated by reference
    to Exhibit 10.85 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                        
|        | 4.21 |  |             | Registration Rights Agreement, dated
    December 20, 2001, by and among Collins & Aikman
    Products Co., Collins & Aikman Corporation, and each of
    the subsidiaries listed on the signature pages thereof, and
    J.P. Morgan Securities Inc., Credit Suisse First Boston
    Corporation, Deutsche Banc Alex. Brown Inc. and Merrill Lynch,
    Pierce, Fenner & Smith Incorporated and the other
    several initial purchasers parties to the Purchase Agreement is
    hereby incorporated by reference to Exhibit 10.89 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.
|        | 4.22 |  |             | Registration Rights Agreement dated as of
    December 20, 2001 by and among Becker Ventures, LLC,
    Dresdner Kleinwort Capital Partners 2001 LP, Masco Capital
    Corporation, ML IBK Positions, Inc. and Collins &
    Aikman Corporation is hereby incorporated by reference to
    Exhibit 10.90 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                                                 
|        | 4.23 |  |             | Registration Rights Agreement, dated
    December 20, 2001, by and between Collins & Aikman
    Corporation, Textron Inc., and Textron Holdco Inc is hereby
    incorporated by reference to Exhibit 10.91 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.                                                                                                                                                                                                                                                                                                                          
|        | 4.24 |  |             | Preferred Stock Registration and Other Rights
    Agreement, dated as of December 20, 2001, by and among
    Collins & Aikman Products Co. and Textron Inc is hereby
    incorporated by reference to Exhibit 10.92 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.                                                                                                                                                                                                                                                                                                                 
|        | 10.1 |  |             | Employment Agreement, dated as of April 1,
    2000, between Collins & Aikman Products Co. and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.3 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended July 1, 2000.                                                                                                                                                                                                                                                                                                                                                                            
|        | 10.2 |  |             | 1993 Employee Stock Option Plan, as amended and
    restated, is hereby incorporated by reference to
    Exhibit 10.13 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended April 29, 1995.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10.3 |  |             | 1994 Employee Stock Option Plan, as amended
    through February 7, 1997, is hereby incorporated by
    reference to Exhibit 10.12 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended March 29, 1997.                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.4 |  |             | 2000 Employee Stock Option Plan is hereby
    incorporated by reference to Exhibit 10.6 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the fiscal quarter ended July 1, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.5 |  |             | 1994 Directors Stock Option Plan as amended and
    restated is hereby incorporated by reference to
    Exhibit 10.15 to Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 26, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.6 |  |             | 1994 Employee Stock Option Plan, as amended and
    restated through June 3, 1999 is hereby incorporated by
    reference to Exhibit 10.2 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended June 26, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.7 |  |             | Change in Control Agreement, dated March 17,
    1998, between Collins & Aikman Corporation and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.22 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended March 28, 1998.                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.8 |  |             | Change in Control Agreement, dated March 17,
    1998, between Collins & Aikman Corporation and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.29 of Collins & Aikman
    Corporations Report on Form 10-K for the fiscal year ended
    December 25, 1999.                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.9 |  |             | Change in Control Agreement, dated as of
    April 1, 2000, between Collins & Aikman Products
    Co. and an executive officer is hereby incorporated by reference
    to Exhibit 10.4 of Collins & Aikman
    Corporations Report on Form 10-Q for the fiscal quarter
    ended July 1, 2000.                                                                                                                                                                                                                                                                                                                                                                     

S-5



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##### 



|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----- |  | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |            
|Number  |       |  | Description
|        |       |  |            
|        | 10.10 |  |             | Stockholders Agreement, dated February 23,
    2001, by and among Collins & Aikman Corporation,
    Heartland Industrial Partners, L.P. and other investor
    stockholders listed on Schedule 1 thereto, Blackstone Capital
    Company II, L.L.C., Blackstone Family Investment
    Partnership I L.P., Blackstone Capital Partners L.P., and
    Wasserstein/C&A Holdings, L.L.C., incorporated by reference
    to Annex E to Exhibit 10.1 to Collins &
    Aikman Corporations Current Report on form 8-K dated
    January 12, 2001 and filed January 16, 2001.
|        | 10.11 |  |             | Share Purchase Agreement, dated as of
    January 12, 2001, between Collins & Aikman
    Corporation and Heartland Industrial Partners, L.P., is hereby
    incorporated by reference to Exhibit 10.1 of
    Collins & Aikman Corporations Report on Form 8-K
    dated January 12, 2001, incorporated by reference to
    Exhibit 10.1 to Collins & Aikman
    Corporations Current Report on Form 8-K dated
    January 12, 2001 and filed January 16, 2001.                                                                                                      
|        | 10.12 |  |             | Services Agreement, dated as of February 23,
    2001, by and among Collins & Aikman Corporation,
    Collins & Aikman Products Co. and Heartland Industrial
    Partners, L.P is hereby incorporated by reference to
    Exhibit 10.59 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                   
|        | 10.13 |  |             | Profit Participation Interest Agreement, dated as
    of February 23, 2001, by and among Heartland Industrial
    Partners, L.P. and the other investor stockholders listed on
    Schedule 1 thereto and each of Collins & Aikman
    Corporation, Blackstone Capital Company II, L.L.C. and
    Wasserstein/C&A Holdings, L.L.C., incorporated by reference
    to Annex B to Exhibit 10.1 to Collins &
    Aikman Corporations Current Report on Form 8-K dated
    January 12, 2001 and filed January 16, 2001.                                                  
|        | 10.14 |  |             | Severance Benefit Agreement dated August 9,
    1999 between Collins & Aikman Corporation and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.32 of Collins & Aikman
    Corporations Report on Form 10-K for the fiscal year ended
    December 25, 1999.                                                                                                                                                                                                                                                                            
|        | 10.15 |  |             | Employment Agreement dated December 1, 2000
    between Collins & Aikman Products Co. and an executive
    officer, which is incorporated by reference to
    Exhibit 10.75 of Collins & Aikman
    Corporations Annual Report on Form 10-K for the fiscal
    year ended December 31, 2000.                                                                                                                                                                                                                                                                         
|        | 10.16 |  |             | Employment Agreement dated as of April 1,
    2000, between Collins & Aikman Products Co. and an
    executive officer is hereby incorporated by reference to
    Exhibit 10.3 of Collins & Aikman
    Corporations Report on Form 10-Q for the quarter ended
    July 1, 2000.                                                                                                                                                                                                                                                                                      
|        | 10.17 |  |             | Service Contract between Collins &
    Aikman Products GmbH and an executive officer, which is
    incorporated by reference to Exhibit 10.5 of
    Collins & Aikman Corporations Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2001 and filed
    August 14, 2001.                                                                                                                                                                                                                                                                               
|        | 10.18 |  |             | Lease Agreement, dated as of June 29, 2001,
    between New King, L.L.C., as landlord, and Collins &
    Aikman Products Co., as tenant is hereby incorporated by
    reference to Exhibit 10.82 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                                                          
|        | 10.19 |  |             | Lease Agreement, dated as of June 29, 2001,
    between Anchor Court, L.L.C., as landlord and Collins &
    Aikman Products Co., as tenant is hereby incorporated by
    reference to Exhibit 10.84 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                                                                       
|        | 10.20 |  |             | Registration Rights Agreement, dated July 3,
    2001, by and among Collins & Aikman Corporation,
    Charles E. Becker, Michael E. McInerney and Jens Höhnel
    and, together with the Joan Investors (as defined therein) is
    hereby incorporated by reference to Exhibit 10.86 of
    Collins & Aikman Corporations Report on Form 10-K
    for the year ended December 31, 2001 and filed
    April 1, 2002.                                                                                                                                                 
|        | 10.21 |  |             | First Amendment to Services Agreement, dated as
    of August 7, 2001, among Collins & Aikman
    Corporation, Collins & Aikman Products Co. and
    Heartland Industrial Partners, L.P is hereby incorporated by
    reference to Exhibit 10.87 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.                                                                                                                                                                                          

S-6



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##### 



|        |       |  |             |                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- |  | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |            
|Number  |       |  | Description
|        |       |  |            
|        | 10.22 |  |             | Equipment Lease, dated as of December 18,
    2001, among Textron Automotive Exteriors Inc. and Textron
    Automotive Interiors Inc., collectively as lessee, and IAC
    TAX V, LLC, as lessor is hereby incorporated by reference
    to Exhibit 10.88 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.
|        | 10.23 |  |             | Intellimold Technology License and Support
    Agreement, dated as of December 20, 2001, by and between
    Textron, Inc. and Collins & Aikman Corporation and
    Collins & Aikman Products Co is hereby incorporated by
    reference to Exhibit 10.93 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002. 
|        | 10.24 |  |             | Technology License Agreement (Retained IP), dated
    as of December 20, 2001, by and between Textron, Inc.
    and Collins & Aikman Corporation and Collins &
    Aikman Products Co is hereby incorporated by reference to
    Exhibit 10.94 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.           
|        | 10.25 |  |             | Technology License Agreement (Licensed-Back IP),
    dated as of December 20, 2001, by and between
    Textron, Inc. and Collins & Aikman Corporation and
    Collins & Aikman Products Co is hereby incorporated by
    reference to Exhibit 10.95 of Collins & Aikman
    Corporations Report on Form 10-K for the year ended
    December 31, 2001 and filed April 1, 2002.      
|        | 10.26 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of November 1, 2001 is
    hereby incorporated by reference to Exhibit 10.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                                                                                          
|        | 10.27 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of November 1, 2001 is
    hereby incorporated by reference to Exhibit 10.4 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                                                                                          
|        | 10.28 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of December 20, 2001 is
    hereby incorporated by reference to Exhibit 10.5 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                                                                                         
|        | 10.29 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of December 20, 2001 is
    hereby incorporated by reference to Exhibit 10.6 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                                                                                         
|        | 10.30 |  |             | Employment Agreement between Products and an
    officer of the Company dated as of December 20, 2001 is
    hereby incorporated by reference to Exhibit 10.7 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended March 31, 2002 and filed May 15,
    2002.                                                                                         
|        | 10.31 |  |             | Separation and Consultancy Agreement dated
    July 31, 2002 is hereby incorporated by reference to
    Exhibit 10.1 to Collins & Aikman
    Corporations Current report on Form 8-K filed
    August 2, 2002.                                                                                                                                                                      
|        | 10.32 |  |             | Severance Benefit Agreement between Collins and
    Aikman Corporation and an officer of the Company dated
    April 5, 2002 is hereby incorporated by reference to
    Exhibit 10.2 of Collins & Aikman
    Corporations Report on Form 10-Q for the quarter ended
    June 30, 2002 and filed August 14, 2002.                                                                    
|        | 10.33 |  |             | Employment and Consulting Agreement between
    Collins and Aikman Corporation and an Employee dated July 2002
    is hereby incorporated by reference to Exhibit 10.1 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended September 30, 2002 and filed
    November 14, 2002.                                                                       
|        | 10.34 |  |             | Separation Agreement between Collins and Aikman
    Corporation and an officer of the Company dated October 2002 is
    hereby incorporated by reference to Exhibit 10.3 of
    Collins & Aikman Corporations Report on Form 10-Q
    for the quarter ended September 30, 2002 and filed
    November 14, 2002.                                                                     

S-7



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##### 



|        |       |  |             |                                                                                                                                                                                                                                                                                                                         
|------- | ----- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |  |            
|Number  |       |  | Description
|        |       |  |            
|        | 10.35 |  |             | Employment Agreement between Collins &
    Aikman and an officer of the Company dated January 25,
    2004.*                                                                                                                                                                                                            
|        | 10.36 |  |             | Amendment to Employment Agreement between
    Collins & Aikman Corporation and an officer of the
    Company dated January 25, 2004.*                                                                                                                                                                                   
|        | 10.37 |  |             | Separation Agreement between Collins &
    Aikman Corporation and an officer of the Company dated
    February 29, 2004.*                                                                                                                                                                                               
|        | 11    |  |             | Computation of Earnings Per Share.*                                                                                                                                                                                                                                                                                     
|        | 12.1  |  |             | Computation of Ratio of Earnings to Fixed
    Charges.*                                                                                                                                                                                                                                                                 
|        | 21    |  |             | Subsidiaries of the Registrant.*                                                                                                                                                                                                                                                                                        
|        | 23.1  |  |             | Consent of KPMG.*                                                                                                                                                                                                                                                                                                       
|        | 23.2  |  |             | Consent of PricewaterhouseCoopers.*                                                                                                                                                                                                                                                                                     
|        | 24.1  |  |             | Powers of Attorney.*                                                                                                                                                                                                                                                                                                    
|        | 31.1  |  |             | Certification Pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                               
|        | 31.2  |  |             | Certification Pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                               
|        | 32.1  |  |             | Certification Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 (Chapter 63,
    Title 18 U.S.C. 1350(a) and (b)).*                                                                                                                                                                                         
|        | 99    |  |             | Voting Agreement between Blackstone Capital
    Partners L.P. and Wasserstein Perella Partners, L.P. is hereby
    incorporated by reference to Exhibit 99 of Amendment
    No. 4 to Collins & Aikman Holdings
    Corporations Registration Statement on Form S-2
    (Registration No. 33-53179) filed June 27, 1994.



---



|  |                                   
|- | ----------------------------------
|* | Indicates document filed herewith.

S-8