As filed with the Securities and Exchange Commission on April 27, 2015.

Registration No. 333-201995

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PGI Specialty Materials, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	2221	27-4132779
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

9335 Harris Corners Parkway, Suite 300

Charlotte, North Carolina 28269

(704) 697-5100

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

April Miller Boise

Senior Vice President, General Counsel,

Head of Global Mergers & Acquisitions

and Secretary

PGI Specialty Materials, Inc.

9335 Harris Corners Parkway, Suite 300

Charlotte, North Carolina 28269

(704) 697-5100

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Igor Fert, Esq.

Simpson Thacher & Bartlett LLP

425 Lexington Avenue New York, NY 10017

Telephone: (212) 455-2000

Facsimile: (212) 455-2502

Michael Kaplan, Esq.

Richard D. Truesdell, Jr., Esq.

Davis Polk & Wardwell LLP

450 Lexington Avenue New York, NY 10017

Phone: (212) 450-4000

Fax: (212) 701-5800

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

CALCULATION OF REGISTRATION FEE



Title Of Each Class Of Securities To Be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee(3)
Common Stock, par value $0.01 per share	$100,000,000	$11,620

(1)	Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

(2)	Includes shares of common stock subject to the underwriters’ option to purchase additional shares of common stock.

(3)	Previously paid

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated April 27, 2015.

Shares

LOGO

PGI Specialty Materials, Inc.

Common Stock

This is an initial public offering of shares of common stock of PGI Specialty Materials, Inc.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . PGI Specialty Materials, Inc. intends to list the common stock on The New York Stock Exchange (the “NYSE”) under the symbol “ .”

After the completion of this offering, affiliates of The Blackstone Group L.P. will continue to own a majority of the voting power of all outstanding shares of the common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. See “Principal Stockholders.”

We have granted the underwriters a 30-day option to purchase up to additional shares at the initial public offering price less the underwriting discount and commissions.

Investing in our common stock involves risk. See “Risk Factors” beginning on page 27 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions(1)	$	$
Proceeds, before expenses, to us	$	$

(1)	See “Underwriting” for additional information regarding underwriting compensation.

The underwriters expect to deliver the shares against payment in New York, New York on or about , 2015.


BofA Merrill Lynch		Citigroup

Goldman, Sachs & Co.	Jefferies	RBC Capital Markets

Prospectus dated , 2015.

TABLE OF CONTENTS


	Page
Market, Ranking and Other Industry Data		ii
Trademarks, Service Marks and Tradenames		ii
Basis of Presentation		ii
Summary		1
The Offering		18
Summary Historical and Pro Forma Condensed Combined Financial Information		20
Risk Factors		27
Forward-Looking Statements		46
Use of Proceeds		47
Dividend Policy		48
Capitalization		49
Dilution		51
Unaudited Pro Forma Condensed Combined Financial Information		53
Selected Historical Consolidated Financial Data		64


	Page
Management’s Discussion and Analysis of Financial Condition and Results of Operations		65
Industry		103
Business		106
Organizational Structure		121
Management		122
Certain Relationships and Related Party Transactions		151
Principal Stockholders		154
Description of Capital Stock		156
Shares Eligible for Future Sale		164
Material U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders of Our Common Stock		166
Underwriting		169
Legal Matters		175
Experts		175
Where You Can Find More Information		175

Unless otherwise indicated or the context otherwise requires, financial data in this prospectus reflects the consolidated business and operations of PGI Specialty Materials, Inc. and its consolidated subsidiaries.

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor the underwriters take responsibility for, nor can provide any assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

MARKET, RANKING AND OTHER INDUSTRY DATA

The data included in this prospectus regarding the markets and the industry in which we operate, including the size of certain markets and our position and the position of our competitors within these markets, are based on reports of government agencies, independent industry sources (including a report prepared for us by Smithers Information Ltd., an independent third-party market research firm, and information obtained from Nonwovens Industry) and our own estimates relying on our management’s knowledge and experience in the markets in which we operate. Our management’s knowledge and experience, in turn, are based on information obtained from our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate. We believe these reports, sources and estimates to be accurate as of their respective dates. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. Unless otherwise specified in this prospectus, all references to market size and our market positions are based on our pro forma net sales for the specified periods.

Although we believe market, ranking and other industry data included in this prospectus is generally reliable, we cannot guarantee the accuracy and completeness of the information and have not independently verified it. We have not independently verified any of the data from other third party sources, nor have we ascertained the underlying assumptions relied upon therein. As a result, you should be aware that market, ranking and other industry data included in this prospectus, and our estimates and beliefs based on that data, may not be reliable. Neither we nor the underwriters can guarantee the accuracy or completeness of any such information contained in this prospectus. While we are not aware of any misstatements regarding the industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus.

TRADEMARKS, SERVICE MARKS AND TRADENAMES

This prospectus contains some of our trademarks, trade names and service marks, including the following: APEX, Chicopee, Chix, Chux, Durawipe, Fiberweb, KAMI, Masslinn, PGI, Polymer Group, Inc., Providência, REEMAY, Spinlace, S-Tex, TYPAR and Worxwell. Each one of these trademarks, trade names or service marks is either (i) our registered trademark, (ii) a trademark for which we have a pending application, (iii) a trade name or service mark for which we claim common law rights or (iv) a registered trademark or application for registration which we have been licensed by a third party to use.

Solely for convenience, the trademarks, service marks, and trade names referred to in this prospectus are without the ^® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, and trade names. This prospectus contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners.

BASIS OF PRESENTATION

As used in this prospectus, unless otherwise noted or the context otherwise requires:

•

references to the “Issuer” are to PGI Specialty Materials, Inc., exclusive of its subsidiaries;

•

references to “we,” “us,” “our,” “PGI,” and “the Company” are to PGI Specialty Materials, Inc. and its subsidiaries;

•

references to “PGI Group” are to Polymer Group, Inc., an indirect subsidiary of the Issuer, exclusive of its subsidiaries;

•

references to “Holdings” are to Scorpio Acquisition Corporation, the direct subsidiary of the Issuer, exclusive of its subsidiaries;

•

references to “Blackstone” and the “Sponsor” are to certain investment funds affiliated with Blackstone Capital Partners V L.P.;

•

references to the “Investor Group” are, collectively, to Blackstone and the management investors (as defined below);

•

references to the “management investors” are to certain members of our management team and employees who have made investments in the Issuer;

•

references to “Providência” are to Companhia Providência Indústria e Comércio, a Brazilian corporation (sociedade anônima);

•

references to “Acquisition Co.” are to our wholly-owned subsidiary, PGI Polímeros do Brasil S.A., a Brazilian corporation (sociedade anônima);

•

references to the “Providência Acquisition” are to the acquisition of approximately 71.25% of the outstanding capital stock of Providência by Acquisition Co.;

•

references to “Providência Refinancing” are to the borrowings under the Incremental Amendment (as defined below), the Senior Unsecured Notes (as defined below) and the use of proceeds therefrom;

•

references to the “Mandatory Tender Offer” are to the mandatory tender offer registration request filed by Acquisition Co., our wholly-owned subsidiary, with the Securities Commission of Brazil (Comissão de Valores Mobiliários or “CVM”) in order to launch as required by Brazilian law, after the CVM’s approval, a tender offer to acquire the remaining approximately 28.75% of the outstanding capital stock of Providência that is currently held by minority shareholders;

•

references to “Fiberweb” are to Fiberweb Limited (formerly known as Fiberweb plc);

•

references to the “Fiberweb Acquisition” are to the completion of the acquisition of the entire issued ordinary share capital of Fiberweb, the borrowings under the Bridge Facilities and the use of proceeds therefrom;

•

references to the “Fiberweb Refinancing” are to the Equity Contribution (as defined below), the borrowings under the Term Loans (as defined below) and the use of proceeds therefrom;

•

references to “Terram Geosynthetics” are to Terram Geosynthetics Private Limited, a joint venture we acquired as part of the Fiberweb Acquisition in which we maintain a 65% interest;

•

references to the “ABL Facility” are to the Credit Agreement, dated as of January 28, 2011, among Holdings, PGI Group, as lead borrower, the lenders from time to time party thereto, Citibank, N.A., as administrative agent and collateral agent, Morgan Stanley Senior Funding, Inc., as syndication agent, Barclays Bank PLC and RBC Capital Markets, as co-documentation agents, and Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc., Barclays Capital Inc. and RBC Capital Markets LLC, as joint lead arrangers and joint book runners, as further amended or supplemented from time to time;

•

references to the “Secured Bridge Facility” are to the $268.0 million secured bridge credit facility, dated as of September 17, 2013, among PGI Group, Holdings, the lenders from time to time party thereto, Citicorp North America, Inc., as administrative agent, Barclays Bank PLC, as syndication agent and Citigroup Global Markets Inc. and Barclays Bank PLC, as joint lead arrangers and joint bookrunners, as further amended or supplemented from time to time;

•

references to the “Unsecured Bridge Facility” are to the $50.0 million unsecured bridge credit facility, dated as of November 26, 2013, among PGI Group, Holdings, the lenders from time to time party thereto, Citicorp North America, Inc., as administrative agent, Barclays Bank PLC, as syndication

iii

agent and Citigroup Global Markets Inc. and Barclays Bank PLC, as joint lead arrangers and joint bookrunners, as further amended or supplemented from time to time;

•

references to the “Bridge Facilities” are to the Secured Bridge Facility and the Unsecured Bridge Facility, collectively;

•

references to the “Term Loans” are to the $295.0 million of term loans outstanding pursuant to the Senior Secured Credit Agreement (the “Term Loan Facility”), dated as of December 19, 2013, among PGI Group, Holdings, the lenders from time to time party thereto, Citicorp North America, Inc., as administrative agent, Barclays Bank PLC, as syndication agent, RBC Capital Markets and HSBC Bank USA, N.A., as co-documentation agents, Citigroup Global Markets Inc. and Barclays Bank PLC, as joint lead arrangers and Citigroup Global Markets Inc., Barclays Bank PLC, RBC Capital Markets and HSBC Securities (USA) Inc., as joint bookrunners, as further amended or supplemented from time to time;

•

references to “Additional Term Loans” are to the $415.0 million of incremental term loans outstanding pursuant to an incremental term loan amendment, dated as of June 10, 2014 (the “Incremental Amendment”), to our existing Term Loan Facility;

•

references to “2015 Additional Term Loans” are to the $283.0 million of incremental term loans outstanding pursuant to the second incremental term loan amendment, dated as of April 17, 2015 (the “Second Incremental Amendment”);

•

references to “Equity Contribution” are to an equity investment by the Sponsor of approximately $30.7 million in the Issuer, the proceeds of which were contributed as a capital contribution to Holdings, which in turn contributed such proceeds to PGI Group as a capital contribution;

•

references to “pro forma” give pro forma effect to the Providência Acquisition and the Providência Refinancing and the Offering (as defined herein), for the period indicated;

•

references to the “Senior Unsecured Notes” are to the $210.0 million aggregate principal amount of 6.875% senior unsecured notes due 2019 issued by PGI Group on June 11, 2014;

•

references to the “Senior Secured Notes” are to the $560.0 million aggregate principal amount of 7.75% notes due 2019 issued by PGI Group on January 13, 2011;

•

reference to “spunmelt” are to spunmelt technology, which uses thermoplastic polymers that are melt-spun to manufacture continuous-filament products;

•

references to “Smithers Pira” are to Smithers Information Ltd., a market research firm. All information included herein that is attributed to Smithers Pira is based on Smithers Pira Consultancy Report: Global Nonwovens Market Study, dated October 30, 2014;

•

references to “nonwovens industry” are to industry size, as measured by either volume (in metric tons) or value (in U.S. dollars), based on information by Smithers Pira. The nonwovens industry, as defined by Smithers Pira, encompasses nonwovens used for various products that serve the hygiene, healthcare filtration, dryer sheets, industrial and wipes applications. The industry also includes geocomposites products, which are an adjacent technology used in industrial applications that can utilize nonwovens;

•

references to “Nonwovens Industry” are to the information publicly available at http://www.nonwovens-industry.com, a website dedicated to the worldwide business of nonwovens;

•

references to “markets” or “regions” generally refers to the four geographic regions in which we operate: North America, South America, Europe (including our India operations), and Asia;

•

references to “applications” generally are to the various customer end-use applications which our products serve. While our products serve a diverse range of applications, for convenience, we group these applications into three primary categories: Personal Care, Infection Prevention and High Performance Solutions. Personal Care includes hygiene applications (such as baby diapers, adult

incontinence products, and feminine hygiene products), personal care wipes, and fabric-softening dryer sheets. Infection Prevention includes healthcare applications (such as surgical gowns and drapes, face masks and wound care products), filtration products (including blood filters, pool and spa filters, and Hepa filtration), and disinfectant wipes (including patient care wipes and hard surface disinfectant wipes). High Performance Solutions includes building, construction and geosynthetics (including house wrap, road underlayment and industrial cable wrap), along with air filtration, home and bedding and industrial wiping applications, among others;

•

references to our market positions or rank are, except as otherwise indicated, based on our pro forma net sales; and

•

references to the “underwriters” are to the firms listed on the cover page of this prospectus.

On January 28, 2011, pursuant to an Agreement and Plan of Merger, dated as of October 4, 2010, we were acquired by affiliates of Blackstone, along with certain members of our management (the “Merger”). Periods prior to January 28, 2011 reflect the financial position, results of operations, and changes in financial position of the Company prior to the Merger (the “Predecessor”). The fiscal year ended December 31, 2011 reflects the financial position, results of operations, and changes in financial position of the Company after the Merger (the “Successor”). The Successor had no operating activities between its November 22, 2010 inception date and the closing date of the Merger. The audited financial statements of the Successor for the period from November 22, 2010 to January 2, 2011, and as of January 2, 2011, have been omitted from this prospectus because we believe the Successor qualified as a “business combination related shell company” within the meaning of relevant SEC guidance during such period, as it was formed for the sole purpose of completing the Merger and did not have any assets as of January 2, 2011.

The Merger was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations and non-controlling interest. The guidance prescribes that the purchase price be allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. As a result, periods prior to the Merger are not comparable to subsequent periods due to the difference in the basis of presentation of purchase accounting as compared to historical cost.

The audited financial statements of Fiberweb as of and for the years ended December 31, 2012, 2011 and 2010 and the unaudited interim financial statements as of and for the nine months ended September 30, 2013 included in this prospectus have been prepared in pounds sterling and in accordance with applicable International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). IFRS differs in certain significant respects from U.S. Generally Accepted Accounting Principles (“GAAP”).

The audited financial statements of Providência as of and for the years ended December 31, 2013 and 2012 and the unaudited condensed interim financial statements as of and for the three months ended March 31, 2014 included in this prospectus have been prepared in Brazilian reals and in accordance with applicable IFRS as issued by the IASB. IFRS differs in certain significant respects from GAAP. See “Unaudited Pro Forma Condensed Combined Financial Information” for a discussion of significant differences between IFRS and GAAP as they relate to Providência.

The Company’s fiscal year is based on a 52 week period ending on the Saturday closest to each December 31. The one month ended January 28, 2011 for the Predecessor contains four weeks. The fiscal year ended December 31, 2011 for the Successor contains 48 weeks. The fiscal years ended December 29, 2012 and December 28, 2013 for the Successor contain operating results for 52 weeks. References herein to “2011,” “2012,” and “2013” generally refer to fiscal 2011, fiscal 2012 and fiscal 2013, respectively, unless the context indicates otherwise. In fiscal year 2014, the Company changed its year-end date to December 31. The Company’s 2014 fiscal year commenced on December 29, 2013 and concluded on December 31, 2014.

SUMMARY

This summary highlights certain significant aspects of our business and this offering. This is a summary of information contained elsewhere in this prospectus, is not complete, and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the section entitled “Risk Factors” and the consolidated financial statements and the notes thereto, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in the forward-looking statements as a result of certain factors such as those set forth in “Risk Factors” and “Forward-Looking Statements.” When making an investment decision, you should also read the discussion under “Basis of Presentation” for the definition of certain terms used in this prospectus and a description of certain transactions and other matters described in this prospectus.

Company Overview

We are a leading global innovator and manufacturer of specialty materials for use in a broad range of products that make the world safer, cleaner and healthier. We design and manufacture versatile high performance materials that can be engineered to possess specific value-added characteristics, including absorbency, tensile strength, softness and barrier properties. We serve customers focused on personal care, infection prevention, and high performance solutions, where our products are critical components used in a broad array of consumer and commercial products. For personal care applications, we supply specialty materials essential to the performance and feel of disposable baby diapers, feminine hygiene products, adult incontinence products, personal wipes and fabric softening dryer sheets. For infection prevention applications, our materials are utilized in products designed to ensure a clean environment, including disinfectant wipes, surgical gowns and drapes, face masks, wound care sponges, and water, air and blood filters. For high performance solutions, we supply protective house wrap, industrial cable wrap, construction and agricultural geosynthetics, as well as components for home and bedding products, industrial cleaning wipes, and various other applications.

We primarily manufacture nonwovens, which are fabric-like, value-added materials produced from polypropylene and other resins, along with natural and synthetic fibers and other components. The total nonwovens industry size is estimated to be worth in excess of $30 billion globally in 2013 and is expected to grow at a compounded annual growth rate (“CAGR”) by volume of 6.6% from 2013 to 2018, according to Smithers Pira.

We are the largest global manufacturer of nonwovens based on our 2013 pro forma net sales, according to Nonwovens Industry. Over the past five years, we have undertaken a series of investments and acquisitions, including the Fiberweb Acquisition in November 2013 and the Providência Acquisition in June 2014, that have expanded our global presence, increased our product portfolio and broadened our technology base. As a result, we estimate that we generated approximately 70% of our 2014 pro forma net sales from applications for which we believe we have either the #1 or #2 position as measured by pro forma net sales or volume. We believe we have one of the largest global platforms in the nonwovens industry, with 22 manufacturing and converting facilities in 14 countries, including a significant presence in high-growth emerging markets such as South America and Asia. We have manufacturing capabilities in each of North America, South America, Europe and Asia, which we believe is a competitive advantage in serving our multi-national, blue-chip customers. Our manufacturing facilities are strategically located near the production facilities of many of our key customers in order to increase our effectiveness in addressing regional demand for our products, many of which do not ship economically over long distances.

For the fiscal year ended December 31, 2014, on a pro forma basis, we generated net sales of $2,006 million, and net loss attributable to PGI Specialty Materials, Inc. of $121 million. For the year ended December 31, 2014, we generated pro forma Adjusted EBITDA of $260 million. For information about how we calculate

Adjusted EBITDA, please see “Summary Historical and Pro Forma Condensed Combined Financial Information.” Our sales are geographically diversified, with 44% of our pro forma net sales generated in North America, 20% generated in South America, 26% generated in Europe and 10% generated in Asia, each for the year ended December 31, 2014.

Segment Overview

We manage our business through four reportable operating segments organized by geographic region: North America, South America, Europe and Asia. Each of our regional manufacturing facilities has a diverse range of capabilities and technologies to serve local demand trends and our customers’ specific requirements, which vary by region. Consequently, each of our regions serves a unique mix of customer applications; however, certain of our applications and customers are consistent across our regions. We believe that our ability to provide consistent, high-quality products across a variety of geographies is a strong competitive advantage in serving our global customers. In addition, our geographic breadth and broad range of applications reduce exposure to any one region, manufacturing facility, application, or customer.

North America

Our North America segment includes five manufacturing and converting facilities in the United States, one in Canada and one in Mexico. Our North America segment includes a broad array of product technologies, including our proprietary Reemay, Spinlace, Apex and TYPAR technologies, that collectively serve a wide spectrum of product applications. Within personal care, we believe we are a leading manufacturer of nonwovens for hygiene applications, such as baby diapers and feminine hygiene products, and substrates for fabric-softening dryer sheets, based on pro forma volume. Within infection prevention, we believe we are the largest provider of substrates for household cleaning wipes, based on pro forma volume, and a leading supplier of specialty materials for use in various medical garments, such as surgical gowns and drapes. Within high performance solutions, we believe we are the largest provider of filtration media for pool and spa filters, as well as the #1 provider of protective house wrap in Canada, based on pro forma volume, and the #2 provider in the United States.

South America

Our South America segment includes two manufacturing facilities in Brazil, one in Argentina and one in Colombia. This footprint enables us to efficiently serve the Caribbean and Central America, the Andean Community (CAN) and the Southern Common Market (MERCOSUR) economic trade zones. All of our facilities in the region utilize leading-edge spunmelt technology and specialize in serving personal care applications, such as baby diapers and feminine hygiene products. We believe consumer adoption of these products is expected to grow rapidly with disposable incomes rising towards the levels of developed economies. We believe we are the leading provider of nonwovens for personal care applications in South America, based on pro forma volume. Within high performance solutions, we also serve certain specialty agriculture and industrial customers in this region.

Europe

Our Europe segment includes two manufacturing facilities in the United Kingdom, two in France, and one in each of Germany, Italy, Spain and the Netherlands. Our Europe segment also includes our India joint venture with one manufacturing facility located in India. Our European segment includes our most diverse set of technologies, such as our proprietary S-tex spunmelt and hydroentanglement technologies, and serves a broad array of personal care, infection prevention and high performance solutions applications. We believe we are the leading global provider of industrial cable wrap and have significant positions in geosynthetics for civil engineering, landscape and military use. We also have meaningful positions in hygiene applications, such as baby diapers and adult incontinence products, and healthcare products, such as surgical drapes, blood filtration and face masks.

Asia

Our Asia segment consists of two manufacturing facilities in China. Infection prevention applications currently represent approximately 60% of our pro forma net sales in Asia, with personal care applications accounting for 31% and high performance solutions applications accounting for the remaining 9%, for the fiscal year ended December 31, 2014. Our Asia region is the primary manufacturing base for servicing our global healthcare customers. For these applications, we supply our specialty materials to regional converters in Asia who cut and sew our products into finished goods for sale primarily in Europe and North America. In addition, we plan to utilize our leading-edge spunmelt technologies to participate in the rapid growth expected in the Asia region from rising disposable incomes and consumer adoption of personal care products.


2014 Pro Forma Net Sales by Geography		2014 Pro Forma Adjusted EBITDA by Geography(1)(2)

(1)

For information about how we calculate pro forma Adjusted EBITDA, please see “Summary Historical and Pro Forma Condensed Combined Financial Information.”

(2)

Percentages in chart are presented before unallocated corporate expenses.

Overview of Key Applications

We design and manufacture specialty materials, which are critical components used in various personal care, infection prevention and high performance solutions products that make the world safer, cleaner and healthier. Our customers include global manufacturers such as Procter & Gamble (diapers, feminine sanitary protection and dryer sheets), Kimberly-Clark (diapers, surgical drapes and face masks) and Cardinal Health (surgical drapes and medical accessories) and a number of regional manufacturers.

While we manufacture specialty materials both for disposable applications (such as hygiene, healthcare, wipes and filtration) and durable applications (such as house wrap and geosynthetics), we believe we are an industry leader in serving disposable applications as measured by pro forma net sales or volume—which we believe are attractive due to the recurring nature of product sales, long-term secular growth trends driven by higher global incomes, and lower cyclicality with macroeconomic cycles. Disposable applications represented approximately 74% of our pro forma net sales in 2014.

2014 Pro Forma Net Sales by Application

The table below outlines our key product applications and related industry metrics.

Key

Applications

% of 2014
Pro Forma
Net Sales(1)

Representative End Products

Representative
Industry Purchasers(2)

Product
Application
Estimated
2013 Size

Product
Application
Projected
Volume
Growth
2013-2018(3)

(dollars in millions)

Personal Care

50%

Hygiene

Baby diapers, feminine hygiene products, adult incontinence products, and training pants

Kimberly-Clark, Procter & Gamble, SCA

$8,549

6.3%

Dryer

Sheets/Personal Wipes

Dryer sheets and Personal wipes

Procter & Gamble, SC Johnson

$1,689

5.1%

Infection Prevention

17%

Healthcare

Surgical gowns and drapes, disposable surgical packs, face masks, shoe covers and wound care sponges and dressings

Cardinal Healthcare, Halyard Health,

Medline

$1,148

5.1%

Filtration

Air, water and blood filters

3M, Pall

$541

6.6%

Disinfectant

Wipes

Patient care & skin disinfectant wipes, hard surface wipes, sanitizer-compatible wipes

Clorox, SC Johnson, Sysco

$387

7.0%

Key

Applications

% of 2014
Pro Forma
Net Sales(1)

Representative End Products

Representative
Industry Purchasers(2)

Product
Application
Estimated
2013 Size

Product
Application
Projected
Volume
Growth
2013-2018(3)

(dollars in millions)

High Performance Solutions

33%

Building & Construction/

Geosynthetics &

Agriculture

House wrap, cable wrap, road underlayment liners, geo cells, tree protection

Regional

Home-builders, CanSave, GAF, Suprema

$4,058

7.4%

Industrial Wipes

Auto/aero wipes, graphic arts, industrial general purpose wipes

3M, Cintas

$849

7.0%

Filtration

Air, structure, and liquid filters, pool and spa filters

Meissner, PALL

$2,309

6.6%

Technical specialties and other

Furniture and bedding, composites, other industrial applications

Hanes, Simmons

$13,540

7.0%

Source: Smithers Pira.

(1)

Gives pro forma effect to the Providência Acquisition, as if it had occurred on December 29, 2013.

(2)

Represents key industry participants in the applications indicated. Certain of such participants are not PGI customers.

(3)

Represents Smithers Pira’s projected compounded annual growth rate in volumes for global nonwoven demand for the indicated product applications from 2013 to 2018.

Personal Care

We manufacture specialty materials that are essential to the performance and feel of hygiene, dryer sheets and personal wipes applications. For hygiene applications, our products are engineered to provide critical performance characteristics including superior absorbency, barrier properties, strength, fit and softness in baby diapers, feminine hygiene products, adult incontinence products and training pants. Our broad product offering and global manufacturing base provides hygiene customers with a full range of these specialized components for their manufacturing facilities around the globe. We believe we are the leading global manufacturer of nonwovens for hygiene applications, based on pro forma volume.

To serve fabric-softening dryer sheet applications we sell products made with our proprietary Reemay technology that provides superior heat resistance and scent retention, which are critical to product performance and customer demands. We believe we are the primary supplier of these products to the two largest dryer sheet manufacturers in the United States.

Within wipes applications, our products serve as the key substrate for facial wipes and other personal cleansing wipes. Wipes producers rely on our specialty materials to enhance the durability, softness and liquid dispensability of their products.

We frequently partner with industry leaders to jointly develop innovative products to meet changing consumer demands. We believe our ability to serve global manufacturers and provide specialty material consistently across geographical regions differentiates us from our competition.

2014 Personal Care Pro Forma Net Sales by Application

Infection Prevention

Our specialty materials are integral to many healthcare products that ensure a sterile environment by enhancing key performance characteristics such as barrier performance, breathability, strength and softness. Our healthcare products are used for the manufacture of disposable surgical packs, surgical gowns and drapes, face masks, shoe covers and wound care sponges. For these applications, our customers predominantly convert our specialty materials into their products in lower labor cost countries, such as China, for export to Western markets. We believe that our high-quality nonwoven manufacturing capabilities in China, strategically located near the manufacturing and converting operations of our customers, combined with our global position, provide a competitive advantage in serving these customers. We believe we are the leading global supplier of nonwovens for healthcare applications, based on pro forma volume.

We also provide substrates with superior absorbency, strength, softness or abrasiveness, durability and liquid dispensability for use in hard surface disinfectant wipes, patient care wipes and other infection prevention wipes. Our infection prevention wipes products include our Chicopee-branded converted wipes sold into foodservice channels to sanitize eating surfaces, as well as substrates sold to leading consumer products companies for conversion into hard surface disinfectant wipes for consumer use. We believe we are the leading North American supplier of materials for use in consumer disinfectant wipes, based on pro forma volume.

Additionally, our specialty materials are critical to many filtration applications including blood, water and air filtration. We believe there are significant opportunities to expand our existing business in the areas of air filtration for HVAC applications, HEPA air filtration, as well as blood and water filtration.

2014 Infection Prevention Pro Forma Net Sales by Application

High Performance Solutions

Numerous industrial and other applications make use of our specialty materials due to our ability to engineer characteristics such as strength and durability, barrier protection, breathability and insulation properties. High performance solutions applications include protective house wrap, industrial cable wrap, geosynthetics, products for agricultural uses, industrial wipes and various other specialty materials used in home furnishings and bedding, road underlayment, liners and railroad materials.

We believe we are a leading supplier of house wrap to home-builders in the United States and Canada. House wrap is a protective layer used to prevent moisture-related damage and enhance energy efficiency. Through our Typar brand, we believe that we are the #1 provider of house wrap in Canada, based on pro forma volume, and the #2 provider in the United States. As this application is linked both to new construction and renovation spending, we expect continued growth in this segment to the extent the housing market recovery continues.

We believe that we are also a leading supplier of industrial cable wrap in Europe. Cable wrap is a protective cover used for pipelines and cables to prevent damage to these critical infrastructure assets. In addition, we believe we are the leading provider of nonwoven substrates for pool and spa filtration applications in North America through our proprietary Reemay-branded technology based on pro forma volume.

Geosynthetics products include various specialty materials used to improve the performance and mitigate the environmental impact of civil engineering and construction projects. Geosynthetics also include products for military, forestry, agriculture and landscaping applications. Key brands in this category include Terram, Tubex, DefenCell and Agryl.

Our high performance solutions also include converted wipes sold under our Chicopee brand name for use in automotive, graphics arts and cleanroom wipes, materials for household and bedding applications, industrial filtration media and various other technical products.

2014 High Performance Solutions Pro Forma Net Sales by Category

(1)

Includes materials for protective apparel, furniture and bedding, composites and other industrial durable and infrastructure applications.

Our Competitive Strengths

Global Leader with Strong Competitive Positions

We are a leading global supplier of specialty materials and the largest global manufacturer of nonwovens based on our 2013 pro forma net sales, according to Nonwovens Industry. The nonwovens industry has experienced significant consolidation in recent years, including our own acquisitions of Fiberweb and Providência, which we believe has improved our competitive position and enhanced our opportunities for growth across each of our geographic regions.

2013 Nonwovens Sales (in billions of $)

Source: Nonwovens Industry.

(1)

Includes $1.2 billion of revenue from PGI, $398 million of revenue from Fiberweb, and $360 million of revenue from Providência.

(2)

Production is primarily for internal consumption.

(3)

Represents companies primarily focused on nonwovens for disposable applications, such as hygiene, healthcare and wipes.

We estimate that we generated approximately 70% of our 2014 pro forma net sales from applications for which we believe we have either the #1 or #2 position as measured by pro forma net sales or volume. Specifically, we believe that we are an industry leader in serving disposable applications as measured by pro forma net sales or volume, which accounted for approximately 70% of our 2014 pro forma net sales. We also believe we are the leading global supplier of nonwovens for applications in personal care and healthcare, based on pro forma volume.

In addition, we believe that we have leading positions in a number of niche applications. We believe that we hold a leading position in pool and spa filtration in the United States through our Reemay branded products, which are sold to filter manufacturers. We also believe that we are the leading manufacturer of substrates for dryer sheets in the United States. Through our Typar brand, we believe that we are the #1 provider of house wrap in Canada, based on pro forma volume, and the #2 provider in the United States. As we continue to evolve to higher value specialty materials, we believe there is meaningful opportunity to grow in each of the key applications which we serve: personal care, infection prevention and high performance solutions. We believe that our innovative and differentiated technology platforms position us well to gain share in these applications as we work to broaden the use of our products.

Our market positions in numerous applications are a reflection of our differentiated technologies, customer service and global footprint. These capabilities enable us to effectively serve global customers, such as Procter & Gamble and Cardinal Health, who are among the industry leaders in their respective product applications. Our marketing and research and development teams collaborate closely with customers to develop new products through the application of new technologies, as well as meet our customers’ stringent product qualifications and process standards. These factors encourage customer loyalty, leading to an average relationship length of approximately 15 years with our key customers.

Attractive Long-Term Industry Growth Outlook Driven by Socio-Economic Trends

According to Smithers Pira, global demand for nonwovens is projected to grow at a CAGR of 6.6% by volume from 2013 to 2018 driven by several socio-economic trends, including overall population growth, a growing middle class in emerging markets, an aging population, increasing health standards, product innovation and agricultural efficiency. These trends favorably impact the various applications which we serve. For example, population growth and rising incomes impact the consumption of personal care products, such as baby diapers and wipes. In addition, increasing life expectancy and an aging population in many developed countries present a growing opportunity for adult incontinence and healthcare products. For example, the market for adult incontinence products, which uses up to 60% more of our specialty materials than baby diapers, was estimated at $2.4 billion in 2013 and is expected to grow to $3.4 billion in 2018. Increasingly stringent health standards and consumer focus on infection prevention are also driving greater consumption of disposable medical gowns, drapes, face masks, sanitary wipes and disinfectant wipes. Our specialty materials also serve a number of attractive niche applications, such as house wrap, industrial cable wrap and geosynthetics, which could benefit from a recovery in construction spending.

Our specialty materials are primarily used to manufacture disposable products, which accounted for approximately 74% of our pro forma net sales for the fiscal year ended December 31, 2014. We believe disposable products, such as baby diapers and medical gowns, have attractive long-term growth trends and are less cyclical than durable products, strengthening our financial profile through economic cycles (as demonstrated in the table below by the sale volumes of disposable products from 2008 to 2012). We believe that this resilience, combined with the diversification of our revenues across regions and applications, enhance our long-term financial profile and mitigates the risk of disruptions within any region, application, facility or customer.

Historical Disposable Application Growth

Expected Nonwoven Application Growth

LOGO

Source: Smithers Pira.

(1)

Wipes end market comprises personal wipes, dryer sheets, disinfectant wipes and industrial wipes.

(2)

Filtration end market includes medical and industrial filtration applications.

Significant Exposure to Attractive Emerging Markets

We believe that emerging markets represent a significant long-term secular growth opportunity for our specialty materials, especially in personal care applications. In many emerging markets, penetration rates for personal care products that utilize specialty nonwoven materials, such as disposable baby diapers, are significantly lower relative to developed markets. For example, the penetration of baby diapers is only 27% in China and 62% in Central and South America, compared to 98% in the United States and Canada, according to Price Hanna Consultants estimates. We believe growth will be driven by increasing disposable product penetration resulting from rising per capita incomes as well as population growth. According to Smithers Pira, total nonwovens volume demand in South America and Asia is projected to grow at a CAGR of 6.4% and 9.2%, respectively, from 2013 to 2018.

The chart below contrasts the high penetration rates in developed regions in diaper consumption with the significantly lower current penetration rates seen in developing markets, which present a sizable growth opportunity. According to Smithers Pira, a 1% increase in the penetration rate of disposable diapers in China in 2013 would result in approximately $30 million of incremental materials market value, assuming current product design and pricing. Additionally, under-developed regions, such as India, Africa, and other emerging markets in Asia, represent additional longer-term growth opportunities.

2012 Actual and Estimated Potential Diaper Consumption by Region (in Billions of Diapers)

Source: Price Hanna Consultants estimates.

*	Represents potential market size if these regions achieve a penetration rate of 100%. Actual future penetration rates will vary.

We believe that we are well-positioned to capitalize on this anticipated demand. The Providência Acquisition strengthened our presence in South America, providing us with the #1 nonwovens position in the region, based on pro forma volume, and two attractive manufacturing assets in Brazil to complement our existing production facilities in Colombia and Argentina. Pro forma for the Providência Acquisition, we are the leading manufacturer of nonwovens for hygiene and medical products in the region. Additionally, recent capacity expansions in Nanhai, China (expected to be completed in 2015) and Suzhou, China (completed in mid-2013) have enhanced our manufacturing capabilities in Asia. In 2014, we derived approximately 30% of our pro forma net sales and 32% of our Adjusted EBITDA from our South America and Asia segments.

Scalable Cost Structure and Operational Excellence To Drive Margin Expansion

Our scalable global infrastructure and focus on operational excellence position us to reduce our costs and increase our operating margins as we expand both organically and through acquisitions. We have increased our gross profit margin and Adjusted EBITDA margin from 15.5% and 11.8%, respectively, in 2011 on a stand alone basis to 17.9% and 13.0%, respectively, for the year ended December 31, 2014, on a pro forma basis. We have achieved this margin expansion through a combination of annual productivity and cost saving initiatives as well as realization of cost synergies associated with our recent acquisitions. For example, as of December 31, 2014, we have fully implemented initiatives at Fiberweb accounting for approximately $39.2 million of annualized

savings (above our initial estimates of $28 million) and we continue to pursue initiatives aimed at achieving additional savings. Likewise, we have also identified initiatives that are estimated to generate meaningful synergies in connection with the Providência Acquisition.

In addition to executing on the identified acquisition synergies, we have recently implemented a robust business excellence program designed to generate annual productivity savings, achieve a low-cost position and prolong the useful life of our assets through product and process innovation. These initiatives have included continuous improvement programs focused on procurement, manufacturing, and distribution costs, facility consolidation and optimization, and optimization of our fixed cost structure. For example, in 2012, we restructured our global operations in order to consolidate our global footprint, align resources and capabilities with future growth opportunities, and provide a more efficient structure to serve existing customers. We believe we have the opportunity to continue to accelerate our annual productivity savings, which would serve to offset inflation in our business and benefit our margins.

Strong Free Cash Flow Generation

For the years ended December 29, 2012, December 28, 2013 and December 31, 2014, we have consistently generated strong free cash flow, which we define as Adjusted EBITDA minus capital expenditures, of $78.0 million, $155.8 million and $177.5 million, respectively. For the same periods, our net cash provided by operating activities was $75.5 million, $16.9 million and $49.1 million, respectively. Our strong cash flow generation has benefited from pass-through pricing mechanisms in many of our customer contracts, which allow us to pass through increases in certain raw material costs by changing our prices, thereby mitigating the potential impact of fluctuations in raw material costs on our profitability.

Our cash flow generation also benefits from our disciplined approach to capital investments. We believe our maintenance capital requirements (defined as investments required to maintain current production capabilities) range from 2.0% to 2.5% of our annual net sales, enabling us to deploy a meaningful portion of our capital investments toward projects designed to expand our capacity and/or capabilities or to reduce our operating costs. For instance, over the past five years, we have commercialized four new state-of-the-art spunmelt lines to expand our capacity to meet growing demand as well as realize their lower relative production cost per unit and their ability to produce lower basis weight products suited for certain hygiene applications. Additionally, we have invested in commercializing proprietary technologies, such as our Spinlace and Arium platforms, that provide differentiated product capability and cost performance. Our cash flow generation in the future may also benefit from our significant net operating losses, which were $284.1 million for the year ended December 31, 2014 and may result in reduced U.S. tax payments in the future.

Successful Track Record of Value-Enhancing Acquisitions

We have completed two significant acquisitions, Providência and Fiberweb, which enhanced our competitive position by expanding our capabilities in existing regions (like the US and Europe) and new regions (such as Brazil). These acquisitions also enhanced our technology positions in several new applications, such as filtration, where we believe there are significant growth opportunities. Additionally, given our scalable global infrastructure, we believe these acquisitions will result in meaningful cost savings and enhance our operating margins.

America, with facilities in Brazil, Argentina and Colombia that enable us to cost-effectively serve customers across the continent. We have begun the integration of Providência into our existing regional operations and expect to generate meaningful cost savings from the elimination of duplicative costs, implementation of best practices, and by leveraging our enhanced scale.

The Fiberweb Acquisition was completed in November 2013. With operations in North America and Europe, Fiberweb improved our capabilities in several existing applications (such as hygiene and healthcare) but also meaningfully expanded our positions in several complementary applications, such as filtration, dryer sheets and house wrap. Fiberweb also provided access to several new technologies such as S-Tex (hygiene) and Nano fiber (filtration), which offer differentiated products to address our customers’ needs for innovation and customized solutions. Fiberweb has been fully integrated into our European and North American regions and we believe will generate significant cost savings, in excess of our initial estimates. As of December 31, 2014, we have fully implemented initiatives at Fiberweb accounting for approximately $39.2 million of annualized savings (above our initial estimates of $28 million).

Experienced Management Team

Our senior management team has extensive industry and operational experience and has been instrumental in developing and executing our growth strategy. Our nine person senior management team has an average of over 20 years of experience, including significant experience with specialty materials and similar businesses, and has successfully integrated numerous acquisitions. Our Chief Executive Officer, J. Joel Hackney Jr., who joined us in 2013 after holding a variety of senior executive roles with General Electric, Nortel and Avaya, has 21 years of relevant experience, including significant experience with leading global organizations and executing organic and acquisition-driven growth programs. Since mid-2012, we have successfully implemented an enhanced business strategy designed to significantly expand our business, both organically and through acquisitions, and to improve our cost structure and capital efficiency. We believe the proven abilities of our senior management team will allow us to continue to execute on our strategy, grow our global business, and deliver value to our stakeholders.

Our Strategy

Our mission is to provide superior products and services to enable our customers to create a safer, cleaner and healthier world. By leveraging our global team and broad portfolio of assets and technologies, we engineer customized solutions to meet our customers’ needs. We are focused on supplying consistent high quality products from our global manufacturing footprint, supported by knowledgeable local sales and technical service teams. We believe that our global presence and breadth of application expertise (further enhanced by the recent acquisitions of Fiberweb and Providência) provide a strong foundation for us to grow with our existing customers across the globe as well as for enhanced access to new customers across an array of highly specialized applications. As a result, we strive to grow our revenues consistent with the demand growth of the applications which we serve, while enhancing our operating efficiencies to improve our margins. To accomplish our mission and drive continued success, we are focused on the following strategies:

Support Continued Growth of Our Existing Customers Globally

We will invest to support the continued growth of our existing customers across the globe. As previously discussed, many of our customers’ products benefit from attractive growth trends and, consequently, our customers demand an increasing amount of our specialty materials. We will seek to enhance our competitive positions by providing cutting edge innovations, high quality and cost-effective products, and dedicated customer service. We will do so through initiatives to expand the production capacity of our current asset base as well as prudent capital investments to expand our capabilities. Many of our customers are increasingly growing their business globally, and we believe we are well positioned to gain share with these customers given our global presence and ability to reliably deliver consistent products across the globe.

Further Strengthen our Positions in Emerging Markets

We intend to establish stronger positions in emerging markets through partnerships with new customers, as well as by accelerating growth with existing accounts where we are viewed as a strategic supplier. For example, the Providência Acquisition enhanced our position in South America, particularly Brazil, where we are now the leading supplier of hygiene products to a broad and long standing customer base. Additionally, in China, we have recently made significant capital investments in new production capacity designed to meet the growing demand for our products. In 2014, we generated 30% of our net sales and 32% of our Adjusted EBITDA in South America and Asia, respectively, on a pro forma basis. We believe there will be significant growth in our existing markets in South America and Asia. Additionally, in the future, we believe there may be growth opportunities in currently under-developed regions, where current penetration rates for many of the applications we serve are lower compared to other regions. As these emerging markets develop, we will continue to make careful, disciplined investments to expand our global capabilities and operations.

Pursue Growth in Complementary Businesses

We intend to use our industry expertise and capabilities to pursue growth opportunities in complementary products that share one or more key characteristics with our core businesses, including customers, products, manufacturing technologies or supply chain. We will prioritize opportunities in higher value applications with greater product differentiation, higher margins and lower capital intensity. For example, the Fiberweb Acquisition resulted in a significant improvement in our standing in several complementary applications, including filtration, dryer sheets and house wrap. By leveraging Fiberweb’s position and certain of our existing technologies and capabilities, we believe there may be opportunities to expand in these adjacent applications. We may pursue these opportunities organically or through targeted acquisitions depending on the specific industry dynamics and required capabilities.

Drive Business Excellence to Pursue Economic Leadership and Enhance Margins

Our success is dependent upon our ability to offer an attractive value proposition to our customers and to maximize customer satisfaction through our innovation, product quality and reliability. Consequently, we will seek to use our global platform and capabilities to offer solutions which maximize customers’ value and streamline their operations. We will also seek to improve our supply chain management to improve our cost position. We will seek to accelerate our business excellence initiatives to generate recurring annual productivity savings to offset inflation, enable reinvestment in growth, and improve our margins. These initiatives are focused on procurement savings, manufacturing yield optimization, lean initiatives, preventative maintenance and logistics savings. Over the past three years, we have increased our gross profit margin and Adjusted EBITDA margin from 15.5% and 11.8%, respectively, in 2011 on a stand alone basis to 17.9% and 13.0%, respectively, for the year ended December 31, 2014, on a pro forma basis. Through the realization of acquisition-related cost savings and our business excellence initiatives, we plan to continue to pursue improved cost positions and operating margins in the future.

Opportunistically Pursue Value-Enhancing Acquisitions

The nonwovens industry has experienced significant consolidation in recent years, including our acquisitions of Fiberweb and Providência. However, the industry remains relatively fragmented with many smaller regional players. In the future, we will continue to opportunistically evaluate potential acquisitions that enhance our business. We will prioritize transactions that complement our existing businesses, offer a potential for meaningful cost savings, enhance our capabilities in complementary products or regions or improve our growth profile by leveraging our existing customer relationships, technologies, global manufacturing and distribution network, and expertise in engineered materials.

Develop and Attract Top Talent

We strive to attract and develop the best talent in the industry. We work as a team to make a positive impact to our organization, our customers and suppliers, and the community. We believe that our history of growth and innovation coupled with our strong global position will highlight the Company as an attractive career opportunity for talented business leaders. Over the past several years, we have redesigned our global organization structure and significantly enhanced the senior leadership team adding resources and capabilities in several key areas to address our strategic growth priorities.

Recent Acquisitions

We have recently completed two significant acquisitions. On June 11, 2014, Acquisition Co., our wholly-owned subsidiary, completed the acquisition of approximately 71.25% of the outstanding capital stock of Providência and on November 15, 2013, PGI Acquisition Limited, our indirect wholly-owned subsidiary, completed the acquisition of the entire issued ordinary share capital of Fiberweb. As required by Brazilian law, we intend to launch, subject to CVM approval, the Mandatory Tender Offer to acquire the remaining outstanding capital stock of Providência from the minority shareholders. See “Business—Expansion and Optimization—Providência Acquisition.”

Providência is a leading manufacturer of spunmelt nonwoven products based in Brazil, with a presence throughout the Americas, offering nonwoven fabrics under the KAMI brand. Its products are primarily used in hygienic and personal care applications, such as disposable diapers, sanitary pads, cleansing tissues and adult incontinence products. Providência operates state-of-the-art spunmelt technology, utilizing 13 Reicofil lines situated in three sites in North and South America. Providência was founded in 1963 and is based in São José dos Pinhais, Brazil. Following the completion of the Providência acquisition, Herminio Vicente Smania de Freitas joined PGI as President—South America & Global Hygiene. He continues to serve as chief executive officer of Providência.

The Providência Acquisition strengthened our competitive position in North and South America. With three well-invested manufacturing facilities (two in Brazil and one in the United States) focused on hygiene applications, Providência’s operations were highly complementary with our existing operations. In particular, as a result of the acquisition, we became the largest producer of nonwovens in South America, with facilities in Brazil, Argentina and Colombia that enable us to cost-effectively serve customers across the continent. We have begun the integration of Providência into our existing regional operations and expect to generate meaningful cost savings from the elimination of duplicative costs, implementation of best practices, and by leveraging our enhanced scale.

Fiberweb is one of the largest global manufacturers of specialized technical fabrics with eight production sites in six countries. Fiberweb creates specialty materials that are found in many critical applications, including hygiene and healthcare, as well as house wrap, filtration, dryer sheets, and several other specialized niche applications. In each area, Fiberweb helps its customers meet a range of technical challenges from precise filtration to reducing the energy demands of housing.

With operations in North America and Europe, Fiberweb improved our capabilities in several existing applications (such as hygiene and healthcare) but also meaningfully expanded our positions in several complementary applications, such as filtration, dryer sheets, and house wrap. Fiberweb also provided access to several new technologies such as S-Tex (hygiene) and Nano fiber (filtration), which offer differentiated products to address our customers’ needs for innovation and customized solutions. Fiberweb has been fully integrated into our European and North American regions and we believe will generate significant cost savings, in excess of our initial estimates. As of December 31, 2014, we have fully implemented initiatives at Fiberweb accounting for approximately $39.2 million of annualized savings (above our initial estimates of $28 million).

Recent Developments

Dounor Acquisition

On March 25, 2015, we announced that PGI France Holdings SAS, our wholly-owned subsidiary, entered into an agreement to acquire Dounor SAS (“Dounor”), a French manufacturer of materials used in hygiene, healthcare and industrial applications. The acquisition of Dounor was completed on April 17, 2015 using the proceeds from borrowings under an incremental amendment (the “Second Incremental Amendment”) to the Company’s existing Term Loan Facility.

Term Loan Facility Amendment

On April 17, 2015, PGI Group entered into the Second Incremental Amendment. Pursuant to the Second Incremental Amendment, PGI Group obtained $283.0 million of commitments for incremental term loans (the “2015 Additional Term Loans”). A portion of the proceeds of the 2015 Additional Term Loans were used to fund the consideration due in respect of the previously announced acquisition of Dounor. The remaining proceeds are expected to be used to redeem $200.0 million outstanding principal amount of the PGI Group’s outstanding Senior Secured Notes, to pay related fees and expenses (including the redemption premium) and for general corporate purposes.

Redemption of Senior Secured Notes

On April 8, 2015, PGI Group issued a conditional notice of its election to redeem $200.0 million of the outstanding principal amount of its Senior Secured Notes. The Senior Secured Notes are expected to be redeemed on May 8, 2015 (the “Redemption Date”) at a redemption price of 103.875% of the principal amount thereof, plus accrued and unpaid interest on the Senior Secured Notes to, but excluding, the Redemption Date.

Risks Related to Our Business

Investing in our common stock involves substantial risks, and our ability to successfully operate our business and execute our growth plan is subject to numerous risks. Some of the more significant challenges and risks include the following:

•

the specialized markets in which we sell our products are highly competitive and we may therefore have difficulty growing our business and maintaining profit margins;

•

we must continue to invest significant resources in developing innovative products in order to maintain a competitive edge in the highly specialized markets in which we operate;

•

increases in prices for raw materials and energy, as well as a reduction of our selling prices to customers could reduce our profit margins;

•

a material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales or negatively affect our results of operation and financial condition;

•

we rely on a limited number of suppliers to provide raw materials, significant machinery and components used in our production facilities. A material interruption in supply or delivery could prevent or limit our ability to accept and fill orders for our products;

•

we generate most of our revenue from the sale of manufactured products that are used in a wide variety of consumer and industrial applications and the potential for product liability exposure could be significant;

•

goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets;

•

our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness;

•

affiliates of our Sponsor control us and have the ability to elect all of the members of our Board of Directors; the Sponsor’s interests may conflict with ours or yours in the future; and

•

other factors set forth under “Risk Factors” in this prospectus.

Corporate Information

PGI Specialty Materials, Inc. was incorporated under the laws of the State of Delaware in November 22, 2010. PGI Specialty Materials, Inc.’s only material asset is the equity of Holdings, sole equityholder of PGI Group, through which we conduct our operations. Our principal executive office is located at 9335 Harris Corners Parkway, Suite 300, Charlotte, North Carolina. Our telephone number is (704) 697-5100.

Our Sponsor

Blackstone (NYSE: BX) is one of the world’s leading investment firms. Blackstone’s asset management businesses, with approximately $310 billion in assets under management as of March 31, 2015, include investment vehicles focused on private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis. Blackstone also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services.

Immediately after the offering of our common stock, affiliates of Blackstone will beneficially own approximately % of our common stock or approximately % if the underwriters exercise in full their option to purchase additional shares.

THE OFFERING

Common stock offered by us

shares.

Option to purchase additional shares

The underwriters have an option to purchase up to additional shares of our common stock from us. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

Common stock outstanding after giving effect to this offering

shares ( shares if the underwriters exercise their option to purchase additional shares in full).

Use of proceeds

We estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and estimated offering expenses payable by us, will be approximately $ , based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

We intend to use the net proceeds from this offering to redeem $ aggregate principal amount of the Senior Secured Notes and to pay a $ million one-time Advisory Agreement termination fee to our Sponsor, with any remaining balance to be used for general corporate purposes. See “Use of Proceeds.”

Dividend policy

Risk factors

See “Risk Factors” for a discussion of risks you should carefully consider before deciding to invest in our common stock.

Proposed NYSE trading symbol

“ ”

The number of shares of our common stock to be outstanding immediately after the consummation of this offering is based on shares of common stock outstanding as of , and excludes:

•

shares of common stock issuable upon the exercise of options to purchase shares outstanding as of , at a weighted average exercise of $ per share;

•

shares of common stock issuable pursuant to restricted stock units as of , ; and

•

shares of common stock reserved for future issuance following this offering under our equity plans.

Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:

•

assumes (1) no exercise of the underwriters’ option to purchase additional shares and (2) an initial public offering price of $ per share, which is the mid-point of the range set forth on the cover page of this prospectus;

•

reflects a for one stock split of our common stock, to be effected prior to the consummation of this offering; and

•

assumes the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the consummation of this offering.

SUMMARY HISTORICAL AND PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

The following summary historical and pro forma condensed combined financial information and other data set forth below should be read in conjunction with “Summary—Recent Acquisitions,” “Basis of Presentation,” “Unaudited Pro Forma Condensed Combined Financial Information” and the historical financial statements of the Company, Providência and Fiberweb, including the related notes, included elsewhere in this prospectus.

The summary historical financial information presented below as of and for the fiscal years ended December 31, 2014, December 28, 2013 and December 29, 2012 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary historical financial information presented below is not necessarily indicative of the results to be expected for any future period.

The summary unaudited pro forma condensed combined financial information presented below is based upon the historical consolidated financial statements of the Company and Providência and has been prepared to illustrate the effects of the Providência Acquisition and the Providência Refinancing (collectively, the “Transactions”) as well as the effects of the completion of this offering and the use of proceeds therefrom, after deducting estimated underwriting discounts and estimated offering expenses payable by us (the “Offering”). The summary unaudited pro forma condensed combined statements of operations data for the fiscal year ended December 31, 2014 has been prepared to give pro forma effect to the Transactions and the Offering as if they had occurred on December 29, 2013.

The summary unaudited pro forma condensed combined financial information includes only adjustments that are directly attributable to the Transactions and the Offering, factually supportable and with respect to the statements of operations, expected to have a continuing impact on the combined results. The Providência Acquisition has been accounted for using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). ASC 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. The estimated fair values of Providência assets acquired, liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its fair value analysis. The Company has not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Providência net assets and related allocation of purchase price. The Company is still waiting for additional information to finalize the valuation of its acquired intangible assets and property, plant and equipment as well as the accounting for certain tax matters. The Company expects to complete its final purchase price allocation during the second quarter of 2015. Upon completion of detailed valuation studies and the final determination of fair value, the Company may make additional adjustments to the fair value allocation, which may differ significantly from the valuations set forth in the unaudited pro forma condensed combined financial information.

The summary unaudited pro forma condensed combined financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s results of operations actually would have been had the Transactions and the Offering, as applicable, been completed as of the dates indicated, nor is it necessarily indicative of future operating results of the combined company. As a result, the summary pro forma condensed combined statements of operations have not been adjusted to reflect future events that may have occurred since the date of acquisition and/or are expected to occur after the Transactions and the Offering, including, but not limited to, the anticipated realization of ongoing savings from operating synergies and certain one-time charges we expect to incur in connection with the Providência Acquisition, including but not limited to, costs in connection with the integration of the operations of the Company and Providência.


(in thousands, except for per share data)	Pro Forma Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 28, 2013			Fiscal Year Ended December 29, 2012
	(unaudited)
Statement of Operations Data:
Net sales	$	2,005,678		$	1,859,914		$	1,214,862		$	1,155,163
Cost of goods sold		(1,649,134	)		(1,526,406	)		(1,018,806	)		(957,917	)

Gross profit		356,544			333,508			196,056			197,246
Selling, general and administrative expenses		(280,490	)		(254,280	)		(153,188	)		(140,776	)
Special charges, net		(40,633	)		(59,185	)		(33,188	)		(19,592	)
Other operating, net		(3,346	)		(1,845	)		(2,512	)		287

Operating income (loss)		32,075			18,198			7,168			37,165
Other income (expense):
Interest expense		(111,177	)		(96,153	)		(55,974	)		(50,414	)
Debt modification and extinguishment costs		(2,587	)		(15,725	)		(3,334	)		—
Foreign currency and other, net		(43,004	)		(27,083	)		(8,851	)		(5,134	)

Income (loss) before income taxes		(124,693	)		(120,763	)		(60,991	)		(18,383	)
Income tax (provision) benefit		(5,400	)		1,523			36,024			(7,655	)

Net income (loss)		(130,093	)		(119,240	)		(24,967	)		(26,038	)
Less: Earnings attributable to noncontrolling interest and redeemable noncontrolling interest		(9,573	)		(3,943	)		(34	)		—
Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(120,520	)	$	(115,297	)	$	(24,933	)	$	(26,038	)

Per Share Data:
Basic and diluted loss per share				$	(467.89	)	$	(94.09	)	$	(99.99	)


	As of
(in thousands)	December 31, 2014 (as Adjusted)(2)		December 31, 2014			December 28, 2013		December 29, 2012
	(unaudited)
Balance Sheet Data:
Cash and cash equivalents		$	$	178,491		$	86,064	$	97,879
Operating working capital(1)	$		$	100,115		$	43,170	$	29,628
Total assets	$		$	2,035,173		$	1,464,520	$	1,022,069
Short-term borrowings and long-term debt, including current portion	$		$	1,482,840		$	896,668	$	599,689
Redeemable noncontrolling interest	$		$	89,181		$	—	$	—
Total PGI Specialty Materials, Inc. shareholders’ equity	$		$	(24,355	)	$	158,896	$	139,202

(1)	Operating working capital is defined as accounts receivable plus inventories less trade accounts payable and accrued liabilities.

(2)	As adjusted to reflect this Offering.


(in thousands)	Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 28, 2013			Fiscal Year Ended December 29, 2012
Statement of Cash Flows Data:
Net cash provided by (used in) operating activities	$	49,148		$	16,850		$	75,471
Net cash (used in) investing activities		(436,682	)		(337,759	)		(50,233	)
Net cash provided by (used in) financing activities		487,376			308,190			(42	)


(in thousands) (unaudited)	Pro Forma Fiscal Year Ended December 31, 2014		Fiscal Year Ended December 31, 2014		Fiscal Year Ended December 28, 2013		Fiscal Year Ended December 29, 2012
Other Financial Data:
Adjusted EBITDA(1)	$	259,977	$	259,977	$	210,411	$	129,671
Depreciation and amortization(2)		123,768		112,557		71,497		64,041
Total capital expenditures(3)		89,488		82,457		54,642		51,625

(1)

Our management uses Adjusted EBITDA, defined as net income (loss) before interest expense (net of interest income), income and franchise taxes and depreciation and amortization, further adjusted to exclude certain other items permitted in calculating covenant compliance under our credit agreements and the indentures governing our Senior Secured Notes and Senior Unsecured Notes. Under our credit agreements and indentures governing our Senior Secured Notes and our Senior Unsecured Notes, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments, and making restricted payments is tied to ratios based on Adjusted EBITDA. In addition, targets based on Adjusted EBITDA are among the measures we use to evaluate our management’s performance for purposes of determining their compensation under our incentive plans as further described under “Management—Executive Compensation.”

Pro forma Adjusted EBITDA incorporates the adjustments described above and also gives pro forma effect to the Transactions and the Offering as if they had occurred on December 29, 2013. We present pro forma Adjusted EBITDA, in addition to Adjusted EBITDA, to provide a more complete understanding of our results of operations that gives effect to the Transactions and the Offering. The pro forma financial information we present is based on estimates and assumptions regarding the Transactions and Offering and our actual results may differ materially from such assumptions and estimates.

Adjusted EBITDA and pro forma Adjusted EBITDA are not recognized terms under GAAP, should not be considered in isolation or as a substitute for a measure of our liquidity or performance prepared in accordance with GAAP and are not indicative of income from operations or pro forma income of operations as determined under GAAP. Adjusted EBITDA, pro forma Adjusted EBITDA and other non-GAAP financial measures have important limitations which should be considered before using these measures to evaluate the Company’s liquidity or financial performance. Adjusted EBITDA and pro forma Adjusted EBITDA eliminate the effect of non-cash depreciation of tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Adjusted EBITDA and pro forma Adjusted EBITDA also eliminate the effects of interest rates and changes in capitalization which management believes may not necessarily be indicative of a company’s underlying operating performance. Adjusted EBITDA and pro forma Adjusted EBITDA, as presented by us, may not be comparable to similarly titled measures of other companies due to varying methods of calculation. We believe that Adjusted EBITDA and pro forma Adjusted EBITDA provide useful information about flexibility under our covenants to investors, lenders, financial analysts and rating agencies since these groups have historically used EBITDA-related measures in our industry, along with other measures, to estimate the value of a company, to make informed investment decisions, and to evaluate a company’s ability to meet its debt service requirements. Adjusted EBITDA and pro forma Adjusted EBITDA should be read in conjunction with “Unaudited Pro Forma

Condensed Combined Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.

(2)

Depreciation and amortization excludes the amortization of loan acquisition costs that is included in interest expense. Pro forma depreciation and amortization for the fiscal year ended December 31, 2014 includes Providência results for the pre-acquisition period from January 1, 2014 through June 10, 2014.

(3)

Total capital expenditures for the Issuer represent purchases of property, plant and equipment included within the Statement of Cash Flow. Pro forma total capital expenditures for the fiscal year ended December 31, 2014 include capital expenditures of Providência for the pre-acquisition period from January 1, 2014 through June 10, 2014.

We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income (loss). The following table reconciles net income (loss) to Adjusted EBITDA for the periods presented:


(in thousands) (unaudited)	Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 28, 2013			Fiscal Year Ended December 29, 2012
Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(115,297	)	$	(24,933	)	$	(26,038	)
Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest		(3,943	)		(34	)		—
Interest expense		96,153			55,974			50,414
Income and franchise tax		(297	)		(35,658	)		8,025
Depreciation and amortization(a)		112,557			71,497			64,041
Purchase accounting adjustments(b)		6,976			7,288			936
Non-cash compensation(c)		1,931			4,329			842
Special charges, net(d)		59,185			33,188			19,592
Foreign currency and other non-operating, net(e)		32,531			11,689			4,982
Loss on debt modification		15,725			3,334			—
Severance and relocation expenses(f)		3,542			4,943			1,657
Business optimization expenses(g)		1,263			319			979
Management, monitoring and advisory fees(h)		5,546			3,855			3,361
Other(i)		2,899			958			880

Adjusted EBITDA before contribution from acquisitions and contribution from estimated synergies	$	218,771		$	136,749		$	129,671
Contribution from acquisitions(j)		13,366			37,946			—
Contribution from estimated synergies(k)		27,840			35,716			—

Adjusted EBITDA	$	259,977		$	210,411		$	129,671

(a)	Excludes amortization of loan acquisition costs that are included in interest expense.

(b)	Reflects fair market value adjustments as a result of purchase accounting associated with acquisitions, primarily related to the step-up in inventory value and its amortization into earnings over the period of the acquired company’s normal inventory turns.

(c)	Reflects non-cash compensation costs related to employee and director restricted stock, restricted stock units and stock options.

(d)

Reflects costs associated with non-cash asset impairment charges, the restructuring and realignment of manufacturing operations and management organizational structures, pursuit of certain transaction opportunities, including expenses related to the Fiberweb and Providência acquisitions as well as the Merger, and other charges included in Special charges, net in our Consolidated Statement of Operations.

(e)

Reflects (gains) losses from foreign currency translation of intercompany loans, unrealized (gains) losses on interest rate and foreign currency hedging transactions, (gains) losses on sales of assets outside the ordinary course of business, factoring costs and certain other non-operating (gains) losses recorded in Foreign Currency and Other, net above as well as (gains) losses from foreign currency transactions recorded in Other Operating, net above.

(f)	Reflects severance and relocation expenses not included under Special charges, net as well as costs incurred with the CEO transition in 2013.

(g)	Reflects costs incurred to improve IT and accounting functions, costs associated with establishing new facilities and certain other expenses.

(h)	Reflects management, monitoring and advisory fees paid under the Sponsor management agreement. We intend to terminate the Advisory Agreement in connection with this offering. See “Certain Relationships and Related Party Transactions—Advisory Agreement.”

(i)	Reflects charges such as gain/loss on disposals, start-up costs and other add-backs permitted under our debt agreements.

(j)

Pursuant to the indentures governing our Senior Secured Notes and our Senior Unsecured Notes and the credit agreements governing our Term Loans and our ABL Facility, we are permitted to include in our Adjusted EBITDA calculation the Adjusted EBITDA contributions from acquisitions for the portion of the fiscal year prior to the closing of the acquisition. The fiscal year ended December 28, 2013 reflects Adjusted EBITDA contributions of the Fiberweb Acquisition for the period from January 1, 2013 through November 15, 2013. The fiscal year ended December 31, 2014 reflects Adjusted EBITDA contributions of the Providência Acquisition for the period from January 1, 2014 through June 11, 2014.

(k)

Pursuant to the indentures governing our Senior Secured Notes and our Senior Unsecured Notes and the credit agreements governing our Term Loans and our ABL Facility, we are permitted to include in our calculation of Adjusted EBITDA contributions from estimated synergies resulting from acquisitions (subject to certain limitations). The adjustment represents management’s estimate of synergies expected to be realized within 12 months following the applicable acquisitions. The fiscal year ended December 28, 2013 includes the Adjusted EBITDA contribution from estimated synergies from the Fiberweb Acquisition. The fiscal year ended December 31, 2014 includes the Adjusted EBITDA contribution from estimated synergies from the Providência Acquisition.

The credit agreement governing our Term Loans limits the amount of estimated synergies included in the calculation of Adjusted EBITDA for any consecutive four quarter period to 20% of Adjusted EBITDA, while the indenture governing our Senior Secured Notes and the credit agreement governing our ABL Facility limits such amount to the greater of $20 million or 10% of Adjusted EBITDA. The indenture governing our Senior Unsecured Notes does not include such limitation. Accordingly, Adjusted EBITDA for the fiscal year ended December 31, 2014 and December 28, 2013 presented in the table above includes $1.8 million and $14.7 million, respectively, of estimated synergies that exceed the limitations in our Senior Secured Notes and ABL Facility. Therefore, we are not permitted to include that portion of estimated synergies in Adjusted EBITDA for purposes of determining our compliance with certain covenants in the Senior Secured Notes and ABL Facility. The limitation under the credit agreement governing the Term Loans has not been reached for the amount of synergies presented in the table above.

We present these synergy adjustments as they are permitted under the terms of our debt instruments, but you should not view these adjustments as a projection of future results. Our ability to realize these anticipated synergies is subject to significant uncertainties and you should not place undue reliance on the adjustments.

The following table reconciles pro forma net income (loss) to pro forma Adjusted EBITDA for the fiscal year ended December 31, 2014:


(in thousands) (unaudited)	Pro Forma Fiscal Year Ended December 31, 2014
Net income (loss) attributable to PGI Specialty Materials, Inc.(a)	$	(120,520	)
Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest		(9,573	)
Interest expense		111,177
Income and franchise tax		6,626
Depreciation and amortization(b)		123,768
Purchase accounting adjustments(c)		6,976
Non-cash compensation(d)		2,053
Special charges, net(e)		40,633
Foreign currency and other non-operating, net(f)		49,552
Loss on debt modification		2,587
Severance and relocation expenses(g)		3,547
Business optimization expenses(h)		1,625
Management, monitoring and advisory fees(i)		5,546
Other(j)		8,140

Pro forma Adjusted EBITDA before contribution from estimated synergies	$	232,137

Contribution from estimated synergies(k)		27,840

Pro forma Adjusted EBITDA	$	259,977

(a)	Refer to “Unaudited Pro Forma Condensed Combined Financial Information”, included elsewhere in this prospectus, for more information related to pro forma net income (loss).

(b)	Excludes amortization of loan acquisition costs that are included in interest expense.

(c)	Reflects fair market value adjustments as a result of purchase accounting associated with acquisitions primarily related to the step up in inventory value and its amortization into earnings over the period of the acquired company’s normal inventory terms.

(d)	Reflects non-cash compensation costs related to employee and director restricted stock, restricted stock units and stock options.

(e)

Reflects costs associated with non-cash asset impairment charges, the restructuring and realignment of manufacturing operations and management organizational structures, pursuit of certain transaction opportunities, including expenses related to the Fiberweb and Providência acquisitions, and other charges included in Special charges, net in our consolidated statement of operations.

(f)

Reflects (gains) losses from foreign currency translation of intercompany loans, unrealized (gains) losses on interest rate and foreign currency hedging transactions, (gains) losses on sales of assets outside the ordinary course of business, factoring costs and certain other non-operating (gains) losses recorded in Foreign Currency and Other, net above as well as (gains) losses from foreign currency transactions recorded in Other Operating, net above.

(g)	Reflects severance and relocation expenses not included under Special charges, net.

(h)	Reflects costs incurred to improve IT and accounting functions, costs associated with establishing new facilities and certain other expenses.

(i)	Reflects management, monitoring and advisory fees paid under the Sponsor management agreement. We intend to terminate the Advisory Agreement in connection with this offering. See “Certain Relationships and Related Party Transactions—Advisory Agreement.”

(j)	Reflects charges such as gain/loss on disposals and start-up costs.

(k)

Pursuant to the indentures governing our Senior Secured Notes and our Senior Unsecured Notes and the credit agreements governing our Term Loans and our ABL Facility, we are permitted to include in our calculation of pro forma Adjusted EBITDA contributions from estimated synergies resulting from acquisitions (subject to certain limitations described below). The adjustment represents management’s estimate of synergies expected to be realized within the next 12 months. The fiscal year ended December 31, 2014 includes a pro forma Adjusted EBITDA contribution of $27.8 million from the Fiberweb and Providência acquisitions (of which $8.9 million represents the portion attributable to Fiberweb and $18.9 million represents the portion attributable to Providência).

The credit agreement governing our Term Loans limits the amount of estimated synergies included in the calculation of pro forma Adjusted EBITDA for any consecutive four quarter period to 20% of pro forma Adjusted EBITDA, while the indenture governing our Senior Secured Notes and the credit agreement governing our ABL Facility limit such amount to the greater of $20 million or 10% of pro forma Adjusted EBITDA. The indenture governing our Senior Unsecured Notes does not include such limitation. Accordingly, pro forma Adjusted EBITDA for the fiscal year ended December 31, 2014 includes approximately $1.8 million of estimated synergies that exceed the limitations in our Senior Secured Notes and ABL Facility. Therefore, we are not permitted to include that portion of estimated synergies in pro forma Adjusted EBITDA for purposes of determining our compliance with certain covenants in the Senior Secured Notes, and ABL Facility. The limitation under the credit agreement governing the Term Loans has not been reached for the amount of synergies presented in the table above.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and the other information contained in this prospectus, including our consolidated financial statements and the related notes, before you decide whether to purchase our common stock.

Risks Related To Our Business

The specialized markets in which we sell our products are highly competitive, as a result we may have difficulty growing our business and maintaining profit margins.

The markets for our products are highly competitive. The primary competitive factors include product innovation and performance, quality, service, cost, distribution and technical support. In addition, we compete against a number of competitors in each of our markets. Some of these competitors are larger companies that have greater financial, technological, manufacturing and marketing resources than we do. A reduction in overall demand, a significant increase in manufacturing capacity in excess of demand or increased costs to design and produce our products would likely further increase competition and that increased competition could lead to reduced sales or cause us to reduce our prices, which could lower our profit margins and impair our ability to grow.

The global nonwovens market has historically experienced stable growth. However, beginning in late 2010, several of our competitors, primarily in the hygiene markets, installed or announced an intent to install capacity in excess of what we believe to be then current market demand. Consequently, as this manufacturing capacity entered into commercial production, the short-term to mid-term excess supply created unfavorable market dynamics, resulting in a downward pressure on selling prices. In recent years, we believe growing demand has filled a portion of this excess capacity and we have observed fewer new capacity expansions, leading to improving capacity utilization in our view.

Increases in prices for raw materials and energy could reduce our profit margins.

The primary raw materials used to manufacture most of our products are polypropylene resins (accounting for approximately 75% of raw materials costs historically), polyester fiber, polyethylene resin and, to a lesser extent, rayon and tissue paper. In addition, energy-related costs are a significant expense for us (both directly and as inputs to our primary raw materials). The prices of raw materials and energy can be volatile and are susceptible to rapid and substantial changes due to factors beyond our control such as changing economic conditions, currency fluctuations, political unrest and instability in energy-producing nations, and supply and demand considerations. To the extent that we are able to pass along raw material price increases to some of our customers, there is often a delay between the time we are required to pay the increased raw material price and the time we are able to pass the increase on to our customers. To the extent we are not able to pass along all or a portion of such increased prices of raw materials, our cost of goods sold would increase and our operating income and margins would correspondingly decrease. There can be no assurance that the prices of raw materials and energy will not increase in the future or that we will be able to pass on any increases to our customers. In addition, volatility in the prices for raw materials could make it more difficult for us to pass along all or a portion of any increase to our customers. Material increases in raw material and energy prices that cannot be passed on to customers could have a material adverse effect on our profit margins, results of operations and financial condition.

The industries that we serve are subject to the overall economic environment and demand for end-use products.

Our net sales are affected by general economic conditions, and the development of demand for and prices of end-use products in the industries that we serve. Geographically, general economic conditions constitute important factors affecting the demand for our products. Our results may also be affected by the cyclicality of the end-uses applications and industries we serve, although these cycles vary across industries and geographic

regions. Demand for and prices of our products have fluctuated during the past years as demand by end-users and intermediate converters has changed. A substantial decline in general economic conditions combined with a consequent decline in the prices and/or demand for our products could have an adverse effect on our business, results of operations or financial condition.

The loss of any of our large volume customers could significantly reduce our revenues and profits.

A significant amount of our products are sold to large volume customers. We have one major customer, Procter & Gamble, that accounts for over approximately 12% of our business and our 20 largest customers represented approximately 51% of our sales in 2014. We also do not have any long-term volume commitments with our customers and, as a result, the amount, and prices at which, our customers purchase from us may vary across periods. As a result, a decrease in business from, or the loss of any large volume customers, could materially reduce our product sales, lower our profits and impair our financial condition.

Our international operations pose risks to our business that may not be present with our domestic operations.

Our manufacturing facilities in the United States accounted for approximately 33% of net sales for 2014, with facilities in Mexico, Canada, Europe, Asia and South America accounting for approximately 67% of net sales for the same period. As a result of the Providência Acquisition, we have further strengthened our presence in South America and we expect a proportionate increase to our net sales in that region. As part of our growth strategy, we have expanded, and may continue to expand operations in foreign countries where we have an existing presence or enter new foreign markets and expect to increase sales of products as disposable income increases in developing markets. Our foreign operations are, and any future foreign operations will be, subject to certain risks that are unique to doing business in foreign countries. These risks include fluctuations in foreign currency exchange rates, inflation, economic or political instability, shipping delays in both our products and receiving delays of raw materials, changes in applicable laws, including assessments of income and non-income related taxes, reduced protection of intellectual property and regulatory policies and various trade restrictions including potential changes to export taxes or countervailing and anti-dumping duties for exported products from these countries. Any of these risks could have a negative impact on our ability to deliver products to customers on a competitive and timely basis. This could reduce or impair our net sales, profits, cash flows and financial position. We have not historically hedged our exposure to foreign currency risk except for risk associated with certain capital spending projects or acquisitions.

We may not realize certain productivity enhancements or improvements in costs.

As part of our business strategy, we must continuously identify opportunities to improve profitability by reducing costs and enhancing productivity to improve our results. Any cost savings or productivity enhancements that we realize from such efforts may differ materially from our estimates. We cannot assure you that these initiatives will be completed as anticipated or that the benefits we expect will be achieved on a timely basis or if they will be achieved at all. If we are unable to reduce costs or improve productivity, our competitive position and profitability could be adversely affected.

We have experienced losses in the past, and we may experience similar losses in the future.

For each of the fiscal years ended December 31, 2014, December 28, 2013 and December 29, 2012 we experienced net losses. Please see the section under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this prospectus for a discussion of our operational history and the factors accounting for such losses. We cannot assure you that in the future we will be profitable.

We generate most of our revenue from the sale of manufactured products that are used in a wide variety of consumer and industrial applications and the potential for product liability exposure could be significant.

We manufacture a wide variety of products that are used in consumer and industrial applications, such as disposable diapers, baby wipes, surgical gowns, wound dressings, carpet backing and industrial packaging. As a

result, we may face exposure to product liability claims in the event that the failure of our products results, or is alleged to result, in property damage, bodily injury and/or death. In addition, if any of our products are, or are alleged to be, defective, we may be required to make warranty payments or to participate in a recall of those products.

The future costs associated with defending product liability claims or responding to product warranty claims could be material and we may experience significant losses in the future as a result. A successful product liability claim brought against us in excess of available insurance coverage or a requirement to participate in any product recall could substantially reduce our profitability and cash generated from operations.

Reductions in our selling prices to customers could reduce our profit margins.

In cases where changes in our selling prices to customers are determined via contract based on changes in an underlying raw material price index, such as the index for polypropylene, and the index decreases, sales would decrease and our operating income would correspondingly decrease if we are not able to obtain corresponding reductions in our raw material costs. Such decreases in operating income could be material. There can be no assurance that the index used in such contracts will not decrease in the future or that we will be able to obtain corresponding reductions in our raw material costs. Additionally, unfavorable competitive dynamics could cause us to lower our selling prices without a change in raw material cost.

Delay in the procurement of raw materials could reduce our revenues and profits.

In certain regions of the world, we may source certain key raw materials from a limited number of suppliers or on a sole source basis. To the extent that we cannot procure our raw material requirements from a local country supplier, we seek to import raw materials from outside refiners. The loss of any of our key suppliers or the delay in the import of raw materials could, in the short-term, adversely affect our business until alternative supply arrangements are secured and the respective suppliers are qualified with our customers, or until importation delays of raw material are resolved. Accordingly, a delay in the procurement of raw materials could reduce product sales, lower our profits and impair our financial condition.

A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales or negatively affect our results of operation and financial condition.

Any of our manufacturing facilities, or any of our machines or equipment within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including:

•

unscheduled maintenance outages;

•

prolonged power failures;

•

an equipment failure;

•

a chemical spill or release;

•

labor difficulties;

•

disruptions in transportation infrastructure, including roads, bridges, railroad tracks and tunnels;

•

fires, floods, windstorms, earthquakes, hurricanes or other catastrophes;

•

terrorism or threats of terrorism;

•

governmental regulations; and

•

other operational problems.

For example, on May 15, 2014, Providência announced that production on three of its spunmelt lines at its São José dos Pinhais facility had been partially interrupted. The interruption was the result of an order by the

Brazilian Ministry of Labor, pending remedial action by Providência to bring the facility into compliance with applicable Brazilian workplace safety regulations. The shutdown impacted sales volumes in excess of 6,500 metric tons of nonwovens during the 2014 fiscal year. Any such future disruption could prevent us from meeting customer orders, reduce our sales or profits and negatively affect our results of operations and financial condition.

We must continue to invest significant resources in developing innovative products in order to maintain a competitive edge in the highly specialized markets in which we operate.

Our continued success depends, in part, upon our ability to maintain our technological capabilities and to continue to identify, develop and commercialize innovative products for the nonwoven and oriented polymer industries. We must also protect the intellectual property rights underlying our new products to realize the full benefits of our efforts. If we fail to continue to develop products or to keep pace with technological developments by our competitors, we may lose market share, reduce product sales and lower our margins, which would impair our results of operations and financial condition.

We may not be able to utilize our production capacity efficiently due to variability in customer demand or unexpected events.

Our ability to utilize our production capacity efficiently may be affected by variability in customer demand or interruptions in production. We have a relatively versatile production base with 22 production facilities worldwide, which facilitates effective use of capacity by, for example, allowing for the redirection of resources to reflect changes in demand. Any interruption in production at our production sites, whether due to lack of orders, labor action, environmental incidents, breakdown of major production machines, fire, accidents or other factors, has the potential to affect adversely our ability to meet production goals for the year and result in lost business opportunities in the future. Also, any failure to fill customer orders on schedule could lead customers to seek alternative sources of supply.

We typically only produce goods against orders received, rather than for stock. Although we believe that close customer relationships have helped us to make accurate estimates of future orders in the past, there could be significant or numerous reductions, delays or cancellations in anticipated or confirmed orders by a customer or group of customers in the future, which could cause us to incur downtime on our machines and thereby have an adverse effect on our business, results of operations or financial condition.

Because a significant number of our employees are represented by labor unions or trade councils and work under collective bargaining agreements, any employee slowdown or strikes or the failure to renew our collective bargaining agreements could disrupt our business.

As of December 31, 2014, approximately 49% of our employees were represented by labor unions or trade councils and worked under collective bargaining agreements, all of which expire within one year. We may not be able to maintain constructive relationships with these labor unions or trade councils. We may not be able to successfully negotiate new collective bargaining agreements on satisfactory terms in the future. The loss of a substantial number of these employees or a prolonged labor dispute could disrupt our business. Any such disruption could reduce our revenues, increase our costs and result in significant losses.

We rely on a limited number of suppliers to provide raw materials, significant machinery and components used in our production facilities. A material interruption in supply or delivery could prevent or limit our ability to accept and fill orders for our products.

We currently depend upon a limited number of outside unaffiliated suppliers for key machinery and components used in our manufacturing and converting facilities. We cannot produce most of our nonwoven and oriented polyolefin products within the specifications required by our customers without such key machinery and

components. If any of our suppliers cease to provide new machinery and components or replacement parts for existing machinery and components in sufficient quantity to meet our needs, there may not be adequate alternative sources of supply. To date, we have been able to obtain the required machinery and components to allow us to expand our business and supply products to our customers within their required specifications without any significant delays or interruptions. Obtaining alternative sources of such machinery and components could involve significant delays and other costs, and these supply sources may not be available to us on reasonable terms or at all. In some cases, we expect that it would take several months, or longer, for a new supplier to begin providing machinery and components to specification. Any disruption of machinery and component supplies could result in lost or deferred sales which could adversely affect our business and financial results.

We purchase raw materials from an array of suppliers, some of which supply a significant portion of our raw materials. Our top five suppliers of raw materials accounted for over 48% of our total purchases and our largest supplier represented approximately 26% of our total purchases, in each case for the year ended December 31, 2014. A loss of a significant supplier could cause us to experience substantial production delays and may impact our business and financial results. We use third-party transportation providers for our shipment of raw materials and our final products, including shipment tracking and freight dispatch services. Our use of transportation services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather, which may impact the ability of providers to provide delivery services that adequately meet our shipping needs. Any material shipping interruptions can adversely affect our ability to meet our production goals or result in significant additional costs.

We could be subject to substantial costs to comply with, and liabilities under, environmental laws, and violations of such laws may increase costs or require us to change certain business practices.

We use and generate a variety of chemicals in our manufacturing operations and we are subject to a broad range of federal, state, local and foreign environmental laws and regulations. These environmental laws govern, among other things, air emissions, wastewater discharges, the handling, storage, disposal and release of wastes and hazardous substances, cleanup of contaminated sites and human health and safety. We regularly incur costs to comply with environmental requirements, and such costs could increase significantly, or our business or operations could be materially affected, with changes in legal requirements or their interpretation or enforcement. For example, certain local governments have adopted ordinances prohibiting or restricting the use or disposal of certain plastic products, such as certain of the plastic wrapping materials that we produce. Widespread adoption of such prohibitions or restrictions could adversely affect demand for our products and thereby have a material adverse effect upon us. In addition, a decline in consumer preference for plastic or disposable products due to environmental considerations could have a material adverse effect upon us. We could incur substantial costs, including clean-up and capital costs, fines and sanctions and third-party property damage or personal injury claims, as a result of violations of environmental laws. Failure to comply with environmental requirements could also result in enforcement actions that materially limit or otherwise affect our operations. We are also subject to laws, such as the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, that may impose liability retroactively and without fault for releases or threatened releases of regulated materials at on-site or off-site locations.

Additionally, greenhouse gas (“GHG”) emissions have increasingly become the subject of a large amount of international, national, regional, state and local attention. Cap and trade initiatives to limit GHG emissions have been enacted in the European Union. Numerous bills related to climate change have been introduced in the U.S. Congress, and various states and federal agencies, including the U.S. Environmental Protection Agency, have taken or are considering actions to regulate GHG emissions, which could adversely impact us and many other industries including our suppliers or customers, which may result in higher costs or other impacts to our business. Within the U.S., most of these actions and proposals have resulted or would result in the regulation and/or taxation, in one fashion or another, of the production of carbon dioxide and other GHGs to facilitate the reduction of GHG emissions to the atmosphere, and provide tax and other incentives to produce and use more clean energy.

Our insurance policies may be insufficient to cover certain eventualities

We have extensive insurance policies that we believe provide coverage consistent with industry practice. However, there is a possibility that these insurance policies may not adequately cover all risks and catastrophic events, and that any particular claim may not be paid. For example, in December 2010, a severe rainy season impacted many parts of Colombia and caused us to temporarily cease manufacturing at our Cali, Colombia facility due to a breach of a levy and flooding at the industrial park where our manufacturing facility is located. Although we carried flood insurance, it was insufficient to cover all of our losses and we incurred additional liability for costs associated with the flood and restoration of the facility. A catastrophic event or multiple catastrophic events may cause large losses and could have a material adverse effect on our business, results of operations or financial condition. Natural catastrophic events to which we are exposed include fires, windstorms, hurricanes, earthquakes, tornadoes, severe hail, severe winter weather and floods, which are inherently unpredictable in terms of both their occurrence and severity. We are also exposed to man-made catastrophic events, which may have a significant adverse impact on the industry where we operate and our business.

If we are unable to adequately protect our intellectual property, we could lose a significant competitive advantage.

Our success depends, in part, on our ability to protect our technologies and products against competitive pressure and to defend our intellectual property rights. If we fail to adequately protect our intellectual property rights, competitors may manufacture and market similar products, which could adversely affect our market share and results of operations. We consider our patents and trademarks, in the aggregate, to be important to our business and seek to protect our proprietary know-how in part through United States and foreign patent and trademark registrations. We have a total of over 1,300 pending and approved trademark and domain name registrations worldwide and over 600 pending and approved patents worldwide, and maintain certain trade secrets. We may not receive patents for all our pending patent applications, and existing or future patents or licenses may not provide competitive advantages for our products. Our competitors may challenge, invalidate or avoid the application of any existing or future patents, trademarks, or other intellectual property rights that we receive or license. In addition, patent rights may not prevent our competitors from developing, using or selling products that are similar or functionally equivalent to our products. The loss of protection for our intellectual property could reduce the value of our products, reduce product sales, lower our profits, and impair our financial condition.

We may not be able to recover the carrying value of our long-lived assets, which could require us to record asset impairment charges and materially and adversely affect our results of operations.

Property, plant and equipment represent a significant portion of our assets. Restructuring initiatives and changing conditions can impact our ability to recover the carrying value of our long-lived assets. The continuing presence of these factors, as well as other factors, could require us to record asset impairment charges in future periods which could materially and adversely affect our results of operations.

Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets.

Goodwill and other intangible assets represent a significant portion of our assets. Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. In the future, goodwill and intangible assets may increase as a result of future acquisitions. We review goodwill and intangible assets at least annually for impairment. Impairment may result from, among other things, deterioration in performance, adverse competitive conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products and services we sell, challenges to the validity of certain registered intellectual property, reduced sales of certain products incorporating registered intellectual property, and a variety of other factors. Any impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, which would adversely affect our results of operations.

If we fail to maintain effective internal control over financial reporting at a reasonable assurance level, we may not be able to accurately report our financial results, and may require the restatement of previously

published financial information which could have a material adverse effect on our operations, investor confidence in our business and the trading prices of our securities.

We recently identified an error in the accounting for noncontrolling interest in the financial statements of our subsidiary, PGI Group, for the unaudited interim periods ended June 28, 2014 and September 27, 2014 relating to our Providência Acquisition, which resulted in the restatement of PGI Group’s consolidated financial statements for such periods. The restatement only impacted the Consolidated Balance Sheets, the Consolidated Statement of Changes in Equity and certain footnote disclosures for such periods. The restatement has no impact on the Consolidated Statements of Comprehensive Income (Loss) or the Consolidated Statements of Cash Flows for such periods. As a result of the restatement, we concluded that we had a material weakness in internal controls over financial reporting. In addition, in the past we have identified and remediated material weaknesses and other deficiencies in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As of February 6, 2015, we implemented additional procedures that we believe are sufficient to remediate the existing material weakness. However, if we determine that these material weaknesses have not been fully remediated or if additional material weaknesses in our internal controls are discovered in the future, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, we may fail to prevent or detect material misstatements in our annual or interim financial statements.

In addition, it is possible that control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified. Such a failure could result in regulatory scrutiny, cause investors to lose confidence in our reported results, lead to a default under our indebtedness or a decline in our stock price and otherwise materially adversely affect our business and financial condition.

The failure of our information technology systems could disrupt our business operations which could have a material adverse effect on our business, financial condition and/or results of operations.

The operation of our business depends on our information technology systems. The failure of our information technology systems to perform as we anticipate could disrupt our business and could result in, among other things, transaction errors, processing inefficiencies, loss of data and the loss of sales and customers, which could cause our business and results of operations to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including, without limitation, fire, natural disasters, power outages, systems failure, system conversions, security breaches, cyber-attacks, viruses and/or human error. In any such event, we could be required to make a significant investment to fix or replace information technology systems, and we could experience interruptions in our ability to service our customers. Any such damage or interruption could adversely affect our business, financial condition and/or results of operations.

The loss of our senior management could disrupt our business.

Our senior management is important to the success of our business. However, the specialty materials and nonwovens industries are characterized by significant competition for a limited pool of experienced executive personnel and, as a result, we may not be able to retain our existing senior management. In addition, we may not be able to fill new positions or vacancies created by expansion or turnover. The loss of any member of our senior management team without retaining a suitable replacement (either from inside or outside our existing management team) could restrict our ability to enhance existing products in a timely manner, sell products to our customers or manage the business effectively.

Risks Relating to Our Indebtedness

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.

We have a substantial amount of debt, which requires significant interest and principal payments. As of December 31, 2014, on an as adjusted basis giving effect to the Offering, our total debt would have been approximately $ million. Our high level of debt could have important consequences, including the following:

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making it more difficult for us to satisfy our obligations with respect to our debt;

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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

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increasing our vulnerability to general adverse economic and industry conditions;

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exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;

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limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

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placing us at a disadvantage compared to other, less leveraged competitors; and

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increasing our cost of borrowing.

Despite our current level of indebtedness, we may be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

We may be able to incur significant additional indebtedness in the future. Although the indentures governing the Senior Secured Notes and the Senior Unsecured Notes and the credit agreements governing the ABL Facility, the Term Loans, the Additional Term Loans and the 2015 Additional Term Loans contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and additional indebtedness incurred in compliance with these restrictions could be substantial.

The restrictions contained in the indentures and the credit agreements also will not prevent us from incurring obligations, such as trade payables, that do not constitute indebtedness as defined under our debt instruments. In addition, as of December 31, 2014, on an as adjusted basis giving effect to the Offering, our ABL Facility would have provided for unused commitments of $43.6 million (subject to availability under a borrowing base and after giving effect to $19.3 million of outstanding letters of credit). Furthermore, we may increase our commitments under our ABL Facility without the consent of lenders under our ABL Facility, other than those lenders who, in their discretion, issue a commitment to provide all or a portion of such increase, by up to an additional $75.0 million, subject to certain customary conditions, and available debt capacity under the indentures governing the Senior Secured Notes and the Senior Unsecured Notes and the credit agreement governing the Term Loans. To the extent new debt is added to our currently anticipated debt levels, the substantial leverage risks described in the previous risk factor would increase. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness.”

Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Borrowings under our ABL Facility, the Term Loans, the Additional Term Loans and the 2015 Additional Term Loans and certain of our foreign indebtedness are at variable rates of interest and expose us to interest rate

risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

We may be unable to service our indebtedness.

Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the international banking and capital markets. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.

Moreover, in the event of a default, the holders of our indebtedness, including the Senior Secured Notes, the Senior Unsecured Notes, the ABL Facility, the Term Loans, the Additional Term Loans and the 2015 Additional Term Loans, could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest. The lenders under our ABL Facility could also elect to terminate their commitments thereunder and cease making further loans. The lenders and holders of our secured debt could institute foreclosure proceedings against their collateral, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our ABL Facility to avoid being in default. If we breach our covenants under our ABL Facility, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

The agreements governing our indebtedness and the Lease Agreements (as defined below) impose significant operating and financial restrictions on us, which may prevent us from capitalizing on business opportunities.

The indentures governing the Senior Secured Notes and the Senior Unsecured Notes, the credit agreements governing our ABL Facility, the Term Loans, the Additional Term Loans and the 2015 Additional Term Loans, and the lease agreements associated with two of our U.S. spunmelt lines (the “Lease Agreements”) impose significant operating and financial restrictions on us. These restrictions limit our ability to, among other things:

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incur additional indebtedness, issue preferred stock or enter into sale and leaseback obligations;

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pay certain dividends or make certain distributions on our capital stock or repurchase or redeem our capital stock;

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make certain capital expenditures;

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make certain loans, investments or other restricted payments;

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place restrictions on the ability of subsidiaries to pay dividends or make other payments to us;

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engage in transactions with stockholders or affiliates;

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sell certain assets or engage in mergers, acquisitions and other business combinations;

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amend or otherwise alter the terms of our indebtedness;

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alter the business that we conduct;

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guarantee indebtedness or incur other contingent obligations; and

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create liens.

In addition, the restrictive covenants in our ABL Facility and Lease Agreements may require us to maintain a specified financial ratio and satisfy other financial condition tests. Our ability to comply with those financial ratios and tests can be affected by factors beyond our control. As a result, we are limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. Our failure to comply with the terms of the Lease Agreements could result in a default thereunder which, if not cured or waived, could result in our being required to make substantial unscheduled payments in respect of the applicable Lease Agreement. The terms of any future indebtedness we may incur could include more restrictive covenants or could impact compliance with existing restrictive covenants.

We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants. Our failure to comply with the restrictive covenants described above as well as other terms of our existing indebtedness and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.

Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our results of operations and our financial condition.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments.

Risks Related to our Acquisitions

The success of our business depends, in part, on achieving our objectives for strategic acquisitions and dispositions.

We may pursue acquisitions or joint ventures as part of our long-term business strategy. In pursuing these transactions, we may encounter significant challenges and risks including that the transaction does not advance our business strategy, that we do not realize a satisfactory return on the investment made, that we increase our debt levels beyond what the acquired business can support, that we may incur unknown liabilities or that we experience difficulty in completing such transactions or in the integration of new operations, employees, business systems, and technology, or diversion of management’s attention from our other businesses. These factors could adversely affect our operating results or financial condition.

We may, as part of our long-term business strategy, evaluate the potential disposition of assets and businesses that may no longer be in alignment with our strategic direction. When we decide to sell assets or businesses, we may encounter difficulty finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the accomplishment of strategic objectives, or we may dispose of a business at a price or on terms which are less than optimal. In addition, there is a risk that we sell a business whose subsequent performance exceeds expectations, in which case the decision would have potentially sacrificed enterprise value. Alternatively, we may be too optimistic about a particular business’s prospects, in which case we may be unable to find a buyer at an acceptable price or sacrifice enterprise value by retaining such business.

Our recent acquisitions, including the Fiberweb Acquisition and Providência Acquisition, may not achieve their intended results, including anticipated cost savings.

Although we completed the Fiberweb Acquisition and Providência Acquisition with the expectation that each transaction will result in various benefits, including a significant amount of cost savings and other financial and operational benefits, there can be no assurance regarding when or the extent to which we will be able to realize any of these benefits. Achieving the anticipated benefits of an acquisition, including cost savings, is subject to a number of uncertainties, including whether the businesses acquired can be operated in the manner we intend. The integration may be subject to delays or changed circumstances, and we can give no assurance that the acquired businesses will perform in accordance with our expectations or that our expectations with respect to integration or cost savings as a result of acquisitions will materialize. In addition, we expect to incur additional costs and charges in connection with integrating the acquired businesses, including severance payments and other restructuring and transitional charges. Additional unanticipated costs, expenses, liabilities, competitive responses, or loss of customer and supplier relationships may also arise during the integration process. The integration of acquired businesses, including the Fiberweb and Providência businesses, may place an additional burdens on our management and internal resources, and the diversion of management’s attention during the integration and restructuring process could have an adverse effect on our profit margins, results of operations and financial condition.

The Providência Acquisition exposes us to additional risks and uncertainties with respect to the acquired businesses and their operations.

We expect that the Providência Acquisition will rebalance our business mix to a greater percentage of international operations. The acquired businesses will generally be subject to risks similar to those that we are subject to in our existing international businesses. In addition, we will be subject to increased foreign currency exchange rate risks because a greater portion of our cash flows will be generated by our international business operations. These risks relate primarily to changes in the relative value of the Brazilian real and the U.S. dollar between the time we initially invest U.S. dollars in our Brazilian business and the time that cash is repatriated to the United States from Brazil. In addition, our consolidated reported earnings on a GAAP basis may be subject to increased currency translation risk, which is the result of the conversion of earnings as reported in our Brazilian businesses on a Brazilian real basis to a U.S. dollar basis in accordance with GAAP requirements. In addition, regulatory requirements, political and/or competitive conditions associated with aspects of the acquired businesses may differ from those of our existing business, which may increase our costs.

In connection with the Providência Acquisition, approximately R$106.9 million (or $47.9 million) of the total consideration due to the selling shareholders pursuant to the stock purchase agreement constitutes Deferred Purchase Price, payable to the selling shareholders to the extent the Providência Tax Claims are resolved in Providência’s favor. See “Business—Expansion and Optimization—Providência Acquisition.” In addition, to the extent minority shareholders participate in the Mandatory Tender Offer, a pro rata amount of the consideration due to such tendering shareholders will be treated as Deferred Purchase Price with respect to such tendering holders. Based on currently available information, we do not anticipate that the actual tax liability will materially exceed the Deferred Purchase Price. However, the actual tax liability will be determined according to applicable Brazilian law, and to the extent the actual tax liability is in excess of the Deferred Purchase Price, we will be responsible for such excess.

Our subsidiary Providência is a Brazilian company and may remain a public company following completion of the tender offer in Brazil.

We may not succeed in acquiring 100% of the share capital of Providência. If Providência remains a public company in Brazil, it will remain subject to Brazilian laws and regulations applicable to domestic public companies, including Brazilian Corporation Law and the Sao Paulo stock exchange listing requirements, some of which may differ from the legal principles and rules that would apply if Providência were incorporated in a jurisdiction in the United States. In addition, we will continue to incur costs and expenses associated with being a public company in Brazil.

The Providência business may also be adversely affected by any changes to Brazilian economic conditions. The Brazilian economy has historically been characterized by interventions by the Brazilian government and unstable economic cycles. The Brazilian government has often changed monetary, taxation, credit, tariff and other policies. For example, the government’s actions to control inflation have at times involved setting wage and price controls, blocking access to bank accounts, imposing exchange controls and limiting imports into Brazil. We have no control over, and cannot predict, what policies or actions the Brazilian government may take in the future. Providência’s business, results of operations, financial condition and prospects may be adversely affected by, among others, the following factors:

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exchange rate movements;

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exchange control policies;

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expansion or contraction of the Brazilian economy;

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inflation;

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tax policies;

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other economic political, diplomatic and social developments in or affecting Brazil;

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interest rates;

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energy shortages or rationalization;

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liquidity of domestic capital and lending markets;

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changes in environmental regulation; and

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social and political instability, particularly in light of recent protests against public policy and related vandalism in major Brazilian cities.

These factors, as well as uncertainty over whether the Brazilian government may implement changes in policy or regulations relating to these factors, may adversely affect Providência and its business and financial performance. The Brazilian government has considerable power to determine governmental policies and actions that relate to the Brazilian economy and, consequently, affect the operations and financial performance of businesses in Brazil. The government may face domestic pressure to retreat from the current macroeconomic policies in an attempt to achieve higher rates of economic growth. We cannot predict what policies will be adopted by the Brazilian government and whether these policies will negatively affect the economy or Providência’s business or financial performance. In addition, uncertainty leading up to and after the election over whether the Brazilian government may implement changes in policy or regulations may contribute to economic uncertainty in Brazil.

The market for securities issued by Brazilian public companies is influenced, to varying degrees, by economic and market conditions in other emerging market countries, especially other Latin American countries. Accordingly, developments in one country may cause capital and credit markets in other countries to fluctuate and such fluctuations may be significant. Developments or adverse economic conditions in other emerging market countries have at times resulted in significant outflows of funds from, and declines in the amount of foreign currency invested in, Brazil. The Brazilian economy also is affected by international economic and market conditions generally, especially economic and market conditions in the United States. Share prices on the São Paulo Stock Exchange, for example, have historically been sensitive to fluctuations in U.S. interest rates, as well as movements of the major U.S. stocks indexes.

Following the Providência Acquisition, we have minority shareholders, who may interfere with our business plans and adversely affect our business strategy, or our future operating performance, financial condition, cash flows or results of operations.

Following the completion of the Providência Acquisition, we indirectly own approximately 71.25% of the outstanding capital stock of Providência, and other shareholders unrelated to us own approximately the

remaining 28.75%. While we filed the Mandatory Tender Offer registration request with the CVM, as required under Brazilian law, completion of the Mandatory Tender offer may be delayed due to the ongoing approval process of the CVM, certain minority shareholders may choose not to participate and/or we may incur additional costs in connection with the acquisition of the minority shareholders’ shares. In the event we own less than 100% of Providência, any such minority shareholders may have interests that are contrary to our business plans with respect to Providência, which may include de-listing of Providência’s common stock. In addition, minority shareholders may seek to assert certain rights that they may purport to have under Brazilian law. If we are not able to implement our business plan with respect to Providência, we may incur additional costs. In addition, it could also adversely affect our business strategy, or our future operating performance, financial condition, cash flows or results of operations.

We may not receive dividends from Providência.

According to the bylaws of Providência, the company must pay to its shareholders, including us, at least 25% of its annual net income as dividends, calculated and adjusted pursuant to Brazilian Law No. 6,404 of December 15, 1976, as amended. Providência’s net income may be used to absorb losses or otherwise retained as allowed by Brazilian law, and may not be available to be paid as dividends. In addition, Providência is allowed to suspend the mandatory distribution of dividends in any particular fiscal year if its Board of Directors decides and informs its shareholders that such distribution would negatively impact its financial condition. While we indirectly own approximately 71.25% of the outstanding capital stock of Providência following the completion of the Providência Acquisition, 20% of the Board of Directors will be independent from us, pursuant to applicable Brazilian law.

Risks Related to this Offering and Ownership of Our Common Stock

No market currently exists for our common stock, and an active, liquid trading market for our common stock may not develop, which may cause our common stock to trade at a discount from the initial offering price and make it difficult for you to sell the common stock you purchase.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in the Company will lead to the development of an active trading market on the or otherwise or how active and liquid that market may become. If an active and liquid trading market does not develop or continue, you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all.

You will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

Prior stockholders have paid substantially less per share of our common stock than the price in this offering. The initial public offering price of our common stock will be substantially higher than the net tangible book value per share of outstanding common stock prior to completion of the offering. Based on our net tangible book value as of December 31, 2014 and upon the issuance and sale of shares of common stock by us at an assumed initial public offering price of $ per share, which is the mid-point of the range set forth on the cover page of this prospectus, if you purchase our common stock in this offering, you will pay more for your shares than the amounts paid by our existing stockholders for their shares and you will suffer immediate dilution of approximately $ per share in net tangible book value. Dilution is the amount by which the offering price paid by purchasers of our common stock in this offering will exceed the pro forma net tangible book value per share of our common stock upon completion of this offering. A total of shares of common stock has been reserved for future issuance under the 2015 Omnibus Incentive Plan. You may experience additional dilution

upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, executive officers and directors under our current and future stock incentive plans, including our 2015 Omnibus Incentive Plan. See “Dilution.”

Our stock price may change significantly following the offering, and you may not be able to resell shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.

The trading price of our common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. We and the underwriters will negotiate to determine the initial public offering price. You may not be able to resell your shares at or above the initial public offering price due to a number of factors such as those listed in “—Risks Related to Our Business” and the following:

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results of operations that vary from the expectations of securities analysts and investors;

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results of operations that vary from those of our competitors;

•

changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors;

•

declines in the market prices of stocks generally, particularly those of food distribution companies;

•

strategic actions by us or our competitors;

•

announcements by us or our competitors of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments;

•

changes in general economic or market conditions or trends in our industry;

•

changes in business or regulatory conditions;

•

future sales of our common stock or other securities;

•

investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives;

•

the public’s response to press releases or other public announcements by us or third parties, including our filings with the Securities and Exchange Commission (the “SEC”);

•

announcements relating to litigation;

•

guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

•

the development and sustainability of an active trading market for our stock;

•

changes in accounting principles; and

•

other events or factors, including those resulting from natural disasters, war, acts of terrorism or responses to these events.

These broad industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We intend to retain future earnings, if any, for future operations, expansion, and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. The declaration, amount, and payment of any future dividends on shares of common stock will be at the sole discretion of our Board of Directors. Our Board of Directors may take into account general and economic conditions, our financial condition, and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts ceases coverage of the Company or fail to publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

Future sales, or the perception of future sales, by us or our existing stockholders in the public market following this offering could cause the market price for our common stock to decline.

After this offering, the sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon consummation of this offering we will have a total of shares of common stock outstanding. All shares sold in this offering will be freely tradable without registration under the Securities Act, and without restriction by persons other than our “affiliates” (as defined under Rule 144 of the Securities Act (“Rule 144”)), including our directors, executive officers and other affiliates (including affiliates of the Sponsor) whose shares may be sold only in compliance with the limitations described in “Shares Eligible for Future Sale.”

The remaining shares, representing % of our total outstanding shares of common stock following this offering based on the number of shares outstanding as of December 31, 2014, will be “restricted securities” within the meaning of Rule 144 and subject to certain restrictions on resale following the consummation of this offering. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144, as described in “Shares Eligible for Future Sale.”

In connection with this offering, we, our directors and executive officers, and holders of substantially all of our common stock have each agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of our or their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives of the underwriters. See “Underwriting” for a description of these lock-up agreements.

Upon the expiration of the lock-up agreements described above, shares held by the Investor Group and certain of our directors, officers and employees will be eligible for resale, subject to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to a registration rights agreement, our existing owners have the right, subject to certain conditions, to require us to register the sale of their shares of our common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, our existing owners could cause the prevailing market price of our common stock to decline. Following completion of this offering, the shares covered by registration rights would represent approximately % of our outstanding common stock (or %, if the underwriters exercise in full their option to purchase additional shares). Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See “Shares Eligible for Future Sale.”

As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our shares of common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

In addition, the shares of our common stock reserved for future issuance under the 2015 Omnibus Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and Rule 144, as applicable. A total of shares of common stock has been reserved for future issuance under the 2015 Omnibus Incentive Plan. The special pricing committee of the Board of Directors may determine the exact number of shares to be reserved for future issuance under the 2015 Omnibus Incentive Plan at its discretion.

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you.

Anti-takeover provisions in our organizational documents could delay or prevent a change of control.

Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

These provisions provide for, among other things:

•

a classified Board of Directors with staggered three-year terms;

•

the ability of our Board of Directors to issue one or more series of preferred stock;

•

advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;

•

certain limitations on convening special stockholder meetings;

•

the removal of directors only for cause and only upon the affirmative vote of holders of at least % of the shares of common stock entitled to vote generally in the election of directors if the Sponsor and its affiliates hold less than % of our outstanding shares of common stock; and

•

that certain provisions may be amended only by the affirmative vote of at least % of the shares of common stock entitled to vote generally in the election of directors if the Sponsor and its affiliates hold less than % of our outstanding shares of common stock.

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third-party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. See “Description of Capital Stock.”

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation will provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director or officer of our Company to the Company or the Company’s stockholders, creditors, or other constituents, (iii) action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”) or our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Affiliates of the Sponsor control us and their interests may conflict with ours or yours in the future.

Immediately following this offering of common stock, affiliates of the Sponsor will beneficially own approximately % of our common stock, or approximately % if the underwriters exercise in full their option to purchase additional shares. As a result, investment funds associated with or designated by affiliates of the Sponsor will have the ability to elect all of the members of our Board of Directors and thereby control our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence or modification of debt by us, amendments to our amended and restated certificate of incorporation and amended and restated bylaws and the entering into of extraordinary transactions, and their interests may not in all cases be aligned with your interests. In addition, the Sponsor may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you. For example, the Sponsor could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets.

The Sponsor is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.

Our amended and restated certificate of incorporation will provide that none of the Sponsor, any of its affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. The Sponsor also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. So long as the Sponsor continues to own a significant amount of our combined voting power, even if such amount is less than 50%, the

Sponsor will continue to be able to strongly influence or effectively control our decisions and, so long as the Sponsor and its affiliates collectively own at least 5% of all outstanding shares of our stock entitled to vote generally in the election of directors, it will be able to appoint individuals to our Board of Directors under a stockholders agreement which we expect to adopt in connection with this offering. In addition, the Sponsor will be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change of control of the Company or a change in the composition of our Board of Directors and could preclude any unsolicited acquisition of the Company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of the Company and ultimately might affect the market price of our common stock.

We will be a “controlled company” within the meaning of the rules of the NYSE and the rules of the SEC. As a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies.

After completion of this offering, the Sponsor will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

•

the requirement that a majority of our Board of Directors consist of “independent directors” as defined under the rules of the NYSE;

•

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

•

the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•

the requirement for an annual performance evaluation of the compensation and nominating and corporate governance committees.

Following this offering, we intend to utilize these exemptions. As a result, we may not have a majority of independent directors, our nominating/corporate governance committee, if any, and compensation committee may not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

In addition, on June 20, 2012, the SEC passed final rules implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 pertaining to compensation committee independence and the role and disclosure of compensation consultants and other advisers to the compensation committee. The SEC’s rules direct each of the national securities exchanges (including the NYSE on which we intend to list our common stock) to develop listing standards requiring, among other things, that:

•

compensation committees be composed of fully independent directors, as determined pursuant to new independence requirements;

•

compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel and other committee advisors; and

•

compensation committees be required to consider, when engaging compensation consultants, legal counsel or other advisors, certain independence factors, including factors that examine the relationship between the consultant or advisor’s employer and us.

As a “controlled company,” we will not be subject to these compensation committee independence requirements.

Our ability to use our net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited as a result of future changes in the ownership of our stock and the absence of taxable income in the United States.

As of December 31, 2014, we had U.S. federal net operating loss carryforwards (“NOLs”), of approximately $380.7 million available to offset future taxable income. A significant portion of these NOLs is currently subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and these NOLs have been and will continue to be subject to a valuation allowance in our financial statements. Furthermore, our ability to use our NOLs may be limited if we undergo a future “ownership change,” as defined in Section 382 of the Code, that causes the NOLs to be subject to a greater limitation than the current limitation.

An ownership change could be triggered by substantial changes in the ownership of our outstanding stock. For example, an ownership change would occur if certain shareholders increase their aggregate percentage ownership of our stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change. Although this offering is not expected to cause a change of control for purposes of Section 382 of the Code, future changes in the ownership of our stock could cause an ownership change for purposes of Section 382 of the Code.

The amount of our NOLs has not been audited or otherwise validated by the Internal Revenue Service. The Internal Revenue Service could challenge the amount of our NOLs and other tax assets, which could result in an increase in our liability for income taxes in the future. Further, our NOLs only have value to the extent we generate taxable income in the United States. If we are unable to generate sufficient taxable income prior to the expiration of the NOLs or to the extent our earnings are subject to non-U.S. tax, we will be limited in our ability to utilize the tax benefits related to our NOLs. There can be no assurance that we will have sufficient taxable income to be able to utilize our NOLs prior to their expiration.

We will incur increased costs and obligations as a result of being a public company.

As a public company, we will incur significant legal, accounting, insurance, and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also will incur costs associated with complying with the requirements of the Sarbanes-Oxley Act of 2002 and related rules implemented by the SEC and the NYSE. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make certain activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees, or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory action, and potentially civil litigation.

FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical facts included in this prospectus, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position and our business outlook, business trends and other information referred to under “Prospectus Summary,” “Risk Factors,” “Dividend Policy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” are forward-looking statements. When used in this prospectus, the words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “intend”, “may”, “plans”, “predict”, “project”, “schedule”, “seeks”, “should”, “target” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Such risks, uncertainties and other important factors include, among others, the risks, uncertainties and factors set forth above under “Risk Factors,” and the following risks, uncertainties and factors:

•

general economic factors including, but not limited to, changes in interest rates, foreign currency translation rates, consumer confidence, trends in disposable income, changes in consumer demand for goods produced, and cyclical or other downturns;

•

cost and availability of raw materials, labor and natural and other resources, and our ability to pass raw material cost increases along to customers

•

changes to selling prices to customers which are based, by contract, on an underlying raw material index;

•

ability to meet existing debt covenants or obtain necessary waivers;

•

achievement of objectives for strategic acquisitions and dispositions;

•

ability to achieve successful or timely start-up of new or modified production lines;

•

reliance on major customers and suppliers;

•

domestic and foreign competition;

•

information and technological advances;

•

risks related to operations in foreign jurisdictions; and

•

changes in, compliance with, and liabilities under, environmental laws and regulations, including climate change-related legislation and regulation.

USE OF PROCEEDS

We estimate that the net proceeds from our sale of shares of common stock in this offering based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $ million (or $ million if the underwriters exercise in full their option to purchase additional shares).

We intend to use a portion of the net proceeds received by us from this offering to redeem $ aggregate principal amount of the Senior Secured Notes, which bear interest at 7.75% per annum and mature on February 1, 2019. As of December 31, 2014, the aggregate principal amount outstanding of the Senior Secured Notes was $504.0 million. On April 8, 2015, PGI Group issued a conditional notice of its election to redeem $200.0 million of the outstanding principal amount of its Senior Secured Notes. The $200.0 million Senior Secured Notes are expected to be redeemed on May 8, 2015. On and after February 1, 2015 and until February 1, 2016, PGI Group may redeem any or all of the Senior Secured Notes at a redemption price of 103.875%, plus accrued and unpaid interest to the redemption date.

In connection with this offering, we intend to terminate the Advisory Agreement. We will use approximately $ million of the net proceeds to us from this offering to pay a one-time termination fee to affiliates of the Sponsor in connection with the termination of the Advisory Agreement. See “Certain Relationships and Related Party Transactions—Advisory Agreement.”

We intend to use any remaining proceeds received by us from this offering for general corporate purposes.

A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $ million (or $ million if the underwriters exercise in full their option to purchase additional shares), assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

DIVIDEND POLICY

We have no current plans to pay dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, and other factors that our Board of Directors may deem relevant. Because we are a holding company and have no direct operations, we will only be able to pay dividends from funds we receive from our subsidiaries. In addition, our ability to pay dividends will be limited by covenants in our existing indebtedness and may be limited by the agreements governing other indebtedness we or our subsidiaries incur in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness.”

CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of December 31, 2014 on:

•

an actual basis; and

•

an as adjusted basis to give effect to:

•

the sale by us of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and

•

the application of net proceeds from this offering as described under “Use of Proceeds,” as if this offering and the application of the net proceeds therefrom had occurred on December 31, 2014.

You should read this table in conjunction with the information contained in “Use of Proceeds,” “Selected Historical Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our audited and unaudited consolidated financial statements included elsewhere in this prospectus and the notes thereto included elsewhere in this prospectus.


	As of December 31, 2014
	Actual			As Adjusted(1)
	(dollars in thousands)* (unaudited)
Cash and cash equivalents	$	178,491		$

Short-term borrowings(2)	$	17,665
Long-term debt, including current portion:
ABL Facility(3)		—
Term Loans(4)		703,029
Senior Secured Notes(5)		504,000
Senior Unsecured Notes		210,000
Other existing debt and capital lease obligations(6)		48,146

Total short-term borrowings and long-term debt, including current portion		1,482,840
Deferred Purchase Price(7)		47,931
Redeemable noncontrolling interest(8)		89,181
Equity:
Common stock, $0.01 par value, 1,000,000 shares authorized, actual; 292,491 shares issued and outstanding, actual; shares authorized, as adjusted; and shares issued and outstanding, as adjusted)(9)		3
Additional paid-in capital		277,245
Retained earnings (deficit)		(242,439	)
Accumulated other comprehensive income (loss)		(59,164	)

Total PGI Specialty Materials, Inc. shareholders’ equity		(24,355	)
Noncontrolling interest(10)		554

Total equity		(23,801	)

Total capitalization(11)	$	1,596,151		$

*	Amounts may reflect rounding.

(1)	Each $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, cash and cash equivalents, additional paid-in capital and total

shareholders’ equity by approximately $ million, assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses that we must pay.

(2)	Represents $17.0 million under short-term credit facilities used to finance short-term working capital needs and $0.7 million of short-term indebtedness of Terram Geosynthetics.

(3)	As of December 31, 2014, we had $43.6 million of availability under our ABL Facility, after giving effect to $19.3 million issued but undrawn letters of credit. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Indebtedness—ABL Facility.”

(4)	On April 17, 2015, PGI Group borrowed an additional $283.0 million under the Second Incremental Amendment. See “Summary—Recent Developments—Term Loan Facility Amendment.”

(5)	On April 8, 2015, PGI Group issued a conditional notice of its election to redeem $200.0 million of the outstanding principal amount of its Senior Secured Notes. The $200.0 million Senior Secured Notes are expected to be redeemed on May 8, 2015.

(6)

Actual column represents (i) $5.0 million outstanding under our Argentina—Nacion facility; (ii) $2.0 million outstanding under our Argentina—Galicia facility; (iii) $18.9 million outstanding under our China Hygiene facility; (iv) $2.4 million indebtedness of Terram Geosynthetics; (v) $0.9 million of capital lease obligations; and (vi) $18.9 million of indebtedness of Providência that remains outstanding after the completion of the Providência Acquisition, comprised of (a) $0 million in respect of a U.S. dollar-denominated export credit facility and (b) $18.9 million in respect of a Brazilian real-denominated export credit facility.

(7)

Reflects $47.9 million in respect of the Deferred Purchase Price for Providência (see “Business—Expansion and Optimization—Providência Acquisition”), which is treated as “Indebtedness” under the indentures governing the Senior Secured Notes and the Senior Unsecured Notes and the credit agreements governing our ABL Facility and Term Loan Facility.

(8)

(9)

The number of shares of our common stock to be outstanding immediately after the consummation of this offering is based on 292,491 shares of common stock outstanding as of December 31, 2014, plus shares of common stock to be sold by the Company in this offering, and does not give effect to shares of common stock reserved for future issuance under the 2015 Omnibus Incentive Plan or shares of common stock issued in connection with our long-term incentive compensation program after December 31, 2014.

(10)	Noncontrolling interest represent the minority partners’ interest in the income or loss of Terram Geosynthetics Private Limited, a joint venture located in Gujarat, India, in which we maintain a 65% controlling interest.

(11)

Does not reflect (i) our future minimum rental payments required under operating lease obligations of $58.2 million over the next 5 years and $20.3 million thereafter, (ii) our financing obligation related to the Old Hickory facility acquired in the Fiberweb Acquisition, which had an outstanding balance as of December 31, 2014 of $18.4 million or (iii) $15.0 million of undrawn letters of credit to raw material vendors outstanding as of December 31, 2014. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Indebtedness.”

DILUTION

If you invest in shares of our common stock in this offering, your investment will be immediately diluted to the extent of the difference between the initial public offering price per share of common stock and the net tangible book value per share of common stock after this offering. Dilution results from the fact that the per share offering price of the shares of common stock is substantially in excess of the net tangible book value per share attributable to the shares of common stock held by existing owners.

Our net tangible book value as of December 31, 2014 was a deficit of approximately $242.4 million, or $ per share of common stock. We calculate net tangible book value per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities, and then dividing that amount by the total number of shares of common stock outstanding.

Dilution is determined by subtracting pro forma net tangible book value per share of common stock, as adjusted to give effect to this offering, from the initial public offering price per share of common stock.

After giving effect to our sale of the shares in this offering at an assumed initial public offering price of $ per share, the midpoint range described on the cover of this prospectus, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us, our net tangible book value as of December 31, 2014 would have been $ , or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share of common stock to our existing owners and an immediate and substantial dilution in net tangible book value of $ per share of common stock to investors in this offering at the assumed initial public offering price.

The following table illustrates this dilution on a per share of common stock basis assuming the underwriters do not exercise their option to purchase additional shares of common stock:


Assumed initial public offering price per share of common stock		$
Net tangible book value per share of common stock as of December 31, 2014		$
Increase in net tangible book value per share of common stock attributable to investors in this offering		$

As adjusted net tangible book value per share of common stock after the offering		$

Dilution per share of common stock to investors in this offering		$

A $1.00 increase in the assumed initial public offering price of $ per share of our common stock would increase our net tangible book value after giving to the offering by $ million, or by $ per share of our common stock, assuming the number of shares offered by us remains the same and after deducting the underwriting discount and the estimated offering expenses payable by us. A $1.00 decrease in the assumed initial public offering price per share would result in equal changes in the opposite direction.

The following table summarizes, as of December 31, 2014, the total number of shares of common stock purchased from us, the total cash consideration paid to us, and the average price per share paid by existing owners and by new investors. As the table shows, new investors purchasing shares in this offering will pay an average price per share substantially higher than our existing owners paid. The table below assumes an initial public offering price of $ per share, the midpoint of the range set forth on the cover of this prospectus, for shares purchased in this offering and excludes underwriting discounts and commissions and estimated offering expenses payable by us:

Shares of Common
Stock Purchased

Total
Consideration

Average
Price Per
Share of
Common
Stock

Number

Percent

Amount

Percent

(dollar amounts in thousands,
except for per share data)

Existing owners

Investors in this offering

Total

Each $1.00 increase in the assumed offering price of $ per share would increase total consideration paid by investors in this offering and total consideration paid by all stockholders by $ million, assuming the number of shares offered by us remains the same and after deducting the underwriting discount and the estimated offering expenses payable by us. A $1.00 decrease in the assumed initial public offering price per share would result in equal changes in the opposite direction.

The dilution information above is for illustration purposes only. Our net tangible book value following the consummation of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information herein is based upon the historical consolidated financial statements and/or financial information of the Company and Providência and has been prepared to illustrate the effects of the Transactions and the Offering.

The accompanying unaudited pro forma condensed combined statements of operations for the year ended December 31, 2014 have been prepared to give pro forma effect to the Transactions and the Offering as if they had occurred on December 29, 2013. Since the most recent balance sheet presented in this prospectus as of December 31, 2014 includes the impact of the Transactions, a pro forma balance sheet as of December 31, 2014 has not been presented.

The following unaudited pro forma condensed combined financial information includes only adjustments that are directly attributable to the Transactions and the Offering, factually supportable and, with respect to the statements of operations, expected to have a continuing impact on the combined results. The Providência Acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805. ASC 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. The estimated fair values of Providência assets acquired, liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its fair value analysis. The Company has not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Providência net assets and related allocation of purchase price. The Company is still waiting for additional information to finalize the valuation of its acquired intangible assets and property, plant and equipment as well as the accounting for certain tax matters. The Company expects to complete its final purchase price allocation during the second quarter of 2015. Upon completion of detailed valuation studies and the final determination of fair value, the Company may make additional adjustments to the purchase price allocation, which may differ significantly from the valuations set forth in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s results of operations actually would have been had the Transactions and the Offering, as applicable, been completed as of the dates indicated, nor is it necessarily indicative of future operating results of the combined company. As a result, the pro forma condensed combined statements of operations have not been adjusted to reflect future events that may have occurred after the Transactions and/or that are expected to occur after the Offering, including, but not limited to, the anticipated realization of ongoing savings from operating synergies and certain one-time charges we expect to incur in connection with the Providência Acquisition, including but not limited to, costs in connection with the integration of the operations of the Company and Providência.

The information presented below should be read in conjunction with information included under the headings “Summary,” “Capitalization,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements of the Company, Fiberweb, and Providência, including the related notes, included elsewhere in this prospectus. All pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed combined financial information.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Fiscal Year Ended December 31, 2014


*In thousands, except for per share data*	PGI Specialty Materials, Inc.			Providência U.S. GAAP (Note 2 (a))			Providência Pro Forma Adjustments (Note 2 (b))			Offering and Adjustments (Note 3)	Pro Forma Combined
	USD			USD			USD			USD	USD
Net sales	$	1,859,914		$	145,764		$	—		$	$	2,005,678
Cost of goods sold		(1,526,406	)		(123,550	)		822				(1,649,134	)

Gross profit		333,508			22,214			822				356,544
Selling, general and administrative expenses		(254,280	)		(26,754	)		544				(280,490	)
Special charges, net		(59,185	)		(8,728	)		27,280				(40,633	)
Other operating, net		(1,845	)		(1,501	)		—				(3,346	)

Operating income (loss)		18,198			(14,769	)		28,646				32,075
Other income (expense):
Interest expense		(96,153	)		(5,782	)		(9,242	)			(111,177	)
Debt modification and extinguishment costs		(15,725	)		—			13,138				(2,587	)
Foreign currency and other, net		(27,083	)		631			(16,552	)			(43,004	)

Income (loss) before income taxes		(120,763	)		(19,920	)		15,990				(124,693	)
Income tax (provision) benefit		1,523			(1,307	)		(5,616	)			(5,400	)

Net income (loss)		(119,240	)		(21,227	)		10,374				(130,093	)
Less: Earnings attributable to noncontrolling interest and redeemable noncontrolling interest		(3,943	)		(6,103	)		473				(9,573	)

Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(115,297	)	$	(15,124	)	$	9,901		$	$	(120,520	)

Per share data:
Common shareholders per share
Basic and Diluted	$	(467.89	)

Weighted Average Shares Outstanding
Basic and Diluted		292,178

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial information herein is based upon the historical consolidated financial statements of the Company and Providência and has been prepared to illustrate the effects of the Transactions and the Offering in accordance with GAAP and pursuant to Article 11 of Regulation S-X as if they had occurred on December 29, 2013.

The following unaudited pro forma condensed combined financial statements give effect to the Providência Acquisition under the acquisition method of accounting in accordance with ASC 805. ASC 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill. The estimated fair values of Providência assets acquired, liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its fair value analysis. The Company has not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Providência net assets and related allocation of purchase price. The Company is still waiting for additional information to finalize the valuation of its acquired intangible assets and property, plant and equipment as well as the accounting for certain tax matters. The Company expects to complete its final purchase price allocation during the second quarter of 2015. Upon completion of detailed valuation studies and the final determination of fair value, the Company may make additional adjustments to the fair value allocation, which may differ significantly from the valuations set forth in the unaudited pro forma condensed combined financial information.

For purposes of measuring the estimated fair value, where applicable, of the assets acquired and the liabilities assumed as reflected in the unaudited pro forma condensed combined financial information, the Company has applied the guidance in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.

Following the Providência Acquisition, we indirectly own approximately 71.25% of the outstanding capital stock of Providência. As required by Brazilian law, we intend to launch, subject to CVM approval, the Mandatory Tender Offer. While we intend to acquire the remaining outstanding capital stock of Providência pursuant to the Mandatory Tender Offer, there is no assurance that we will be able to do so. If we do acquire more shares, our combined statements of operations will reflect lower earnings attributable to redeemable noncontrolling interest for the percentage of Providência capital stock that we acquire. For the purposes of the following unaudited pro forma condensed combined financial information, we have assumed that we only own approximately 71.25% of the outstanding capital stock of Providência.

The historical financial statements of Providência have been prepared in accordance with IFRS as issued by the IASB. Any differences in accounting principles between IFRS and GAAP as they apply to Providência have been adjusted to reflect such results in accordance with GAAP. Adjustments have also been made to conform Providência’s accounting policies to the Company’s. In addition, Providência has historically reported its financial statements in its local currency, the Brazilian real (“BRL” or R$). In order to present the pro forma condensed combined financial statements in U.S. dollars, Providência’s statement of operations has been translated using the weighted-average exchange rate for the applicable period.

The unaudited pro forma condensed combined financial information does not reflect ongoing cost savings that the Company expects to achieve as a result of the Providência Acquisition or the costs necessary to achieve these costs savings or synergies.

Note 2. Providência Acquisition

(a) Providência GAAP

Financial information reported under the column heading “Providência GAAP” represents unaudited Providência’s historical financial information prepared in accordance with IFRS (“Providência As Reported”) prior to the Providência Acquisition, translated from Providência’s local currency, the Brazilian real, to the U.S. dollar (“Providência Translated”) and adjusted to reflect Providência’s financial information on a GAAP basis and in accordance with the Company’s accounting policies (“Providência GAAP Adjustments”). These Providência GAAP Adjustments are unaudited. A reconciliation of Providência’s As Reported financial information to amounts presented in the unaudited pro forma condensed combined statement of operations under the column heading “Providência GAAP” is as follows:

Period

Ended June 10, 2014

A reconciliation of Providência’s As Reported financial information to amounts presented in the unaudited pro forma condensed combined statement of operations under the column heading “Providência GAAP” for the period January 1, 2014 through June 10, 2014 is as follows:

Providência

Consolidated Statement of Operations

IFRS to GAAP Reconciliation

For the Period January 1, 2014 through June 10, 2014


	Providência, As Reported (BRL)(A)			Providência Translated (USD)(B)			Providência GAAP Adjustments (USD)				Providência GAAP (USD)
	in thousands
Net sales	R$	330,320		$	143,260		$	2,504		E	$	145,764
Cost of goods sold		(262,091	)		(113,669	)		(9,881	)	C, D, E		(123,550	)

Gross profit		68,229			29,591			(7,377	)			22,214
Selling, general and administrative expenses		(80,484	)		(34,906	)		8,152		C,E		(26,754	)
Special charges, net		—			—			(8,728	)	E		(8,728	)
Other operating, net		(311	)		(135	)		(1,366	)	E		(1,501	)

Operating income (loss)		(12,566	)		(5,450	)		(9,319	)			(14,769	)
Other income (expense):
Interest expense		(11,668	)		(5,060	)		(722	)	E		(5,782	)
Foreign currency and other, net		(2,773	)		(1,203	)		1,834		E		631

Income (loss) before income taxes		(27,007	)		(11,713	)		(8,207	)			(19,920	)
Income tax (provision) benefit		(9,455	)		(4,101	)		2,794		F		(1,307	)

Net income (loss)	R$	(36,462	)	$	(15,814	)	$	(5,413	)		$	(21,227	)

The following is a summary of the adjustments reflected in the above IFRS to GAAP Reconciliation for the period ended June 10, 2014:

Represents historical financial information of Providência prepared in accordance with IFRS for the period January 1, 2014 through June 10, 2014, the date of the Providência Acquisition, and presented on a consistent format with the Company’s financial statement presentation.

Historical financial information of Providência has been translated to U.S. dollars using the weighted-average rate of R$1.00 to $0.4337 for the period January 1, 2014 through June 10, 2014.

In 2007, Providência was acquired by a group of private investors for an aggregate purchase price of R$932 million. In addition, Providência acquired ISOFILME in 2007, which was purchased for an

aggregate purchase price of R$43.0 million (together the “Historical Providência Transactions”). For the Historical Providência Transactions, in accordance with local generally accepted accounting principles (prior to Providência adopting IFRS), Providência did not reflect the step-up in basis of its property, plant and equipment to fair value, resulting in a GAAP adjustment to increase Cost of goods sold and Selling, general and administrative expenses by $1.4 million and $0.1 million, respectively, for additional depreciation on the step-up basis of the acquired property, plant and equipment.

Providência adopted IFRS during 2010. As part of the first time adoption, a retrospective revaluation adjustment was allowed to adjust the historical cost of property, plant and equipment to its current fair value with a corresponding adjustment to equity. Under GAAP, property, plant and equipment is recognized at historical cost and revaluation adjustments are not permitted. As such, a GAAP adjustment was recorded to reverse the revaluation adjustments recognized under IFRS, which resulted in a lower depreciation under GAAP, and a decrease to Cost of goods sold by $3.0 million.

The historical financial information of Providência presented has been adjusted by reclassifying certain line items in order to conform to the Company’s financial statement presentation and by recording certain adjustments to align accounting policies.

The reclassification to conform to the Company’s financial statement presentation is as follows:


	For the Period January 1, 2014 through June 10, 2014
Net Sales		(0.3	)(1)
Selling, general and administrative expenses		8.7	(2)
Special charges, net		(8.7	)(2)
Other operating, net		(1.4	)(3)
Interest expense		(0.7	)(3)
Foreign currency and other, net		2.4	(3)

(1)

The decrease in Net sales relates to adjustments of Providência’s revenue recognition presentation to that of the Company’s.

(2)

The decrease in Selling, general and administrative expenses and the increase in Special charges, net of $8.7 million relates to the reclassification of acquisition-related costs incurred by Providência associated with the Providência Acquisition. Per the Company’s financial statement presentation, such costs are presented within Special charges, net.

(3)

The increase in other operating, net and in interest expense and the decrease in Foreign currency and other, net primarily relates to the reclassification of Providência derivatives. Per the Company’s financial statement presentation, changes in the fair value of foreign exchange contracts and call option contracts are recorded within Other operating, net and of interest rate swaps are recorded within Interest expense.

Adjustments made to align Providência’s accounting policies to the Company’s are as follows:


	For the Period January 1, 2014 through June 10, 2014
Net Sales		2.8	(1)
Cost of good sold		(11.4	)(2)
Selling, general and administrative expenses		(0.4	)(3)
Foreign currency and other, net		(0.6	)(4)

(1)

The increase in Net sales relates to the aligning of Providência’s revenue recognition policies to that of the Company’s.

(2)

The increase in Cost of goods sold is driven by $2.2 million from the aligning of revenue recognition policies, $4.6 million from conforming capitalization policies and a further $4.6 million of aligning the useful lives of property, plant and equipment.

(3)

The increase in Selling, general and administrative expenses relates to the conforming of capitalization policies.

(4)

The increase in Foreign currency and other, net relates to the foreign currency impact associated with the aligning of Providência revenue recognition policies and other non-operating transactions to that of the Company.

Adjustment reflects the income tax effects of the Providência GAAP Adjustments calculated at the statutory rates in effect in each significant jurisdiction for the time periods presented. This rate does not reflect Providência’s effective tax rate, which includes other income tax items, such as foreign taxes, as well as other income tax charges or benefits, and does not take into account any historical or possible future tax events that may impact Providência.

(b) Providência Pro Forma Adjustments

The preliminary allocation of the purchase price of the Providência Acquisition is as follows:


In thousands	June 11, 2014
Cash	$	20,621
Accounts receivable		52,929
Inventory		34,077
Other current assets		31,848

Total current assets		139,475

Property, plant and equipment		305,306
Goodwill		133,647
Intangible assets		19,000
Other noncurrent assets		12,288

Total assets acquired	$	609,716

Current liabilities	$	31,605
Total debt		74,930
Deferred income taxes		(4,435	)
Other noncurrent liabilities		1,992

Total liabilities assumed	$	104,092

Redeemable noncontrolling interest		80,792

Net assets acquired	$	424,832

The estimated fair values of Providência assets acquired, liabilities assumed and resulting goodwill are subject to adjustment as the Company finalizes its fair value analysis. The Company has not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of Providência net assets and related allocation of purchase price. The Company is still waiting for additional information to finalize the valuation of its acquired intangible assets and property, plant and equipment as well as the accounting for certain tax matters. The Company expects to complete its final purchase price allocation during the second quarter of 2015. A decrease in the fair value of assets acquired or an increase in the fair value of liabilities assumed in the Providência Acquisition from those preliminary valuations presented in the Company’s audited consolidated financial statements would impact the amount of goodwill. In addition, if the value of the acquired assets is higher than the preliminary indication, it may result in higher amortization and depreciation expense than is presented in these unaudited pro forma condensed combined statements of operations.

The following is a summary of the material adjustments for amounts reported in the unaudited pro forma condensed combined statements of operations under the “Providência Pro Forma Adjustments” column heading for the year ended December 31, 2014:

Cost of goods sold—Represents the preliminary adjustment to depreciation expense associated with the change in fair value of the property, plant and equipment recorded in relation to the Providência Acquisition. Based upon a preliminary valuation analysis, the fair value of acquired property, plant and equipment was $305 million. The estimated fair value of property, plant and equipment is expected to be amortized on a straight-line basis over the estimated average remaining useful life of 18 years. Depreciation expense has been estimated based upon the nature of activities associated with the property, plant and equipment acquired. Therefore, for purposes of this pro forma statement of operations, the Company has reflected a reduction of $0.9 million of estimated depreciation expense.

With other assumptions held constant, a change of 1 year in the useful life of the property, plant and equipment would result in a $1.2 million change in annual depreciation expense. With other assumptions held constant, a change of 10% in the fair value of the property, plant and equipment would result in a $1.7 million change in annual depreciation expense.

Selling, general and administrative expense—Adjustment represents the preliminary depreciation and amortization expense associated with the change in fair value of the property, plant and equipment and intangible assets recorded in relation to the Providência Acquisition. The net adjustments to Selling, general and administrative expenses is comprised of the following (dollars in millions):


	Fiscal Year Ended December 31, 2014
Pro forma adjustment to depreciation expense of property, plant and equipment(1)	$	0.1
Pro forma adjustment to amortization expense of intangible assets(2)		0.4

Pro forma adjustment to *Selling, general and administrative expenses*	$	0.5

(1)	For a discussion of Pro forma adjustment to depreciation expense of property, plant and equipment see footnote to the Cost of goods sold Pro Forma adjustment described above.

(2)

Represents the preliminary adjustment to amortization expense associated with the change in fair value of intangible assets recorded in relation to the Providência Acquisition. Based upon a preliminary valuation analysis, the fair value of acquired intangible assets, which consist of customer relationships, was $19.0 million. The estimated fair value of amortizable intangible assets is expected to be amortized on a straight-line basis over the estimated useful lives of 15 years. Amortization expense has been estimated based upon the nature of activities associated with the intangible assets acquired. Therefore, for purposes of this pro forma statements of operations, the Company has reflected a reduction of $0.4 million of amortization expense.

With other assumptions held constant, a change of 1 year in the useful life of the intangible assets would result in a $0.1 million change in annual amortization expense. With other assumptions held constant, a change of 10% in the fair value of the intangible assets would result in a $0.1 million change in annual amortization expense.

Special charges—The net adjustment to Special charges is calculated as follows (dollars in millions):


	Fiscal Year Ended December 31, 2014
Acquisition-related costs associated with the Providência Acquisition incurred by the Company(1)	$	18.6
Acquisition-related costs associated with the Providência Acquisition incurred by Providência(2)		8.7

Pro forma adjustment to *Special charges*	$	27.3

(1)

Adjustment represents the removal of $18.6 million of acquisition-related costs incurred by the Company associated with the Providência Acquisition during the year ended December 31, 2014 as such amounts are directly attributable to the Providência Acquisition and will not have a continuing impact on the combined results.

(2)

Adjustment represents the removal of $8.7 million of acquisition-related costs incurred by Providência associated with the Providência Acquisition during the period ended June 10, 2014 as such amounts are directly attributable to the Providência Acquisition and will not have a continuing impact on the combined results.

Interest expense—Adjustment reflects the estimated interest expense that would have been incurred by the Company during the historical periods presented assuming the Transactions had occurred as of December 29, 2013 (dollars in millions):


	Fiscal Year Ended December 31, 2014
Reversal of Providência’s historical interest expense, including amortization of debt issuance costs, related to debt not assumed for the period January 1, 2014 through June 10, 2014	$	4.2
Reversal of Providência’s historical expense related to changes in the fair value of interest rate swaps not assumed for the period January 1, 2014 through June 10, 2014(1)		1.0
Amortization of capitalized debt issuance costs related to new borrowings for the period December 29, 2013 through June 10, 2014(2)		(1.0	)
Estimated interest expense on senior unsecured notes at 6.875% for the period December 29, 2013 through June 10, 2014(3)		(6.3	)
Estimated interest expense on Additional Term Loans at 5.25% for the period December 29, 2013 through June 10, 2014(3)		(7.1	)

Pro forma adjustment to *Interest expense*	$	(9.2	)

(1)

Providência historically used derivative instruments to reduce the exposure to fluctuations in interest rates. The Company has eliminated the change in the fair value of such interest rate swaps not assumed as part of the Providência Acquisition; the respective impacts are reduced expenses of $1.0 million for the year ended December 31, 2014.

(2)

The Company incurred in total $21.3 million in debt issuance costs in conjunction with the senior unsecured notes and the Additional Term Loans which comprises $10.6 million of capitalized debt issuance costs and $10.7 million of debt issuance costs expensed as incurred based on ASC Topic 470, Debt (“ASC 470”). For purposes of these pro forma statements of operations, the Company has reversed the $10.7 million debt issuance costs expensed as such expenses are directly attributable to the Providência Refinancing and will not have a continuing impact on the combined results (see footnote to the Debt modification and extinguishment costs Pro Forma adjustments described below). The capitalized debt issuance costs of $10.6 million associated with the new borrowings will be amortized over approximately five years. Therefore, for purposes of this pro forma statement of operations, the Company has reflected $1.0 million of amortization expense of capitalized debt issuance costs related to new borrowings for the period ended June 10, 2014.

(3)

On June 10, 2014, we entered into the Incremental Amendment, pursuant to which the Company obtained $415.0 million of commitments for incremental term loans from the existing lenders, of which the Company borrowed $310 million of Additional Term Loans. The remaining $105.0 million of commitments were available for borrowing until December 31, 2014 and were used to repay existing indebtedness during the third quarter of 2014. Borrowings bear interest at a fluctuating rate per annum equal to, at our option, (i) a base rate equal to the highest of (a) the federal funds rate plus ¹⁄₂ of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Citicorp North America, Inc. as its “prime rate” and (c) the LIBOR rate for a one-month interest period plus 1.0% (provided that in no event shall such base rate with respect to the Term Loans be less than 2.0% per annum), in each case plus an applicable margin of 3.25% or (ii) a LIBOR rate for the applicable interest period (provided that in no event shall such LIBOR rate with respect to the Term Loans be less than 1.0% per annum) plus an applicable margin of 4.25%. The applicable margin for the Term Loans is subject to one 25 basis point step-down upon the achievement of a senior secured net leverage ratio of 3.50:1.00. We are required to repay installments on the Term Loans in quarterly installments in aggregate amounts equal to 1.0% per annum of their funded total principal amount, with the remaining amount payable on the maturity date. In addition, in connection with the Providência Acquisition, we issued on June 11, 2014 $210.0 million aggregate principal amount of 6.875% senior unsecured notes due 2019.

The Additional Term Loans have a variable interest rate with a floor of 5.25%; however an increase of 1/8% (12.5 basis points) in the interest rate on the Company’s Additional Term Loans would result in a $0.4 million increase in our annual interest expense. An increase of 1/8% (12.5 basis points) in the interest rate on all of the Company’s total variable rate debt (including the Additional Term Loans) would result in a $0.8 million change in our annual interest expense.

Debt modification and extinguishment costs—The net adjustment to Debt modification and extinguishment costs is calculated as follows (dollars in millions):


	Fiscal Year Ended December 31, 2014
Reversal of debt issuance costs expensed as incurred associated with the Providência Refinancing(1)	$	10.7
Reversal of debt extinguishment costs associated with the Providência Refinancing(2)		2.4

Pro forma adjustment to *Debt modification and extinguishment costs*	$	13.1

(1)

(2)

On September 22, 2014, the Company entered into an assignment agreement with Itaú Unibanco S.A in order to transfer its rights and obligations under the agreement to the Company. The purchase price was funded with a portion of the proceeds from the Incremental Amendment. Pursuant to ASC 470, we recognized a loss on debt extinguishment of $2.4 million during the year ended December 31, 2014. A pro forma adjustment has been recorded to eliminate the $2.4 million debt extinguishment costs expensed as such expense is directly attributable to the Providência Refinancing and will not have a continuing impact on the combined results.

Foreign currency and other, net—The net adjustment to Foreign currency and other, net is calculated as follows (dollars in millions):


	Fiscal Year Ended December 31, 2014
Reversal of foreign exchange gains associated with the Providência Acquisition(1)	$	(18.9	)
Reversal of Providência’s historical foreign currency impacts related interest rate swaps not assumed for the period January 1, 2014 through June 10, 2014(2)		2.3

Pro forma adjustment to *Foreign currency and other, net*	$	(16.6	)

(1)

The Company entered into a series of financial instruments used to minimize foreign exchange risk on the future consideration to be paid for the Providência Acquisition and the Deferred Purchase Price. For purposes of these pro forma statements of operations, we have eliminated the $18.9 million foreign exchange gains associated with such financial instruments for the year ended December 31, 2014 as such gains will not have a continuing impact on the combined results.

(2)

Providência historically used derivative instruments to reduce the exposure to fluctuations in interest rates. Certain of these interest rate swaps were denominated in USD which resulted in foreign currency impacts recorded in the historical financial information of Providência. The Company has eliminated the historical foreign currency impacts of such interest rate swaps not assumed as part of the Providência’s acquisition of $2.3 million for the period ended June 10, 2014.

Income tax (provision) benefit—Adjustment reflects the income tax effects of the pro forma adjustments made to the pro forma statements of operations calculated at the combined federal and state statutory rates in effect in each significant jurisdiction for the time periods presented. This rate, 35.1%, does not reflect the Company’s effective tax rate, which includes other income tax items, such as foreign taxes, as well as other income tax charges or benefits, and does not take into account any historical or possible future tax events that may impact the combined company. Fair value and other adjustments effective at the closing of the Providência Acquisition could be different based on factors including but not limited to tax rates, valuation differences, further information on taxes by jurisdiction, or other factors.

Earnings attributable to noncontrolling interest and to redeemable noncontrolling interest—Noncontrolling interest and redeemable noncontrolling interest represent the minority partners’ interest in the income or loss of consolidated subsidiaries which are not wholly-owned by the Company. For the purposes of the unaudited pro forma condensed combined financial information, we have assumed that we only own approximately 71.25% of the outstanding capital stock of Providência.

Note 3. The Offering

Reflects shares of common stock to be sold in this offering and the application of net proceeds of approximately $ therefrom to be received by us, assuming an initial public offering price of $ per share, the midpoint of the offering range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use a portion of the net proceeds received by us from this offering to repay $ million of our outstanding indebtedness, resulting in a decrease in pro forma interest expense of $ and $ for the the fiscal year ended December 31, 2014, respectively. This pro forma interest expense adjustment is inclusive of the reversal of amortization of deferred financing fees recognized during the fiscal year ended December 31, 2014 related to the indebtedness being repaid. Additionally, as a result of extinguishing our borrowings as discussed above, we will write-off $ in deferred financing costs; however, this charge has not been reflected in the unaudited pro forma condensed combined statements of operations as it is not expected to have a continuing impact on our operations.

In connection with this offering, we intend to terminate the Advisory Agreement in accordance with its terms. We will use approximately $ million of the net proceeds to us from this offering to pay a one-time termination fee to affiliates of the Sponsor in connection with the termination of the Advisory Agreement. See “Certain Relationships and Related Party Transactions—Advisory Agreement.” The unaudited pro forma condensed combined statements of operations do not reflect the impacts on special charges, net of an increase of $ million related to this one-time termination fee as this amount is directly related to this offering and is not expected to have a continuing impact on our operations.

We intend to use any remaining proceeds received by us from this offering for general corporate purposes.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The selected historical consolidated financial data presented below for, and as of the end of, the fiscal years ended December 31, 2014, December 28, 2013 and December 29, 2012, has been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated financial data presented below for, and as of the end of, the fiscal year ended December 31, 2011 for the Successor, and the one month ended January 28, 2011, and the fiscal year ended January 1, 2011 for the Predecessor has been derived from our audited consolidated financial statements not included in this prospectus. Our historical results are not necessarily indicative of the results expected for any future period.

You should read the selected consolidated financial data below together with our audited consolidated financial statements included elsewhere in this prospectus including the related notes thereto appearing elsewhere in this prospectus, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the other financial information included elsewhere in this prospectus.


(in thousands, except for per share data)	Fiscal Year Ended December 31, 2014 (Successor)			Fiscal Year Ended December 28, 2013 (Successor)			Fiscal Year Ended December 29, 2012 (Successor)			Fiscal Year Ended December 31, 2011 (Successor)			One Month Ended January 28, 2011 (Predecessor)			Fiscal Year Ended January 1, 2011 (Predecessor)
Statement of Operations Data:
Net sales	$	1,859,914		$	1,214,862		$	1,155,163		$	1,102,929		$	84,606		$	1,106,211
Cost of goods sold		(1,526,406	)		(1,018,806	)		(957,917	)		(932,523	)		(68,531	)		(896,319	)

Gross profit		333,508			196,056			197,246			170,406			16,075			209,892
Selling, general and administrative expenses		(254,280	)		(153,188	)		(140,776	)		(134,483	)		(11,564	)		(141,461	)
Special charges, net		(59,185	)		(33,188	)		(19,592	)		(41,345	)		(20,824	)		(17,993	)
Acquisition and integration expenses		—			—			—			—			—			(1,742	)
Other operating, net		(1,845	)		(2,512	)		287			(2,634	)		564			815

Operating income (loss)		18,198			7,168			37,165			(8,056	)		(15,749	)		49,511
Other income (expense):
Interest expense		(96,153	)		(55,974	)		(50,414	)		(46,409	)		(1,922	)		(31,728	)
Debt modification and extinguishment costs		(15,725	)		(3,334	)		—			—			—			—
Foreign currency and other, net		(27,083	)		(8,851	)		(5,134	)		(18,636	)		(82	)		(1,454	)

Income (loss) before income taxes		(120,763	)		(60,991	)		(18,383	)		(73,101	)		(17,753	)		16,329
Income tax (provision) benefit		1,523			36,024			(7,655	)		3,272			(549	)		(4,534	)

Income (loss) from continuing operations	$	(119,240	)	$	(24,967	)	$	(26,038	)	$	(69,829	)	$	(18,302	)	$	11,795

Discontinued operations, net of tax		—			—			—			(6,283	)		182			(765	)

Net income (loss)		(119,240	)		(24,967	)		(26,038	)		(76,112	)		(18,120	)		11,030
Earnings attributable to noncontrolling interest and redeemable noncontrolling interest		(3,943	)		(34	)		—			59			83			623

Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(115,297	)	$	(24,933	)	$	(26,038	)	$	(76,171	)	$	(18,203	)	$	10,407

Weighted average shares outstanding, basic		292,178			264,998			260,403			259,895			21,626,038			20,785,000
Basic Earnings (Loss) Per Share	$	(467.89	)	$	(94.09	)	$	(99.99	)	$	(268.91	)	$	(0.85	)	$	0.54
Loss from discontinued operations		—			—			—			(24.18	)		0.01			(0.04	)
Basic Net Income (Loss) per Share	$	(467.89	)	$	(94.09	)	$	(99.99	)	$	(293.09	)	$	(0.84	)	$	0.50
Weighted average shares outstanding, diluted		292,178			264,998			260,403			259,895			21,626,038			21,196,000
Diluted Earnings (Loss) Per Share	$	(467.89	)	$	(94.09	)	$	(99.99	)	$	(268.91	)	$	(0.85	)	$	0.53
Loss from discontinued operations		—			—			—			(24.18	)		0.01			(0.04	)
Diluted Net Income (Loss) Per Share	$	(467.89	)	$	(94.09	)	$	(99.99	)	$	(293.09	)	$	(0.84	)	$	0.49

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the “Summary—Summary Historical and Pro Forma Condensed Combined Financial Information,” “Selected Historical Consolidated Financial Data” and our consolidated financial statements and notes thereto incorporated by reference in this prospectus. It should be noted that our gross profit margins may not be comparable to other companies since some entities classify shipping and handling costs in cost of goods sold and others, including us, include such costs in selling, general and administrative expenses. Similarly, some entities, including us, include foreign currency gains and losses resulting from operating activities as a component of operating income, and some entities classify all foreign currency gains and losses outside of operating income. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Out actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this prospectus, particular in the “Risk Factors” and “Forward-Looking Statements.”

Overview

We primarily manufacture nonwovens, which are fabric-like, value-added materials produced from polypropylene and other resins, along with natural and synthetic fibers and other components. The total nonwovens industry size is estimated to be worth in excess of $30 billion globally in 2013 and is expected to grow at a CAGR by volume of 6.6% from 2013 to 2018, according to Smithers Pira.

Our Industry

We compete primarily in the global nonwovens industry, estimated to be worth in excess of $30 billion globally in 2013 and expected to grow at a CAGR by volume of 6.6% from 2013 to 2018, according to Smithers Pira. Nonwovens are broadly defined as engineered sheet or web structures, made from polymers and/or natural fibers that are bonded together by entangling fiber or filaments mechanically, thermally or chemically. Nonwovens are flat sheets that are made directly from separate fibers or from molten plastic or plastic film and, by definition, are not made by weaving or knitting and do not require converting the fibers to yarn. See “Industry.”

Recent Developments

Dounor Acquisition

On March 25, 2015, we announced that PGI France Holdings SAS, our wholly-owned subsidiary, entered into an agreement to acquire Dounor, a French manufacturer of materials used in hygiene, healthcare and industrial applications. The acquisition of Dounor was completed on April 17, 2015 using the proceeds from borrowings under the Second Incremental Amendment.

European Restructuring

On March 7, 2014, we announced our plan to exit the European roofing business, which we acquired as part of the Fiberweb Acquisition, in an effort to optimize our portfolio. The plan included (1) the possible shutdown of selected manufacturing lines at our Berlin, Germany facility, (2) the possible closure of our manufacturing facility in Aschersleben, Germany with the consolidation of its converting activities to Berlin and (3) possible workforce reductions at both facilities.

In the second quarter of 2014, we commenced negotiations to sell selected equipment used to manufacture roofing materials at our Berlin, Germany location. In July 2014, we ceased production of roofing materials in Berlin and signed a contract to sell one manufacturing line for €1.6 million ($2.0 million) recognizing a $2.0 million gain on the sale. We also commenced negotiations in the third quarter of 2014 to sell the manufacturing facility located in Aschersleben, Germany. In November 2014, we completed such negotiations and entered into a definitive asset purchase and transfer agreement to sell the land, buildings, inventory, machinery and equipment, intellectual property and certain existing contracts for approximately €2.0 million ($2.4 million). As of December 31, 2014, the assets to be sold were reported as assets held for sale and included in Other current assets in the Consolidated Balance Sheets. The transaction closed on January 1, 2015. There will be no gain or loss recognized on the sale of the business since it was determined the proceeds received for the tangible and intangible assets approximated the carrying value of the assets sold.

Providência Acquisition

On January 27, 2014, we announced that Acquisition Co. entered into a stock purchase agreement with Providência and certain shareholders named therein. Pursuant to the terms and subject to the conditions of the stock purchase agreement, Acquisition Co. agreed to acquire an approximately 71.25% controlling interest in Providência. Providência is a leading manufacturer of nonwovens primarily used in hygiene applications as well as industrial and healthcare applications. Based in Brazil, Providência has three manufacturing locations, including one in the United States. Total consideration paid included $47.9 million of deferred purchase price (the “Deferred Purchase Price”) and $8.2 million deposited into an escrow account. The Deferred Purchase Price is held by the Company and relates to certain unaccrued tax claims of Providência (the “Providência Tax Claims”). The Deferred Purchase Price is denominated in Brazilian real and accretes at a rate of 9.5% per annum compounded daily. Upon final resolution of the Providência Tax Claims by the Brazilian court, either tax payments for the Providência Tax Claims will be made to the Brazilian tax authorities or the Deferred Purchase Price will be paid to the selling shareholders.

The Providência Acquisition was completed on June 11, 2014 for an aggregate purchase price of $424.8 million and funded with the proceeds from borrowings under the Incremental Amendment as well as the

proceeds from the issuance of the Senior Unsecured Notes. As required by Brazilian law, we intend to launch, subject to CVM approval, the Mandatory Tender Offer to acquire the remaining outstanding capital stock of Providência from the minority shareholders.

On January 27, 2014, we entered into a series of financial instruments with a third-party financial institution used to minimize foreign exchange risk on the future consideration to be paid for the Providência Acquisition and the Mandatory Tender Offer (the “Providência Contracts”). Each contract allows us to purchase a fixed amounts of Brazilian reals (R$) in the future at specified U.S. dollar rates, coinciding with either the Providência Acquisition or the Mandatory Tender Offer. The primary financial instrument was related to the Providência Acquisition and consisted of a foreign exchange forward contract settled upon consummation of the transaction. The remaining financial instruments relate to a series of options that expire between 1 year and 5 years associated with the Mandatory Tender Offer and the deferred portion of the consideration paid for the Providência Acquisition.

Prior to completing the Providência Acquisition, Providência announced that production on three spunmelt lines at its Sao Jose dos Pinhais manufacturing facility was partially interrupted. The interruption was the result of an order by the Brazilian Ministry of Labor, pending remedial action by Providência to bring the facility into compliance with applicable Brazilian workplace safety regulations. The three lines were shut down from April 1, 2014 until early July 2014 when clearance was received from the Brazilian Ministry of Labor and production resumed. During the shutdown period, the impact to sales volumes is estimated to have been in excess of 6,500 metrics tons during 2014, which represents 5.5% and 5.9% of metric tons sold by Providência in 2014 and 2013, respectively. In addition, the lines experienced certain start-up inefficiencies during the third quarter which continued as the facility began to resume more normalized operations near the end of the third quarter. During the shutdown and the subsequent ramp-up period through the end of 2014, Providência incurred additional costs to bring the manufacturing lines into compliance as well as incurred higher relative overhead costs and increased scrap rates, which negatively impacted operating profit.

Expansion and Optimization Initiatives

Over the past five years, we have undertaken a series of initiatives to expand our global capabilities as well as to focus on operational excellence. Initiatives include capacity expansion projects, plant consolidations, plant alignment, acquisitions and divestitures. We believe these initiatives will help drive performance in our businesses and improve our overall cost structure.

Expansion Initiatives

In order to address the growing demand for hygiene and healthcare products, we have completed four capacity expansions since 2009. In addition, we recently commenced the upgrade of manufacturing lines at our facilities located in Tarragona, Spain and Benson, North Carolina, the expansion of our specialty materials manufacturing capabilities at our San Luis Potosi, Mexico, facility, and have completed an upgrade of a manufacturing line near Buenos Aires, Argentina, and our upgrade of machinery and the expansion of our manufacturing facility in Waynesboro, Virginia. A description of our completed expansion initiatives are as follows:

•

In the second quarter of 2013, our spunmelt hygiene line in Suzhou, China commenced commercial production. The plant expansion increased capacity to meet demand for nonwoven materials in hygiene applications in China.

•

In the third quarter of 2011, our spunmelt line in Waynesboro, Virginia commenced commercial production. The plant expansion increased capacity to meet demand for nonwoven materials in hygiene and healthcare applications in the U.S.

•

In the third quarter of 2011, our spunmelt healthcare line in Suzhou, China commenced commercial production. The plant expansion increased capacity to meet demand for nonwoven materials in healthcare applications in China.

•

In the second quarter of 2009, our spunmelt line in San Luis Potosi, Mexico commenced commercial production. The plant expansion increased capacity to meet demand for nonwoven materials in hygiene and healthcare applications in the U.S. and Mexico.

Our expansion projects are funded using a combination of existing cash balances, internal cash flows as well as financing arrangements with third-party financial institutions. We intend to continue to expand in markets we believe have attractive supply and demand characteristics as well as maintain and upgrade manufacturing lines to improve our global competitive position.

Optimization Initiatives

We actively and continuously pursue initiatives to prolong the useful life of our assets through product and process innovation. In some instances, we have determined that our fixed cost structure would be enhanced through consolidation. While investing in several new manufacturing lines in high-growth regions, we have simultaneously undertaken a number of initiatives to rationalize low-margin legacy operations and relocate certain assets to improve our cost structure. These initiatives are intended to result in lower working capital levels and improve operating performance and profitability. Our strategy with respect to past consolidation efforts in the U.S. and Europe was focused on the elimination of costs associated with underutilized legacy capacity. During 2014, we exited the European roofing business, consolidated our German manufacturing operations to Berlin and entered into an agreement to sell the manufacturing operations in Aschersleben. We continually assess our global footprint to determine what we believe is an appropriate and sustainable asset base.

Other Acquisitions and Divestitures

On September 17, 2013, PGI Acquisition Limited, a wholly-owned subsidiary of the Company, entered into an agreement with Fiberweb containing the terms of a cash offer to purchase 100% of the issued and to be issued ordinary share capital of Fiberweb at a cash price of £1.02 per share. The offer was effected by a court sanctioned scheme of arrangement of Fiberweb under Part 26 of the UK Companies Act 2006 and consummated on November 15, 2013, whereby Fiberweb became a wholly-owned subsidiary of the Company. The aggregate purchase price was valued at $287.8 million and funded on November 27, 2013 with the proceeds of borrowings under a $268.0 million Senior Secured Bridge Credit Agreement and a $50.0 million Senior Unsecured Bridge Credit Agreement. The Bridge Facilities were subsequently refinanced, along with transaction expenses, with the proceeds from a $295.0 million Senior Secured Credit Agreement and a $30.7 million equity investment from Blackstone. Fiberweb is one of the largest global manufacturers of specialized technical fabrics with eight production sites in six countries.

On April 29, 2011, we entered into an agreement to sell certain assets and the working capital of Difco Performance Fibers, Inc. (“Difco”) for cash proceeds of $10.9 million. The agreement provided that Difco would continue to produce goods during the three month manufacturing transition services agreement that expired in the third quarter of 2011. The sale was completed on May 10, 2011 and resulted in a loss of $0.7 million recognized during the fiscal year ended December 31, 2011.

The results of operations of Difco, previously included in the North America segment, have been segregated from continuing operations and included in Discontinued operations, net in the Consolidated Statements of Operations as the cash flows of Difco were eliminated from our ongoing operations and we had no continuing involvement in the operations of the business after the disposition.

On May 26, 2010, we signed an equity transfer agreement (the “Nanhai Agreement”) to purchase the remaining 20% interest in our Chinese subsidiary, Nanhai Nanxin Non-Woven Co. Ltd, subject to Chinese government approval. Pursuant to the Nanhai Agreement, we deposited $1.5 million into an escrow account with a bank to serve as a performance guarantee. On March 9, 2011, we received government approval and

subsequently completed the noncontrolling interest acquisition for a purchase price of $7.2 million. The acquisition was accounted as an equity transaction in which no gain or loss was recognized.

On December 2, 2009, we completed an acquisition from Grupo Corinpa S.L (“Grupo Corinpa”) of certain assets and the operations of the nonwovens business of Tesalca-99, S.A. and Texnovo, S.A. located in Barcelona, Spain. Consideration for the acquired assets consisted of 1.049 million shares of the Predecessor’s Class A common stock which had a fair value of $14.5 million on the date of acquisition. The agreement contained a provision under which Grupo Corinpa was granted a put option on its land, building and equipment that were included in a lease under which we were provided full and exclusive use of the assets. In addition, the agreement contained a provision under which we were granted a call option for the same assets. On January 28, 2011, immediately prior to the Merger, we exercised our call option and purchased the remaining assets for an aggregate purchase price of $41.2 million.

Results of Operations

We operate our business on a regional basis with profit accountability aligned with our physical presence. This reflects how the overall business is currently managed by our senior management and reviewed by our Board of Directors. In light of the Providência Acquisition, we realigned our reportable segments during the third quarter of 2014 to more closely reflect our corporate and business strategies and to promote additional productivity and growth. Reportable segments are now as follows: North America, South America, Europe and Asia. The operations previously reported in the Oriented Polymers segment are now included within the North America segment, along with the operations in Mexico. The South America segment includes the Providência operations in Brazil in addition to our previously existing operations in Colombia and Argentina. The Europe and Asia segments remain unchanged.

Gross Profit Drivers

Our net sales are driven principally by the following factors:

•

Volumes sold, which are tied to our available production capacity and customer demand for our products;

•

Prices, which are tied to the quality of our products, the overall supply and demand dynamics in our regional markets, and the cost of our raw material inputs, as changes in input costs have historically been passed through to customers through either contractual mechanisms or business practices. This can result in significant increases in total net sales during periods of sustained raw material cost increases as well as significant declines in net sales during periods of raw material cost declines; and

•

Product mix, which is tied to demand from various markets and customers, along with the type of available capacity and technological capabilities of our facilities and equipment. Average selling prices can vary for different product types, which impacts our total revenue trends.

Our primary costs of goods sold (“COGS”) include:

•

Raw material costs (primarily polypropylene resins, which generally comprise over 75% of our raw material purchases) represent approximately 60% to 70% of COGS. We purchase raw materials, including polypropylene resins, from a number of qualified vendors located in the regions in which we operate. Polypropylene is a petroleum-based commodity material and its price historically has exhibited volatility. As discussed in the revenue factors above, we have historically been able to mitigate volatility in polypropylene prices through changes in our selling prices to customers, enabling us to maintain a more stable gross profit per kilogram;

•

Other variable costs include direct labor, utilities (primarily electricity), maintenance and variable overhead. Utility rates vary depending on the regional market and provider. Labor generally represents

less than 10% of COGS and varies by region. Historically, we have been able to mitigate wage rate inflation with operating initiatives resulting in higher productivity and improvements in throughout and yield; and

•

Fixed overhead consists primarily of depreciation expense, which is impacted by our level of capital investments and structural costs related to our locations. We believe our strategically located manufacturing facilities provide sufficient scale to maintain competitive unit manufacturing costs.

The level of our revenue and COGS vary due to changes in raw material cost. As a result, our gross profit margin as a percent of net sales can vary significantly from period to period. As such, we believe total gross profit provides a clearer representation of our operating trends. Changes in raw material costs historically have not resulted in a significant sustained impact on gross profit, as we have generally been able to effectively mitigate changes in raw material costs through changes in our selling prices to customers in order to maintain a more steady gross profit per kilogram sold.

Comparability of Periods

Prior to 2014, our fiscal year was based on a 52 week period ending on the Saturday closest to each December 31. As a result, the fiscal years ended December 28, 2013 and December 29, 2012 each contain operating results for 52 weeks. On December 11, 2014, our Board of Directors approved a change in our fiscal year end to a calendar year ending on December 31, beginning with the fiscal year 2014.

On June 11, 2014, the Providência Acquisition was completed whereby Providência became an indirect subsidiary of the Company. Pursuant to the terms and subject to the conditions of the Providência Acquisition, the Company acquired an approximately 71.25% controlling interest in Providência. As a result, the results of operations of Providência have been included in the Consolidated Balance Sheet at December 31, 2014 and the Consolidated Statement of Operations since June 11, 2014.

On November 15, 2013, the Fiberweb Acquisition became effective pursuant to a court sanctioned scheme of arrangement under Part 26 of the UK Companies Act of 2006 whereby Fiberweb became an indirect wholly-owned subsidiary of the Company. As a result, the results of operations of Fiberweb have been included in the Consolidated Balance Sheet at December 28, 2013 and the Consolidated Statement of Operations since November 15, 2013.

The global nonwovens market has historically experienced stable growth and favorable pricing dynamics. However, since late 2010, several of our competitors, primarily in the hygiene markets, installed or announced an intent to install, capacity in excess of what we believe to be current market demand in the regions that we conduct business. As additional nonwovens manufacturing capacity entered into commercial production, in excess of market demand, the short-term to mid-term excess supply created unfavorable market dynamics, resulting in a downward pressure on selling prices. In recent years, we believe growing demand has filled a portion of this excess capacity and we have observed fewer new capacity expansions, leading, in our view, to improved capacity utilization and resulting in a more stabilized pricing environment since the second half of 2013.

Our sales are impacted by our selling prices, which are influenced by the cost of our raw material inputs. Historically, changes in input costs have generally been passed through to customers either by contractual mechanisms or business practices. This can result in significant increases in total net sales during periods of sustained raw material cost increases as well as significant declines in net sales during periods of raw material cost declines. As a result, financial statement items that use percentage of net sales as an economic indicator are influenced by the changes in our selling prices. In general, average prices for polypropylene resin and other raw material modestly trended downward throughout 2012. The trend was reversed in 2013 and 2014, however, negatively impacting our results. As a result, we continue to operate in a volatile raw material environment. In recent months, we have seen raw material prices decline again.

Our financial results are affected to a certain extent by changes in foreign currency exchange rates in the various countries in which our products are manufactured and/or sold. Our recent acquisitions have significant foreign operations which has increased our exposure to foreign currency volatility, and, more specifically, our exposure to volatility in connection with the Euro as a result of the Fiberweb Acquisition and the Brazilian real as a result of the Providência Acquisition. Hence, the financial results of our foreign subsidiaries can fluctuate as the respective local currencies weaken or strengthen against the U.S. dollar, the Company’s reporting currency.

Comparison of Fiscal Year Ended December 31, 2014 and Fiscal Year Ended December 28, 2013

The following table sets forth the period change for each category of the Consolidated Statement of Operations for the fiscal year ended December 31, 2014 as compared to the fiscal year ended December 28, 2013, as well as each category as a percentage of net sales:


	Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 28, 2013			Period Change Favorable (Unfavorable)			Percentage of Net Sales for the Respective Period End
In thousands	Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 28, 2013			Period Change Favorable (Unfavorable)			December 31, 2014			December 28, 2013
Net sales	$	1,859,914		$	1,214,862		$	645,052			100.0	%		100.0	%
Cost of goods sold		(1,526,406	)		(1,018,806	)		(507,600	)		82.1	%		83.9	%

Gross profit		333,508			196,056			137,452			17.9	%		16.1	%
Selling, general and administrative expenses		(254,280	)		(153,188	)		(101,092	)		13.7	%		12.6	%
Special charges, net		(59,185	)		(33,188	)		(25,997	)		3.2	%		2.7	%
Other operating, net		(1,845	)		(2,512	)		667			0.1	%		0.2	%

Operating income (loss)		18,198			7,168			11,030			1.0	%		0.6	%
Other income (expense):
Interest expense		(96,153	)		(55,974	)		(40,179	)		5.2	%		4.6	%
Debt modification and extinguishment costs		(15,725	)		(3,334	)		(12,391	)		0.8	%		0.3	%
Foreign currency and other, net		(27,083	)		(8,851	)		(18,232	)		1.5	%		0.7	%

Income (loss) before income taxes		(120,763	)		(60,991	)		(59,772	)		(6.5	)%		(5.0	)%
Income tax (provision) benefit		1,523			36,024			(34,501	)		(0.1	)%		(3.0	)%

Net income (loss)		(119,240	)		(24,967	)		(94,273	)		(6.4	)%		(2.1	)%
Less: Earnings attributable to noncontrolling interest and redeemable noncontrolling interest		(3,943	)		(34	)		(3,909	)		0.2	%		—	%

Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(115,297	)	$	(24,933	)	$	(90,364	)		(6.2	)%		(2.1	)%

Net Sales

Net sales for the fiscal year ended December 31, 2014 were $1,859.9 million, a $645.0 million increase compared with the fiscal year ended December 28, 2013. A reconciliation presenting the components of the period change by each of our reportable segments is as follows:


In millions	North America			South America		Europe			Asia			Total
Beginning of period	$	572.1		$	153.8	$	316.4		$	172.6		$	1,214.9
Changes due to:
Volume		11.5			5.1		13.1			22.5			52.2
Acquisitions		241.8			144.6		201.7			—			588.1
Price/product mix		4.6			2.7		(1.6	)		(1.0	)		4.7
Currency translation		(1.4	)		—		0.9			0.5			—

Sub-total		256.5			152.4		214.1			22.0			645.0

End of period	$	828.6		$	306.2	$	530.5		$	194.6		$	1,859.9

Volumes sold for the fiscal year ended December 31, 2014 were 456.8 thousand metric tons (“kMT”), a 145.4 kMT increase compared with the fiscal year ended December 28, 2013. A reconciliation presenting the components of the period change by each of our reportable segments is as follows:


In kMT	North America		South America		Europe		Asia		Total
Beginning of period		148.9		46.3		68.6		47.6		311.4
Changes due to:
Volume		2.4		1.5		1.9		5.8		11.6
Acquisitions		48.6		41.5		43.7		—		133.8

Sub-total		51.0		43.0		45.6		5.8		145.4

End of period		199.9		89.3		114.2		53.4		456.8

For the fiscal year ended December 31, 2014, volumes increased by $640.3 million compared with the fiscal year ended December 28, 2013. The primary driver of the increase related to our acquisitions, with Fiberweb contributing an incremental $393.8 million for the period and Providência providing $194.3 million of net sales since the date of acquisition. Incremental volume growth of $22.5 million in Asia was driven by higher volumes sold in the healthcare and hygiene markets, both of which were supported by our recent capacity expansions. In Europe, stabilization of underlying demand in the healthcare, hygiene and wipes markets increased sales by $13.1 million. Improvements in the wipes and technical specialties markets provided $5.1 million of incremental volume growth in South America. Volumes increased $11.5 million in North America, primarily driven by the hygiene and construction markets. However, these improvements were partially offset by lower wipes volume driven by the reduction in demand by a key customer. In addition, lower filtration volume was driven by the exit of certain low margin customers during the year.

For the fiscal year ended December 31, 2014, net selling prices increased $4.7 million compared with the fiscal year ended December 28, 2013. The pricing increase was primarily driven by higher net selling prices of $4.6 million in North America, which reflects the positive impacts of certain pricing initiatives implemented during the year and the pass-through of higher raw material costs to our customers. In addition, we experienced pricing improvements of $2.7 million in South America. The pricing increase, which primarily resulted from our passing through higher raw material costs associated with index-based selling agreements and market-based pricing trends, more than offset lower selling prices of $1.6 million in Europe. Lower net selling prices in Asia impacted net sales by $1.0 million. The decrease was a result of a larger proportion of current year sales in the

hygiene market compared with more prior year sales in the healthcare market (which have higher average selling prices) and was also impacted by a competitive pricing environment.

Gross Profit

Gross profit for the fiscal year ended December 31, 2014 was $333.5 million, a $137.5 million increase compared with the fiscal year ended December 28, 2013. The primary driver of the increase related to the contributions from Fiberweb, which represented an incremental $95.8 million for the period, including contributions associated with integration synergies. In addition, contributions from Providência were $33.9 million, including $4.5 million related to the non-recurring amortization expense of the inventory step-up established as a result of the acquisition as well as the negative impact of start-up inefficiencies in Brazil as certain lines were returning to normal operations during the second half of the year after being temporarily shut down in the second quarter due to required alterations to meet safety regulations.

Additional volume and net selling price increases provided $14.1 million of incremental gross profit, which included $14.0 million of lower net spreads (the difference between the change in raw material costs and selling prices). The reduction in spread was primarily driven by increases in the market prices for raw materials, primarily polypropylene, which impacted North America, South America and Asia. However, a $2.1 million reduction of our labor component of cost of goods sold reflects the positive benefits of our cost reduction initiatives. Other costs that impacted gross profit include an $8.3 million increase to our overhead component of cost of goods sold. The increase, primarily related to the increase in volume-related costs, was partially offset by manufacturing efficiencies in North America and South America. As a result, gross profit as a percentage of net sales for fiscal year ended December 31, 2014 increased to 17.9% from 16.1% for the fiscal year ended December 28, 2013.

The volatility of the Argentinean and Colombian peso in relation to the U.S. dollar has not materially impacted gross profit as the majority of raw material cost increases, including those caused by currency movements, have been passed through to our customers by formulaic or other mechanisms in our sales contracts. There are similar arrangements in place in Brazil, but not to the same magnitude as the rest of South America as such that the weakening of the Brazilian real modestly impacted gross profit. The weakening of the Euro in relation to the U.S. dollar, which started in the second half of 2014, did not materially impact gross profit in 2014 compared to 2013 as average exchange rates for the year were generally similar. All other currency changes did not have a material impact on gross profit which is primarily due to the combination of sales and costs in both U.S. dollar and non U.S. dollar and underlying mechanisms to manage.

Operating Income (Loss)

Operating income for the fiscal year ended December 31, 2014 was $18.2 million, a $11.0 million increase compared with the fiscal year ended December 28, 2013. A reconciliation presenting the components of the period change by each of our reportable segments is as follows:


In millions	North America			South America			Europe			Asia			Sub-total			Corporate/ Other			Total
Beginning of period	$	51.5		$	7.7		$	8.5		$	17.8		$	85.5		$	(78.3	)	$	7.2

Changes due to:
Volume		5.5			1.6			4.5			7.6			19.2			—			19.2
Acquisitions		36.5			4.1			5.2			(0.2	)		45.6			—			45.6
Price/product mix		4.6			2.7			(1.6	)		(1.0	)		4.7			—			4.7
Raw material cost		(8.8	)		(5.6	)		1.9			(6.2	)		(18.7	)		—			(18.7	)
Manufacturing costs		2.4			(4.7	)		(1.8	)		0.6			(3.5	)		—			(3.5	)
Currency translation		(0.1	)		6.9			(0.2	)		0.4			7.0			0.5			7.5
Depreciation and amortization		2.9			0.3			—			(2.0	)		1.2			—			1.2
Purchase accounting		(3.8	)		(4.0	)		5.1			—			(2.7	)		—			(2.7	)
Special charges		—			—			—			—			—			(26.0	)		(26.0	)
All other		(3.5	)		(2.2	)		(0.1	)		0.3			(5.5	)		(10.8	)		(16.3	)

Sub-total		35.7			(0.9	)		13.0			(0.5	)		47.3			(36.3	)		11.0

End of period	$	87.2		$	6.8		$	21.5		$	17.3		$	132.8		$	(114.6	)	$	18.2

The amounts included in Special charges net have not been allocated to our reportable business divisions because our management does not evaluate such charges on a division-by-division basis. Division operating performance is measured and evaluated before such items.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the fiscal year ended December 31, 2014 were $254.3 million, a $101.1 million increase compared with the fiscal year ended December 28, 2013. The increase was primarily related to the inclusion of Fiberweb, which added an incremental $61.3 million of costs for the period. In addition, expenses related to our recent acquisition of Providência added $32.1 million to selling, general and administrative expenses. Other selling general and administrative expenses increased $7.7 million compared to the prior year. Factors that contributed to the increase include higher incentive compensation and Sponsor-related management fees as well as increased selling, marketing and freight expenses. In addition, we incurred higher employee-related expense and costs related to third-party fees and expenses. These costs were partially offset by lower stock-based compensation expense, depreciation and amortization expense. As a result, selling, general and administrative expenses as a percentage of net sales increased to 13.7% for the fiscal year ended December 31, 2014 from 12.6% for the fiscal year ended December 28, 2013. The fiscal year ended December 28, 2013 includes costs related to the announced retirement of our previous Chief Executive Officer and simultaneous appointment of our new Chief Executive Officer. Amounts recorded totaled $6.5 million, which included $2.0 million of non-cash stock compensation expense.

Special Charges, net

As part of our business strategy, we incur costs related to corporate-level decisions or Board of Director actions. These actions are primarily associated with initiatives attributable to restructuring and realignment of manufacturing operations and management structures as well as the pursuit of certain transaction opportunities when applicable. In addition, we evaluate our long-lived assets for impairment whenever events or changes in circumstances including the aforementioned, indicate that the carrying amounts may not be recoverable.

Special charges for the fiscal year ended December 31, 2014 were $59.2 million and consisted of the following components:

•

$24.4 million related to professional fees and other transaction costs associated with our acquisition of Providência;

•

$14.6 million related to professional fees and other transaction costs associated with our acquisition of Fiberweb;

•

$9.7 million related to separation and severance expenses associated with our plant realignment cost initiatives;

•

$6.9 million related to non-cash goodwill impairment charge in South America segment; and

•

$3.6 million related to other corporate initiatives.

Special charges for the fiscal year ended December 28, 2013 were $33.2 million and consisted of the following components:

•

$18.3 million related to professional fees and other transaction costs associated with our acquisition of Fiberweb;

•

$8.6 million related to separation and severance expenses associated with our plant realignment cost initiatives; and

•

$2.3 million non-cash impairment charge related to the fair value adjustment of property and equipment at our manufacturing facility in Buenos Aires, Argentina; and

•

$4.0 million related to other corporate initiatives.

The amounts included in Special charges, net have not been allocated to our reportable business divisions because our management does not evaluate such charges on a division-by-division basis. Division operating performance is measured and evaluated before such items.

Other Operating, net

For the fiscal year ended December 31, 2014, other operating expense totaled $1.8 million, of which $5.4 million was associated with foreign currency losses. These losses were partially offset by $3.6 million related to other operating income. Other operating expense for the fiscal year ended December 28, 2013 was $2.5 million. Amounts associated with foreign currency losses on operating assets and liabilities totaled $2.8 million. These losses were partially offset by $0.3 million of other operating income.

Other Income (Expense)

Interest expense for the fiscal year ended December 31, 2014 and the fiscal year ended December 28, 2013 was $96.2 million and $56.0 million, respectively. The increase primarily relates to interest expense and amortization of debt issuance costs associated with the Term Loans and the Senior Unsecured Notes, both of which were used to fund our recent acquisitions. Interest expense on third-party debt assumed in the Providência Acquisition also contributed to the increase. Combined, we realized an additional $37.0 million of expense associated with changes to our debt structure as a result of the Fiberweb and Providência transactions. The fiscal year ended December 28, 2013 included $4.4 million of interest expense related to the acquisition of Fiberweb, primarily related to interest expense and amortization of debt issuance costs associated with the Bridge Facilities, which were used to initially fund the acquisition of Fiberweb. Interest expense on the Term Loans, which were used to partially repay the Bridge Facilities, was an additional component of the balance.

During the fiscal year ended December 31, 2014, we redeemed $56.0 million of the Senior Secured Notes at a redemption price of 103.0% of the aggregate principal amount plus any accrued and unpaid interest. As a result,

we recognized a loss on debt extinguishment of $2.6 million. In addition, we entered into an assignment agreement with a third-party financial institution to transfer, to us, their rights and obligations under an export credit facility acquired in the Providência Acquisition. Fees related to the assignment totaled $2.4 million during the period. In association with the Providência Acquisition, we incurred $21.3 million of loan acquisition costs, of which $10.7 million was expensed as incurred during the second quarter of 2014. These amounts are included within Debt modification and extinguishment costs.

Foreign currency and other, net was a loss of $27.1 million for the fiscal year ended December 31, 2014. The main driver of the expense related to $35.6 million associated with foreign currency losses on non-operating assets and liabilities. A majority of the loss occurred in South America as the U.S. dollar strengthened significantly against local currencies in Brazil and Argentina. In addition, non-operating asset values in Europe created currency losses as the Euro weakened against the U.S. dollar. Other non-operating income totaled $8.5 million and included the settlement of a foreign exchange forward contracts associated with the Providência Acquisition, which provided $18.9 million of income realized at the date of acquisition. In addition, we realized $1.1 million in gains on the sale of assets, primarily associated with our European restructures. However, these amounts were partially offset by $1.7 million of non-operating expenses, primarily associated with factoring fees as well as $4.5 million of expenses associated with Providência. Other costs recognized included $5.3 million associated with the changes in fair value of a series options related to the Mandatory Tender Offer and the deferred portion of the purchase price. Foreign currency and other was an expense of $8.9 million for the fiscal year ended December 28, 2013. Items impacting the results include $6.7 million associated with foreign currency losses on non-operating assets and liabilities as well as $1.7 million of other non-operating expenses, primarily associated with factoring fees. In addition, we incurred $0.5 million related to the release of a tax indemnification asset that was established in the opening balance sheet in connection with the merger.

Income Tax (Provision) Benefit

During the fiscal year ended December 31, 2014, we recognized an income tax benefit of $1.5 million on consolidated pre-tax book loss from continuing operations of $120.8 million for a 1.3% effective benefit. During the fiscal year ended December 28, 2013, we recognized an income tax benefit of $36.0 million on consolidated pre-tax book loss from continuing operations of $61 million for a 59.1% effective tax benefit.

The change in our effective tax rate was primarily driven by incremental operating losses in the U.S. of $1.8 million for which we recorded a full valuation allowance and the absence of certain discrete benefits recorded in the U.S. in 2013. Specifically Fiberweb entities in the U.S. carried a deferred tax liability of $36.7 million that could be used as a source of income against the Company’s U.S. deferred tax assets. Shortly after the completion of the Fiberweb acquisition the Company elected then to disregard the U.S. Fiberweb parent entities in the United Kingdom. The Fiberweb entities in the U.S. were treated as directly owned by the Company for tax purposes and included in the Company’s U.S. consolidated federal tax return. Making this election resulted in the release of $36.7 million of our valuation allowance which was reflected as a discrete tax benefit in 2013.

Additionally our effective tax rate in 2014 was impacted by losses in certain jurisdictions for which no income tax benefits are anticipated, foreign withholding taxes for which tax credits are not anticipated, changes in the amounts recorded for tax uncertainties, foreign taxes calculated at statutory rates different than the U.S. federal statutory rate, and the application of intraperiod tax allocation rules.

Earnings Attributable to Noncontrolling Interest and to Redeemable Noncontrolling Interest

Earnings attributable to noncontrolling interest and to redeemable noncontrolling interest for the fiscal year ended December 31, 2014 was a loss of $3.9 million. Noncontrolling interest and redeemable noncontrolling interest represent the minority partners’ interest in the income or loss of consolidated subsidiaries which are not wholly-owned by us. Our acquisition of Providência represents approximately a 71.25% controlling interest and the remaining 28.75% is recorded as redeemable noncontrolling interest on our Consolidated Balance Sheets. As a result, we incurred $3.6 million related to the redeemable noncontrolling interest during the current period. In

association with the acquisition of Fiberweb, the Company assumed control of Terram Geosynthetics Private Limited, a joint venture located in Gujarat, India in which we maintain a 65% controlling interest. As a result, we incurred $0.3 million related to the noncontrolling interest during the current period. Earnings attributable to noncontrolling interests for the fiscal year ended December 28, 2013 was $0.1 million, all of which related to Terram Geosynthetics Private Limited.

Comparison of Fiscal Year Ended December 28, 2013 and Fiscal Year Ended December 29, 2012

The following table sets forth the period change for each category of the Statement of Operations for the fiscal year ended December 28, 2013 as compared to the fiscal year ended December 29, 2012, as well as each category as a percentage of net sales:


	Fiscal Year Ended December 28, 2013			Fiscal Year Ended December 29, 2012			Period Change			Percentage of Net Sales for the Respective Period End
*In thousands*	Fiscal Year Ended December 28, 2013			Fiscal Year Ended December 29, 2012			Period Change			December 28, 2013			December 29, 2012
Net sales	$	1,214,862		$	1,155,163		$	59,699			100.0	%		100.0	%
Cost of goods sold		(1,018,806	)		(957,917	)		(60,889	)		83.9	%		82.9	%

Gross profit		196,056			197,246			(1,190	)		16.1	%		17.1	%
Selling, general and administrative expenses		(153,188	)		(140,776	)		(12,412	)		12.6	%		12.2	%
Special charges, net		(33,188	)		(19,592	)		(13,596	)		2.7	%		1.7	%
Other operating, net		(2,512	)		287			(2,799	)		0.2	%		—

Operating income (loss)		7,168			37,165			(29,997	)		0.6	%		3.2	%
Other income (expense):
Interest expense		(55,974	)		(50,414	)		(5,560	)		4.6	%		4.4	%
Debt modification and extinguishment charges		(3,334	)		—			(3,334	)		0.3	%		—	%
Foreign currency and other, net		(8,851	)		(5,134	)		(3,717	)		0.7	%		0.4	%

Income (loss) before income taxes		(60,991	)		(18,383	)		(42,608	)		(5.0	)%		(1.6	)%
Income tax (provision) benefit		36,024			(7,655	)		43,679			(3.0	)%		0.7	%

Net income (loss)		(24,967	)		(26,038	)		1,071			(2.1	)%		(2.3	)%
Less: Earnings attributable to noncontrolling interest		(34	)		—			(34	)		—			—

Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(24,933	)	$	(26,038	)	$	1,105			(2.1	)%		(2.3	)%

Net Sales

Net sales for the fiscal year ended December 28, 2013 were $1,214.9 million, a $59.7 million increase compared with the fiscal year ended December 29, 2012. A reconciliation presenting the components of the period change by each of our reportable segments is as follows:


In millions	North America			South America			Europe			Asia			Total
Beginning of period	$	542.8		$	161.5		$	294.1		$	156.8		$	1,155.2
Changes due to:
Volume		(3.3	)		(5.2	)		(13.0	)		19.7			(18	)
Acquisitions		27.1			—			24.8			—			51.9
Price/product mix		5.9			(2.5	)		2.6			(5.2	)		0.8
Currency translation		(0.4	)		—			7.9			1.3			8.8

Sub-total		29.3			(7.7	)		22.3			15.8			59.7

End of period	$	572.1		$	153.8		$	316.4		$	172.6		$	1,214.9

Volumes sold for the fiscal year ended December 28, 2013 were 311.4 kMT, a 7.0 kMT increase compared with the fiscal year ended December 29, 2012. A reconciliation presenting the components of the period change by each of our reportable segments is as follows:


In kMT	North America			South America			Europe			Asia		Total
Beginning of period		146.5			47.9			67.7			42.3		304.4
Changes due to:
Volume		(2.0	)		(1.6	)		(3.8	)		5.3		(2.0	)
Acquisitions		4.4			—			4.7			—		9.0

Sub-total		2.4			(1.6	)		0.9			5.3		7.0

End of period		148.9			46.3			68.6			47.6		311.4

For the fiscal year ended December 28, 2013, volumes increased by $50.1 million compared with the fiscal year ended December 29, 2012. The primary driver of the increase related to the contribution of Fiberweb results since the acquisition date, which represented an incremental $51.9 million for the period. Excluding acquisitions, volumes decreased 1.8 million primarily driven by volume reductions in North America and Europe. European results reflected the stabilization of underlying demand in our industrial, consumer disposables and healthcare markets. However, they were more than offset by reductions in the hygiene market. Volumes were lower in North America, primarily driven by the exit of certain low-margin business in the healthcare market during 2012 as well as lower consumer disposable volume. Combined, these reductions had a $16.3 million net impact to volumes. In addition, the volume reduction of $5.2 million in South America was primarily attributable to lower demand in the hygiene market. Incremental volume growth of $19.7 million in Asia was driven by higher volumes sold in the hygiene and healthcare markets, both of which were supported by our recent capacity expansions.

For the fiscal year ended December 28, 2013, net selling prices increased $0.8 million compared with the fiscal year ended December 29, 2012. The pricing increase was primarily driven by increases in the North American and European industrial and consumer disposable markets. The pricing increases, which resulted from our passing through higher raw material costs associated with index-based selling agreements and market-based pricing trends, provided an incremental $8.5 million to net sales. However, these amounts were partially offset by product mix movements in Asia, a result of a larger proportion of current year sales in the hygiene market compared with more prior year sales in the healthcare market, which have higher average selling prices. In addition, product mix movements in South America impacted results as we shifted products between sites and end-uses. Combined, these factors impacted net sales by $7.7 million.

Gross Profit

Gross profit for the fiscal year ended December 28, 2013 was $196.0 million, a $1.2 million decrease compared with the fiscal year ended December 29, 2012. The decrease in gross profit was primarily driven by higher overall cost for the raw materials of resin and fibers, especially polypropylene resin. The increase impacted gross profit by $16.3 million (resulting in lower net spreads of $12.0 million) primarily driven by competitive pricing influenced by the continuing market surplus. Included in gross profit are the results of Fiberweb since the date of acquisition, which represented an incremental $3.4 million for the period and included $7.3 million associated with the non-recurring amortization of the inventory step-up established as a result of the Fiberweb Acquisition. In addition, our overhead component increased $4.3 million primarily associated with volume-related inefficiencies in North America and South America as well as increased depreciation in Asia. However, the decrease in gross profit was partially offset by the improvement in our labor component of cost of goods sold of $8.2 million which reflects the positive benefits of our cost reduction initiatives implemented during 2012. As a result, gross profit as a percentage of net sales for the fiscal year ended December 28, 2013 decreased to 16.1% from 17.1% for the fiscal year ended December 29, 2012.

The volatility of the Argentinean and Colombian peso in relation to the U.S. dollar has not materially impacted gross profit as the majority of raw material cost increases, including those caused by currency movements, have been passed through to our customers by formulaic or other mechanisms in our sales contracts. The Euro in relation to the U.S. dollar did not materially impact gross profit in 2013 compared to 2012 as average exchange rates for the year were generally similar. All other currency changes did not have a material impact on gross profit which is primarily due to the combination of sales and costs in both U.S. dollar and non U.S. dollar and underlying mechanisms to manage.

Operating Income (Loss)

Operating income for the fiscal year ended December 28, 2013 was $7.2 million, a $30.0 million decrease compared with the fiscal year ended December 29, 2012. A reconciliation presenting the components of the period change by each of our reportable segments is as follows:


In millions	North America			South America			Europe			Asia			Sub-total			Corporate/ Other			Total
Beginning of period	$	50.0		$	18.1		$	11.1		$	18.1		$	97.3		$	(60.1	)	$	37.2
Changes due to:
Volume		(1.6	)		(1.7	)		(2.9	)		7.8			1.6			—			1.6
Acquisitions		3.7			—			(.8	)		—			2.9			—			2.9
Price/product mix		6.0			(2.5	)		2.6			(5.2	)		0.9			—			0.9
Raw material cost		(6.8	)		(4.8	)		(0.2	)		(1.1	)		(12.9	)		—			(12.9	)
Manufacturing costs		3.9			(2.4	)		(0.6	)		4.8			5.7			—			5.7
Currency translation		(0.8	)		1.0			1.5			(0.4	)		1.3			—			1.3
Depreciation and amortization		2.5			0.7			(1.1	)		(6.2	)		(4.1	)		—			(4.1	)
Purchase accounting		(5.0	)		—			(2.7	)		—			(7.7	)		—			(7.7	)
Special charges		—			—			—			—			—			(13.6	)		(13.6	)
All other		(0.4	)		(0.7	)		1.6			—			0.5			(4.6	)		(4.1	)

Sub-total		1.5			(10.4	)		(2.6	)		(0.3	)		(11.8	)		(18.2	)		(30.0	)

End of period	$	51.5		$	7.7		$	8.5		$	17.8		$	85.5		$	(78.3	)	$	7.2

The amounts for acquisition and integration expenses as well as special charges have not been allocated to our reportable business divisions because our management does not evaluate such charges on a division-by-division basis. Division operating performance is measured and evaluated before such items.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the fiscal year ended December 28, 2013 were $153.2 million, a $12.4 million increase compared with the fiscal year ended December 29, 2012. As a result, selling, general and administrative expenses as a percentage of net sales increased to 12.6% for the fiscal year ended December 28, 2013 from 12.2% for the fiscal year ended December 29, 2012. The increase was primarily related to the inclusion of Fiberweb results since the Acquisition Date, which added an incremental $8.5 million for the period. In addition, costs related to the announced retirement of our previous Chief Executive Officer and simultaneous appointment of our new Chief Executive Officer totaled $6.5 million, which included $2.0 million of non-cash stock compensation expense. Combined, these expenses had a 1.3 point impact on selling, general and administrative expenses as a percentage of net sales. Other factors that contributed to the increase include shipping and handling costs as activity between regions increased with the ramp up of certain new products, higher depreciation and amortization on new capital investments as well as increase in third-party fees and expenses. However, these amounts were more than offset by lower short-term incentive compensation as well as the impacts of our cost reduction initiatives implemented during the year which reduced employee-related expenses.

Special Charges, net

As part of our business strategy, we incur costs related to corporate-level decisions or Board of Directors actions. These actions are primarily associated with initiatives attributable to restructuring and realignment of

manufacturing operations and management structures as well as the pursuit of certain transaction opportunities when applicable. In addition, we evaluate our long-lived assets for impairment whenever events or changes in circumstances including the aforementioned, indicate that the carrying amounts may not be recoverable.

Special charges for the fiscal year ended December 28, 2013 were $33.2 million and consisted of the following components:

•

$18.3 million related to professional fees and other transaction costs associated with our acquisition of Fiberweb;

•

$8.5 million related to separation and severance expenses associated with our plant realignment cost initiatives;

•

$2.3 million related to cost associated with our internal redesign and restructuring of global operations initiatives;

•

$2.2 million non-cash impairment charge related to the fair value adjustment of property and equipment at our manufacturing facility in Buenos Aires, Argentina; and

•

$1.9 million related to other corporate initiatives.

Special charges for the fiscal year ended December 29, 2012 were $19.6 million and consisted of the following components:

•

$12.4 million related to cost associated with our internal redesign and restructuring of global operations initiatives;

•

$4.1 million related to separation and severance expenses associated with our plant realignment cost initiatives;

•

$0.9 million related to separation and severance expenses associated with our IS support initiative;

•

$0.5 million related to professional fees and other transaction costs associated with the Merger; and

•

$1.7 million related to other corporate initiatives.

The amounts included in Special charges, net have not been allocated to our reportable business divisions because our management does not evaluate such charges on a division-by-division basis. Division operating performance is measured and evaluated before such items.

Other Operating, net

Other operating expense for the fiscal year ended December 28, 2013 was $2.5 million. Amounts associated with foreign currency losses on operating assets and liabilities totaled $2.8 million. These losses were partially offset by $0.3 million of other operating income. For the fiscal year ended December 29, 2012, other operating income totaled $0.3 million, of which $0.2 million was associated with foreign currency gains and $0.1 million related to other operating income.

Other Income (Expense)

Interest expense for the fiscal year ended December 28, 2013 and the fiscal year ended December 29, 2012 was $56.0 million and $50.4 million, respectively. The increase primarily relates to interest expense and amortization of debt issuance costs associated with the Secured Bridge Facility and the Unsecured Bridge Facility, which were used to fund the acquisition of Fiberweb. Interest expense on the Senior Secured Credit Agreement, which was used to partially repay both bridge facilities, also contributed to the increase. Combined, we realized an additional $4.4 million associated with changes to our debt structure as a result of the Fiberweb transaction.

In association with the acquisition of Fiberweb, we refinanced the Bridge Facilities with a Senior Secured Credit Agreement during the fourth quarter of 2013. As a result, we recognized a loss on the extinguishment of debt of $3.3 million during the period. This amount represented debt issuance costs that were previously capitalized and required to be written off upon the refinancing and included within Debt modification and extinguishment costs.

Foreign currency and other was an expense of $8.9 million for the fiscal year ended December 28, 2013. Items impacting the results include $6.7 million associated with foreign currency losses on non-operating assets and liabilities as well as $1.7 million of other non-operating expenses, primarily associated with factoring fees. In addition, we incurred $0.5 million related to the release of a tax indemnification asset that was established in the opening balance sheet in connection with the Merger.

For the fiscal year ended December 29, 2012, foreign currency and other was an expense of $5.1 million. Items impacting the results include $3.4 million associated with foreign currency losses on non-operating assets and liabilities as well as $1.0 million of other non-operating expenses, primarily associated with factoring fees. In addition, we incurred $0.7 million related to the release of a tax indemnification asset that was established in the opening balance sheet in connection with the Merger.

Income Tax (Provision) Benefit

During the fiscal year ended December 28, 2013, we recognized an income tax benefit of $36.0 million on consolidated pre-tax book loss from continuing operations of $61.0 million for a 59.1% effective tax benefit. During the fiscal year ended December 29, 2012, we recognized income tax expense of $7.7 million on consolidated pre-tax book loss from continuing operations of $18.4 million for a (41.6%) effective tax expense.

The change in our effective tax rate was primarily driven by incremental operating losses in the U.S. of $24.7 million for which we recorded a full valuation allowance and a certain discrete benefit recorded in the U.S. in 2013. Specifically Fiberweb entities in the U.S. carried a deferred tax liability of $36.7 million that could be used as a source of income against the Company’s U.S. deferred tax assets. Shortly after the completion of the Fiberweb acquisition the Company elected to disregard the U.S. Fiberweb parent entities in the United Kingdom. Therefore the Fiberweb entities in the U.S. were then treated as directly owned by the Company for tax purposes and included in the Company’s U.S. consolidated federal tax return. Making this election resulted in the release of $36.7 million of our valuation allowance which was reflected as a discrete tax benefit in 2013.

Additionally our effective tax rate in 2013 was impacted by due to losses in certain jurisdictions for which no income tax benefits are anticipated, foreign withholding taxes for which tax credits are not anticipated, changes in the amounts recorded for Personal Holding Company (“PHC”) tax uncertainties, foreign taxes calculated at statutory rates different than the U.S. federal statutory rate, and the application of intraperiod tax allocation rules.

Earnings Attributable to Noncontrolling Interest

Earnings attributable to noncontrolling interest for the fiscal year ended December 28, 2013 were $0.1 million. Noncontrolling interest represents the minority partners’ interest in the income or loss of consolidated subsidiaries which are not wholly-owned by us. In association with the acquisition of Fiberweb, the Company assumed control of Terram Geosynthetics Private Limited, a joint venture located in Gujarat, India in which we maintain a 65% controlling interest. As a result, we incurred $0.1 million related to the noncontrolling interest.

Liquidity and Capital Resources

The following table contains several key measures of our financial condition and liquidity:


*In millions*	December 31, 2014			December 28, 2013
Balance Sheet Data:
Cash and cash equivalents	$	178.5		$	86.1
Operating working capital(1)	$	100.1		$	43.2
Total assets	$	2,035.2		$	1,464.5
Total debt	$	1,482.8		$	896.7
Deferred purchase price	$	42.4		$	—
Redeemable noncontrolling interest	$	89.2		$	—
Total PGI Specialty Materials Inc., shareholders’ equity	$	(24.4	)	$	158.9

(1)	Operating working capital represents accounts receivable plus inventory less accounts payable and accrued liabilities

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and income tax rates. Our cash requirements primarily consist of the following:

•

debt service requirements;

•

funding of working capital; and

•

funding of capital expenditures.

Our primary sources of liquidity include cash balances on hand, cash flows from operations, cash inflows from the sale of certain accounts receivables through our factoring arrangements, proceeds from notes offerings, borrowing availability under our existing credit facilities and our ABL Facility. We expect our cash on hand and cash flow from operations (which may fluctuate due to short-term operational requirements), combined with the current borrowing availability under our existing credit facilities and our ABL Facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending during the next twelve month period and our ongoing operations, projected working capital requirements and capital spending during the foreseeable future.

On January 28, 2011, pursuant to an Agreement and Plan of Merger, dated as of October 4, 2010, we were acquired by affiliates of Blackstone along with certain members of the Company’s management for an aggregate purchase price of $403.5 million. In addition, we have subsequently increased our debt balances in connection with our acquisitions of Fiberweb and Providência. As a result, we are highly leveraged. Accordingly, our liquidity requirements are significant, primarily due to our debt service requirements. Cash interest payments for the fiscal year ended December 31, 2014 were $86.6 million. We had $178.5 million of cash and cash equivalents on hand and an additional $43.6 million of undrawn availability under our ABL Facility as of December 31, 2014. The availability under our ABL Facility is determined in accordance with a borrowing base which can fluctuate due to various factors.

We currently have significant net operating losses in the U.S., multiple intercompany loan agreements, and in certain circumstances, management services agreements in place that allow us to repatriate foreign subsidiary cash balances to the U.S. without being subject to significant amounts of either foreign jurisdiction withholding taxes or adverse U.S. taxation. In addition, our U.S. legal entities have royalty arrangements, associated with our foreign subsidiaries’ use of U.S. legal entities intellectual property rights that allow us to repatriate foreign subsidiary cash balances, subject to foreign jurisdiction withholding tax requirements. Should we decide to

permanently repatriate foreign jurisdiction earnings by means of a dividend, the repatriated cash would be subject to foreign jurisdiction withholding tax requirements. We believe that any such dividend activity and the related tax effect would not be material.

At December 31, 2014, we had $178.5 million and $86.1 million of cash and cash equivalents on hand respectively, of which $67.0 million was held by subsidiaries outside of the U.S., the majority of which was available for repatriation through various intercompany arrangements. In addition, our U.S. legal entities in the past have also borrowed cash, on a temporary basis, from our foreign subsidiaries to meet U.S. obligations via short-term intercompany loans. Our U.S. legal entities may in the future borrow from our foreign subsidiaries. Only $7.4 million of cash and cash equivalents held by subsidiaries outside of the U.S. is considered permanently reinvested. If management decided to repatriate these earnings we do not believe we would incur significant tax liability in the U.S. due to our net operating losses.

Our liquidity and our ability to fund our capital requirements is dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control and many of which are described in “Risk Factors.” If those factors significantly change or other unexpected factors adversely affect us, our business may not generate sufficient cash flow from operations or we may not be able to obtain future financings to meet our liquidity needs. We anticipate that to the extent additional liquidity is necessary to fund our operations, it would be funded through borrowings under our ABL Facility, incurring other indebtedness, additional equity financings or a combination of these potential sources of liquidity. We may not be able to obtain this additional liquidity on terms acceptable to us or at all.

Cash Flows

The following table sets forth the major categories of cash flows:


*In millions*	Fiscal Year Ended December 31, 2014			Fiscal Year Ended December 28, 2013			Fiscal Year Ended December 29, 2012
Net cash provided by (used in) operating activities	$	49.1		$	16.9		$	75.5
Net cash provided by (used in) investing activities		(436.7	)		(337.8	)		(50.2	)
Net cash provided by (used in) financing activities		487.4			308.2			(0.1	)

Total	$	99.8		$	(12.7	)	$	25.2

Operating Activities

Net cash provided by operating activities for the fiscal year ended December 31, 2014 was $49.1 million, of which net income provided $12.3 million after adjusting for non-cash transactions. In addition, net income was significantly impacted by cash outflows for transaction and integration related spending during the current year. Working capital requirements used $15.7 million, after adjusting for the net assets purchased in the Providência Acquisition of $89.0 million, and was significantly impacted by cash outflows for transaction and integration related spending during the current period. The primary driver of the working capital outflow related to a $18.1 million increase in accounts receivable, which resulted from increased sales during the period as well as from our passing through higher raw material costs associated with index-based selling agreements and market-based pricing trends. Days sales outstanding was 45 days at December 31, 2014 and December 28, 2013. Inventory increased $4.0 million as a result of the higher average purchase price of raw materials. Inventory on hand was 39 days at December 31, 2014 compared with 41 days at December 28, 2013. Other current assets increased $2.3 million (after a $4.7 million adjustment for the non-cash impact of the Providência Contracts) primarily due to the timing of prepaid items as well as the timing of payments from our factoring agents. In addition, accounts payables and accrued expenses increased $8.8 million. Trade accounts payable were impacted by the timing of supplier payments while accrued expenses were impacted by the timing of vendor payments and the bi-annual

interest payment associated with our Senior Secured Notes, restructuring programs and employee-related expenses. As a result, accounts payable days decreased to 72 days at December 31, 2014 from 80 days at December 28, 2013. We continue to focus on working capital management, however, changes in raw material prices and the associated lag effect on selling prices can impact accounts receivable and inventory balances.

Net cash provided by operating activities for the fiscal year ended December 28, 2013 was $16.9 million, of which net income provided $23.0 million after adjusting for non-cash transactions. In addition, net income was impacted by cash outflows for transaction related spending during the year. Working capital requirements provided $19.9 million after adjusting for $65.7 million for the net assets purchased in the Fiberweb Acquisition. The primary driver of the inflow related to a $22.5 million increase in accounts payable and accruals. Trade accounts payable were impacted by the timing of supplier payments while accrued expenses were impacted by the timing of vendor payments, restructuring programs and employee-related expenses. As a result, accounts payable days increase to 80 days at December 28, 2013. In addition, inventory decreased $4.4 million as a result of the lower average purchase price of raw materials. Inventory on hand was 41 days at December 28, 2013. These amounts were partially offset by an increase in accounts receivable, which reduced net cash provided by operating activities by $12.4 million. The increase, which resulted from our passing through higher raw material costs associated with index-based selling agreements and market-based pricing trends, increased days sales outstanding to 45 days.

Net cash provided by operating activities for the fiscal year ended December 29, 2012 was $75.5 million, of which working capital requirements provided $33.2 million. The primary driver of the inflow related to decreases in both accounts receivable and inventory during the year. Accounts receivable decreased $9.4 million as a result of lower selling prices coupled with an increase of amounts sold through factoring agreements. The $9.3 million decrease in inventory was impacted by the lower overall purchase price of raw materials. At December 29, 2012, days sales outstanding was 44 days and inventory on hand was 38 days. Accounts payable and accruals increased $13.2 million. The increase was driven by the lower overall purchase price of raw materials partially offset by savings related to our internal redesign and restructure of our global operations. Accounts payable days was 79 days at December 29, 2012.

As sales volume and raw material costs vary, inventory and accounts receivable balances are expected to rise and fall accordingly, which in turn, result in changes in our levels of working capital and cash flows going forward. In addition, we review our business on an ongoing basis relative to current and expected market conditions, attempting to match our production capacity and cost structure to the demands of the markets in which we participate, and strive to continuously streamline our manufacturing operations consistent with world-class standards. Accordingly, in the future we may decide to undertake certain restructuring efforts to improve our competitive position. To the extent from time to time further decisions are made to restructure our business, such actions could result in cash restructuring charges and asset impairment charges, which could be material. Cash tax payments are significantly influenced by, among other things, actual operating results in each of our tax jurisdictions, changes in tax law, changes in our tax structure and any resolutions of uncertain tax positions.

Investing Activities

Net cash used in investing activities for the fiscal year ended December 31, 2014 was $436.7 million. The primary driver of the outflow related to the Providência Acquisition, where we acquired Providência for an aggregate purchase price of $424.8 million, of which $356.3 million was cash consideration, net of cash acquired. Property, plant and equipment expenditures totaled $82.5 million and primarily related to machinery and equipment upgrades that extend the useful life and/or increased the functionality of the asset. In addition, a portion of the expenditures relate to capacity expansions in certain manufacturing facilities as well as costs related to the plan to relocate our Nanhai, China manufacturing facilities.

Net cash used in investing activities for the fiscal year ended December 28, 2013 was $337.8 million. The primary driver of the outflow related to the Fiberweb Acquisition, where we acquired Fiberweb for an aggregate

purchase price of $287.8 million. Property, plant and equipment expenditures totaled $54.6 million, primarily associated with our manufacturing expansion project in China which was completed in May 2013. Other items included in our capital expenditures relates to machinery and equipment upgrades that extend the useful life and/or increased the functionality of the asset. In addition, we acquired $4.6 million of intangible assets, primarily related to the purchase of land-use rights in connection with the plan to relocate our Nanhai, China manufacturing facilities.

Net cash used in investing activities for the fiscal year ended December 29, 2012 was $50.2 million. The primary driver of the balance related to $51.6 million of property, plant and equipment expenditures associated with our manufacturing expansion project in China. In addition, other items included in our capital expenditures relates to machinery and equipment upgrades that extend the useful life and/or increased the functionality of the asset. These amounts were partially offset by $1.7 million of proceeds recognized in the first quarter of 2012 associated with the sale of a former manufacturing facility in North Little Rock, Arkansas.

Financing Activities

Net cash provided by financing activities for the fiscal year ended December 31, 2014 was $487.4 million. The primary driver of the inflow related to the $415.0 million of proceeds from borrowings under our Senior Secured Credit Agreement as well as the proceeds from the issuance of $210.0 million of 6.875% Senior Unsecured Notes. These amounts were used to fund the Providência Acquisition and repay a portion of our outstanding debt. Other borrowings totaled $32.1 million and primarily related to short-term credit facilities used to finance various investments in non-U.S. jurisdictions and certain liquidity requirements. These amounts were partially offset by repayments of $148.3 million and $25.3 million of costs associated with our debt.

Net cash provided by financing activities for the fiscal year ended December 28, 2013 was $308.2 million. The primary driver of the inflow related to the proceeds received from a Senior Secured Credit Agreement and an additional equity investment from our owners used to repay outstanding borrowings under our Senior Secured Bridge Credit Agreement and the Senior Unsecured Bridge Credit Agreement used in connection with the Fiberweb Acquisition. Proceeds from other borrowings included $13.9 million related to a credit facility funding our manufacturing expansion project in China. In addition, proceeds of $3.5 million related to a new credit facility in Argentina used to fund the upgrade of one of our manufacturing lines. Other amounts were related to short-term facilities.

Net cash used in financing activities for the fiscal year ended December 29, 2012 was $0.1 million. Proceeds from borrowings totaled $16.7 million and primarily related to our credit facility in China funding our manufacturing expansion project in China. Other proceeds were related to short-term facilities. These amounts were more than offset by repayments of $17.6 million.

Indebtedness

The following table summarizes our outstanding debt at December 31, 2014:


*In thousands*	Currency	Matures	Interest Rate			Outstanding Balance
Term Loans	USD	2018		5.25	%	$	703,029
Senior Secured Notes	USD	2019		7.75	%		504,000
Senior Unsecured Notes	USD	2019		6.875	%		210,000
ABL Facility	USD	2016		—			—
Argentina credit facilities:
Nacion Facility	USD	2016		3.13	%		5,010
Galicia Facility	ARS	2016		15.25	%		2,047
China Credit Facility	USD	2015		5.43	%		18,920
Brazil export credit facilities:
Itaú Facility ($)	USD	2018		4.85	%		—
Itaú Facility (R$)	BRL	2016		8.00	%		18,871
Recovery Zone Facility Bonds	USD	2018		2.50	%		—
India Loans	INR	2017		14.70	%		2,437
Capital lease obligations	Various	2015-2019		Various			861

Total long-term debt							1,465,175
Short-term borrowings	Various	2015		Various			17,665

Total debt						$	1,482,840

Term Loans

On December 19, 2013, our subsidiary, PGI Group, entered into a Senior Secured Credit Agreement with a maturity date upon the earlier of (i) December 19, 2019 and (ii) the 91st day prior to the scheduled maturity of our 7.75% Senior Secured Notes; provided that on such 91st day, our 7.75% Senior Secured Notes have an outstanding aggregate principal amount in excess of $150.0 million. The Term Loans provide for a commitment by the lenders to make secured term loans in an aggregate amount not to exceed $295.0 million, the proceeds of which were used to partially repay amounts outstanding under the Senior Secured Bridge Credit Agreement and the Senior Unsecured Bridge Credit Agreement. In connection with the refinancing of the Bridge Facilities with the Term Loans, we recognized a loss on the extinguishment of debt of $3.3 million during the fourth quarter of 2013. This amount, included within Debt modification and extinguishment costs, represented debt issuance costs that were previously capitalized and required to be written off upon the refinancing.

Borrowings bear interest at a fluctuating rate per annum equal to, at PGI Group’s option, (i) a base rate equal to the highest of (a) the federal funds rate plus ¹⁄₂ of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Citicorp North America, Inc. as its “prime rate” and (c) the LIBOR rate for a one-month interest period plus 1.0% (provided that in no event shall such base rate with respect to the Term Loans be less than 2.0% per annum), in each case plus an applicable margin of 3.25% or (ii) a LIBOR rate for the applicable interest period (provided that in no event shall such LIBOR rate with respect to the Term Loans be less than 1.0% per annum) plus an applicable margin of 4.25%. The applicable margin for the Term Loans is subject to a 25 basis point step-down upon the achievement of a certain senior secured net leverage ratio. We are required to repay installments on the Term Loans in quarterly installments in aggregate amounts equal to 1.0% per annum of their funded total principal amount, with the remaining amount payable on the maturity date.

On June 10, 2014, PGI Group entered into the Incremental Amendment to the existing Term Loans in which we obtained $415.0 million of commitments for incremental term loans from the existing lenders, the terms of which are substantially identical to the terms of the Term Loans. Pursuant to the Incremental Amendment, we borrowed $310.0 million, the proceeds of which were used to fund a portion of the consideration paid for the

Providência Acquisition. The remaining commitments were used during the third quarter of 2014 to repay existing indebtedness.

The Term Loans are secured (i) together with the Tranche 2 (as defined below) loans, on a first-priority lien basis by substantially all of the assets of PGI Group, and any existing and future subsidiary guarantors (other than collateral securing the ABL Facility on a first-priority basis), including all of the capital stock of PGI Group and each restricted subsidiary (which, in the case of foreign subsidiaries, will be limited to 65% of the capital stock of each first-tier foreign subsidiary) and (ii) on a second-priority basis by the collateral securing the ABL Facility, in each case, subject to certain exceptions and permitted liens. We may voluntarily repay outstanding loans at any time without premium or penalty, other than a voluntary prepayment of Term Loans in connection with a repricing transaction on or prior to the date that is six months after the closing date of the Incremental Amendment and customary “breakage” costs with respect to LIBOR loans.

The agreement governing the Term Loans, among other restrictions, limits PGI Group’s ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional debt or issue disqualified stock or preferred stock; (ii) pay dividends and make other distributions on, or redeem or repurchase, capital stock; (iii) make certain investments; (iv) repurchase stock; (v) incur certain liens; (vi) enter into transactions with affiliates; (vii) merge or consolidate; (viii) enter into agreements that restrict the ability of subsidiaries to make dividends or other payments to PGI Group; (ix) designate restricted subsidiaries as unrestricted subsidiaries; and (x) transfer or sell assets. In addition, the Term Loans contain certain customary representations and warranties, affirmative covenants and events of default.

Under the credit agreement governing the Term Loans, PGI Group’s ability to engage in activities such as incurring additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger transactions is governed, in part, by its ability to satisfy tests based on Adjusted EBITDA (defined as Consolidated EBITDA in the credit agreement governing the Terms Loans).

Senior Secured Notes

In connection with the Merger, PGI Group issued $560.0 million of 7.75% Senior Secured Notes due 2019 on January 28, 2011. The Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally on a senior secured basis, by each of PGI Group’s wholly-owned domestic subsidiaries. Interest on the Senior Secured Notes is paid semi-annually on February 1 and August 1 of each year. On July 23, 2014, we redeemed $56.0 million aggregate principal amount of the Senior Secured Notes at a redemption price of 103.0% of the aggregate principal amount plus any accrued and unpaid interest, to, but excluding, July 23, 2014. The redemption amount was funded by proceeds from the Incremental Amendment. Pursuant to ASC 470, “Modifications and Extinguishments” (“ASC 470”), we recognized a loss on debt extinguishment of $2.6 million, which included $0.9 million related to unamortized debt issuance costs. As the nature of this transaction related to a non-operating event, the loss on extinguishment is included in Debt modifications and extinguishment costs in the current period.

The indenture governing the Senior Secured Notes limits, subject to certain exceptions, the ability of PGI Group and its restricted subsidiaries to: (i) incur or guarantee additional debt or issue disqualified stock or preferred stock; (ii) pay dividends and make other distributions on, or redeem or repurchase, capital stock; (iii) make certain investments; (iv) incur certain liens; (v) enter into transactions with affiliates; (vi) merge or consolidate; (vii) enter into agreements that restrict the ability of subsidiaries to make dividends or other payments to PGI Group; (viii) designate restricted subsidiaries as unrestricted subsidiaries; and (ix) transfer or sell assets. It does not limit the activities of Holdings or the amount of additional indebtedness that Holdings or its parent entities may incur. In addition, it also provides for specified events of default, which, if any of them occurs, would permit or require the principal of and accrued interest on the Senior Secured Notes to become or to be declared due and payable.

Under the indenture governing the Senior Secured Notes, PGI Group’s ability to engage in certain activities such as incurring additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger transactions is governed, in part, by its ability to satisfy tests based on Adjusted EBITDA (defined as EBITDA in the indenture governing the Senior Secured Notes).

Senior Unsecured Notes

In connection with the Providência Acquisition, PGI Group issued $210.0 million of 6.875% Senior Unsecured Notes due 2019 on June 11, 2014. The Senior Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by each of PGI Group’s wholly-owned domestic subsidiaries. Interest on the Senior Unsecured Notes is paid semi-annually on June 1 and December 1 of each year.

The indenture governing the Senior Unsecured Notes limits, subject to certain exceptions, the ability of PGI Group and its restricted subsidiaries to: (i) incur or guarantee additional debt or issue disqualified stock or preferred stock; (ii) pay dividends and make other distributions on, or redeem or repurchase, capital stock; (iii) make certain investments; (iv) incur certain liens; (v) enter into transactions with affiliates; (vi) merge or consolidate; (vii) enter into agreements that restrict the ability of subsidiaries to make dividends or other payments to PGI Group; (viii) designate restricted subsidiaries as unrestricted subsidiaries; and (iv) transfer or sell assets. It does not limit the activities of Holdings or the amount of additional indebtedness that Holdings or its parent entities may incur. In addition, it also provides for specified events of default which, if any occurs, would permit or require the principal of and accrued interest on the Senior Unsecured Notes to become or to be declared due and payable.

Under the indenture governing the Senior Unsecured Notes, PGI Group’s ability to engage in certain activities such as incurring additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger transactions is governed, in part, by its ability to satisfy tests based on Adjusted EBITDA (defined as EBITDA in the indenture governing the Senior Unsecured Notes).

ABL Facility

On January 28, 2011, PGI Group entered into a senior secured asset-based revolving credit facility which was amended and restated on October 5, 2012 to provide for borrowings not to exceed $50.0 million, subject to borrowing base availability. The ABL Facility provides borrowing capacity available for letters of credit and borrowings on a same-day basis and is comprised of (i) a revolving tranche of up to $42.5 million (“Tranche 1”) and (ii) a first-in, last out revolving tranche of up to $7.5 million (“Tranche 2”). Provided that no default or event of default was then existing or would arise therefrom, we had the option to request that the ABL Facility be increased by an amount not to exceed $20.0 million. The facility matures on October 5, 2017.

On November 26, 2013, PGI Group entered into an amendment to the ABL Facility which increased the Tranche 1 revolving credit commitments by $30.0 million (for a total aggregate revolving credit commitment of $80.0 million) as well as made certain other changes to the agreement. In addition, we increased the amount by which we can request that the ABL Facility be increased at our option to an amount not to exceed $75.0 million. The effectiveness of the amendment was subject to the satisfaction of certain specified closing conditions by no later than January 31, 2014, all of which were satisfied prior to such date.

Based on current average excess availability, the borrowings under the ABL Facility will bear interest at a rate per annum equal to, at PGI Group’s option, either (A) British Bankers Association LIBOR Rate (“LIBOR”) (adjusted for statutory reserve requirements) plus a margin of (i) 2.00% in the case of Tranche 1 or (ii) 4.00% in the case of Tranche 2 or (B) the higher of (a) the rate of interest in effect for such day as publicly announced from time to time by Citibank, N.A. as its “prime rate” and (b) the federal funds effective rate plus ¹⁄₂ of 1.0% (“ABR”) plus a margin of (x) 1.00% in the case of Tranche 1 or (y) 3.00% in the case of the Tranche 2. As of December 31, 2014, we had no outstanding borrowings under the ABL Facility. The borrowing base availability

was $62.9 million, however, outstanding letters of credit in the aggregate amount of $19.3 million left $43.6 million available for additional borrowings. The aforementioned letters of credit were primarily provided to certain administrative service providers and financial institutions. None of these letters of credit had been drawn on as of December 31, 2014.

The ABL Facility contains certain restrictions which limit PGI Group’s ability and the ability of its restricted subsidiaries to: (i) incur or guarantee additional debt; (ii) pay dividends and make other distributions on, or redeem or repurchase, capital stock; (iii) make certain investments; (iv) repurchase stock; (v) incur certain liens; (vi) enter into transactions with affiliates; (vii) merge or consolidate or other fundamental changes; (viii) enter into agreements that restrict the ability of subsidiaries to make dividends or other payments; (ix) designate restricted subsidiaries as unrestricted subsidiaries; (x) transfer or sell assets and (xi) prepay junior financing or other restricted debt. In addition, it contains certain customary representations and warranties, affirmative covenants and events of default. If such an event of default occurs, the lenders under the ABL Facility would be entitled to take various actions, including the acceleration of amounts due under the ABL Facility and all actions permitted to be taken by a secured creditor.

Under the credit agreement governing the ABL Facility, PGI Group’s ability to engage in activities such as incurring additional indebtedness, making investments, refinancing certain indebtedness, paying dividends and entering into certain merger transactions is governed, in part by, its ability to satisfy tests based on Adjusted EBITDA (defined as Consolidated EBITDA in the credit agreement governing the ABL Facility).

Nación Facility

In January 2007, our subsidiary in Argentina entered into an arrangement with banking institutions in Argentina in order to finance the installation of a new spunmelt line at its facility located near Buenos Aires, Argentina. The maximum borrowings available under the facility, excluding any interest added to principal, were 33.5 million Argentine pesos with respect to an Argentine peso-denominated loan and $26.5 million with respect to a U.S. dollar-denominated loan. The loans are secured by pledges covering (i) the subsidiary’s existing equipment lines; (ii) the outstanding stock of the subsidiary; and (iii) the new machinery and equipment being purchased, as well as a trust assignment agreement related to a portion of receivables due from certain major customers of the subsidiary.

The interest rate applicable to borrowings under these term loans is based on LIBOR plus 290 basis points for the U.S. dollar-denominated loan and Buenos Aires Interbanking Offered Rate plus 475 basis points for the Argentine peso-denominated loan. Principal and interest payments began in July 2008 with the loans maturing as follows: annual amounts of $3.5 million beginning in 2011 and continuing through 2015, and the remaining $1.7 million in 2016.

In connection with the Merger, we repaid and terminated the Argentine peso-denominated loans. In addition, the U.S. dollar-denominated loan was adjusted to reflect its fair value as of the date of the Merger. As a result, we recorded a contra-liability in Long-term debt and will amortize the balance over the remaining life of the facility. At December 31, 2014, the face amount of the outstanding indebtedness under the U.S. dollar-denominated loan was $5.2 million, with a carrying amount of $5.0 million and a weighted average interest rate of 3.13%.

Galicia Facility

On September 27, 2013, our subsidiary in Argentina entered into an arrangement with a banking institution in Argentina in order to partially finance the upgrade of a manufacturing line at its facility located near Buenos Aires, Argentina. The maximum borrowings available under the facility, excluding any interest added to principal, is 20.0 million Argentine pesos (approximately $3.5 million). The three-year term of the agreement began with the date of the first draw down on the facility, which occurred in the third quarter of 2013, with

payments required in twenty-five equal monthly installments beginning after one year. Borrowings will bear interest at 15.25%. As of December 31, 2014, the outstanding balance under the facility was $2.0 million. The remainder of the upgrade is expected to be financed by existing cash balances and cash generated from operations.

China Credit Facility

In the third quarter of 2012, our subsidiary in China entered into a three-year U.S. dollar-denominated construction loan agreement (the “Hygiene Facility”) with a banking institution in China to finance a portion of the installation of a new spunmelt line at its manufacturing facility in Suzhou, China. The interest rate applicable to borrowings under the Hygiene Facility is based on three-month LIBOR plus an amount to be determined at the time of funding based on the lender’s internal head office lending rate (520 basis points at the time the credit agreement was executed).

The maximum borrowings available under the facility, excluding any interest added to principal, were $25.0 million. At December 28, 2013, the outstanding balance under the Hygiene Facility was $24.9 million with a weighted-average interest rate of 5.46%. We repaid $6.0 million of the principal balance during 2014 using a combination of existing cash balances and cash generated from operations. As a result, the outstanding balance under the Hygiene Facility was $18.9 million at December 31, 2014 with a weighted average interest rate of 5.43%.

Brazil Export Credit Facilities

As a result of the acquisition of Providência, we assumed a U.S. dollar-denominated export credit facility with Itaú Unibanco S.A., pursuant to which Providência borrowed $52.4 million in the third quarter of 2011 for the purpose of financing certain export transactions from Brazil. Borrowings bear interest at 4.85% per annum, payable semi-annually. Principal payments are due in 11 equal installments, beginning in September 2013 and ending at final maturity in September 2018. The facility is secured by interests in the receivables related to the exports financed by the facility.

On September 22, 2014, we entered into an assignment agreement with Itaú Unibanco S.A in order to transfer their rights and obligations under the agreement to us. The purchase price for the assigned interest totaled $45.2 million, which we funded with a portion of the proceeds from the Incremental Amendment. Pursuant to ASC 470, we recognized a loss on debt extinguishment of $2.4 million. As the nature of this transaction related to a non-operating event, the loss on extinguishment is included in Debt modifications and extinguishment costs in the current period.

As a result of the Providência Acquisition, we assumed a Brazilian real-denominated export credit facility with Itaú Unibanco S.A., pursuant to which Providência borrowed R$50.0 million in the first quarter of 2013 for the purpose of financing certain export transactions from Brazil. Borrowings bear interest at 8.0% per annum, payable quarterly. The facility matures in February 2016 and is unsecured. At December 31, 2014, outstanding borrowings under the facility totaled $18.9 million.

Recovery Zone Facility Bonds

As a result of the Providência Acquisition, we assumed a loan agreement in connection with the issuance of a like amount of recovery zone facility bonds by the Iredell County Industrial Facilities and Pollution Control Financing Authority. The proceeds of $9.1 million were used to finance, in part, the construction of a manufacturing facility in Statesville, North Carolina. The borrowings bear interest at a floating rate, which is reset weekly, and are supported by a letter of credit. On July 21, 2014, the Company repaid the aggregate principal amount of indebtedness with a portion of the proceeds from the Incremental Amendment.

India Indebtedness

As a result of the Fiberweb Acquisition, we indirectly assumed control of Terram Geosynthetics Private Limited, a joint venture located in Mundra, India in which we maintain a 65% controlling interest. As part of the net assets acquired, we assumed $3.8 million of debt (including short-term borrowings) that was entered into with a banking institution in India. Amounts outstanding primarily relate to a 14.70% term loan, due in 2017, used to purchase fixed assets. Other amounts relate to a short-term credit facility used to finance working capital requirements (included in Short-term borrowings in the consolidated balance sheets) and an existing automobile loan. Combined, the outstanding balances totaled $3.1 million at December 31, 2014.

Other Indebtedness

We periodically enter into short-term credit facilities in order to finance various liquidity requirements, including insurance premium payments and short-term working capital needs. At December 31, 2014 and December 28, 2013, outstanding amounts related to such facilities were $17.0 million and $0.4 million, respectively. Borrowings under these facilities are included in Short-term borrowings in the Consolidated Balance Sheets.

We also have documentary letters of credit not associated with the ABL Facility or the Hygiene Facility. These letters of credit were primarily provided to certain raw material vendors and amounted to $7.8 million and $8.5 million at December 31, 2014 and December 28, 2013. None of these letters of credit have been drawn on.

Factoring Agreements

In the ordinary course of business, we may utilize accounts receivable factoring arrangements with third-party financial institutions in order to accelerate its cash collections from product sales. These arrangements involve the ownership transfer of eligible U.S. and non-U.S. trade accounts receivable, without recourse or discount, to a third party financial institution in exchange for cash. The maximum amount of outstanding advances at any one time is $20.0 million under the U.S. based program and $84.4 million (measured at December 31, 2014 foreign exchange rates) under the non-U.S. based program. At December 31, 2014, the net amount of trade accounts receivable sold to third-party financial institutions, and therefore excluded from our accounts receivable balance, was $92.5 million. Amounts due from the third-party financial institutions were $13.6 million at December 31, 2014. In the future, we may increase the sale of receivables or enter into additional factoring agreements.

Contractual Obligations

As of December 31, 2014, we had certain cash obligations associated with contractual commitments. The amounts due under these commitments are as follows:


	Payments Due by Period
*In millions*	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Short-term borrowings	$	17.7	$	17.7	$	—	$	—	$	—
Long-term debt (fixed)		732.9		0.1		18.8		714.0		—
Long-term debt (variable)		732.8		31.7		18.2		682.9		—
Estimated interest payments(1)		384.6		93.5		181.4		109.7		—
Financing obligations		20.4		3.4		6.7		6.7		3.6
Capital lease obligation(2)		0.9		0.3		0.5		0.1		—
Operating lease obligations(3)		78.5		15.4		27.4		15.4		20.3
Purchase commitments(4)		92.1		92.1		—		—		—

Total	$	2,059.9	$	254.2	$	253.0	$	1,528.8	$	23.9

(1)	Represents the annual interest expense on fixed and variable rate debt. Projections on variable rate debt are based on current interest rates.

(2)	Represents rental payments under capital leases with initial or remaining non-cancelable terms in excess of one year.

(3)	We lease certain manufacturing, warehousing and other facilities and equipment under operating leases. The leases on most of the properties contain renewal provisions.

(4)	Represents our commitments related to the purchase of raw materials and capital projects.

Future expected obligations under our pension and postretirement benefit plans as well as our unrecognized tax obligations have not been included in the Contractual Obligations table as these items are difficult to make reasonably reliable estimates of the timing and amount to be paid.

Operating Lease Obligations

We lease certain manufacturing, warehousing and other facilities and equipment under operating leases. The leases on most of the properties contain renewal provisions. Rent expense (net of sub-lease income), including incidental leases, was $20.1 million, $15.4 million and $14.5 million during the fiscal years ended December 31, 2014, December 28, 2013 and December 29, 2012, respectively. These expenses are recognized on a straight-line basis over the life of the lease.

In the third quarter of 2011, our state-of-the-art spunmelt line in Waynesboro, Virginia commenced commercial production. The plant expansion increased capacity to meet demand for nonwoven materials in the hygiene and healthcare applications in the U.S. The line was principally funded by a seven year equipment lease with a capitalized cost of $53.6 million. From the commencement of the lease to its fourth anniversary date, we will make annual lease payments of $8.3 million. From the fourth anniversary date to the end of the lease term, our annual lease payments may change, as defined in the lease agreement. The aggregate monthly lease payments under the agreement, subject to adjustment, are expected to approximate $58 million. The lease includes covenants, events of default and other provisions that requires us to maintain certain financial ratios and other requirements.

Purchase Commitments

At December 31, 2014, we had purchase commitments of $92.1 million, of which $77.1 million related to the purchase of raw materials in the normal course of business. The remaining $15.0 million related to capital projects, primarily associated with the plan to relocate our Nanhai, China manufacturing facilities and the warehouse expansion project at the Company’s Old Hickory, Tennessee manufacturing facilities.

Financing Obligation

As a result of the acquisition of Fiberweb, we acquired a manufacturing facility in Old Hickory, Tennessee, the assets of which included a utility plant used to generate steam for use in its manufacturing process. Upon completion of its construction in 2011, the utility plant was sold to an unrelated third-party and subsequently leased back by Fiberweb for a period of 10 years. We have accounted for this transaction as a direct financing lease, recognizing the assets as part of property, plant and equipment and a related financing obligation as a long-term liability. Cash payments to the lessor are allocated between interest expense and amortization of the financing obligation. At the end of the lease term, we will recognize the sale of the utility plant, however, no gain or loss will be recognized as the financing obligation will equal the expected carrying value of the assets. At December 31, 2014, the outstanding balance of the financing obligation was $18.4 million.

Deferred Purchase Price

Total consideration paid for the acquisition of Providência includes $47.9 million of Deferred Purchase Price. The Deferred Purchase Price is held by the Company and relates to the Providência Tax Claims. The Deferred Purchase Price is denominated in Brazilian real and accretes at a rate of 9.5% per annum compounded

daily. Upon resolution of the Providência Tax Claims by the Brazilian court, either tax payments for the Providência Tax Claims will be made to the Brazilian tax authorities or the Deferred Purchase Price will be paid to the selling shareholders. We will be responsible for any actual tax payment in excess of the Deferred Purchase Price. The Deferred Purchase Price is reflected on the Consolidated Balance Sheet as a Noncurrent liability as resolution of the Providência Tax Claims is expected to take longer than a year. At December 31, 2014, the outstanding balance of the Deferred Purchase Price was $42.4 million.

Redeemable Noncontrolling Interest

In connection with the Providência Acquisition, as required by Brazilian law, PGI Acquisition Company filed the Mandatory Tender Offer registration request with the CVM in order to launch, after its approval, a tender offer to acquire all of the remaining outstanding capital stock of Providência from the minority shareholders. As of December 31, 2014, the Mandatory Tender Offer was still under review by the CVM. Hence, the conditions for the launch of the Mandatory Tender Offer have not been met as of December 31, 2014. However, once the Mandatory Tender Offer is approved and launched, the minority shareholders will have the right, but not the obligation, to sell their remaining outstanding capital stock of Providência. Given such right of the minority shareholders, we determined that ASC 480 requires the noncontrolling interest to be presented as mezzanine equity on the Consolidated Balance Sheets and adjusted to its estimated maximum redemption amount at each balance sheet date. At December 31, 2014, the redemption value of the redeemable noncontrolling interest was $89.2 million.

Deferred Benefit Pension Plans

At December 31, 2014, we had a net surplus of $10.0 million related to our pension plans. It is our objective to contribute to pension plans to ensure adequate funds are available in the plans to make benefit payments to plan participants and beneficiaries when required. Because the timing and amounts of long-term funding requirements for pension obligations are uncertain, they have been excluded from the Contractual Obligations table.

Postretirement Benefit Plans

At December 31, 2014, we had postretirement benefit obligations of $5.5 million. We fund postretirement benefit costs principally on a pay-as-you-go basis as medical costs are incurred by covered retiree populations. Because the timing and amounts of long-term funding requirements for postretirement obligations are uncertain, they have been excluded from the Contractual Obligations table.

Uncertain Tax Positions

At December 31, 2014, we have total unrecognized tax benefits for uncertain tax positions of $13.0 million, which includes $9.1 million of related accrued interest and penalties as well as $1.8 million of operating loss carry forwards for which unrecognized tax benefits have been established. The liability has been excluded from the Contractual Obligations table as we are unable to reasonably estimate the amount and period in which these liabilities might be paid.

Covenant Compliance

Under our credit agreements and indentures governing our Senior Secured Notes and our Senior Unsecured Notes, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments, and making restricted payments is tied to ratios based on Adjusted EBITDA.

We believe that the most directly comparable GAAP measure to Adjusted EBITDA is Net income (loss) attributable to PGI Specialty Materials, Inc. The following table reconciles Net income (loss) attributable to PGI Specialty Materials, Inc to Adjusted EBITDA.


*In thousands*	Fiscal Year Ended December 31, 2014
Net income (loss) attributable to PGI Specialty Materials, Inc.	$	(115,297	)
Net income (loss) attributable to noncontrolling interest and redeemable noncontrolling interest		(3,943	)
Interest expense		96,153
Income and franchise tax		(297	)
Depreciation and amortization(a)		112,557
Purchase accounting adjustments(b)		6,976
Non-cash compensation(c)		1,931
Special charges, net(d)		59,185
Foreign currency and other non-operating, net(e)		32,531
Loss on debt modification		15,725
Severance and relocation expenses(f)		3,542
Business optimization expense(g)		1,263
Management, monitoring and advisory fees(h)		5,546
Other(i)		2,899

Adjusted EBITDA before contribution from acquisitions and contribution from estimated synergies	$	218,771

Contribution from acquisitions(j)		13,366
Contribution from estimated synergies(k)		27,840

Adjusted EBITDA	$	259,977

(a)	Excludes amortization of loan acquisition costs that are included in interest expense.

(b)	Reflects fair market value adjustments as a result of purchase accounting associated with acquisitions, primarily related to the step-up in inventory value and its amortization into earnings over the period of the acquired company’s normal inventory turns.

(c)	Reflects non-cash compensation costs related to employee and director restricted stock, restricted stock units and stock options.

(d)

Reflects costs associated with non-cash asset impairment charges, the restructuring and realignment of manufacturing operations and management organizational structures, pursuit of certain transaction opportunities, including expenses related to the Fiberweb and Providência acquisitions, and other charges included in Special charges, net in our Consolidated Statement of Operations.

(e)

Reflects (gains) losses from foreign currency translation of intercompany loans, unrealized (gains) losses on interest rate and foreign currency hedging transactions, (gains) losses on sales of assets outside the ordinary course of business, factoring costs and certain other non-operating (gains) losses recorded in Foreign Currency and Other, net as well as (gains) losses from foreign currency transactions recorded in Other Operating, net.

(f)	Reflects severance and relocation expenses not included under Special charges, net as well as costs incurred with the CEO transition in 2013.

(g)	Reflects costs incurred to improve IT and accounting functions, costs associated with establishing new facilities and certain other expenses.

(h)	Reflects management, monitoring and advisory fees paid under the Sponsor management agreement. We intend to terminate the Advisory Agreement in connection with this offering. See “Certain Relationships and Related Party Transactions—Advisory Agreement.”

(i)	Reflects charges such as gain/loss on disposals and start-up costs.

(j)

Pursuant to the indentures governing our Senior Secured Notes and our Senior Unsecured Notes and the credit agreements governing our Term Loans and our ABL Facility, we are permitted to include in our Adjusted EBITDA calculation the Adjusted EBITDA contributions from acquisitions for the portion of the fiscal year prior to the closing of the acquisition. The fiscal year ended December 31, 2014, reflects the Adjusted EBITDA contribution from estimated synergies from the Providência Acquisition for the period from January 1, 2014 through June 11, 2014.

(k)

Pursuant to the indentures governing our Senior Secured Notes and our Senior Unsecured Notes and the credit agreements governing our Term Loans and our ABL Facility, we are permitted to include to our calculation of Adjusted EBITDA contributions from estimated synergies resulting from acquisitions (subject to certain limitations). The adjustment represents management’s estimate of synergies expected to be realized within 12 months following the applicable acquisition. The fiscal year ended December 31, 2014 includes the Adjusted EBITDA contribution from estimated synergies from the Providência Acquisition.

The credit agreement governing our Term Loans limits the amount of estimated synergies included in the calculation of Adjusted EBITDA for any consecutive four quarter period to 20% of Adjusted EBITDA, while the indenture governing our Senior Secured Notes and the credit agreement governing our ABL Facility limit such amount to the greater of $20 million or 10% of Adjusted EBITDA. The indenture governing our Senior Unsecured Notes does not include such limitation. Accordingly, Adjusted EBITDA for the fiscal year ended December 31, 2014 presented in the table above includes $1.8 million of estimated synergies that exceed the limitations in our Senior Secured Notes and ABL Facility. Therefore, we are not permitted to include that portion of estimated synergies in Adjusted EBITDA for purposes of determining our compliance with certain covenants in the Senior Secured Notes and ABL Facility. The limitation under the credit agreement governing the Term Loans has not been reached for the amount of synergies presented in the table above.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Standards

Changes to GAAP are established by the FASB in the form of Accounting Standards Updates (“ASUs”) to the FASB’s ASC. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s Condensed Financial Statements.

In April 2015, the FASB issued ASU No. 2015-03, “Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”) which requires an entity to present debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. ASU 2015-03 is effective on a retrospective basis for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years beginning after December 15, 2016. The adoption of this guidance concerns presentation only and will not have any impact on the Company’s financial results.

In January 2015, the FASB issued ASU No. 2015-01, “Income Statement—Extraordinary and Unusual Items” (“ASU 2015-01”), which eliminates from GAAP the concept of extraordinary items. If an event or transaction meets the criteria for extraordinary classification, it is segregated from the results of ordinary operations and is shown as a separate item in the income statement, net of tax. ASU 2015-01 is effective for

annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We are currently assessing the adoption and impact of this ASU, however, we do not anticipate that adoption of this ASU will impact our consolidated financial position and results of operations.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern” (“ASU 2014-15”). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. Management’s evaluation should be based on relevant conditions or events, considered in the aggregate, that are known and reasonably knowable at the date that the financial statements are issued. ASU 2014-15 is effective prospectively for reporting periods beginning after December 15, 2016, with early adoption permitted. We do not expect that the adoption of this guidance will have a material effect on our financial results.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which creates a comprehensive, five-step model for revenue recognition that requires a company to recognize revenue to depict the transfer of promised goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Under the new guidance, a company will be required to use more judgment and make more estimates when considering contract terms as well as relevant facts and circumstances when identifying performance obligations, estimating the amount of variable consideration in the transaction price and allocating the transaction price to each separate performance obligation. In addition, ASU 2014-09 enhances disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016 and allows for either full retrospective or modified retrospective adoption. Early application is not permitted. We are currently evaluating the impact of adopting ASU 2014-09 on our financial results.

In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of and Entity” (“ASU 2014-08”), which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or a group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. In addition, ASU 2014-08 enhances disclosures for reporting discontinued operations. ASU 2014-08 is effective prospectively for reporting periods beginning after December 15, 2014, with early adoption permitted. We do not expect that the adoption of this guidance will have a material effect on our financial results.

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”), which requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective prospectively for reporting periods beginning after December 15, 2013, with retroactive application permitted. We adopted this accounting pronouncement effective December 29, 2013.

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”), which requires an entity to provide information

about the amounts reclassified out of accumulated other comprehensive income by component. In addition, ASU 2013-02 requires an entity to present, either on the face of the income statement or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income in the financial statements. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this guidance concerns disclosure only and did not have an impact on our financial results.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment” which amended the guidance on the annual impairment testing of indefinite-lived intangible assets other than goodwill. The amended guidance will allow a company the option to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, based on the qualitative assessment, it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if a company concludes otherwise, quantitative impairment testing is not required. This new guidance was adopted in the fourth quarter of 2012 and its adoption did not significantly impact the Company’s consolidated financial statements.

Critical Accounting Policies and Other Matters

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with those accounting principles requires management to use judgment in making estimates and assumptions based on the relevant information available at the end of each period. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain. Actual results may differ from estimates. The following is a summary of certain accounting estimates and assumptions made by management that we consider critical.

Long-Lived Assets

Management reviews long-lived assets, which consist of property, leasehold improvements, equipment and definite-lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. For long-lived assets to be held and used, management evaluates recoverability by comparing the carrying value of the asset to future undiscounted cash flows expected to be generated by the asset. If the undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recognized for the amount by which the carrying value of the asset exceeds the fair value of the asset. For long-lived assets for which we have committed to a disposal plan, we report such assets at the lower of the carrying value or fair value less the cost to sell.

In determining the fair value of long-lived assets, we make judgments relating to the expected useful lives of long-lived assets and our ability to realize any undiscounted cash flows in excess of the carrying amounts of such assets. Factors that impact these judgments include the ongoing maintenance and improvements of the assets, changes in the expected use of the assets, changes in economic conditions, changes in operating performance and anticipated future cash flows. If actual fair value is less than our estimates, long-lived assets may be overstated on the balance sheet, which would adversely impact our financial position.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and intangible assets with indefinite useful lives are no longer amortized, but are tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset.

Between annual impairment tests, the Company continues to monitor for potential indicators of impairment of goodwill whenever events or changes in circumstances occur, such as a significant decline in the expected future cash flows, a significant adverse change in legal factors or in the business climate, adverse assessment or action by a regulator, and unanticipated competition.

Recoverability of goodwill is measured at the reporting unit level and begins with a qualitative assessment to determine, as a basis for whether it is necessary to perform the two-step impairment test under GAAP, if it more likely than not that the fair value of each reporting unit is less than its carrying amount. For the reporting units where it is required, the first step compares the carrying amount of the reporting unit to its estimated fair value. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. To the extent that the carrying value of the reporting unit exceeds its estimated fair value, a second step is performed, wherein the reporting unit’s carrying value of goodwill is compared to the implied fair value of goodwill. To the extent that the carrying value exceeds the implied fair value, impairment exists and must be recognized.

2014 Interim Impairment Test

In connection with the Providência Acquisition, the Company realigned its internal reporting structure to reflect its new organizational structure and business focus. Per ASC 350, “Goodwill and Other” (“ASC 350”), goodwill is required to be tested for impairment both before and after a reorganization. As a result, the Company performed a qualitative assessment during the third quarter and determined that goodwill was not impaired at any of the reporting units prior to the reorganization. Subsequent to the reorganization, the Company performed an interim goodwill impairment test and determined that the fair value of goodwill at the Argentina/Colombia reporting unit was zero and that all of its goodwill was impaired. As a result, the Company recorded a non-cash impairment charge of $6.9 million. The decline in fair value resulted from changes in the outlook on the operations, primarily in Argentina, as the local economic environment shifted compared to prior periods.

2014 Impairment Test

For our annual impairment test performed during the fourth quarter of 2014, we calculated the fair value of each of our reporting units. Based on the result of these calculations, we determined that the fair values of all our reporting units exceeded their carrying amounts. As a result, no impairment was recognized. The excess of our reporting units estimated fair value over carrying value (expressed as a percentage of carrying value) was a minimum of 15%, except for our Brazil reporting unit. The fair value of our Brazil reporting unit approximates its carrying value due to the short passage of time between the close date of the Providência Acquisition and the annual impairment testing date. Goodwill allocated to our Brazil reporting unit was $107.4 million as of December 31, 2014. Small variations to our assumptions and estimates used to determine the fair value of our Brazil reporting unit, particularly the expected growth rates, discount rate, cash expenditures embedded in our cash flow projections and the residual capitalization rate could have a significant impact on fair value. An unfavorable change in any of these assumptions could have caused us to fail step 1 of the goodwill impairment test, and step 2 of the goodwill impairment test would have been necessary and could have yielded an impairment of up to the entire goodwill allocated to our Brazil reporting unit of $107 million as of December 31, 2014. If the Brazil reporting unit does not achieve the operating results anticipated, we could record an impairment charge to goodwill in a future period.

Recoverability of other intangible assets with indefinite useful lives begins with a qualitative assessment to determine, as a basis for whether it is necessary to calculate the fair value of the indefinite-lived intangible asset,

if it is more likely than not that the asset is impaired. When required, recoverability is measured by a comparison of the carrying amount of the intangible assets to the estimated fair value of the respective intangible assets. Any excess of the carrying value over the estimated fair value is recognized as an impairment loss equal to that excess. The determination of estimated fair value requires management to make assumptions about estimated cash flows, including profit margins, long-term forecasts, discount rates, royalty rates and terminal growth rates. Management developed these assumptions based on the best information available as of the date of the assessment. We completed our assessment of intangible assets with indefinite useful lives during the fourth quarter of 2014 and determined that no impairment existed at that date.

Although no impairment was recognized, there can be no assurances that future impairments will not occur. Future adverse developments in market conditions or our current or projected operating results could cause the fair value of our goodwill and intangible assets with indefinite useful lives to fall below carrying value, which would result in an impairment charge that would adversely affect our financial position.

Income Taxes

We record an income tax valuation allowance when, based on the weight of the evidence, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The ultimate realization of the deferred tax asset depends on our ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. In assessing the realization of the deferred tax assets, consideration is given to, among other factors, the trend of historical and projected future taxable income, the scheduled reversal of deferred tax liabilities, the carryforward period for net operating losses and tax credits, as well as tax planning strategies available to us. Additionally, we have not provided U.S. income taxes for undistributed earnings of certain foreign subsidiaries that are considered to be retained indefinitely for reinvestment. Certain judgments, assumptions and estimates are required in assessing such factors and significant changes in such judgments and estimates may materially affect the carrying value of the valuation allowance and deferred income tax expense or benefit recognized in our consolidated financial statements.

We recognize a tax benefit associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management.

A number of years may elapse before a particular matter for which a liability related to an unrecognized tax benefit is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe our liability for unrecognized tax benefits is adequate. Favorable resolution of an unrecognized tax benefit could be recognized as a reduction in the effective tax rate in the period of resolution. Unfavorable settlement of an unrecognized tax benefit could increase the effective tax rate and may require the use of cash in the period of resolution. Accordingly, our future results may include favorable or unfavorable adjustments due to the closure of tax examinations, new regulatory or judicial pronouncements, changes in tax laws or other relevant events.

Revenue Recognition

Revenue is recognized and earned when all of the following criteria are satisfied: (a) persuasive evidence of a sales arrangement exists; (b) price is fixed or determinable; (c) collectability is reasonably assured; and (d) delivery has occurred or service has been rendered. We recognize revenue when the title and the risks and

rewards of ownership have substantially transferred to the customer. We permit customers from time to time to return certain products and we continuously monitor and track such returns and record an estimate of such future returns, which is based on historical experience and recent trends. While such returns have historically been within management’s expectations and the provisions established have been adequate, we cannot guarantee that we will continue to experience the same return rates that we have in the past. If future returns increase significantly, it could adversely impact our results of operations.

Stock-Based Compensation

We account for stock-based compensation awards in accordance with ASC 718, “Compensation—Stock Compensation” (“ASC 718”), which requires a fair value based method for measuring the value of stock-based compensation. Fair value is measured once at the date of grant and is not adjusted for subsequent changes. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. These assumptions include the expected term, expected volatility, risk-free interest rate and the expected dividend. In the absence of a public trading market, we determine the fair value of our common stock utilizing methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Aid, “Valuation of Privately-Held-Company Equity Securities Issued as Compensation.” Our approach considered contemporaneous common stock valuations in determining the equity value of our company using a weighted combination of various methodologies, each of which can be categorized under either of the following two valuation approaches: the income approach and the market approach. The assumptions used in calculating the fair value of stock-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

Employee Benefit Plans

We provide a range of benefits to eligible employees and retired employees, including pension and postretirement benefits. Determining the cost associated with such benefits is dependent on various actuarial assumptions including discount rates, expected return on plan assets, compensation increases, employee mortality and turnover rates and healthcare cost trend rates. Actuarial valuations are performed to determine expense in accordance with GAAP. Actual results may differ from the actuarial assumptions and are generally accumulated and amortized into earnings over future periods. The expected return on plan assets assumption impacts our net periodic benefit cost, since it is our practice to fund amounts for our qualified pension plans at least sufficient to meet the minimum requirements set forth in applicable employee benefit laws and local tax laws. For 2014, the range of return on assets assumptions for our pension plan assets, including U.S. Pension and Non-U.S. Pension Plans, was between 3.0% and 7.0%. The process for setting the expected rates of return is described in Note 14., Pension and Postretirement Benefit Plans, to the Consolidated Financial Statements. In 2014, an increase in the rate of return of 100 basis points for our U.S. Pension Plan assets and Non-U.S. Pension Plan assets would decrease our fiscal 2014 annual net periodic benefit cost by approximately $1 million and $1.4 million, respectively. In 2014, a decrease in the rate of return of 100 basis points for our U.S. Pension Plan assets and Non-U.S. Pension Plan assets would increase our fiscal 2014 annual net periodic benefit cost by approximately $1.0 million and $1.4 million, respectively.

For 2014, the range of return on assets assumptions for our pension plan assets, including U.S. pension and non-U.S. pension plans, was between 3.0% and 7.0%. The process for setting the expected rates of return is described in Note 14, Pension and Postretirement Benefit Plans, to the Consolidated Financial Statements. In 2014, an increase in the rate of return of 100 basis points for both U.S. and non-U.S. pension plan assets would decrease our fiscal 2014 net periodic benefit cost by approximately $2.4 million. In 2014, a decrease in the rate of return of 100 basis points for both U.S. and non-U.S. pension plan assets would increase our fiscal 2014 net periodic benefit cost by approximately $2.4 million.

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Since pension liabilities are measured on a discounted basis, the discount rate impacts our projected net benefit obligation and net periodic benefit cost. Discount rates used for our U.S. pension plans are based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan. For our non-U.S. pension plans, the discount rates are set by benchmarking against investment grade corporate bonds rated AA or better. The average discount rate on the defined benefit pension plans, including U.S. pension and non-U.S. pension plans, was between 1.7% and 8.0%. A 100-basis point increase in the pension discount rate for both U.S. and non-U.S. pension plans would decrease our 2014 annual net periodic benefit cost by approximately $0.3 million. A 100-basis point decrease in the pension discount rate for both U.S. and non-U.S. pension plans would increase our fiscal 2014 net periodic benefit cost by approximately $1.7 million.

We review our actuarial assumptions at each measurement date and make modifications to the assumptions based on current rates and trends, if appropriate. We believe that the assumptions utilized in recording our obligations under our plans are reasonable based on input from actuaries, outside investment advisors and information as to assumptions used by plan sponsors.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to fluctuations in currency exchange rates, interest rates and commodity prices which could impact our results of operations and financial condition. As a result, we employ a financial risk management program, whose objective is to seek a reduction in the potential negative earnings impact of changes in interest rates, foreign exchange rates and raw material pricing arising in our business activities. To manage these exposures, we primarily use operational means. However, to manage certain of these exposures, we used derivative instruments as described below. Derivative instruments utilized by us in our hedging activities are viewed as risk management tools, involve little complexity and are not used for trading or speculative purposes. To minimize the risk of counterparty non-performance, agreements are made only through major financial institutions with significant experience in such derivative instruments.

Long-Term Debt and Interest Rate Market Risk

Our objective in managing exposure to interest rate changes is to manage the impact of interest rate changes on earnings and cash flows as well as to minimize our overall borrowing costs. To achieve these objectives, we may use financial instruments such as interest rate swaps, in order to manage our mix of floating and fixed-rate debt.

The majority of our long-term financing consists of our $504.0 million of 7.75% fixed-rate, Senior Secured Notes due 2019 and $210 million of 6.875% fixed-rate, Senior Unsecured Notes due 2019. However, the remaining portion of our indebtedness, including the Term Loans, have variable interest rates, for which we have not hedged the risks attributable to fluctuations in interest rates. Hypothetically, a 1% change in the interest rate affecting our outstanding variable interest rate indebtedness, as of December 31, 2014 and December 28, 2013, would change our interest expense by approximately $7.3 million and $3.3 million, respectively.

Foreign Currency Exchange Rate Risk

Outside of the United States, we maintain assets and operations primarily in South America, Europe and Asia. As a result, our financial results are affected to a certain extent by changes in foreign currency exchange rates in the various countries in which our products are manufactured and/or sold. The reported income of our foreign subsidiaries will be higher or lower depending on a weakening or strengthening of the U.S. dollar, the Company’s reporting currency, against the respective foreign currency. We assess the market risk of changes in foreign currency exchange rates utilizing a sensitivity analysis that measures the potential impact on our operating income. If the average exchange rate used to translate revenue from our major currencies relative to the U.S. dollar hypothetically depreciated 10%, it would have resulted in a reduction of operating income by approximately $3.9 million and $2.6 million for the fiscal years ended December 31, 2014 and December 28, 2013, respectively.

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On January 27, 2014, we entered into a series of financial instruments with a third-party financial institution used to minimize foreign exchange risk on the future consideration to be paid for the Providência Acquisition and the Mandatory Tender Offer. Each contract allows us to purchase a fixed amounts of Brazilian reals in the future at specified U.S. dollar rates, coinciding with either the Providência Acquisition or the Mandatory Tender Offer. At June 28, 2014, the remaining financial instruments relate to a series of options that expire between 1 and 5 years associated with the Mandatory Tender Offer and the deferred portion of the consideration paid for the Providência Acquisition. In addition, we assumed a variety of derivative instruments in the Providência Acquisition used to reduce the exposure to fluctuations in interest rates and foreign currencies. These financial instruments include an interest rate swap, forward foreign exchange contracts and call option contracts.

Raw Material and Commodity Risks

The primary raw materials used in the manufacture of most of our products are polypropylene resin, polyester fiber, polyethylene resin, and, to a lesser extent, rayon and tissue paper. The prices of polypropylene, polyethylene and polyester are a function of, among other things, manufacturing capacity, demand and the price of crude oil and natural gas liquids. In certain regions of the world, we may source certain key raw materials from a limited number of suppliers or on a sole source basis. In addition, to the extent that we cannot procure our raw material requirements from a local country supplier, we will import raw materials from outside refiners. We believe that the loss of any one or more of our suppliers would not have a long-term material adverse effect on us because other suppliers with whom we conduct business would be able to fulfill our long-term requirements. However, the loss of certain of our suppliers or the delay in the import of raw materials could, in the short-term, adversely affect our business until alternative supply arrangements are secured and the respective suppliers were qualified with our customers, or when importation delays of raw material are resolved. We have not historically experienced, and do not expect, any significant disruptions in the long-term supply of raw materials.

We have not historically hedged our exposure to raw material increases with synthetic financial instruments. However, we have certain customer contracts with price adjustment provisions which provide for index-based pass-through of changes in the underlying raw material costs, although there is often a delay between the time we incur the new raw material cost and the time that we are able to adjust the selling price to our customers. On a global basis, raw material costs continue to fluctuate in response to certain global economic factors, including the regional supply versus demand dynamics for the raw materials and the volatile price of oil.

In periods of rising raw material costs, to the extent we are not able to pass along price increases of raw materials, or to the extent any such price increases are delayed, our cost of goods sold would increase and our operating profit would correspondingly decrease. Based on budgeted purchase volume for fiscal 2014 and fiscal 2013, if the price of polypropylene was to rise $.01 per pound and we were not able to pass along any of such increase to our customers, we would realize a $8.4 and a $5.6 million increase, respectively, million in our cost of goods sold. Significant increases in raw material prices that cannot be passed on to customers could have a material adverse effect on our results of operations and financial condition. In periods of declining raw material costs, if sales prices do not decrease at a corresponding rate, our cost of goods sold would decrease and our operating profit would correspondingly increase.

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INDUSTRY

We compete primarily in the global nonwovens industry, estimated to be worth in excess of $30 billion globally in 2013, according to Smithers Pira. Nonwovens are broadly defined as engineered sheet or web structures, made from polymers and/or natural fibers that are bonded together by entangling fiber or filaments mechanically, thermally or chemically. They are flat sheets that are made directly from separate fibers or from molten plastic or plastic film. By definition, they are not made by weaving or knitting and do not require converting the fibers to yarn.

Nonwovens are an extremely versatile specialty material that can be engineered and customized for various applications. These specialty materials take many forms, some have single-use or limited lives, while others can be very durable and long-lived. Nonwovens are engineered to provide specific characteristics such as absorbency, liquid repellency, resilience, stretch, softness, strength, flame retardancy, washability, cushioning, filtering, bacterial barriers and sterility. These properties are often combined to create fabrics suited for specific applications while achieving a good balance between product durability and cost. They can mimic the appearance, texture and strength of a woven fabric.

The global nonwoven fabrics industry is highly fragmented with many single-site and regional participants and only a few true global players. The top four companies in the industry accounted for approximately 20% of total market in 2013.

2013A Global Volume by Geography

Source: Smithers Pira

According to Smithers Pira, global volume demand for nonwovens was approximately 7,659 thousand metric tons (“kMT”) in 2013 and is projected to grow at a CAGR by volume of 6.6% from 2013 to 2018 driven by:

•

overall population growth;

•

aging population demanding products with a high content of nonwoven materials (such as adult diapers, wipes, and other products);

•

increases in global demand for disposable products driven by the increase of health standards;

•

a growing middle class in emerging markets driving greater consumption and penetration of sanitary products;

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•

environmental standards driving air filtration and water purification;

•

global economic development coupled with the development of new nonwoven applications and technologies; and

•

agricultural efficiency.

Emerging markets, and in particular Asia and South America are expected to be the fastest growing areas of demand. Demand in Asia and South America is estimated to grow at 9.2% and 6.4% respectively annually through 2018. European and North American annual demand growth is also estimated to be robust at 4.5% and 5.2% through 2018.

2013A – 2018E Nonwovens Volume CAGR by Region

LOGO

Source: Smithers Pira

From an end-use perspective, the hygiene and technical specialties and other market segments are the largest and accounted for approximately two-thirds of total nonwovens volumes in 2013. Hygiene applications represented 2,021kMT or $8.5 billion of the nonwovens market in 2013, according to Smithers Pira. Hygiene applications include baby diapers, baby training pants, feminine hygiene products and adult incontinence products. The technical specialties and other segment is the nonwovens industry’s largest and most-diverse segment with 2,909kMT of demand worth approximately $13.5 billion in 2013. Within this application, end-products include furniture, apparel and footwear, geosynthetics, and other durable nonwovens which serve a variety of end-uses including, for example, furniture and bedding, composites, and other industrial and infrastructure applications.

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Building and construction applications represented 1,101kMT of demand worth approximately $4.1 billion in 2013, according to Smithers Pira. Applications within the segment include housewrap and road underlayment liners for construction, geosynthetics for agricultural, forestry, military, and landscaping purposes. Healthcare applications represented 282kMT or $1.1 billion of the nonwovens industry in 2013, according to Smithers Pira. Healthcare applications include drapes and gowns, sterile packaging, other medical apparel, wound care (such as dressings/pads, sponges/gauze, cast paddings/wraps, tapes and swabs), and other medical nonwovens. Filtration applications represented 406kMT or $2.9 billion of the nonwovens industry in 2013, according to Smithers Pira. Within this category, end-products include air filtration (HEPA and standard), liquid filtration (pool and spa, and others) and medical filtration. Wipes represented 940kMT or $2.9 billion of the nonwovens industry in 2013, according to Smithers Pira. Applications include dryer sheets, personal care wipes, healthcare wipes, baby wipes, industrial wipes (such as auto, graphic arts, general purpose and other industrial) and all other wipes.

2013A Global Volume by End Market

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(1)	Wipes end market comprises personal wipes, dryer sheets, disinfectant wipes and industrial wipes.

(2)	Filtration end market includes medical and industrial filtration applications.

2013A – 2018E Volume CAGR by End Market

LOGO

(1)	Wipes end market comprises personal wipes, dryer sheets, disinfectant wipes and industrial wipes.

(2)	Filtration end market includes medical and industrial filtration applications.

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BUSINESS

Company Overview

We primarily manufacture nonwovens, which are fabric-like, value-added materials produced from polypropylene and other resins, along with natural and synthetic fibers and other components. The total nonwovens industry size is estimated to be worth in excess of $30 billion globally in 2013 and is expected to grow at a CAGR by volume of 6.6% from 2013 to 2018, according to Smithers Pira.

Segment Overview

North America

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for hygiene applications, such as baby diapers and feminine hygiene products, based on pro forma volume. Within infection prevention, we believe we are the largest provider of substrates for household cleaning wipes, based on pro forma volume and a leading supplier of specialty materials for use in various medical garments, such as surgical gowns and drapes. Within high performance solutions, we believe we are the largest provider of filtration media for pool and spa filters, as well as the #1 provider of protective house wrap in Canada, based on pro forma volume, and the #2 provider in the United States.

South America

Europe

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Asia

Our Asia segment consists of two manufacturing facilities in China. Infection Prevention applications currently represent approximately 60% of our pro forma net sales in Asia, with personal care applications accounting for 31% and high performance solutions applications accounting for the remaining 9%, for the fiscal year ended December 31, 2014. Our Asia region is the primary manufacturing base for servicing our global healthcare customers. For these applications, we supply our specialty materials to regional converters in Asia who cut and sew our products into finished goods for sale primarily in Europe and North America. In addition, we plan to utilize our leading-edge spunmelt technologies to participate in the rapid growth expected in the Asia region from rising disposable incomes and consumer adoption of personal care products.


2014 Pro Forma Net Sales by Geography		2014 Pro Forma Adjusted EBITDA by Geography(1)(2)

(1)

For information about how we calculate pro forma Adjusted EBITDA, please see “Summary Historical and Pro Forma Condensed Combined Financial Information.”

(2)

Percentages in chart are presented before unallocated corporate expenses.

Industry Overview

We compete primarily in the global nonwovens market, which was estimated to be worth in excess of $30 billion globally in 2013 and is estimated to grow at a CAGR by volume of 6.6% from 2013 to 2018, according to Smithers Pira. Nonwovens are broadly defined as engineered sheet or web structures, made from polymers and/or natural fibers that are bonded together by entangling fiber or filaments mechanically, thermally or chemically. Nonwovens are flat sheets that are made directly from separate fibers or from molten plastic or plastic film and, by definition, are not made by weaving or knitting and do not require converting the fibers to yarn. See “Industry.”

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Our Competitive Strengths

Global Leader with Strong Competitive Positions

2013 Nonwovens Sales (in billions of $)

Source: Nonwovens Industry.

(1)

Includes $1.2 billion of revenue from PGI, $398 million of revenue from Fiberweb and $360 million of revenue from Providência.

(2)

Production is primarily for internal consumption.

(3)

Represents companies primarily focused on nonwovens for disposable applications, such as hygiene, healthcare, and wipes.

In addition, we believe we have leading positions in a number of niche applications. We believe that we hold a leading position in pool and spa filtration in the United States through our Reemay branded products, which are sold to filter manufacturers. We also believe that we are the leading manufacturer of substrates for dryer sheets in the United States. Through our Typar brand, we believe that we are the #1 provider of house wrap in Canada, based on pro forma volume, and the #2 provider in the United States. As we continue to evolve to higher value specialty materials, we believe there is meaningful opportunity to grow in each of the key applications which we serve: personal care, infection prevention and high performance solutions. We believe that our innovative and differentiated technology platforms position us well to gain share in these applications as we work to broaden the use of our products.

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through the application of new technologies, as well as meet our customers’ stringent product qualifications and process standards. These factors encourage customer loyalty, leading to an average relationship length of approximately 15 years with our key customers.

Attractive Long-Term Industry Growth Outlook Driven by Socio-Economic Trends

Historical Disposable Application Growth

Expected Nonwoven Application Growth

LOGO

Source: Smithers Pira.

Significant Exposure to Attractive Emerging Markets

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2012 Actual and Estimated Potential Diaper Consumption by Region (in Billions of Diapers)

Source: Price Hanna Consultants estimates.

*	Represents potential market size if these regions achieve a penetration rate of 100%. Actual future penetration rates will vary.

We believe that we are well-positioned to capitalize on this anticipated demand. The Providência Acquisition strengthened our presence in South America, providing us with the #1 nonwovens position in the region based on pro forma volume and two attractive manufacturing assets in Brazil to complement our existing production facilities in Colombia and Argentina. Pro forma for the Providência Acquisition, we are the leading manufacturer of nonwovens for hygiene and medical products in the region. Additionally, recent capacity expansions in Nanhai, China (expected to be completed in 2015) and Suzhou, China (completed in mid-2013) have enhanced our manufacturing capabilities in Asia. In 2014, we derived approximately 30% of our pro forma net sales and 32% of our Adjusted EBITDA from our South America and Asia segments.

Scalable Cost Structure and Operational Excellence To Drive Margin Expansion

Our scalable global infrastructure and focus on operational excellence position us to reduce our costs and increase our operating margins as we expand both organically and through acquisitions. We have increased our gross profit margin and Adjusted EBITDA margin from 15.5% and 11.8%, respectively, in 2011 on a stand alone basis to 17.9% and 13.0%, respectively, for the year ended December 31, 2014, on a pro forma basis. We have achieved this margin expansion through a combination of annual productivity and cost saving initiatives as well as realization of cost synergies associated with our recent acquisitions. For example, as of the December 31, 2014, we have fully implemented initiatives at Fiberweb accounting for approximately $39.2 million of annualized savings (above our initial estimates of $28 million) and we continue to pursue initiatives aimed at achieving additional savings. Likewise, we have also identified initiatives that are estimated to generate meaningful synergies in connection with the Providência Acquisition.

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In addition to executing on the identified acquisition synergies, we have recently implemented a robust business excellence program designed to generate annual productivity savings, achieve a low-cost position, and prolong the useful life of our assets through product and process innovation. These initiatives have included continuous improvement programs focused on procurement, manufacturing, and distribution costs, facility consolidation and optimization, and optimization of our fixed cost structure. For example, in 2012, we restructured our global operations in order to consolidate our global footprint, align resources and capabilities with future growth opportunities, and provide a more efficient structure to serve existing customers. We believe we have the opportunity to continue to accelerate our annual productivity savings, which would serve to offset inflation in our business and benefit our margins.

Strong Free Cash Flow Generation

For the years ended December 29, 2012, December 28, 2013 and December 31, 2014, we have consistently generated strong free cash flow, which we define as Adjusted EBITDA minus capital expenditures, of $78.0 million, $155.8 million and $177.5 million, respectively. For the same periods, our Net cash provided by (used in) operating activities was $75.5 million, $16.9 million and $49.1 million, respectively. Our strong cash flow generation has benefited from pass-through pricing mechanisms in many of our customer contracts, which allow us to pass through increases in certain raw material costs by changing our prices, thereby mitigating the potential impact of fluctuations in raw material costs on our profitability.

Our cash flow generation also benefits from our disciplined approach to capital investments. We believe our maintenance capital requirements (defined as investments required to maintain current production capabilities) range from 2 to 2.5% of our annual net sales, enabling us to deploy a meaningful portion of our capital investments toward projects designed to expand our capacity and/or capabilities or to reduce our operating costs. For instance, over the past five years, we have commercialized four new state-of-the-art spunmelt lines to expand our capacity to meet growing demand as well as realize their lower relative production cost per unit and their ability to produce lower basis weight products suited for certain hygiene applications. Additionally, we have invested in commercializing proprietary technologies, such as our Spinlace and Arium platforms, that provide differentiated product capability and cost performance. Our cash flow generation in the future may also benefit from our significant net operating losses, which were $284.1 million as of December 31, 2014 and may result in reduced U.S. tax payments in the future.

Successful Track Record of Value-Enhancing Acquisitions

The Providência Acquisition was completed in June 2014 and strengthened our competitive position in North and South America. With three well-invested manufacturing facilities (two in Brazil and one in the United States) focused on hygiene applications, Providência’s operations were highly complementary with our existing operations. In particular, as a result of the acquisition, we are the largest producer of nonwovens in South America, with facilities in Brazil, Argentina and Colombia that enable us to cost-effectively serve customers across the continent. We have begun the integration of Providência into our existing regional operations and expect to generate meaningful cost savings from the elimination of duplicative costs, implementation of best practices, and by leveraging our enhanced scale.

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also meaningfully expanded our positions in several complementary applications, such as filtration, dryer sheets and house wrap. Fiberweb also provided access to several new technologies such as S-Tex (hygiene) and Nano fiber (filtration), which offer differentiated products to address our customers’ needs for innovation and customized solutions. Fiberweb has been fully integrated into our European and North American regions and we believe will generate significant cost savings, in excess of our initial estimates. As of December 31, 2014, we have fully implemented initiatives at Fiberweb accounting for approximately $39.2 million of annualized savings (above our initial estimates of $28 million).

Experienced Management Team

Our Strategy

Support Continued Growth of Our Existing Customers Globally

We will invest to support the continued growth of our existing customers across the globe. As previously discussed, many of our customers’ products benefit from attractive growth trends and, consequently, our customers demand an increasing amount of our specialty materials. We will seek to enhance our competitive positions by providing cutting edge innovations, high quality and cost-effective products, and dedicated customer service. We will do so through initiatives to expand the production capacity of our current asset base as well as prudent capital investments to expand our capabilities. Many of our customers are increasingly growing their business globally, and we believe we are well positioned to gain market share with these customers given our global presence and ability to reliably deliver consistent products across the globe.

Further Strengthen our Positions in Emerging Markets

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recently made significant capital investments in new production capacity designed to meet the growing demand for our products. In 2014, we generated 30% of our net sales and 32% of our Adjusted EBITDA in South America and Asia, on a pro forma basis. We believe there will be significant growth in our existing markets in South America and Asia. Additionally, in the future, we believe there may be growth opportunities in currently under-developed regions, where current penetration rates for many of the applications we serve are lower compared to other regions. As these emerging markets develop, we will continue to make careful, disciplined investments to expand our global capabilities and operations.

Pursue Growth in Complementary Businesses

Drive Business Excellence to Pursue Economic Leadership and Enhance Margins

Our success is dependent upon our ability to offer an attractive value proposition to our customers and to maximize customer satisfaction through our innovation, product quality and reliability. Consequently, we will seek to use our global platform and capabilities to offer solutions which maximize customers’ value and streamline their operations. We will also seek to improve our supply chain management to improve our cost position. We will seek to accelerate our business excellence initiatives to generate recurring annual productivity savings to offset inflation, enable reinvestment in growth, and improve our margins. These initiatives are focused on procurement savings, manufacturing yield optimization, lean initiatives, preventative maintenance and logistics savings. Over the past three years, we have increased our gross profit margin and Adjusted EBITDA margin from 15.5% and 11.8%, respectively, in 2011 on a stand alone basis to 17.9% and 13%, respectively, for the year ended December 31, 2014, on a pro forma basis. Through the realization of acquisition-related cost savings and our business excellence initiatives, we plan to continue to pursue improved cost positions and operating margins in the future.

Opportunistically Pursue Value-Enhancing Acquisitions

Develop and Attract Top Talent

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Expansion and Optimization

Providência Acquisition

On January 27, 2014, we announced that Acquisition Co. entered into a stock purchase agreement with Providência and certain shareholders named therein. On June 11, 2014, Acquisition Co., our wholly-owned subsidiary, completed the acquisition of approximately 71.25% of the outstanding capital stock of Providência. The cash consideration due at closing of the Providência Acquisition was approximately R$437.8 million (or $196.1 million, based on our effective exchange rate of R$1.00 = $0.4481 as of June 11, 2014), of which (i) approximately R$419.4 million was paid to the selling shareholders (subject to specified deductions for certain transaction expenses), and (ii) R$18.4 million was deposited into an escrow account. Approximately R$106.9 million (or $47.9 million, based on our effective exchange rate of R$1.00 = $0.4481 as of June 11, 2014) relates to deferred purchase price (the “Deferred Purchase Price”). The Deferred Purchase Price is held by the Company and relates to certain unaccrued tax claims of Providência (the “Providência Tax Claims”). The Deferred Purchase Price is denominated in Brazilian real and accretes at a rate of 9.5% per annum compounded daily. Upon final resolution of the Providência Tax Claims by the Brazilian court, either tax payments for the Providência Tax Claims will be made to the Brazilian tax authorities or the Deferred Purchase Price will be paid to the selling shareholders. We will be responsible for any actual tax payment made to settle the Providência Tax Claims in excess of the Deferred Purchase Price.

In connection with the Providência Acquisition, on June 10, 2014, PGI Group entered into the Incremental Amendment providing for $415.0 million of commitments for incremental term loans, of which it borrowed $310.0 million. The remaining $105.0 million of commitments were available for borrowing until December 31, 2014 and were used to repay existing indebtedness during the third quarter of 2014. In addition, PGI Group issued the Senior Unsecured Notes pursuant to an indenture dated as of June 11, 2014. PGI Group used the borrowings under the Incremental Amendment and the proceeds from the Senior Unsecured Notes to fund a portion of the consideration due in respect of the Providência Acquisition, repay certain existing debt of Providência, pay related fees and expenses and for general corporate purposes. The borrowings under the Incremental Amendment, the Senior Unsecured Notes and the use of proceeds therefrom are collectively referred to in this prospectus as the “Providência Refinancing.”

As required by Brazilian law, Acquisition Co., our wholly-owned subsidiary, filed the Mandatory Tender Offer registration request with the CVM in order to launch, after its approval, a tender offer to acquire the remaining approximately 28.75% of the outstanding capital stock of Providência that is currently held by minority shareholders. The price per share to be paid to minority shareholders in connection with the Mandatory Tender Offer will be substantially the same paid to the selling shareholders upon acquisition of control, subject to a portion of such amount being held in escrow and subject to deferral as described above. Assuming all outstanding shares held by the minority shareholders are tendered, the total consideration, including accreted interest, for the Mandatory Tender Offer will be approximately Brazilian R$237.0 million as of December 31, 2014 (or $89.2 million, based on our effective exchange rate of R$1.00=$0.3763 as of December 31, 2014). In addition, we voluntarily opted to amend the Mandatory Tender Offer to provide minority shareholders with an alternative price structure with no escrow or deferred purchase price. Based on the alternative offer, the minority shareholders would receive an all-cash purchase price at closing. Assuming all minority shareholders tender their shares at the alternate price, the total consideration, including accreted interest, for the Mandatory Tender Offer will be approximately Brazilian R$202.5 million as of December 31, 2014 (or $76.2 million, based on our effective exchange rate of R$1.00=$0.3763 as of December 31, 2014). The Mandatory Tender Offer registration request is currently under review by the CVM. As of the date of this prospectus, we are not able to determine whether and when such approval to launch the Mandatory Tender Offer will be obtained. See “Risk Factors—Risks Related to our Acquisitions.”

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incontinence products. Providência’s products are also used for durable applications including furniture and bedding; various packaging applications; apparel; and agricultural applications. Providência operates state-of-the-art spunmelt technology, utilizing 13 Reicofil lines situated in three sites in North and South America. Providência was founded in 1963 and is based in São José dos Pinhais, Brazil. Following the completion of the Providência acquisition, Herminio Vicente Smania de Freitas joined PGI as President—South America & Global Hygiene. He continues to serve as chief executive officer of Providência.

Fiberweb Acquisition

On September 17, 2013, PGI Acquisition Limited, an indirect wholly-owned subsidiary of the Company, entered into an agreement with Fiberweb containing the terms of a cash offer to purchase 100% of the issued and to be issued ordinary share capital of Fiberweb at a cash price of £1.02 per share. The offer was effected by a court sanctioned scheme of arrangement of Fiberweb under Part 26 of the UK Companies Act 2006. On November 15, 2013, PGI Acquisition Limited, our indirect wholly-owned subsidiary, completed the acquisition of the entire issued ordinary share capital of Fiberweb for total cash consideration of approximately £180.1 million (or $287.8 million, based on our effective exchange rate of £1.00 = $1.5980), which was funded on November 27, 2013. To fund the cash consideration and to pay certain related fees and expenses, PGI Group borrowed $268.0 million under the Secured Bridge Facility and $50.0 million under the Unsecured Bridge Facility.

On December 19, 2013, PGI Group entered into the Term Loan Facility and borrowed $295.0 million of Term Loans thereunder. In addition, Blackstone made the Equity Contribution. The proceeds of such borrowings under the Term Loans and the Equity Contribution were used to repay in full the amounts outstanding under the Bridge Facilities. Following such repayment, the Bridge Facilities were terminated.

Fiberweb is one of the largest global manufacturers of specialized technical fabrics with eight production sites in six countries. Fiberweb creates materials that are found in many critical applications, including filtration, civil engineering, medical devices and products, railways, aerospace, buildings and agriculture. In each area, Fiberweb helps its customers meet a range of technical challenges from precise filtration to reducing the energy demands of housing.

Expansion Initiatives

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Our expansion projects are funded using a combination of existing cash balances, internal cash flows and financing arrangements with third-party financial institutions. We intend to continue to expand where we believe there are attractive supply and demand characteristics as well as maintain and upgrade manufacturing lines to improve our global competitive position.

Optimization Initiatives to Achieve Economic Leadership

We actively and continuously pursue initiatives to prolong the useful life of our assets through product and process innovation. In some instances, we have determined that our fixed cost structure would be enhanced through consolidation. While investing in several new manufacturing lines in high-growth regions, we have simultaneously undertaken a number of initiatives to rationalize low-margin legacy operations and relocate certain assets to improve our cost structure. These initiatives are intended to result in lower working capital levels and improve operating performance and profitability. Our strategy with respect to past consolidation efforts in the U.S. and Europe was focused on the elimination of costs associated with underutilized legacy capacity, and we believe our current footprint reflects an appropriate and sustainable asset base.

Other Acquisitions and Divestitures

On April 29, 2011, we entered into an agreement to sell certain assets and the working capital of Difco for cash proceeds of $10.9 million. The agreement provided that Difco would continue to produce goods during the three month manufacturing transition services agreement that expired in the third quarter of 2011. The sale was completed on May 10, 2011 and resulted in a loss of $0.7 million recognized during the fiscal year ended December 31, 2011.

On May 26, 2010, we entered into the Nanhai Agreement. Pursuant to the Nanhai Agreement, we deposited $1.5 million into an escrow account with a bank to serve as a performance guarantee. On March 9, 2011, we received government approval and subsequently completed the noncontrolling interest acquisition for a purchase price of $7.2 million. The acquisition was accounted as an equity transaction in which no gain or loss was recognized.

On December 2, 2009, we completed an acquisition from Grupo Corinpa of certain assets and the operations of their nonwovens business located in Barcelona, Spain. Consideration for the acquired assets consisted of 1.049 million shares of the Predecessor’s Class A common stock which had a fair value of $14.5 million on the date of acquisition. The agreement contained a provision under which Grupo Corinpa was granted a put option on its land, building and equipment that were included in a lease under which we were provided full and exclusive use of the assets. In addition, the agreement contained a provision under which we were granted a call option for the same assets. On January 28, 2011, immediately prior to the Merger, we exercised our call option and purchased the remaining assets for an aggregate purchase price of $41.2 million.

Competition

Our industry is highly competitive throughout the world. Due to the diversity of the products we sell and the variety of segments we serve, we encounter a wide variety of regional and global competitors that vary by product line. They include well-established regional competitors, competitors who are more specialized than we are in particular applications, as well as larger companies or divisions of larger companies with substantial sales, marketing, research, and financial capabilities. Generally, the principal methods of competition relate to product innovation and performance, product quality, service, distribution and cost. In addition, technical support is highly valued by the largest customers.

Our primary competitors include Ahlstrom Corporation, Avgol Industries Ltd., E.I. du Pont de Nemours & Co., First Quality Enterprises, Inc., Fitesa, Toray Saehan, Inc., Intertape Polymer Group Inc. and Mitsui Chemicals, Inc., among others.

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Raw Materials

The primary raw materials used to manufacture most of our products are polypropylene resin, polyester fiber, polyethylene resin and, to a lesser extent, rayon and tissue paper. These raw materials are available from multiple sources and we purchase such materials from a variety of global suppliers. In certain regions of the world, we may source certain raw materials from a limited number of suppliers or on a sole-source basis. In addition, to the extent that we cannot procure our raw material requirements from a local country supplier, we will import raw materials from outside refiners.

We believe that the loss of any one or more of our suppliers would not have a long-term material adverse effect on us because other suppliers with whom we conduct business would be able to fulfill our long-term requirements. However, the loss of certain of our suppliers or the delay in the import of raw materials could, in the short-term, adversely affect our business until alternative supply arrangements are secured and the respective suppliers were qualified with our customers, or when importation delays of raw material are resolved. We have not historically experienced, and do not expect, any significant disruptions in the long-term supply of raw materials.

Sales and Marketing

We sell a majority of our products through our regional direct sales force of approximately 140 individuals worldwide. Our sales and marketing activities are organized primarily on a regional basis to provide customers with local sales and technical support. We combine our local technical sales capabilities with key account management support provided by our global product application groups to offer an attractive overall value proposition and to provide customers with the benefits of our global scale. We endeavor to extend these commercial and technical relationships to multiple levels within our customers’ organization using our direct sales force and technical service group to accomplish this objective.

Our global product application groups are responsible for global market development and product positioning, expansion of our business and the design and implementation of short and mid-term marketing strategies activities. They monitor relevant market trends, gather market intelligence and set pricing parameters for our key products. Additionally, our global product application groups coordinate with our sales force and technical specialists to ensure that the needs of our customers are addressed, and assist with the development and commercialization of new products.

Inventory and Backlogs

At December 31, 2014 and December 28, 2013, our inventory balance was $173.7 million and $156.1 million, respectively. As a result, our days of inventory on hand represented 39 days at December 31, 2014 and 41 days at December 28, 2013. Unfilled orders as of December 31, 2014 amounted to approximately $171.4 million. The level of unfilled orders is affected by many factors, including the timing of orders and the delivery time for the specific products. Unfilled orders typically represent approximately 30 to 40 days of annualized sales. Historically, we have not experienced a high level of unfilled order volatility. Consequently, we do not consider the amount of unfilled orders a meaningful indicator of future sales.

Patents and Trademarks

We consider our patents and trademarks to be important to our business and seek to protect our proprietary know-how in part through United States and foreign patent and trademark registrations. We have over 1,300 pending and approved trademark and domain name registrations worldwide and over 600 pending and approved patents worldwide, and maintain certain trade secrets.

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Research and Development

We engage in research and development activities in an effort to introduce new products, enhance existing products effectiveness, increase safety, improve ease of use and reliability as well as expand the various applications for which our products may be appropriate. In addition, we continually evaluate developing technologies in areas that we believe will enhance our business for possible investment or acquisition. We will continue to make expenditures for research and development activities as we look to maintain and improve our competitive position.

Environmental Regulations

We are subject to a broad range of federal, foreign, state and local laws and regulations relating to the pollution and protection of the environment. Various environmental requirements are applicable to us, including laws relating to air emissions, wastewater discharges, the handling, storage, disposal and release of solid and hazardous substances and wastes, remediation of soil, surface and groundwater contamination and human health and safety. We do not currently anticipate any material adverse effect on our operations or financial or competitive position as a result of our efforts to comply with environmental requirements. However, some risk of environmental liability is inherent due to the nature of our business and, accordingly, there can be no assurance that material environmental liabilities will not arise.

Seasonality

Historically, use and consumption of our products in most regions and applications do not fluctuate significantly due to seasonality. However, with the acquisition of Fiberweb, we have seen increased exposure to seasonality in certain applications, such as building and construction, agriculture and geosynthetics, as sales volumes correspond to the applicable building or growing season as the case may be.

Employees

As of December 31, 2014, the Company had approximately 4,400 employees worldwide. Of this total, approximately 49% of these employees are represented by labor unions or trade councils that have entered into separate collective bargaining agreements with the Company. All of these collective bargaining agreements will expire within one year. We believe our employee relations are satisfactory.

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Properties

The Company and its subsidiaries operate several manufacturing plants and facilities, a majority of which are owned by us, with the remainder under long-term lease agreements. The Company believes that its facilities are generally well-maintained, in good condition and adequate for our current needs. As of January 1, 2015, a list of our principal manufacturing plants and facilities in addition to the principal functions performed at each respective location is as follows:


	Principal Function
Location	Manufacturing	Warehousing	Research and Development	Sales and Marketing	Administration
North America
Benson, North Carolina	X	X	X	—	—
Mooresville, North Carolina	X	X	X	—	—
Old Hickory, Tennessee	X	X	X	X	X
Portland (Clackamas), Oregon	—	—	—	—	—
Waynesboro, Virginia	X	X	X	—	—
North Bay (Ontario), Canada	X	X	X	X	X
San Luis, Potosi, Mexico	X	X	X	X	X
Statesville, North Carolina	X	X	X	—	X

South America
Buenos Aires, Argentina	X	X	X	X	X
Cali, Colombia	X	X	X	X	X
São José dos Pinhais, Brazil	X	X	X	X	X
Pouso Alegre, Brazil	X	X	X	X	X

Europe
Bailleul, France	X	X	X	X	X
Biesheim, France	X	X	X	X	X
Berlin, Germany (leased)	X	X	—	X	X
Terno d’Isola, Italy	X	X	—	X	X
Cuijk, the Netherlands	X	X	X	X	X
Tarragona, Spain	X	X	X	X	—
Aberdare, United Kingdom	X	X	—	—	—
Maldon, United Kingdom	X	X	X	X	X
Mundra, India	X	X	—	—	X

Asia
Nanhai, China	X	X	—	X	X
Suzhou, China	X	X	X	X	X

Global Headquarters
Charlotte, NC (leased)	—	—	X	X	X

Capacity utilization during 2014 varied by geographic location and manufacturing capabilities. However, most of the facilities operated moderately below capacity.

Litigation

We are engaged in the defense of certain claims and lawsuits arising out of the ordinary course and conduct of our business, the outcomes of which are not determinable at this time. We have insurance policies covering such potential losses where such coverage is cost effective. In our opinion, any liability that might be incurred by us upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our financial condition or results of operations.

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ORGANIZATIONAL STRUCTURE

The following chart summarizes our organizational structure, equity ownership and our principal indebtedness immediately following the consummation of the Offering. This chart is provided for illustrative purposes only and does not represent all legal entities of the Company and its consolidated subsidiaries or all obligations of such entities.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding our directors and executive officers (age as of April 15, 2015):


Name	Age	Position
J. Joel Hackney, Jr.	45	President & Chief Executive Officer and Director
Mike S. Zafirovski	61	Director and Non-Executive Chairman
James S. Alder	66	Director
Peter N. Foss	71	Director
Jason Giordano	36	Director
Veronica Hagen	68	Director
Christine St.Clare	64	Director
Dennis Norman	40	Executive Vice President & Chief Financial Officer
Robert Dale	58	President, APAC & Global Healthcare
Jean-Marc Galvez	48	President, EMEA & Global Building and Geosynthetics
Scott Tracey	46	President, Americas & Global Wipes and Technical Specialties
Herminio de Freitas	53	President, South America and Global Hygiene
Barry Murash	51	President, Global Operations & Business Excellence
Daniel Guerrero	49	Senior Vice President, Strategy & Business Development
Robert Holmes	51	Senior Vice President, Global Human Resources & Employee Communications
April Miller Boise	46	Senior Vice President, General Counsel, Head of Global Mergers & Acquisitions and Secretary

J. Joel Hackney, Jr. has served as the President, Chief Executive Officer and Director of the Company since June 2013. Prior to joining the Company, Mr. Hackney served as the Senior Vice President and General Manager of Avaya Cloud Solutions since January 2013. Prior to that and since June 2010, he served as Avaya’s Senior Vice President of Global Sales and Marketing and President of Field Operations. From December 2009 until June 2010, he was Avaya’s Senior Vice President and President of Avaya Government and Data Solutions. Previously, he spent four years at Nortel Networks Corporation where, from September 2007 to December 2009, he served as the President of Nortel Enterprise Solutions and, from December 2005 to September 2007, he served as the Senior Vice President of Global Operations and Quality. Prior to his career at Nortel Networks Corporation, Mr. Hackney was a member of the senior executive team within General Electric, where he had a 14-year career leading varied businesses and functions in the U.S. and Europe. He holds a B.S. degree in Business Administration from the University of North Carolina at Chapel Hill.

Mike S. Zafirovski has served as a Director of the Company and non-executive Chairman of the Board since December 2012. Mr. Zafirovski is the founder and president of The Zaf Group LLC, which he established in November 2012. Since October 2011, Mr. Zafirovski has served as an Executive Advisor to The Blackstone Group, L.P. Previously, he served as director, President and Chief Executive Officer of Nortel Networks Corporation from November 2005 to August 2009. Prior to that, Mr. Zafirovski was director, President and Chief Operating Officer of Motorola, Inc. from July 2002 to January 2005, and remained a consultant to and a director of Motorola until May 2005. He served as Executive Vice President and President of the Personal Communications Sector (mobile devices) of Motorola from June 2000 to July 2002. Prior to joining Motorola, Mr. Zafirovski spent nearly 25 years with General Electric Company, where he served in management positions, including 13 years as President and Chief Executive Officer of five businesses in the industrial and financial services arenas, his most recent being President and Chief Executive Officer of GE Lighting from July 1999 to May 2000. Mr. Zafirovski also serves as Chairman of the Board of DJO Global, Inc. and on the boards of The Boeing Company, Stericycle, Inc., and Apria Healthcare Group, Inc. Mr. Zafirovski received a BA in Mathematics from Edinboro University.

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James S. Alder has served as a Director of the Company since March 2011. Until his retirement in October 2011, Mr. Alder served as Senior Vice President, Operations and Technical of Celanese Corporation overseeing Celanese’s global manufacturing, supply chain, EHS, and technology operations, as well as the overall productivity efforts, including Six Sigma and operational excellence. Mr. Alder joined Celanese in 1974 and held various roles within Celanese in manufacturing, research and development, and business management. Mr. Alder has a BS in Chemical Engineering from the Massachusetts Institute of Technology.

Peter N. Foss has served as a Director of the Company since December 2014. Mr. Foss is currently the General Manager of the GE/NFL Brain Research Program within GE Healthcare, a unit of General Electric Company, since his appointment in November 2013. Until his retirement in February 2013, Mr. Foss served as the President of General Electric Company’s Olympic Sponsorship and Corporate Accounts since 2003. Prior to his most recent positions, Mr. Foss spent nearly 25 years in various leadership positions within General Electric Company, including General Manager of Enterprise Selling, Regional General Manager of four GE Plastics regions and President of GE Polymerland, Inc., as well as various other commercial roles. Mr. Foss currently serves as a director of Capital Bank, N.A., a subsidiary of Capital Bank Financial Corp. Mr. Foss has a BS in Chemistry from the Massachusetts College of Pharmacy.

Jason Giordano is a Managing Director in Blackstone’s Private Equity Group and has served as a Director of the Company since January 2011. Since joining Blackstone in 2006, Mr. Giordano has been involved in Blackstone’s investments in PGI Group, Pinnacle Foods, Birds Eye Foods, Outerstuff, and Crocs. Before joining Blackstone, Mr. Giordano was with Bain Capital where he evaluated and executed global private equity investments in a wide range of industries. Prior to that, he worked in investment banking at Goldman, Sachs, & Co. focused on Communications, Media and Entertainment clients. Mr. Giordano received an AB from Dartmouth College and an MBA from Harvard Business School. Mr. Giordano serves as a director of Pinnacle Foods, Crocs, Outerstuff and HealthMarkets.

Veronica Hagen has served as a Director of the Company since April 2007. From April 2007 until June 2013 she was Chief Executive Officer and was President between January 2011 and June 2013. Prior to joining the Company, Ms. Hagen served as the President and Chief Executive Officer of Sappi Fine Paper North America, a $1.4 billion division of the South African-based Sappi Limited, since November 2004. Prior to working for Sappi, Ms. Hagen served in various executive roles with Alcoa, Inc. since 1998, including Chief Customer Officer from 2003 to 2004 and President, Alcoa Engineered Products from 2001 to 2003. Ms. Hagen also serves as a director of Newmont Mining Corporation and Southern Company. Ms. Hagen holds a BS in International Relations from the University of Southern California and has participated in an Executive Education program in Finance from the Wharton School, University of Pennsylvania and an Executive Leadership program at Harvard University.

Christine St.Clare has served as a Director of the Company since February 2013. Ms. St.Clare is the founder and president of St.Clare Advisors, LLC, a firm she founded after retiring from KPMG LLP in September 2010 following a 35-year career with the firm. While at KPMG, Ms. St.Clare served a four-year term on the firm’s Board of Directors from 1994 to 1998 and chaired the board’s Audit and Finance Committee. As an Audit Partner from 1986 to 2005, she served as the engagement partner for some of KPMG’s largest clients. She subsequently served as an Advisory Partner from 2005 to 2010 focusing on the Internal Audit, Risk and Compliance Practice. Concurrently, she was the Partner-in-Charge of the Southeast Consumer Markets practice. She currently serves as a director and audit committee chair of Fibrocell Science, Inc. and as a director and audit committee member of AquaBounty Technologies Inc. Ms. St.Clare holds a BS in accounting from California State University, Long Beach.

Dennis Norman was appointed Chief Financial Officer in December 2009. Prior to his current role as Chief Financial Officer, Mr. Norman served as Vice President, Strategy and Corporate Development with responsibilities for long-term planning, capital markets, mergers and acquisitions and investor relations. Mr. Norman joined the Company in November 1999 in investor relations and in 2001 he became Director of Investor Relations & Business Planning. In 2003, he was appointed as a member of the new global management

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team as Vice President, Strategic Planning and Communications. In 2008, his title changed to Vice President, Strategy & Corporate Development, reflecting a greater concentration on corporate strategy, development and capital markets activities. Prior to joining the Company, Mr. Norman was with First American Corporation, a regional financial services company, working in various roles in commercial banking then investor relations and strategic planning. Mr. Norman received a BA in both Business Administration and Accounting from Samford University in Birmingham, Alabama and an MBA from The Citadel.

Robert Dale was appointed President, APAC & Global Healthcare in June 2014. Mr. Dale is responsible for the strategic and operational management of our business in the Asia region and the Company’s global strategy and growth of our hygiene segment. Prior to his current role, Mr. Dale served as the President, APAC & Global Hygiene since January 2014 and served as the Senior Vice President and General Manager of the Asia region since January 2013. From April 2012 to January 2013, Mr. Dale served as Vice President & Global Segment Manager-Wipes & Filtration. From July 2007 to April 2012, Mr. Dale was our Senior Vice President, Research & Development. Mr. Dale has been a key employee of the Company since 1991, serving in a variety of commercial and operating roles. Prior to joining the Company, Mr. Dale held progressively more responsible positions in operations, process engineering, quality management and regulatory affairs at Johnson & Johnson, Kendall Health Care and Milliken. Mr. Dale is a graduate of the University of Georgia and received an MBA from Georgia Regents University.

Jean-Marc Galvez was appointed President, EMEA & Global Building and Geosynthetics in January 2014. Mr. Galvez is responsible for the strategic and operational management of our business in the EMEA region and the Company’s global strategy and growth of our building and geosynthetics segments. Prior to his current role, since April 2012, Mr. Galvez served as the Senior Vice President and General Manager of the EMEA region. Mr. Galvez joined the Company in July 2011 as the Vice President of Sales, Marketing and Development for the EMEA region. Prior to joining the Company, he was the Global Commercial General Manager at Merquinsa from May 2002 to July 2011. He has also held various commercial roles of increasing responsibility at Monsanto and Dow Chemical. Mr. Galvez holds a master’s and bachelor’s degree in chemical engineering from École Nationale Supérieure de Chimie of Montpellier, a PDG (general manager executive education) from IESE Business School, and has completed an executive finance course at Insead.

Scott Tracey was appointed President, North America & Global Wipes and Technical Specialties in May 2014. Mr. Tracey is responsible for the strategic and operational management of our business in the North America region and the Company’s global strategy and growth of our wipes and technical specialties segments. Prior to his current role, Mr. Tracey served as the President, Americas & Global Wipes and Technical Specialties from April 2012 to May 2014. From December 2009 to April 2012, Mr. Tracey served as the Senior Vice President and General Manager of the EMEA region. Mr. Tracey joined the Company in 2004 as Vice President, Sales and Marketing, Branded and has held various positions including U.S. Vice President of Sales, Marketing and Business Development. Prior to joining the Company, Mr. Tracey held multiple leadership positions at SOLO, Sweetheart Cup, Fonda Group and Anchor Packaging. Mr. Tracey received a BS in Marketing from Indiana University and an MBA from Georgia State University.

Herminio de Freitas joined the Company in June of 2014 as President, South America & Global Hygiene following the acquisition of Companhia Providência Industria e Comercio. Mr. de Freitas is responsible for the strategic and operational management of our business in the South American region and the Company’s global strategy and growth of our hygiene segment. Prior to joining the Company, Mr. de Freitas was Chief Executive Officer of Providência since 2007. During the period from 1983 to 2006, he held several positions in Petropar S.A. and its subsidiaries, among them, Plant Manager of Fitesa North America, Director of Fitesa S.A. and Chief Financial and Investor Relations Officer for Petropar S.A. Mr. de Freitas holds a degree in Chemical Engineering from the Universidade Federal do Rio Grande do Sul. He also completed a Program for Management Development (PMD) at Harvard Business School.

Barry Murash joined the Company in January 2014 as the President, Global Operations & Business Excellence. In this role, Mr. Murash assumed leadership of the Company’s global supply chain, business

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excellence, employee health and safety, capital engineering and regional manufacturing functions. Prior to joining the Company, since January 2013, Mr. Murash was the Corporate Vice President, Global Fulfillment for Applied Materials where he was responsible for procurement, logistics, service parts distribution and order management, leading an organization of over 650 employees. While at Applied Materials, Mr. Murash also served as Vice President, Global Sourcing from May 2012 to January 2013 and Vice President, Services Product Operations from November 2010 to May 2012. Prior to that, he served as Vice President, Global Operations for Avaya from November 2009 to November 2010. Prior to Avaya, and since 1987, Mr. Murash held several roles of increasing responsibility with Nortel. Mr. Murash holds a BA and an MBA from the University of Manitoba and is a Certified Management Accountant.

Daniel Guerrero was appointed Senior Vice President, Strategy & Business Development in January 2014. Mr. Guerrero is responsible for strategic planning, marketing, research & development, and business development, including pricing strategy. Prior to his current role, since July 2013, Mr. Guerrero served as the Senior Vice President, Global Supply Chain and from April 2012 to July 2013, as Vice President, Procurement & Process Excellence within the Global Supply Chain function. Previously, since November 2011, he was Senior Vice President, Global Operations and Business Excellence, and from November 2009 to November 2011, was Senior Vice President and General Manager for the U.S. Region. Mr. Guerrero joined the Company in 1999 as part of the leadership team at our Colombia manufacturing facility and over the course of his career has held various roles in finance, administration, sales and marketing, operations, and supply chain. Mr. Guerrero holds a BS in Business Administration and a Masters in Finance from the ICESI University.

Robert Holmes joined the Company in July 2014 as the Senior Vice President of Global Human Resources and Employee Communications. In this role, Mr. Holmes assumed responsibility for the global talent, development, recruiting, total rewards and all aspects of the human resources agenda for the Company. Prior to joining the Company, Mr. Holmes was with Applied Materials from January 2013 to July 2014 where he served as Vice President of Human Resources, Worldwide Operations from January 2013 to September 2013, and then was asked to serve as Vice President of Human Resources for all of the Global Corporate Functions. Prior to joining Applied Materials, Mr. Holmes held executive roles with Nokia Networks from May 2009 to January 2013, and before that, held several roles of increasing responsibility with Nortel. Mr. Holmes holds a BS in Computer Engineering from The Ohio State University and an MBA for the Kelly School of Business at Indiana University.

April Miller Boise joined the Company in March 2015 as Senior Vice President, General Counsel, Head of Global Mergers & Acquisitions and Secretary. Ms. Boise is responsible for the legal affairs of the Company and is the Company’s chief compliance officer. Additionally, Ms. Boise leads the Company’s mergers and acquisitions efforts. Ms. Boise has more than twenty years of experience advising executive leaders in public and private companies on corporate governance, mergers, acquisitions, joint ventures, and capital market transactions. Prior to joining the Company, Ms. Boise served as Vice President, General Counsel and Corporate Secretary and member of the senior leadership team of Veyance Technologies, Inc. (formerly Goodyear Engineered Products) from January 2011. Prior to Veyance Technologies, Inc., Ms. Boise was Managing Partner of Thompson Hine’s Cleveland office and member of the law firm’s executive committee. She also served as the chair of the firm’s Private Equity group and was a founder and chair of the women’s initiative. Ms. Boise received a Bachelor’s of Business Administration from the University of Michigan Business School and a Juris Doctor from the University of Chicago Law School.

Our Corporate Governance

We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance include:

•

our Board of Directors will be divided into three classes of directors, with the classes to be as nearly equal in number as possible, and with the directors serving three-year terms;

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•

we will have independent director representation on our audit, compensation and nominating and corporate governance committees immediately at the time of the offering, and our independent directors will meet regularly in executive sessions without the presence of our corporate officers or non-independent directors;

•

we anticipate that at least one of our directors will qualify as an “audit committee financial expert” as defined by the SEC; and

•

we will implement a range of other corporate governance best practices, including placing limits on the number of directorships held by our directors to prevent “overboarding” and implementing a robust director education program.

Composition of the Board of Directors after this Offering

Prior to the completion of this offering, we expect that , additional independent directors, will be elected to our Board of Directors.

Our business and affairs are managed under the direction of our Board of Directors. In connection with this offering, we will amend and restate our certificate of incorporation to provide for a classified Board of Directors, with directors in Class I (expected to be ), directors in Class II (expected to be ) and directors in Class III (expected to be ). See “Description of Capital Stock—Anti-Takeover Effects of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and Certain Provisions of Delaware Law—Classified Board of Directors.” In addition, we intend to enter into a shareholders agreement with certain affiliates of our Sponsor and other stockholders in connection with this offering. This agreement will grant our Sponsor the right to designate nominees to our Board of Directors subject to the maintenance of certain ownership requirements in us. As of the time of this offering our Sponsor would have the right to nominate at least a majority of the total number of directors comprising our Board of Directors. See “Certain Relationships and Related Party Transactions—Shareholders Agreement.”

Background and Experience of Directors

When considering whether directors and nominees have the experience, qualifications, attributes or skills, taken as a whole, to enable our Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, our Board of Directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth immediately above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of the Company’s business. In particular, the members of our Board of Directors considered the following important characteristics of our directors: (i) Mr. Giordano has significant financial and investment experience from his involvement in The Blackstone Group’s investment in numerous portfolio companies and has played active roles in overseeing those businesses, (ii) Mr. Zafirovski has significant experience leading high-technology enterprises with significant international operations and his senior executive leadership at Nortel, Motorola and GE enable him to provide unique perspectives on general management, strategy planning, technology development, security and financial matters, (iii) Ms. Hagen, our Director and former Chief Executive Officer and President, has extensive experience in leading corporations in the manufacturing sector, including her knowledge and skills in senior management and operations of the Company, among other attributes, (iv) Mr. Alder has extensive knowledge in global manufacturing businesses, as well as manufacturing, technology and executive leadership experience; (v) Mr. Hackney brings financial and executive leadership in a diverse range of businesses; (vi) Ms. St.Clare has expertise in the areas of accounting, audit, governance, risk and compliance matters; and (vii) Mr. Foss brings extensive managerial and sales experience in a diverse range of businesses.

In January 2009, Nortel Networks Corporation, for which Mr. Zafirovski served as director, President and Chief Executive Officer, and subsidiary companies, including Nortel Enterprise Solutions, for which Mr. Hackney served as President, filed for bankruptcy protection in the United States, Canada and Europe. Our

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Board of Directors has concluded that these events do not impair Mr. Zafirovski’s or Mr. Hackney’s ability to continue to serve as a director. Mr. Zafirovski resigned from Nortel on August 9, 2009. Mr. Hackney remained with Nortel Enterprise Solutions until its acquisition by Avaya in December 2009.

Role of Board in Risk Oversight

The Board of Directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by the Audit Committee. The Audit Committee represents the Board of Directors by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal, and internal audit functions, the Audit Committee reviews and discusses all significant areas of our business and summarizes for the Board of Directors all areas of risk and the appropriate mitigating factors. In addition, our Board of Directors receives periodic detailed operating performance reviews from management.

Controlled Company Exception

After the completion of this offering, affiliates of our Sponsor who are party to the shareholders agreement will continue to beneficially own shares representing more than 50% of the voting power of our shares eligible to vote in the election of directors. As a result, we will be a “controlled company” within the meaning of corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including the requirements (1) that a majority of our Board of Directors consist of independent directors, (2) that our Board of Directors have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (3) that our Board of Directors have a nominating and corporate governance committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. For at least some period following this offering, we may utilize these exemptions since our board has not yet made a determination with respect to the independence of any directors other than Messrs. , and . Following this offering, our audit committee will be comprised entirely of these three directors, and Mr. will serve on both our compensation committee and nominating and governance committee. In the future, we expect that our board will make a determination as to whether other directors, including directors associated with Blackstone, are independent for purposes of the corporate governance standards described above. Pending such determination, you may not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that we cease to be a “controlled company” and our shares continue to be listed on the , we will be required to comply with these standards and, depending on the board’s independence determination with respect to our then-current directors, we may be required to add additional directors to our board in order to achieve such compliance within the applicable transition periods.

Board Committees

After the completion of this offering, the standing committees of our Board of Directors will consist of an Audit Committee, a Compensation Committee and a Nominating and Governance Committee.

Our president and chief executive officer and other executive officers will regularly report to the non-executive directors and the Audit, the Compensation and the Nominating and Governance Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. The vice president of internal audit will report functionally and administratively to our chief financial officer and directly to the Audit Committee. We believe that the leadership structure of our Board of Directors provides appropriate risk oversight of our activities given the controlling interests held by our Sponsor.

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Audit Committee

Upon the completion of this offering, we expect to have an Audit Committee, consisting of , who will be serving as the Chair, and . qualifies as an independent director under the NYSE corporate governance standards and the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We expect a second new independent director to be placed on the Audit Committee within ninety days of the effective date of this registration statement and we expect a third new independent director to replace within one year of the effective date of this registration statement so that all of our Audit Committee members will be independent as such term is defined in Rule 10A-3(b)(i) under the Exchange Act and under the NYSE rules and regulations. Following this offering, our Board of Directors will determine which member of our Audit Committee qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K.

The purpose of the Audit Committee will be to prepare the audit committee report required by the SEC to be included in our proxy statement and to assist our Board of Directors in overseeing and monitoring (1) the quality and integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and independence, (4) the performance of our internal audit function and (5) the performance of our independent registered public accounting firm.

Our Board of Directors will adopt a written charter for the Audit Committee which will be available on our website upon the completion of this offering.

Compensation Committee

Upon the completion of this offering, we expect to have a Compensation Committee, consisting of , who will be serving as the Chair, and .

The purpose of the Compensation Committee will be to assist our Board of Directors in discharging its responsibilities relating to (1) setting our compensation program and compensation of our executive officers and directors, (2) monitoring our incentive and equity-based compensation plans and (3) preparing the compensation committee report required to be included in our proxy statement under the rules and regulations of the SEC.

Our Board of Directors will adopt a written charter for the Compensation Committee which will be available on our website upon the completion of this offering.

Nominating and Governance Committee

Upon the completion of this offering, we expect to have a Nominating and Governance Committee, consisting of , who will be serving as the Chair, and . The purpose of our Nominating and Governance Committee will be to assist our Board of Directors in discharging its responsibilities relating to (1) identifying individuals qualified to become new Board of Directors members, consistent with criteria approved by the Board of Directors, subject to the stockholders agreement with our Sponsor; (2) reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the Board of Directors select, the director nominees for the next annual meeting of stockholders; (3) identifying Board of Directors members qualified to fill vacancies on any Board of Directors committee and recommending that the Board of Directors appoint the identified member or members to the applicable committee, subject to the stockholders agreement with our Sponsor; (4) reviewing and recommending to the Board of Directors corporate governance principles applicable to us; (5) overseeing the evaluation of the Board of Directors and management; and (6) handling such other matters that are specifically delegated to the committee by the Board of Directors from time to time.

Our Board of Directors will adopt a written charter for the Nominating and Governance Committee which will be available on our website upon completion of this offering.

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Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee. In connection with this offering, our Board of Directors will establish a compensation committee that will assume responsibility for establishing, maintaining and administering our compensation and benefits policies. See “—Executive Compensation—Compensation Discussion and Analysis.”

Code of Ethics

We will adopt a new Code of Business Conduct that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, which will be available on our website upon the completion of this offering. Our Code of Business Conduct is a “code of ethics,” as defined in Item 406(b) of Regulation S-K. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of ethics on our Internet website.

Executive Compensation

Compensation Discussion and Analysis

This section provides an analysis of our compensation program and policies, the material compensation decisions made under those programs and policies, and the material factors considered in making those decisions. This section should be read together with the compensation tables and related footnotes and narratives that appear below that contain specific information about the compensation earned in fiscal 2014 by the following individuals, referred to as our named executive officers:

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J. Joel Hackney, Jr., President and Chief Executive Officer;

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Dennis Norman, Executive Vice President and Chief Financial Officer;

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Barry Murash, President, Global Operations & Business Excellence;

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Scott Tracey, President, Americas & Global Wipes and Technical Specialties;

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Daniel L. Rikard, former Senior Vice President, General Counsel, Secretary & Ethics Compliance Officer; and

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Michael W. Hale, former Senior Vice President and Advisor to Chief Executive Officer.

On July 8, 2013, Mr. Hale, formerly Senior Vice President, Global Supply Chain Lead, accepted the position of Senior Vice President and Advisor to the Chief Executive Officer effective July 1, 2013 and, on July 9, 2013, announced his planned retirement from the Company effective January 31, 2014. Effective December 31, 2014, Mr. Rikard resigned from the Company to pursue other opportunities.

Prior to this offering, executive compensation and related decisions have been made at the level of our subsidiary, PGI Group. Following the Merger and continuing through fiscal 2012, PGI Group did not have a compensation committee and executive compensation and related decisions were approved by the Board of Directors of PGI Group. On February 20, 2013, PGI Group established a compensation committee. In connection with this offering, our Board of Directors will establish a compensation committee that will assume responsibility for overseeing our compensation and benefit policies.

Except where the context requires otherwise, the terms “Compensation Committee” and “Board of Directors” as used in this “Executive Compensation” section refer to the Board of Directors and Compensation Committee of PGI Group.

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Compensation Philosophy

The Compensation Committee has approved the following four primary objectives of our executive compensation program:

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provide an externally competitive and internally equitable base salary and other current compensation necessary to attract, retain and motivate highly qualified executives who possess the skills and talent required for our success;

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compensate executives in recognition of new responsibilities or new positions and motivate each executive to perform at the highest level;

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encourage executive performance to fulfill our annual and long-term business objectives and strategy by balancing short-term and long-term compensation; and

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provide variable compensation opportunities based on our performance and align executive compensation with the interests of stockholders through long-term equity compensation programs.

To achieve these objectives, we implemented and maintain compensation plans and policies to ensure that executive compensation was fair, reasonable and competitive and rewarded our executives’ contributions to our overall short-term and long-term growth as follows:

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short-term compensation elements, which include: base salary, cash payouts under annual incentive plans, and other annual compensation, including perquisites; and

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long-term compensation elements, which include: grants of stock options under the 2011 Scorpio Holdings Corporation Stock Incentive Plan, (the “Holdings Plan”), that vest over a prescribed service period or upon the achievement of financial performance targets, and other benefits provided under retirement plans and termination agreements.

The compensation levels provided under these plans varied based on the relative management experience, leadership and performance of each executive officer. The Compensation Committee reviewed our compensation plans to ensure that pay levels and the elements of compensation were consistent with our compensation philosophy. The goals of our compensation plans and compensation policies were generally to create a meritocracy by considering individual performance and contribution in making compensation decisions and to invest in future potential in every aspect of compensation. Compensation structures were designed to deliver median compensation when median performance was achieved at the individual, operating unit, or corporate level. When superior performance was achieved, the compensation structures would deliver above median compensation.

Independent Compensation Consultant

In August 2014, the Compensation Committee retained Frederic W. Cook & Co., Inc., an independent compensation consulting firm, to provide guidance on executive compensation in connection with this offering and to provide information and guidance for our compensation program going forward.

Elements of Compensation

As described in greater detail below, each element of short-term and long-term compensation serves a different objective. Base salary provides a known amount of compensation on a regular basis for executive performance that is at an acceptable level. Base salary also reflects the executive officer’s position in the corporate hierarchy, and is primarily based on his or her scope of responsibility, relative value to the Company, and long-term potential. Merit-based increases to base salary are granted (typically within a range of 0% to 6%) to reflect the executive officer’s service and performance during the prior year. Base salary is normally not reduced. The Short Term Incentive Compensation Plan (the “Annual Incentive Plan”), when offered, provides payouts based on the achievement of our financial and operating performance objectives, which includes a modifier for significant personal performance. Equity awards under the Holdings Plan that contained

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performance or multi-year service vesting schedules are intended to motivate the executive officer to remain with us over the long term and provide performance that is aligned with stockholder interests.

Other than as described below with respect to 2014 base salary adjustments, in fiscal 2014, we did not, and generally we do not, use formalized benchmarking criteria or benchmark compensation to designated peer companies when determining compensation. Historically, material increases for executive officers’ compensation typically happened in three situations: when performance was so outstanding that the Compensation Committee or the Board of Directors, at the recommendation of our Chief Executive Officer (“CEO”) (other than with respect to the CEO himself), awarded a cash payout and/or special equity award; when market salary survey data indicated a disparity; or when there was an internal disparity in levels of executive compensation considering the executive officer’s relative responsibilities and experience.

Our compensation decisions are also influenced by the general status of global economic activity. In times of uncertain global economic activity, our short-term and long-term financial planning are impacted. This activity may cause us to be more conservative in our compensation decisions to manage employment stability and profitability in the face of uncertain economic conditions.

The following sections discuss in further detail the Company’s current and long-term incentive compensation components as well as retirement and termination benefits.

Employment Agreements

For retention purposes, PGI Group entered into employment agreements with Messrs. Hackney, Norman and Hale. See “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Summary of Certain Named Officer Employment Agreements” below for a full description of the material terms of these agreements.

Base Salary

Executive officer salary levels are designed to ensure that we attract the necessary executive talent in the marketplace and are negotiated at the time of initial employment or promotion. Base salaries are established based on a consideration of the following variables: the scope of individual responsibilities, relative value compared with our other executives, experience, such market factors as the general status of the U.S. and international labor market and economies, previous employer compensation, salary surveys and market intelligence available in relevant publications and from our compensation consultant resources, and the experiences of our directors and management.

Base salaries of employees, including named executive officers, are reviewed at least annually, typically during the first quarter. During this time, our CEO conducts executive performance reviews by identifying accomplishments and areas of strength and development based on performance during the prior year. Our CEO then recommends salary adjustments for the executive officers (other than himself) to the Compensation Committee based on these performance reviews. Salary decisions for the CEO are determined annually by the Compensation Committee after conducting a review of the CEO’s performance in the prior year. Merit-based salary changes, if available, are typically made early in the Company’s second quarter.

For fiscal 2014, merit-based salary changes for our named executive officers (other than Mr. Hale) were reviewed and approved by the Compensation Committee and were made in January 2014. Based on the merits of their personal performance in connection with their annual performance review the Compensation Committee, based on input from Mr. Hackney, determined to increase the base salaries of the following named executive officers effective January 1, 2014, as follows: Mr. Norman received an 18% increase (from $360,334 to $425,022), Mr. Tracey received a 17.5% increase (from $334,750 to $393,331) and Mr. Rikard received a 10.5% increase (from $338,780 to $374,323). The Compensation Committee reviewed data from the 2013 Towers Watson Compensation Data Bank (“CDB”) General Industry Executive Compensation Survey Report—U.S. as a reference point in determining the size of the salary increases. This survey collected data from over 1,000

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companies on base salary, actual and target bonus, total cash compensation, long-term incentive expected values and total direct compensation. It covered more than 150 benchmark positions and the data was available to participants only.

Payouts under the Annual Incentive Plan

Our Annual Incentive Plan is designed to reward our employees, including our executive officers, for achieving our annual financial and operating goals that are critical to our success and that are aligned with the interests of our stockholders. At the beginning of each fiscal year, the Compensation Committee, based on input from management, sets annual goals. These goals influence the level of performance-based compensation payable under our Annual Incentive Plan, which, if approved for a given year, is typically finalized in April.

During 2014, the Compensation Committee established, and the Board of Directors approved, an Annual Incentive Plan (the “2014 AIP”) and provided cash bonus opportunities under the 2014 AIP targeted at an annual target bonus of 100% of his base salary earned, with a maximum annual bonus of 200% of annual base salary earned for Mr. Hackney, an annual target bonus of 55% of base salary earned, with a maximum annual bonus of 110% of annual base salary earned for Messrs. Norman and Murash, and an annual target bonus of 40% of base salary earned, with a maximum annual bonus of 80% of annual base salary earned for Messrs. Tracey and Rikard.

Pursuant to the terms of the 2014 AIP, Mr. Rikard would not have been eligible for a 2014 AIP award since he resigned prior to the payment date. However, in recognition of his significant contributions made to the Company and given the fact that he was employed through the end of fiscal 2014, the Compensation Committee determined, based on input from management, that it was appropriate to pay him a full-year 2014 AIP award based on actual performance for fiscal 2014. In connection with his departure from the Company in January 2014, Mr. Hale was not entitled to an annual, performance-based cash bonus with respect to fiscal 2014.

Bonus opportunities under the 2014 AIP for the executive officers were based upon achievement of a combination of three company-wide measures: Consolidated EBITDA (weighted at 75.0%), working capital (weighted at 12.5%) and productivity, as measured by net yield (weighted at 12.5%). The definitions of these measures are as follows:

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Consolidated EBITDA, means net income attributable to PGI Group (“Net Income”), as disclosed in accordance with GAAP or IFRS as applicable: (a) increased by the sum of the following amounts, to the extent decreasing Net Income, without duplication: (i) provision for taxes based on income or profits or capital gains, including, without limitation, state, franchise and foreign withholding taxes; plus (ii) Consolidated Interest Expense as defined in the credit agreement governing our ABL Facility; plus (iii) depreciation and amortization expense; plus (iv) non-cash charges relating to impairment of assets; plus (v) non-cash compensation expenses; plus (vi) restructuring and integration costs; plus (vii) management, monitoring and advisory fees (including termination fees) and related indemnities and expenses paid or accrued under the International Advisory Agreement; plus (viii) fees and expenses directly related to evaluation of potential acquisitions, mergers or consolidation; plus (ix) non-cash litigation charges to reserve for future liabilities; plus (x) factoring fees; plus (xi) lease expense associated with the GE Lease as defined in the credit agreement governing our ABL Facility; (b) decreased by non-cash gains, to the extent increasing Net Income, without duplication, excluding reversals of an accrual or reserve for a potential cash item that previously reduced Net Income; (c) increased or decreased by, to the extent decreasing or increasing Net Income, without duplication: (i) net unrealized gains or losses (after any offset) resulting in such period from hedging obligations and the application of ASC 815 “Derivatives and Hedging”; (ii) net non-operating gains or losses attributable to currency translation and financing transactions; (iii) net gains or losses attributable to asset dispositions; (iv) increases or decreases resulting from adjustments to the tax indemnity asset; (v) increases or decreases resulting from the impact of purchase accounting adjustments; and (vi) other items included in special charges, net or other non-operating items included in other expense (income), as reported on the Company’s Consolidated Statements of Operations; and (d) decreased by, to the extent increasing Net Income, without duplication, any net licensing profits earned by the Company related to its nanotechnology IP or related technologies.

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Working capital is defined as accounts receivable plus inventory less accounts payable and accrued liabilities. The target metric is calculated based on the average monthly ratio of operating working capital to annualized trailing three months sales.

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The productivity performance target is measured by net yield, which is derived from the effective yield of the product when recycled or reclaimed material is added back to the product.

We believe evaluating management’s performance based on Consolidated EBITDA and working capital motivated our executive officers and other key employees to focus on key aspects of stockholder value aligned with capital market value drivers and to work together to achieve the Company’s short- and long-term financial goals. Productivity performance was included as a component of our annual incentive compensation program in fiscal 2014 in place of safety performance. We determined to replace safety performance with a new performance measure since we have established a separate company-wide safety performance incentive program in which all employees, not just the participants in the Annual Incentive Plan, are eligible to receive safety performance awards. Productivity performance was chosen to replace safety performance because it reflects our enhanced focus on economic leadership.

Under the 2014 AIP, the Compensation Committee, based on input from management, set, and the Board of Directors approved, a Consolidated EBITDA target of $200.0 million, with a minimum threshold of $180.0 million and a maximum level of $220.0 million, and a working capital target of 11.5%, with a minimum threshold of 12.5% and maximum of 10.5%. The productivity performance target was set at 95.5%, with a minimum threshold of 94.5% and maximum of 96.5%. No payment would be made under a particular performance measure if the minimum threshold level of achievement was not achieved for that measure, and no additional amount would be paid under a particular performance measure if greater than the maximum level of achievement was achieved for that measure. The Company calculates the actual cash bonus independently for each component based on the assigned weightings and adds them together to determine the total annual cash bonus payout for each executive officer, which total amount is subject to adjustment by a personal performance modifier as described below. The payout percentage equals 50% for the minimum threshold level of achievement, 100% for the target level of achievement and 200% for the maximum level of achievement. For actual results that fall between the specified threshold, target and maximum levels, the resulting payout percentage is adjusted on a linear basis.

Achievement against the performance measures determines the funding of the global bonus pool. After reviewing the strategic, qualitative and quantitative results of the individual regions/countries (including corporate), management recommends an allocation of the global bonus pool among each of the regions/countries (including corporate), which allocation is then reviewed and approved by the Compensation Committee.

Under the 2014 AIP, we have also included a personal performance modifier to adjust individual incentive awards up or down to recognize individual performance or adjust for significant shortfalls in individual performance. The maximum potential upward adjustment was +50% of target based upon exceptional, “above and beyond” contributions, such as significant business impact (both financial/non-financial), results delivery, not just effort, embodiment of our core values, customer (internal/external) satisfaction, operational excellence and process improvement, and teamwork/leadership. The maximum potential downward adjustment was up to -100% of the award based upon performance deficiencies (results or behaviors) or code of conduct violations. The decision to adjust payouts with a personal performance modifier is discretionary and is not tied to a specific list of goals for any individual executives.

In 2014, we achieved Consolidated EBITDA of $200.6 million (outperforming the target and resulting in a payout percentage of 100.25% after adjusting for Annual Incentive Plan-related accruals); working capital of 9.6% (outperforming the maximum and resulting in a payout percentage of 200%); and a net yield of 95.54% (outperforming the target and resulting in a payout percentage of 104.0%). Based on the weightings for each of the performance measures, the global bonus pool was funded at a combined achievement factor of 113% of

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target. After reviewing the strategic, qualitative and quantitative results of the regions/countries (including corporate), the Compensation Committee, based on input from management, approved funding the corporate pool, in which Messrs. Hackney, Norman, Murash and Rikard participate, at 110% of target and approved funding the Americas regional pool, in which Mr. Tracey participates, at 100% of target. Based on these achievement factors, the total amounts awarded to the eligible named executive officers were as follows: Mr. Hackney, $935,020, Mr. Norman, $255,633, Mr. Murash, $209,436, Mr. Tracey, $156,440 and Mr. Rikard, $164,111. In addition, for 2014, the Compensation Committee awarded Messrs. Hackney and Norman personal performance modifiers of $187,040 and $51,127, respectively. Key factors that the Compensation Committee considered in making such determination with respect to Mr. Hackney were his role in recruiting and upgrading executive talent and his contributions to the successful completion and integration of the Fiberweb Acquisition and the completion of the Providência Acquisition. Key factors that the Compensation Committee considered in making such determination with respect to Mr. Norman were his leadership in executing significant financing transactions and his contributions to the successful completion and integration of the Fiberweb Acquisition and the completion of the Providência Acquisition. The total amounts awarded based on Consolidated EBITDA, working capital and net yield performance results are reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table under the “2014” designation, while the amounts awarded as a result of the application of the personal performance modifier are reported in the “Bonus” column.

2014 Integration Incentive Compensation Plan

On March 26, 2014, the Board of Directors approved the PGI Group, Inc. 2014 Integration Incentive Compensation Plan (the “Integration Plan”). The Integration Plan was established to:

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provide cash-based incentive compensation to certain key employees of the Company, including our named executive officers (other than Mr. Hale, who was no longer employed by the Company when the Integration Plan was established), by directly linking financial rewards to achieving synergies in connection with the Fiberweb Acquisition;

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increase such key employees’ personal interest in achieving synergies among the Company’s operating units; and

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enhance the Company’s ability to retain key employees who are integral to execution of integration activity, synergy attainment and overall performance of the Company.

The Compensation Committee oversees the Integration Plan. This includes:

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selection of key employees as participants in the Integration Plan;

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determination of the cost saving, growth opportunities, and other efficiency goals related to the post-acquisition integration of Fiberweb (“Synergy Goals”) upon which awards under the Integration Plan will be based and assessment of the extent to which they have been achieved (as described below);

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determination of the applicable incentive percentage that will be multiplied by a participant’s base salary as in effect on March 18, 2014 to determine such participant’s potential award (the “Incentive Target Award”) (as described below);

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interpretation of the Integration Plan and any document or instrument issued under the Integration Plan; and

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establishment of rules and regulations for the Integration Plan’s administration.

The potential awards under the Integration Plan are as follows:

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The Compensation Committee reviewed management’s evaluation of the Company’s performance, on a run-rate basis, as of June 30, 2014 for the “Base Synergy Target” (a specific dollar value of Synergy Goals, as determined by the Compensation Committee in its sole discretion). The Base Synergy Target of $28.0 million has been achieved on a run-rate basis. Therefore, if the Company achieves at least 95% of the Consolidated EBITDA target of $200.0 million for 2014, then each eligible participant will receive a cash payment equal to 10% of his or her Incentive Target Award. Since the Consolidated

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EBITDA target was achieved for 2014, each of the eligible named executive officers earned 10% of their respective Incentive Target Award, which amount was paid in April 2015.

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The Compensation Committee will review management’s evaluation of the Company’s actual performance as of June 30, 2015 for the Base Synergy Target. If the Compensation Committee determines that the Base Synergy Target has been achieved, and the Company has achieved at least 95% of its Consolidated EBITDA target for 2014, then each eligible participant will receive a cash payment equal to 30% of his or her Incentive Target Award, anticipated to be paid in July 2015 or as soon as administratively practicable thereafter, subject to certain conditions. Since the Consolidated EBITDA target was achieved for 2014, each of the eligible named executive officers will earn 30% of their respective Incentive Target Award if the Base Synergy Target is realized as of June 30, 2015.

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The Compensation Committee reviewed management’s evaluation of the Company’s performance, on a run-rate basis, as of December 31, 2014 for the “Enhanced Synergy Target” (a specific dollar value of Synergy Goals, as determined by the Compensation Committee in its sole discretion). The Enhanced Synergy Target of $36.0 million has been achieved on a run-rate basis. Therefore, if the Company achieves at least 95% of the Consolidated EBITDA target of $200.0 million for 2014, then each eligible participant will receive a cash payment equal to 15% of his or her Incentive Target Award. Since the Consolidated EBITDA target was achieved for 2014, each of the eligible named executive officers earned an additional 15% of their respective Incentive Target Award, which amount was paid in April 2015.

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The Compensation Committee will review management’s evaluation of the Company’s performance in the aggregate as of December 31, 2015 for the Enhanced Synergy Target. If the Compensation Committee determines that the Enhanced Synergy Target has been achieved, and the Company achieves at least 95% of its consolidated EBITDA target for 2015 (as set by the Compensation Committee), then each eligible participant will receive a cash payment equal to 45% of his or her Incentive Target Award, anticipated to be paid in January 2016 or as soon as administratively practicable thereafter, subject to certain conditions.

To receive payments, participants must remain continuously employed with the Company through the applicable payment date. The Integration Plan will terminate the day after the last incentive payments are made under the Integration Plan, subject to the right of the Compensation Committee to earlier amend or terminate the Integration Plan. The Compensation Committee determined to set the Incentive Target Awards for our named executive officers as follows: Mr. Hackney ($1,054,022), Mr. Norman ($527,027), Mr. Murash ($465,030), Mr. Tracey ($487,759) and Mr. Rikard ($464,192). Since Mr. Rikard resigned from the Company before the applicable payment dates, he is not eligible to receive a payment under the Integration Plan.

Sign-on Bonuses

From time to time, we may award sign-on bonuses in connection with the commencement of a named executive officer’s employment with us. Sign-on bonuses are used only when necessary to attract highly skilled officers to the Company. Generally they are used to incentivize candidates to leave their current employers, or may be used to offset the loss of unvested compensation they may forfeit as a result of leaving their current employers. In fiscal 2014, in order to attract to Mr. Murash to the position of President, Global Operations & Business Excellence, Mr. Murash was awarded a sign-on bonus of $500,000 in connection with the commencement of his employment with us. The sign-on bonus is payable in four equal installments of $125,000, subject to his continued employment through each applicable payment date. The first installment was paid after 30 days of employment with the Company, the second installment was paid on January 15, 2015 and the remaining installments are scheduled to be paid on January 15, 2016 and 2017. Any sign-on cash bonus received is subject to repayment to the Company on a prorated basis if Mr. Murash voluntarily leaves the Company before completing 24 months of continuous employment.

Perquisites and other Personal Benefits

We provide certain executive officers with several perquisites and other personal benefits as additional compensation that the Board of Directors believes are reasonable and consistent with our overall compensation

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philosophy. We believe that perquisites should not comprise a significant component of compensation. These benefits are not paid through any formal compensation plan and are paid on a case-by-case basis. Benefits may vary among the executive officers based on business purpose. In certain instances, we may reimburse relocation expenses, pay relocation bonuses and provide tax gross-ups to executives who are required to move to another Company location due to promotions, reorganization or relocation of offices.

For 2014, perquisites were paid in keeping with our compensation philosophy to enhance our ability to attract top-level management and to ensure the retention of key-impact executives. Please see footnote (8) to the “Summary Compensation Table” below for detail regarding the perquisites and other personal benefits received by our named executive officers during fiscal 2014.

Long-term Incentive Compensation

Upon consummation of the Merger, we adopted the Holdings Plan for our employees, directors, and certain other service providers and independent contractors. As part of our new equity-based arrangements with our employees, our senior management employees used cash proceeds from the sale of their PGI Group common stock and the cashing out of all outstanding equity awards to purchase shares of the Company. In addition, our Board of Directors granted options to purchase shares of the Company to those management employees who made the minimum required equity investment in the Company. These arrangements were designed to more closely align our management’s interest with those of our stockholders and to incentivize our management employees to remain in our service by providing them with an opportunity to acquire equity interests in the Company. The specific sizes of the option grants made to our named executive officers were determined based on the Board of Directors’ business judgment in light of Blackstone’s practices with respect to management equity programs at other private companies in its portfolio, the executive officer’s position and level of responsibilities within our company and the size of the executive officer’s equity investment in the Company. Historically, grants have not been made on an annual basis, and instead are made upon an executive’s commencement of employment with us, when an executive receives promotions into more senior level positions or in connection with the completion of special projects. For example, on February 5, 2014, we granted Messrs. Murash, Tracey and Rikard the following number of options under the Holdings Plan: Mr. Murash, 1,800 (including 600 time-vesting options and 1,200 exit-vesting options); Mr. Tracey, 100 (including 33.33 time-vesting options and 66.67 exit-vesting options); and Mr. Rikard, 134.8 (including 44.93 time-vesting options and 89.87 exit-vesting options). Mr. Murash’s award was granted in connection with his commencement of employment with us on January 20, 2014. Mr. Tracey’s award was granted in recognition of his promotion to President, Americas & Global Wipes and Technical Specialties. Mr. Rikard’s award was granted in recognition of his contributions to the completion of the Fiberweb Acquisition. The Holdings Plan also permits us to grant other types of equity-based awards, such as restricted stock units, stock appreciation rights, restricted stock and other “full value” awards. For example, in connection with Mr. Hackney’s appointment as President and Chief Executive Officer in fiscal 2013, we granted him 3,000 restricted stock units under the Holdings Plan. See “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” below for a full description of the material terms of the equity awards granted to our named executive officers under the Holdings Plan.

Retirement Benefits

In addition to current and long-term incentive compensation, we provide retirement benefits to the named executive officers. The amount of retirement benefits provided are designed to attract and retain highly qualified executives and may depend on the retirement plans in place in the region where the named executive is employed. We currently provide defined contribution and savings plan benefits to our named executive officers in the form of a qualified 401(k) plan in the United States. The named executive officers are eligible to receive the same level of matching Company 401(k) contributions as all our employees under this plan. See footnote (8) to the “Summary Compensation Table” below for detailed information regarding this compensation. We do not have a defined benefit plan for any of our named executive officers.

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In 2012, the Board of Directors approved the establishment of an unfunded, deferred compensation plan for a select group of management or highly compensated employees of the Company (the “PGI Executive Savings Plan”). The PGI Executive Savings Plan is an unfunded plan maintained by the Company primarily for the purpose of providing a select group of management or highly compensated employees of the Company with an opportunity to defer all or part of the compensation payable to such employees (and is intended to be within the exemptions therefore in, without limitation, sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and section 2520.104-23 of the U.S. Department of Labor Regulations). The PGI Executive Savings Plan is intended to be “unfunded” for purposes of both ERISA and the Code. The PGI Executive Savings Plan is not intended to be a qualified plan under section 401(a) of the Code; rather, the PGI Executive Savings Plan is intended to be a “nonqualified” plan. Our named executive officers do not currently participate in the PGI Executive Savings Plan.

Termination Benefits

We believe that severance protection arrangements are necessary to attract and retain the talent necessary for our long-term success. We view our severance protection arrangements as recruitment and retention devices that help secure the continued employment and dedication of our named executive officers, including when we are considering strategic alternatives.

Mr. Hackney and Mr. Norman each have severance protection arrangements as part of their respective employment agreements. Under the terms of these severance arrangements, each of these named executive officers is entitled to severance benefits if he is terminated by us without “cause” or by him for “good reason” (as such terms are defined in their respective employment agreements). In addition, Messrs. Murash and Tracey have each entered into a separate severance protection agreement with us. See “—Potential Payments Upon Termination or Change in Control” for descriptions of these arrangements.

In addition, Messrs. Rikard and Hale each had a severance protection arrangement with us either as part of his employment agreement, in the case of Mr. Hale, or separately, in the case of Mr. Rikard. Mr. Rikard resigned from the Company on December 31, 2014 and pursuant to the terms of his severance protection arrangement, he was not entitled to any severance payments or benefits. However, in recognition of his significant contributions made to the Company and given the fact that he was employed through the end of fiscal 2014, the Compensation Committee determined, based on input from management, that it was appropriate to pay him a full-year 2014 AIP award based on actual performance for fiscal 2014 and we agreed to extend the post-termination exercise period for his vested time-vesting options. See “—Potential Payments Upon Termination or Change in Control” for descriptions of these severance arrangements and the option award modification with respect to Mr. Rikard.

Certain Accounting and Tax Considerations

Accounting considerations

We accounted for awards issued under the Holdings Plan in accordance with the provisions of ASC 718. Under ASC 718, establishment of grant dates, vesting provisions, including performance-based vesting, the exercise prices for options, the maturity dates of the equity instruments and assumptions used for estimating fair value under the Black-Scholes methodology could all have a material impact on compensation relating to option awards.

Tax considerations

Following our initial public offering, we expect to be able to claim the benefit of a special exemption rule that applies to compensation paid (or compensation in respect of equity awards such as stock options or restricted stock granted) during a specified transition period. This transition period may extend until the first annual stockholders meeting that occurs after the close of the third calendar year following the calendar year in which our initial public offering occurred, unless the transition period is terminated earlier under the Section 162(m)

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post-offering transition rules. At such time as we are subject to the deduction limitations of Section 162(m), we expect that the Compensation Committee will take the deductibility limitations of Section 162(m) into account in its compensation decisions; however, the Compensation Committee may, in its judgment, authorize compensation payments that are not exempt under Section 162(m) when it believes that such payments are appropriate to attract or retain talent.

Summary Compensation Table

The following table presents a summary of compensation for our Chief Executive Officer, our Chief Financial Officer, and each of our other named executive officers.


Name and Principal Position	Year		Salary ($)(4)		Bonus ($)(5)		Stock Awards ($)		Option Awards ($)(6)		Non-Equity Incentive Plan Compensation ($)(7)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)(8)		Total ($)
J. Joel Hackney Jr.(1)		2014		850,000		187,004		—		—		1,198,525		—		77,655		2,313,184
President & Chief Executive		2013		434,817		606,448		3,000,000		1,137,980		—		—		151,256		5,330,501
Officer		2012		—		—		—		—		—		—		—		—
														—

Dennis Norman		2014		425,022		51,127		—		—		387,390		—		17,466		881,005
Executive Vice President &		2013		357,506		—		—		—		108,146		—		16,021		481,673
Chief Financial Officer		2012		342,687		61,956		—		—		126,522		—		16,153		547,318
														—

Barry Murash		2014		360,600		125,000		—		305,568		325,694		—		69,903		1,186,765
President, Global Operations & Business Excellence

Scott Tracey		2014		393,331		—		—		16,976		278,380		—		17,029		705,716
President, Americas & Global Wipes and Technical Specialties

Daniel L. Rikard(2)		2014		374,323		—		—		22,883		164,111		—		18,109		579,426
Former Senior Vice President, General Counsel, Secretary & Ethics Compliance Officer

Michael W. Hale(3)		2014		35,394		—		—		—		—		—		727,758		763,152
Former Senior Vice President, Advisor to Chief Executive Officer		2013		456,510		—		—		—		138,094		—		18,623		613,227
		2012		437,584		79,113		—		—		161,558		—		17,841		696,096

(1)	Mr. Hackney joined the Company in June 2013 as President and Chief Executive Officer.

(2)	Mr. Rikard resigned from the Company on December 31, 2014.

(3)	Mr. Hale retired from the Company on January 31, 2014.

(4)	Mr. Murash joined the Company in January 2014 as President, Global Operations & Business Excellence. Amount reported for Mr. Murash reflects the portion of his $375,024 annual base salary earned in fiscal 2014.

(5)

For 2014, amounts reported for Messrs. Hackney and Norman reflect the portion of the bonus awarded by the Compensation Committee under the 2014 AIP as a result of the personal performance modifier. For 2014, amount reported for Mr. Murash reflects the first installment of his sign-on cash bonus in connection with him joining the Company as President, Global Operations & Business Excellence on January 20, 2014. This payment is subject to repayment to the Company on a prorated basis if Mr. Murash voluntarily leaves the Company before completing 24 months of continuous employment. Amount reported for Mr. Hackney for 2013 reflects a sign-on cash bonus in connection with him joining the Company as President and Chief Executive Officer on June 19, 2013. For 2012, amount reported reflects the portion of the bonus awarded by the Board of Directors under the 2012 AIP as a result of the application of the personal performance modifier. For 2013, the Compensation Committee determined not to adjust any of the 2013 AIP awards with a personal performance modifier.

(6)

Represents the grant date fair value of all option awards issued during the respective period, calculated pursuant to ASC 718. For a discussion of the assumptions and methodologies used to calculate the amounts reported for 2014, please see the discussion of non-qualified stock option awards contained in Note 15. Equity Compensation Plans to our audited consolidated financial statements included elsewhere in this prospectus. Achievement of the performance conditions for the exit-vesting portions of the option awards was not deemed probable on the date of grant, and, accordingly, pursuant to the SEC’s disclosure rules, no value is included in this table for those portions of the awards.

(7)

Amounts for non-equity incentive plan compensation reflect payments under the Annual Incentive Plan for annual performance prior to the application of the personal performance modifier, if any, paid in April of the subsequent year. For 2014, amounts also reflect 25% of the Incentive Target Award earned under the Integration Plan by the eligible named executive officers. In connection with his departure from the Company in 2014, Mr. Hale was not entitled to an annual, performance-based cash bonus with respect to fiscal 2014. In addition, in connection with their respective departures from the Company, Messrs. Rikard and Hale are not eligible for incentive payments under the Integration Plan.

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(8)	All Other Compensation for the named executive officers in fiscal 2014 is as follows:


	Mr. Hackney ($)		Mr. Norman ($)		Mr. Murash ($)		Mr. Tracey ($)		Mr. Rikard ($)		Mr. Hale ($)
Company Contributions to Defined Contribution and Savings Plans		14,131		15,600		13,858		15,600		15,600		—
Life Insurance Premiums Paid by the Company		1,864		612		1,273		819		983		721
Severance Payments and Benefits(1)		—		—		—		—		—		727,037
Perquisites:
Car Usage(2)		20,000		—		—		—		—		—
Relocation(3)		41,233		—		54,732		—		—		—
Other Perquisites(4)		427		1,254		40		610		1,526		—

Total All Other Compensation		77,655		17,466		69,903		17,029		18,109	$	727,758

(1)

Amounts reflect $727,037 of severance payments and benefits pursuant to the terms of Mr. Hale’s employment agreement (consisting of a $653,757 in severance payments, $53,091 paid for accrued and unused vacation days and $20,189 paid for continued participation in our medical, dental, and hospitalization benefit plans from February 1, 2014 through the end of the fiscal year). See “—Potential Payments upon Termination or Change in Control—Departures of Mr. Hale and Mr. Rikard—Mr. Hale.”

(2)

Pursuant to Mr. Hackney’s employment agreement, he is responsible for any automobile costs in excess of $20,000 per year.

(3)

Mr. Murash’s relocation benefits are subject to repayment to the Company on a prorated basis if Mr. Murash voluntarily leaves the Company before completing 24 months of continuous employment.

(4)

Other perquisites are primarily comprised of reimbursement for subscriptions, seminars, professional membership fees and annual credit card fees.

2014 Grants of Plan-Based Awards

The following table presents information regarding grants of plan-based awards to named executive officers during the 2014 fiscal year:


			Estimated Future Payouts Under Non-Equity Incentive Plan Awards									Estimated Future Payouts Under Equity Incentive Plan Awards
Name	Grant Date		Threshold ($)			Target ($)			Maximum ($)			Threshold (#)		Target (#)(4)		Maximum (#)		All Other Stock Awards; Number of Shares of Stock or Units (#)		All Other Option Awards; Number of Securities Underlying Options (#)(4)		Exercise or Base Price of Option Awards ($/Sh)(5)		Grant Date Fair Value of Stock & Option Awards ($)(6)
Mr. Hackney			$	53,125	(1)	$	850,000	(1)	$	1,700,000	(1)		—		—		—		—		—		—		—
				105,402	(2)		1,054,022	(2)		1,054,022	(2)		—		—		—		—		—		—		—

Mr. Norman				14,610	(1)		233,762	(1)		467,524	(1)		—		—		—		—		—		—		—
				52,702	(2)		527,027	(2)		527,027	(2)		—		—		—		—		—		—		—

Mr. Murash				12,396	(1)		198,330	(1)		396,660	(1)		—		—		—		—		—		—		—
				46,503	(2)		465,030	(2)		465,030	(2)		—		—		—		—		—		—		—
		2/5/2014											—		1,200.000		—		—		600.000		1,000		305,568

Mr. Tracey				9,833	(1)		157,332	(1)		314,664	(1)		—		—		—		—		—		—		—
				48,776	(2)		487,759	(2)		487,759	(2)		—		—		—		—		—		—		—
		2/5/2014											—		66.66		—		—		33.33		1,000		16,976

Mr. Rikard(3)				9,358	(1)		149,729	(1)		299,458	(1)		—		—		—		—		—		—		—
				46,419	(2)		464,192	(2)		464,192	(2)		—		—		—		—		—		—		—
		2/5/2014											—		89.86		—		—		44.93		1,000		22,883

Mr. Hale(3)				—			—			—			—		—		—		—		—		—		—

(1)	Amounts represent awards payable under our 2014 AIP. See “—Elements of Compensation—Payouts under the Annual Incentive Plan” above for a description of our 2014 AIP. Amounts reported for Mr. Murash reflect a pro-rated 2014 AIP award based on his January 20, 2014 employment start date.

(2)	Amounts represent awards payable under the Integration Plan. See “—Elements of Compensation—2014 Integration Incentive Compensation Plan” above for a description of the Integration Plan.

(3)

In connection with his retirement from the Company in 2014, Mr. Hale was not eligible for an award under the Integration Plan and was not entitled to an annual, performance-based cash bonus with respect to fiscal 2014. In connection with his resignation from the Company on December 31, 2014, Mr. Rikard is not eligible for an incentive payment under the Integration Plan.

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(4)

The option awards reported above are divided into two tranches for vesting purposes: one-third are time-vesting options and two-thirds are exit-vesting options. The exit-vesting options are reported as an equity incentive plan award in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column, while the time-vesting options are reported as an all other option award in the “All Other Option Awards: Number of Securities Underlying Options” column. See “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” below.

(5)	The exercise price of $1,000 per share represents the fair market value of the Company’s common stock on the date of grant.

(6)

Represents the grant date fair value of the option awards, calculated in accordance with ASC 718 and utilizing the assumptions in Note 15. Equity Compensation Plans to our audited consolidated financial statements included elsewhere in this prospectus. The value at the grant date for the exit-vesting portions of the option awards is based upon the probable outcome of the performance conditions. See footnote (6) to the Summary Compensation Table.

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

The items described below support the data reported in the Summary Compensation Table and the 2014 Grants of Plan-Based Awards table.

Summary of Certain Named Officer Employment Agreements

Employment Agreement with Mr. Hackney

PGI Group entered into an employment agreement with Mr. Hackney to serve as our President and Chief Executive Officer effective June 19, 2013 (the “2013 CEO Agreement”). The 2013 CEO Agreement entitles Mr. Hackney to receive an annual base compensation of $850,000 and an annual target bonus of 100% of his base compensation, with a maximum annual bonus of 200% of his base compensation, determined based upon the achievement of performance criteria as established by our Board of Directors in consultation with Mr. Hackney. In lieu of Mr. Hackney’s participation in the 2013 AIP, he received a sign-on bonus in an amount equal to his annual base salary adjusted by the number of days employed during 2013, plus $150,000, payable within 30 days of the effective date of his employment. A description of the potential payments and benefits that Mr. Hackney is entitled to upon his termination under the 2013 CEO Agreement is set forth below in “—Potential Payments Upon Termination or Change in Control.”

Employment Agreement with Mr. Norman

On January 28, 2011, in connection with the Merger, PGI Group entered into an employment agreement with Mr. Norman to serve as our Chief Financial Officer (the “2011 CFO Agreement”). The employment agreement initially entitled Mr. Norman to receive annual base compensation of $349,830 and an annual target bonus of 55% of his base compensation, with a maximum annual bonus of 110% of his base compensation, determined based upon the achievement of performance criteria as established by our Board of Directors in consultation with the Chief Executive Officer. A description of the potential payments and benefits that Mr. Norman is entitled to upon his termination under the 2011 CFO Agreement is set forth below in “—Potential Payments Upon Termination or Change in Control.”

Employment Agreement with Mr. Hale

On January 28, 2011, in connection with the Merger, PGI Group entered into an employment agreement with Mr. Hale to serve as our Chief Operating Officer (the “2011 COO Agreement”). The employment agreement entitled Mr. Hale to annual base compensation of $415,000 and an annual target bonus of 55% of his base compensation, with a maximum annual bonus of 110% of his base compensation, determined based upon the achievement of performance criteria as established by our Board of Directors in consultation with the Chief Executive Officer.

PGI Group and Mr. Hale entered into an amendment to the 2011 COO Agreement on June 14, 2012 (the “2012 COO Amendment”). The 2012 COO Amendment changed Mr. Hale’s title from Chief Operating Officer

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to Senior Vice President, Global Supply Chain Lead. In addition, the 2012 COO Amendment reduced Mr. Hale’s annual base salary from $431,600 to $275,002 effective June 14, 2012. As a result of the transition of his responsibilities, the 2012 COO Amendment also provided for a monthly payment of $13,050 (the “Transition Compensation”) for the period from May 1, 2012 to December 31, 2013 (the “Transition Period”).

For Mr. Hale, the 2012 COO Amendment also modified his bonus opportunity. Mr. Hale’s annual target bonus for his base compensation was lowered from 55% to 40% of his base compensation earned, with a maximum bonus opportunity equal to 80% of his base compensation. As a result of the transition of his responsibilities, the 2012 COO Amendment also provided for a transition bonus opportunity equal to the sum of (1) a target of 15% up to a maximum of 30% of his base compensation earned, and (2) a target of 55% up to a maximum of 110% of the Transition Compensation earned for each fiscal year or portion thereof during the Transition Period.

On July 8, 2013, Mr. Hale accepted the position of Senior Vice President and Advisor to Chief Executive Officer, effective July 1, 2013. Other than the change in title and role, all of the terms and conditions of his 2012 COO Amendment remained as indicated. However, the Company agreed to certain modifications to his option awards as described below in “—Awards Under the Holdings Plan—Additional Option Award Modifications.” On July 9, 2013, Mr. Hale notified the Company that he would be retiring from the Company on January 31, 2014. A description of the payments and benefits that Mr. Hale is entitled to under the 2011 COO Agreement, as amended by the 2012 COO Amendment, is set forth below in “—Potential Payments Upon Termination or Change in Control.”

Awards Under the Holdings Plan

Upon consummation of the Merger, we adopted the Holdings Plan for our employees, directors, and certain other service providers and independent contractors. All equity-based awards received by our named executive officers were granted under, and subject to the terms of, the Holdings Plan.

Of the initial options to purchase shares of the Company granted in connection with the Merger (and prior to the amendments discussed below), one-third vested based on the passage of time, one-third vested based on the achievement of certain annual performance goals established by our Board of Directors, and one-third vested based on the achievement of cumulative investment returns by Blackstone upon exiting its investment in the Company which satisfy both a total return on investment hurdle and an internal rate of return hurdle of 20%, in all cases generally subject to the holder’s continued employment through the applicable vesting date.

During 2013, our Board of Directors reviewed the historical and projected financial performance of the Company in regard to the satisfaction of the performance-vesting options and exit-vesting options. Under the then-current vesting conditions, a performance-based option would become vested if certain free cash flow targets were achieved in either a given fiscal year or based on cumulative targets over multiple fiscal years. As none of these targets had been achieved since the date of grant with respect to any outstanding performance-vesting options and, based on recent performance, were not expected to be satisfied in the next several years, we decided to commence an offer to all eligible option holders, including each of the named executive officers (other than Messrs. Hackney and Murash), to modify the terms of all performance-vesting and exit-vesting options. All of the eligible option holders elected to participate and, as a result, on August 30, 2013, the vesting terms for all performance-vesting options were modified to vest on terms similar to the existing exit-vesting options. In addition, the required annual internal rate of return for both the existing exit-vesting options and the modified performance-vesting options was reduced from 20% to 15%.

During 2014, the Company granted options to Messrs. Murash, Tracey and Rikard. One-third of the options are time-vesting options and two-thirds of the options are exit-vesting options.

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Vesting Terms of Option Awards

The following describes the general terms of the options granted to our named executive officers. The terms and vesting conditions are as of December 31, 2014 and reflect the modified vesting terms approved on August 30, 2013 described above.

•

Time-Vesting Options. Other than with respect to the time-vesting options granted to Messrs. Murash, Tracey and Rikard in fiscal 2014, which vest in two equal annual installments on each of the first two anniversaries of the applicable vesting reference dates, the time-vesting options vest in five equal annual installments beginning on the respective grant date, subject to the executive’s continued employment with us. These options will become fully vested upon a change in control that occurs during his or her employment with us, or during the 90 days following terminations of his or her employment without “cause” or with “good reason” or due to death or “disability” (as such terms are defined in the option award agreement or the Holdings Plan, as applicable). In addition, if the executive’s employment is terminated (1) by us without cause, (2) by the executive as a result of his or her resignation with good reason or (3) as a result of the executive’s death or disability, an additional number of these time-vesting options will vest equal to the number that would have vested over the 12-month period following the applicable termination date. Any other time-vesting options that remain unvested on termination of employment or do not vest as described above will be forfeited.

•

Exit-Vesting Options. The exit-vesting options will vest on the date, if ever, that Blackstone receives cash proceeds from its investment in the Company aggregating in excess of 2.0 times Blackstone’s cumulative invested capital in the Company’s securities, and such cash proceeds also result in an annual internal rate of return of at least 15% on its cumulative invested capital in the Company’s securities, subject to her or his continued employment with us through such date. In addition, if an executive’s employment is terminated (1) by us without cause, (2) by the executive as a result of her or his resignation with good reason or (3) as a result of the executive’s death or disability, the exit-vesting options will remain outstanding and eligible to vest for 12 months following the applicable termination date. Any other exit-vesting options that remain unvested on termination of employment or do not vest as described above will be forfeited.

•

Post-Termination Exercise Rights. Any part of a named executive officer’s stock option award that is vested upon termination of employment by us without cause or by the executive with good reason will generally remain outstanding and exercisable for 90 days after termination of employment (or, if later, until the 90th day following the date on which the options vest), although this period is extended to one year (or, if later, the first anniversary of the date on which the option vests) if the termination of employment is due to death or disability, and is shortened to 10 days if the named executive officer resigns without good reason. Vested options will immediately terminate if the named executive officer’s employment is terminated by us for cause or if the named executive officer violates any of the restrictive covenants described below.

Additional Option Award Modifications

In connection with Mr. Hale’s change in position from Senior Vice President, Global Supply Chain Leader to Senior Vice President and Advisor to the Chief Executive Officer, pursuant to a letter agreement dated as of July 3, 2013, the Company agreed to modify Mr. Hale’s option awards to provide that any unexercised time-vesting options vested upon a termination of employment will remain exercisable until the earlier of (1) the expiration date of the options or (2) such earlier date that he engages in a “competitive activity”, which is defined as providing services to one of our competitors at any time (regardless of whether the conduct would violate a restrictive covenant) or otherwise breaches any restrictive covenant. In addition, we agreed to waive any call rights with respect to any shares of Company stock acquired by Mr. Hale upon exercise of his vested stock options, unless Mr. Hale breaches any restrictive covenant.

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Mr. Hackney 2013 Awards

In connection with Mr. Hackney’s appointment as President and Chief Executive Officer, effective as of June 19, 2013, we granted Mr. Hackney 6,000 options (including 2,000 time-vesting options and 4,000 exit-vesting options) and 3,000 Restricted Stock Units under the Holdings Plan. The vesting terms of the time and exit-vesting options are the same as the vesting terms of the options previously granted to our other named executive officers, as modified and as described above. Under the Holdings Plan, the Restricted Stock Units will become vested and will be settled in shares of our common stock on the earlier of (1) the third anniversary of the date of grant and (2) termination of Mr. Hackney’s employment without “cause”, for “good reason”, or as result of death or “disability” (as such terms are defined in the restricted stock unit award agreement or the Holdings Plan, as applicable). Dividend equivalent shares will accrue if dividends are paid on our common stock and will vest proportionately with the Restricted Stock Units to which they relate. In the event that Mr. Hackney is terminated by the Company for cause or by Mr. Hackney while grounds for cause exist, all Restricted Stock Units granted (whether or not then vested) as well as any accrued dividend equivalent shares will be forfeited. In the event of a change in control, all Restricted Stock Units granted (whether or not then vested) shall be distributed to Mr. Hackney effective as of immediately prior to the change in control.

Additional Terms of Equity-Based Awards

•

Call Rights. As a condition to purchasing shares of the Company (which was a condition to receiving equity-based awards at the time of the Merger), or as a condition to exercising any stock option, each named executive officer was required to enter into a management equity subscription agreement under the Holdings Plan with the Company. These agreements generally govern the named executive officer’s rights with respect to any common stock of the Company acquired on exercise of vested stock options or settlement of Restricted Stock Units, to the extent applicable. Under the subscription agreement, the Company and Blackstone have rights to repurchase any shares a named executive officer may have acquired upon exercise of his options or settlement of Restricted Stock Units, to the extent applicable. Specifically, if (1) the executive’s employment is terminated by us with “cause”, (2) the executive terminates employment when grounds for a termination with “cause” exist, (3) the executive commenced employment after the Transactions and terminates employment without “good reason” prior to the third anniversary of their hire date, or (4) the executive violates a restrictive covenant (as described below), then the Company and Blackstone have the right for a specified period following the applicable event to cause the executive (or her or his permitted transferees) to sell to us all shares held by her or him at the lesser of fair market value thereof and cost. For any shares so repurchased, this means any increase in value will effectively be forfeited.

•

Restrictive Covenants and Clawback. As a condition of receiving their equity-based awards, our named executive officers have also agreed to certain restrictive covenants, which are contained in the award agreements pursuant to which the options or Restricted Stock Units, as applicable, were granted and are in addition to any other restrictive covenants agreed to by our named executive officers. While employed and for 12 months following their termination of employment (or such longer period as the executive is eligible to receive severance payments pursuant to any other written agreement with the Company or its affiliates), named executive officers are prohibited from competing with us and from soliciting our employees and customers. The award agreements also contain covenants on the rights to work product and an indefinite restriction on the named executive officer’s disclosure of our confidential information. As described above, we have the right to purchase our named executive officers’ shares of our common stock in the event of a breach of these restrictive covenants during the periods covered by the restrictive covenants. In addition, if a named executive officer breaches any of these restrictive covenants or the Company determines after termination that grounds for a termination for cause existed, we have the right to “clawback” and recover any gains the named executive officer may have realized with respect to his or her awards or any shares issued in respect thereof.

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2014 Outstanding Equity Awards at Fiscal Year-End

The following table presents information regarding outstanding equity awards held by named executive officers at the end of the 2014 fiscal year.


	Option Awards										Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)		Equity Incentive Plan Awards; Number of Securities Underlying Unexercised Unearned Options (#) (2)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)(3)		Market Value of Shares or Units That Have Not Vested ($)(4)		Equity Incentive Plan Awards; Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)
Mr. Hackney		400.000		1,600.000		4,000.000	$	1,000		6/19/2023		3,000.000		3,000,000		—		—
Mr. Norman		452.172		301.448		1,507.240		1,000		1/28/2021		—		—		—		—
Mr. Murash		—		600.000		1,200.000		1,000		2/05/2024		—		—		—		—
Mr. Tracey		—		33.333		66.667		1,000		2/05/2024		—		—		—		—
		32.608		65.216		195.646		1,000		4/01/2023
		33.334		33.336		133.330		1,000		6/21/2022
		141.306		94.204		471.020		1,000		1/28/2021
Mr. Rikard(5)		113.046		—		—		1,000		1/28/2021		—		—		—		—
Mr. Hale(6)		452.172		—		—		1,000		1/28/2021		—		—		—		—

(1)

The vesting dates of the time-vesting options are set forth below. In addition, as described in “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Awards under the Holdings Plan” above and “—Potential Payments Upon Termination or Change in Control” below, all or a portion of each time-vesting option grant may vest earlier in connection with a change in control or certain terminations of employment.


	Mr. Hackney		Mr. Norman		Mr. Murash		Mr. Tracey		Mr. Rikard		Mr. Hale
January 20, 2015		—		—		300.000		—		—		—
January 28, 2015		—		150.724		—		47.102		—		—
February 5, 2015		—		—		—		16.666		—		—
April 19, 2015		—		—		—		32.608		—		—
May 1, 2015		—		—		—		16.668		—		—
June 19, 2015		400.000		—		—		—		—		—
January 20, 2016		—		—		300.000		—		—		—
January 28, 2016		—		150.724		—		47.102		—		—
February 5, 2016		—		—		—		16.667		—		—
April 19, 2016		—		—		—		32.608		—		—
May 1, 2016		—		—		—		16.668		—		—
June 19, 2016		400.000		—		—		—		—		—
June 19, 2017		400.000		—		—		—		—		—
June 19, 2018		400.000		—		—		—		—		—

Total		1,6000.000		301.448		600.000		226.089		—		—

(2)	Reflects unvested outstanding exit-vesting options which ordinarily become vested as described in “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Awards Under the Holdings Plan” above.

(3)

Mr. Hackney’s Restricted Stock Units vest on June 19, 2016, the third anniversary of the date of grant. In addition, as described in “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Awards Under the Holdings Plan” above and “—Potential Payments Upon Termination or Change in Control” below, the Restricted Stock Units may vest earlier upon in connection with a change in control or certain terminations of employment.

(4)	Based upon a market value of the Company’s common stock of $1,000 per share as of December 31, 2014.

(5)

As described in “—Elements of Compensation—Termination Benefits” above and “—Potential Payments Upon Termination or Change in Control” below, in connection with Mr. Rikard’s resignation, the Company agreed to modify his option awards to provide that all of his remaining time-vesting options that were vested upon his departure date will remain exercisable until the earlier of (1) the expiration date of the options or (2) such earlier date that he breaches any restrictive covenant. All other time-vesting and exit-vesting options that were not vested upon his departure were immediately forfeited.

144

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

PGI Specialty Materials, Inc. S-1/A