UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549

FORM 10-K

OR

Commission File Number 000-23938

INTERNATIONAL TEXTILE GROUP, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (336) 379-6299

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, par value $.01 per share

(Title of Class) 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No   ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No   ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No   ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No   ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (based upon the assumption, solely for purposes of this computation, that W.L. Ross & Co. LLC and its affiliates (the majority stockholders of the Company) and all of the officers and directors of the registrant were affiliates of the registrant) as of the last business day of the registrant’s most recently completed second fiscal quarter was $696,271.

The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, as of March 15, 2015, was 17,468,327.

DOCUMENTS INCORPORATED BY REFERENCE: 

NONE

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are statements that are not historical in nature, and may relate to predictions, current expectations and future events. Forward-looking statements may include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “continue,” “likely,” “target,” “project,” “intend,” or similar expressions. Readers are cautioned not to place undue reliance on such forward-looking statements, as they involve significant risks and uncertainties.

Forward-looking statements are inherently predictive and speculative and are not a guarantee of performance. No assurance can be given that any such statements, or the results predicted thereby, will prove to be correct. All forward-looking statements are based on management’s current beliefs and assumptions, such as assumptions with respect to general economic and industry conditions, cost and availability of raw materials, the ability to maintain compliance with the requirements under various credit facilities, national and international legislation and regulation, and potential financing sources and opportunities, among others, all of which in turn are based on currently available information and estimates. Any of these assumptions could prove inaccurate, which could cause actual results to differ materially from those contained in any forward-looking statement.

In addition to changes to the underlying beliefs and assumptions, developments with respect to important factors including, without limitation, the following, could cause our actual results to differ materially from those made or implied by any forward-looking statements:

Forward-looking statements also make assumptions about risks and uncertainties. Many of these factors are beyond the Company’s ability to control or predict and their ultimate impact could be material. Further, forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.

PART I

ITEM 1.     BUSINESS

Company Overview

Business

International Textile Group, Inc. (“ITG”, the “Company”, “we”, “us” or “our”) is a global, diversified textile manufacturer headquartered in Greensboro, North Carolina, with operations in the United States, Mexico, and China. The Company believes it is one of the world’s largest and most diversified producers of denim fabrics and the largest producer of better denim fabrics for products distributed through department stores and specialty retailers. In addition, the Company believes it is one of the largest worsted wool manufacturers and commission printers and finishers in North America, and is a leading developer, marketer and manufacturer of performance synthetic apparel fabrics, automotive safety fabrics, technical and value added fabrics, contract fabrics for interior furnishings, and other textile products used in a variety of niche industrial and commercial applications. ITG’s long-term focus includes realizing the benefits of its global expansion, including reaching full production at the Company’s facilities in China, as described below.

The Company, a Delaware corporation incorporated in 1994, was formerly known as Safety Components International, Inc. (“SCI”). The Company combined with a company formerly known as International Textile Group, Inc. (“Former ITG”) in October 2006 (the “Merger”) in a negotiated transaction. Upon completion of the Merger, SCI changed its name to “International Textile Group, Inc.”

Former ITG was formed in August 2004 by certain entities affiliated with Wilbur L. Ross, Jr., our controlling stockholder and who served as the Chairman of our Board of Directors until November 2014 (“WLR”), to consolidate the businesses of leading textile and fabric manufacturers, including Burlington Industries, Inc. (a manufacturer of textile products for apparel and interior furnishing products) and Cone Mills Corporation (a manufacturer of textile products, primarily denim, for apparel and interior furnishing products).

ITG’s strategy is to be the preeminent global supplier of solution-based, value-added performance products and services for the textile supply chain. Combined with capabilities in the U.S., Mexico and China, the Company’s facilities are a key part of the Company’s comprehensive global supply chain solution that is intended to allow the Company to seamlessly supply products and related services to customers worldwide. We believe geographically aligning with our customers is a critical component of our success.

Products and Segments

The Company is organized and managed primarily according to product categories and manufacturing processes rather than by markets or end-use customers. The Company currently has four operating segments that are reported to the chief operating decision maker (“CODM”) and three reportable segments that are presented herein. The reporting of the Company’s operations to the CODM in four segments is consistent with how the Company is managed and how resources are allocated by the CODM.

Bottom-weight Woven Fabrics

The bottom-weight woven fabrics segment includes heavy weight woven fabrics with a high number of ounces of material per square yard. The Company produces apparel fabrics (including denim, cotton, synthetic and worsted) for use in garments, typically bottoms (i.e., pants or shorts). Demand for apparel fabric generally arises, directly or indirectly, from apparel wholesalers and retailers. Generally, wholesalers and retailers do not manufacture garments themselves, but instead they use “cut and sew” contractors who convert apparel fabric into finished garments. When an apparel wholesaler or retailer contracts for finished garments from the cut and sew contractors, they will usually specify which fabric manufacturers’ product is to be used. The cut and sew contractor then purchases apparel fabric directly from the designated fabric manufacturer.

Through its Cone Denim business unit, the Company manufactures and markets a wide variety of denim apparel fabrics for the global jeanswear market. Denims are generally “yarn-dyed,” which means that the yarn is dyed before the fabric is woven. The result is a fabric with variations in color that give denim its distinctive appearance. Denim fabrics are marketed under the Cone Denim® brand name to the premium and vintage jeanswear markets, where styling and innovation are important factors, as well as to the fashion and better basic jeanswear markets, where pricing is more important. The Company’s product developers and designers work directly with customers to provide differentiated denim products. In addition to a focus on product development, Cone Denim provides differentiated solutions to customers through its global network of plants and commercial ventures. This allows the Company to offer superior denim products to internationally known jeanswear brands and retailers who are seeking to differentiate themselves based on fashion, lifestyle branding and superior supply chain management.

Worsted and synthetic fabrics are marketed under the Burlington® WorldWide and Raeford® Uniform brand names. Worsted fabrics include 100% wool and wool blended fabrics primarily targeted at branded men’s apparel customers and the uniform career apparel trade. Worsted fabrics marketed under the Burlington WorldWide brand name are also produced for the military dress uniform business. The Company believes it is the largest producer of worsted fabrics for products produced for the U.S. military and fabrics protected by the Berry Amendment legislation, which generally requires that U.S. military uniform fabric be manufactured in the United States. Synthetic fabrics include 100% polyester, nylon and polyester blended fabrics with wool, rayon and lycra. These products are targeted for the production of men’s and women’s apparel, performance activewear and uniform career apparel. The Company also produces technical and value added fabrics used in a variety of niche industrial and commercial applications including highly engineered materials used in numerous applications and a broad range of industries, such as fire service apparel, ballistics materials, filtration, military fabrics and outdoor awnings and covers.

The Company owns and operates a dyeing and finishing plant in China, which supports the Company’s synthetic apparel business, primarily for customers who cut garments in the Eastern hemisphere. Targeted areas of growth for this plant include expansion of the protective barrier fabrics business as well as the activewear business in both the U.S. and Europe, increased commission processing of apparel and interior furnishings fabrics for other Chinese mills, and increased market share in the men's apparel business.

Through its automotive safety business, the Company produces automotive airbag fabrics, which are components of airbag modules. Component manufacturers such as the Company that sell their products to airbag module integrators are generally referred to as Tier 2 suppliers to the automotive industry. Airbag module integrators, which sell complete airbag modules to automobile manufacturers, are generally referred to as Tier 1 suppliers to the automotive industry. Tier 1 suppliers generally produce a majority of the components required for a complete airbag module, but outsource varying portions of non-proprietary components, such as airbag fabric and airbag cushions, to Tier 2 suppliers that specialize in the production of individual airbag components. The Company has positioned itself as one of only a limited number of independent airbag fabrics suppliers in North America, and also exports airbag fabric into Europe.

Commission Finishing

The Company manufactures fabrics for battle dress uniforms (camouflage) sold primarily to the U.S. government and to government contractors. The Company is a significant producer of military prints that are used to service the battle dress uniform business primarily for the U.S. government, but also for other governments and commercial interests. The Company believes it is one of the largest commission printers and finishers in North America. Commission textile dyeing, printing and finishing services are also provided by the Company for decorative fabrics and specialty prints. The Company’s capabilities in this business include preparation, surface enhancement, dyeing and finishing services.

All Other

The all other segment consists of operations related to transportation services and other miscellaneous items.

Discontinued Operations

On September 23, 2014, the Company completed the sale of the net assets related to Narricot Industries LLC (“Narricot”); on October 7, 2013, substantially all of the operating assets of the Company’s facility in Nicaragua (Cone Denim de Nicaragua or "CDN") were transferred to a third party in full settlement of CDN’s debt and lease financing obligations; and the Company deconsolidated all operations related to its ITG-Phong Phu Joint Venture facility in Vietnam (“ITG-PP”) as of May 25, 2012. The results of operations related to the Narricot, CDN and ITG-PP businesses are presented as discontinued operations for all periods presented in this Form 10-K. For more information regarding the sale of Narricot, the derecognition of CDN and the deconsolidation of ITG-PP, see Note 2 of the Notes to Consolidated Financial Statements.

Segment and Geographic Information

The Company generally attributes its revenues based on the shipping destination of products and attributes its long-lived assets to a particular country based on the location of the assets within each of the Company’s production facilities (see Item 2. “Properties”). The following table presents sales from continuing operations and tangible long-lived assets (including long-lived assets classified as assets held for sale) by reportable segment and geographic area as of and for the fiscal years ended December 31, 2014 and 2013 (in thousands).

Customers

The Company markets and sells its products to a diversified, worldwide customer base within the bottom-weight woven fabric, government uniform fabric, decorative fabric, automotive safety and specialty fabric and services markets. The Company markets and sells its products to leading apparel brands within the bottom-weight woven fabric market.

The Cone Denim and Burlington WorldWide divisions serve customers throughout the apparel and specialty fabric supply chains, including a variety of cut and sew contractors and apparel wholesalers and retailers. The Company believes it is a leading supplier to the world’s leading jeanswear brands. The Company also believes it is a leading supplier to the U.S. military, directly and indirectly, of worsted wool fabrics for dress uniforms and printed fabrics for battle dress uniforms. In addition, printed fabrics for battle dress uniforms are marketed through the Company’s commission finishing segment.

The Company’s business is dependent on the success of, and its relationships with, its largest customers. One customer, V.F. Corporation, accounted for approximately 10% of the Company’s consolidated accounts receivable as of December 31, 2014, and such customer accounted for approximately 10% of the Company’s consolidated net sales in 2014 and 2013, which sales were in the bottom-weight woven fabrics segment. Additionally, the Company believes that two of its customers, Levi Strauss & Co. (in the bottom-weight woven fabrics segment) and the U.S. Department of Defense (in the bottom-weight woven fabrics and commission finishing segments), are able to direct certain of their respective producers to purchase products directly from the Company for use in these customers’ products. Although neither Levi Strauss & Co. nor the U.S. Department of Defense are directly liable for the payment by any of those producers for products purchased from the Company, the Company believes that continued sales to the producers of Levi Strauss & Co. and U.S. Department of Defense products are dependent upon the Company maintaining strong supplier/customer relationships with each of Levi Strauss & Co. and the U.S Department of Defense. The loss of or reduction in business from any key customer or supplier could have a material adverse effect on the Company’s overall results of operations, cash flows or financial position.

Competition

The worldwide textile industry is highly fragmented and competitive. The industry, in certain of the Company’s segments, is characterized by low barriers to entry, many regional and local competitors and a significant number of global competitors. No single company dominates the market, and many companies compete only in limited segments of the industry. Certain of the Company’s products also compete with non-textile products. In many markets, the Company competes with large, integrated enterprises, as well as small, niche regional manufacturers. Textile competition is based in varying degrees on price, product styling and differentiation, quality, response time and customer service. The importance of each of these factors depends upon the needs of particular customers and, within certain of the Company’s segments, the degree of fashion risk inherent in the product.

Imports of foreign-made textile and apparel products, such as denim, men’s worsted wool tailored suiting fabrics, men’s and women’s synthetic active wear fabrics, and dobby fabric used in the commercial and institutional contract interior furnishings market, are a significant source of competition. While imports of textile and apparel garments from Asia have recently leveled off, the Company cannot predict the level of future imports from China, Vietnam and similar countries that may have price advantages as a result of lower labor costs and improving production and distribution facilities. Any future growth of imports could place additional competitive pressures on the Company’s U.S. and Mexican manufacturing locations. The Company has strategically located certain of its operations in China in order to, among other things, more effectively compete with lower cost producers, and believes that its geographic manufacturing diversity provides certain competitive benefits including the ability to increase lower cost production based on industry conditions.

Entry into the market for U.S. military dress uniform fabrics is greatly limited by precise product specifications established by the U.S. Department of Defense, particularly those regarding color matching. We believe the Company’s ability to meet the U.S. Department of Defense’s strict product specifications has positioned the Company as a long-standing preferred supplier under such military contracts.

The Company’s current automotive safety business generally competes with various Tier 2 suppliers for airbag fabric sales. The automotive supply market, which includes the airbag fabric business in which the Company’s automotive safety business operates, is also highly competitive. Some of the Company’s competitors may have greater financial or other resources than the Company, or may be more diversified in product offerings than the Company, although the Company believes it is well positioned to compete in this market based on its long history of providing high quality products meeting stringent technical manufacturing requirements.  

Competition in the textile industry is based on various criteria, including ability to meet stringent performance and technical requirements and similarly high ongoing quality standards, ability to develop seasonal programs and keep up with temporary and/or seasonal demand, ongoing technical and design innovation, on-time delivery, creating solutions that meet customer needs, and price. The Company is focused on creating value-added performance products and services using advanced technical and design innovations across several key businesses, and attempting to differentiate the performance of its textile products from its competitors. The Company believes that it has a strong brand heritage and certain key core competencies, including in technical product development, product quality, yarn and fabric formation, color application and color consistency, application of technology to greige fabrics, and proprietary technology transfer, all of which allow the Company to increase the breadth of its value-added product lines to customers and compete more effectively.

Raw Materials

The Company uses many types of fiber, both natural (principally cotton and wool) as well as synthetic (polyester, nylon, polypropylene, acrylic, rayon, Tencel®, Nomex, and acetate), in the manufacture of its textile fabrics. The Company sources raw materials from a range of suppliers and strives to maintain multiple relationships for all key materials. Other materials, such as dyes and chemicals, are generally available, but, as in the case of the Company’s primary raw materials, continued availability is dependent to varying degrees upon the adequacy and cost of the polymers used in production, as well as petroleum prices.

Cotton and wool are generally available from a wide variety of domestic and foreign sources. Because our customers generally do not purchase our products under long-term supply contracts, but rather on a purchase order basis, we seek to ensure that products are available to meet customer demands while effectively managing inventory levels. The Company’s bottom-weight woven fabrics segment has historically entered into firm purchase commitments for cotton and wool commodity raw materials used in the manufacture of apparel fabrics. Such non-cancellable firm purchase commitments are secured to provide the Company with a consistent supply of a commercially acceptable grade of raw materials necessary to meet expected operating requirements as well as to meet the product specifications and sourcing requirements with respect to anticipated future customer orders. Prices for cotton and wool have declined in recent periods from historical highs; however, prices continue to fluctuate. In response to higher raw material costs in the open market or under our committed purchase contracts, we have in recent periods been able to increase sales prices to some extent in order to maintain sufficient margins, and we expect to continue to attempt to increase sales prices as necessary in the future.

In August 2014, the Company sold its 50% equity interest in the Summit Yarn LLC and Summit Yarn Holdings joint ventures (together, “Summit Yarn”) to its joint venture partner, Parkdale America, LLC (“Parkdale”). The Company’s yarn purchase agreement with Summit Yarn was amended upon completion of the sale of the joint ventures to provide for a continuing long-term supply of yarn for certain of the Company’s operations. Purchases of raw materials from Summit Yarn and Parkdale were approximately $60.6 million in 2014, which purchases were in the bottom-weight woven fabrics segment.

Synthetic fibers, principally polyester, are also generally available from a wide variety of sources both domestically and abroad. However, the prices of those fibers are influenced heavily by demand, manufacturing capacity, petroleum prices and the cost of the underlying polymers. Petroleum prices have fluctuated over recent periods, and the price of the primary synthetic fibers and dyes and chemicals used in the Company’s products, nylon and polyester, is heavily influenced by petroleum prices.

If the Company incurs increased raw material or other costs that it is unable to recoup through price increases, or if decreases in raw material prices lead to downward pressures on the Company’s sales prices while higher costs remain in the Company’s inventories, or if we experience interruptions in raw materials supply, our business, results of operations, financial condition and cash flows may be adversely affected.

Employees

As of December 31, 2014, the Company employed approximately 4,650 individuals worldwide on a full time basis. The Company believes it is in compliance with federally regulated minimum wage requirements in all of its locations. Employees at the Company’s White Oak plant in the United States and at its facilities in Mexico and China are unionized. The Company has not experienced any work stoppages related to its work force and considers its relations with its employees and all unions currently representing its employees to be good.

Regulatory

The Company’s operations are subject to various product safety, environmental, employee safety, wage, and transportation-related statutes and other U.S. and foreign governmental regulations. The Company believes that it is in substantial compliance with existing laws and regulations and has obtained or applied for the necessary permits to conduct its business operations.

As a provider of textile products internationally, the sale of the Company’s products is subject to various regulations governing trade among countries. The Company seeks to maximize the benefits that may be achievable under trade laws of various countries. For example, under the North American Free Trade Agreement, or NAFTA, entered into between the United States, Mexico and Canada, there are no textile or apparel quotas between the United States and either Mexico or Canada for products that meet certain origin criteria. Because the Company is an apparel fabrics manufacturer and a resident, diversified textile product manufacturer in Mexico, the Company believes that NAFTA is generally advantageous to the Company. Generally, trade agreements such as NAFTA affect the Company’s business by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country. However, trade agreements can also impose requirements that limit the countries from which ITG can purchase raw materials and set quantitative limits on products that may be imported from a particular country.

The Berry Amendment, enacted in 1941, is one of multiple statutes that impose “domestic source” requirements on products used in government procurement contracts. The Berry Amendment, in pertinent part, requires the Department of Defense, or DOD, to purchase only domestically produced apparel and fabrics. Under the requirement, these items must be made with 100% U.S. content and labor. The DOD may waive the Berry Amendment requirement and purchase foreign made goods under certain circumstances, such as “emergency” acquisitions or when U.S.-origin products are unavailable. The Kissell Amendment of the American Recovery and Reinvestment Act, passed in February 2009 and modeled after the Berry Amendment, has expanded the U.S.-origin requirements to certain products purchased by the U.S. Department of Homeland Security. The Kissell Amendment applies to government procurement of uniforms and other textiles for the Transportation Security Administration, the U.S. Coast Guard, the U.S. Customs and Border Patrol, Immigration and Customs Enforcement, and the Secret Service. In addition to the Berry and Kissell Amendments, the U.S. military fabric market is supported by the Buy American Act which was passed in 1933 and requires the U.S. government to prefer U.S-made products in its purchases. The United States and other countries in which the Company’s products are manufactured and sold may impose new duties or tariffs, change standards for the classification of products or implement other constraints or restrictions. Management monitors developments and risks related to duties, tariffs, quantitative limits and other trade-related matters pending with the U.S. and foreign governments.

Customers of the automotive safety business often require the Company’s products to meet specific requirements for design validation. In such instances, the Company and its customers typically jointly participate in design and process validations and customers have reliability and performance criteria which must be met prior to qualifying suppliers and awarding a purchase order. The Company also performs process capability studies and designs experiments to determine whether the manufacturing processes meet or exceed the quality levels required by each customer. In addition, certain customers in the Company’s other businesses require or request stringent compliance with various guidelines related to, among others, labor, employee health and safety, legal, ethical, consumer safety, environmental and other corporate social responsibility issues. The Company’s practices under such programs have been well received to date.

Environmental

The Company’s operations and properties are subject to a wide variety of environmental laws. Such laws may impose joint and several liability for violations or environmental clean-up responsibilities, and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessor as well as to conditions of properties at which wastes or other contamination attributable to an entity or its predecessor have been sent or otherwise come to be located. The nature of the Company’s operations expose it to the risk of claims with respect to such matters and there can be no assurance that violations of such laws have not occurred or will not occur or that material costs or liabilities will not be incurred in connection with such claims. Asbestos materials are present at certain of the Company’s facilities, and applicable regulations would require the Company to handle and dispose of these items in a special manner if these facilities were to undergo certain major renovations or if they were demolished. The Company expects to maintain these facilities by repair and maintenance activities that do not involve the removal of any of these items and has not identified any need for major renovations caused by technology changes, operational changes or other factors. The Company believes that it currently is in compliance with applicable environmental regulations in all material respects. However, future events, such as new information, changes in existing environmental laws or their interpretation, or more vigorous enforcement policies of regulatory agencies, may give rise to additional required expenditures or liabilities that could be material. Although no assurances can be given in this regard, in the opinion of management, no material expenditures beyond those accrued are expected to be required for the Company’s environmental control efforts and the final outcomes of these matters are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Research and Development

The Company is committed to research and development of new products, product and process improvements, and improving the quality of its existing products. These efforts are primarily channeled toward improving the quality, styling and performance of its fabrics and related products. The Company’s research and development costs were approximately $6.2 million and $6.6 million in 2014 and 2013.

Both Burlington WorldWide and Cone Denim have a history of research and development projects which have resulted in new products such as denim fabrics with unique appearances, and specialty fabrics with performance characteristics such as increased flexibility without compromising comfort, moisture wicking and stain repellency, and fabric with fire retardant properties. The Company’s Burlington Labs group, which is a part of the bottom-weight woven fabrics segment, works with technology vendors to develop new fabric innovations in exchange for exclusivity commitments from these vendors on new products and to explore and develop proprietary technologies exclusive to Burlington WorldWide, including chemical formulations, fiber enhancements and fabric processing applications designed to lead to new fabric innovations. These innovations include odor absorption, insect repellency, flame retardancy, moisture wicking for a lasting cooling sensation, increased fabric flexibility, and sun protection properties woven into fabrics, without compromising comfort, hand aesthetics or appearance. These products are generally used in activewear and military apparel as well as in hospitals and home fashions. Cone Denim is recognized worldwide for value-added product innovation and market forward fashion, and its Cone 3D group is engaged in a number of new proprietary product development efforts intended to further expand the Company’s value-added product line. The innovation efforts of Cone 3D are focused in the areas of performance, comfort, uniqueness, and sustainability by identifying new fibers and raw materials, incorporating distinctive fiber blends and fabric constructions, and engineering unique process technologies, all supported by sustainable practices. For example, Cone Denim’s recent development efforts have resulted in ultra-high molecular weight fiber that offers increased strength and durability with minimum weight, and Cone 3D has been qualified to offer final product recycled bottle content certification to end users.

Intellectual Property

The Company maintains a portfolio of patents, trade secrets, trademarks and copyrights. The Company and its affiliates hold a number of patents that relate to technical improvements, and the enhancement of product performance, with respect to airbag fabric and technical related products, which will expire at various times in the future. The Company also has several registered trademarks for brand names for some of its technical fabrics. While the Company’s intellectual property portfolio is an important Company asset, neither its business as a whole nor any particular segment is materially dependent upon any one particular patent, trademark, copyright, or trade secret. As the laws of many countries do not protect intellectual property to the same extent as the laws of the United States, the Company cannot provide assurances that it will be able to adequately protect its intellectual property assets outside of the United States. The failure to protect our intellectual property assets could have a material adverse effect on our business.

The Company engages in both active and passive branding in its various business segments, and seeks to leverage the heritage and authenticity of its established, widely-recognized brands and brand names, including Cone Denim®, Burlington House® and Burlington® in its bottom-weight woven fabrics segment, as well as its Raeford® Uniform brand name in its bottom-weight woven fabrics and government uniform fabrics.

Restructuring Activities

The Company continues to examine its manufacturing operations and evaluate opportunities to reconfigure manufacturing and supply chain operations with a focus on operational improvements and cost reductions, as well as seek appropriate opportunities to reduce the Company’s general and administrative expenses. The Company also continuously evaluates opportunities to restructure operations in an effort to better align its manufacturing base with long-term opportunities and increase return on investment. Management continuously evaluates the financial and operating results of our various businesses, and may seek to take various actions, including transferring operations, closing plants, idling operations or disposing of assets from time to time in order to respond to changing economic circumstances and to improve the Company’s overall liquidity and financial results.

Restructuring Activities in the Bottom-weight Woven Fabrics Segment

Hourly and salaried workforce reductions of 53 employees undertaken at our worsted wool fabric manufacturing facility in Mexico resulted in severance and other termination benefits of $0.1 million being recorded in 2014 in the bottom-weight woven fabrics segment. These workforce reductions were primarily attributable to the outlook for lower product demand at this facility. Restructuring recoveries in 2013 were due to the expiration of COBRA benefits of $0.1 million primarily related to employees at the U.S. denim facility.

Restructuring Activities in the Commission Finishing Segment

Beginning in the second quarter of 2012, workforce reductions of mostly hourly employees have been made at the Company’s commission finishing facility primarily as a result of the Company’s ongoing cost saving initiatives as well as the outlook for lower product demand in certain of the segment’s government contract businesses. Workforce reductions of 27 employees were made at the commission finishing facility resulting in severance and other termination benefits of $0.1 million in 2013.

Other Restructuring Activities

In April 2014, the Company implemented an initiative to reduce its corporate administrative cost structure. Because the Company’s size, complexity and business structure has decreased in recent years, the Company’s board of directors determined that cost savings could be achieved with the restructuring of the Company’s executive structure. As a result of this restructuring, the Company and one of its executive officers entered into an agreement in April 2014 that provides certain benefits through December 30, 2017. Such benefits and other related corporate costs in the aggregate amount of $3.0 million were recorded in 2014.

ITEM 2.      PROPERTIES

The Company’s corporate headquarters are located in Greensboro, North Carolina in a facility that is leased by the Company, and the Company owns all of its manufacturing facilities. The Company believes all facilities and machinery and equipment are in good condition and are suitable for the Company’s needs. The Company’s principal manufacturing and distribution facilities at December 31, 2014 are listed below:

PRINCIPAL PROPERTIES

____________

ITEM 3.     LEGAL PROCEEDINGS

In the ordinary course of business and from time to time, we are involved in various pending or threatened legal proceedings. The Company may also be liable for environmental contingencies with respect to environmental cleanup activities. We cannot predict with certainty the outcome of any legal or environmental proceedings to which we are, or are threatened to become, a party. In our opinion, however, adequate liabilities have been recorded for losses that are probable to result from presently known and expected legal proceedings and environmental remediation requirements and are reasonably estimable. If such liabilities prove to be inadequate, however, it is reasonably possible that we could be required to record a charge to our earnings that could be material to our financial condition, results of operations and cash flows in a particular future period.

As previously disclosed, the Company was a party, as a nominal defendant only, to a consolidated class action lawsuit and related derivative action (together, the “Consolidated Action”), which consolidated three factually identical lawsuits filed in 2008 and 2009 under the caption In re International Textile Group, Inc. Merger Litigation, in the Court of Common Pleas, Greenville County, South Carolina (the “Court”), C.A. No. 2009-CP-23-3346. The Consolidated Action related to the combination of the Company, which at the time was named Safety Components International, Inc., and a company formerly known as International Textile Group, Inc. (“Former ITG”), which occurred in late 2006 (the “Merger”). The Consolidated Action named as defendants, among others, certain individuals who were officers and directors, and certain stockholders, of Former ITG or the Company at the time of, and an entity which was an independent financial advisor to the Company in connection with, the Merger (the “Non-Company Defendants”). The plaintiffs in the Consolidated Class Action contended that certain of the Non-Company Defendants breached certain fiduciary duties, and have also made related claims, in connection with the Merger.

The Company, as a nominal defendant, the plaintiffs and the Non-Company Defendants entered into a Stipulation and Settlement Agreement (the “Settlement Agreement”) relating to the Consolidated Action, which was approved by the Court on August 29, 2014 and is no longer subject to appeal. Pursuant to the Settlement Agreement, and in settlement of the Consolidated Action, (i) certain of the Non-Company Defendants made an aggregate $36.0 million cash payment (the “Cash Settlement”), consisting of a $16.0 million cash payment from the independent financial advisor and its insurers and a $20.0 million cash payment from other Non-Company Defendants and their insurers, (ii) $21.9 million in principal and accrued interest of the Company’s senior subordinated notes held by certain affiliates of the Company (the “Affiliates”), (which are designated as “senior subordinated notes—related party, including PIK interest” on the Company’s balance sheets and had a maturity date of June 6, 2015), were cancelled, together with all additional interest that accrued on such notes from December 31, 2013 through August 29, 2014 (collectively, the “Cancelled Notes”), and (iii) 10,315,727 shares of the Company’s Series A Preferred Stock, having a liquidation value of $257.9 million as of December 31, 2013, and 11,488 shares of the Company’s Series C Preferred Stock, having a liquidation value of $11.5 million as of December 31, 2013, in each case together with additional shares of Series A Preferred Stock and Series C Preferred Stock that accrued in arrears with respect to such shares through August 29, 2014 (collectively, the “Cancelled Preferred Stock”), all of which are held by the Affiliates, were cancelled on the effective date of the Settlement Agreement.

As a result of the approval by the Court of the Settlement Agreement, the Cancelled Notes and the Cancelled Preferred Stock were cancelled, and the Company’s respective obligations, and the Affiliates’ respective rights, thereunder were terminated, effective as of December 31, 2013. Such cancellations reduced the Company’s long-term debt and stockholders’ deficit by the amount of the Cancelled Notes, and reduced the aggregate liquidation value of the Series A Preferred Stock and the Series C Preferred Stock by the respective values of the Cancelled Preferred Stock. In 2014, the Company reversed $1.4 million of PIK interest expense that had been recorded through the six months ended June 30, 2014 related to the Cancelled Notes. In accordance with the Settlement Agreement, the Company received $3.8 million of cash from the Cash Settlement for use by the Company to pay fees and expenses of various legal and other advisors in connection with the Consolidated Action. Such amount was received in October 2014 and included in “Other income (expense) – net” in its consolidated statement of income for 2014.

Primarily as a result of its production of automotive safety products, the Company is engaged in a business that could expose it to possible claims for injury resulting from the failure of its products. To date, however, the Company has not been named as a defendant in any automotive product liability lawsuit, nor has it been threatened with any such lawsuit. The Company maintains product liability insurance coverage, which management believes to be adequate. However, a claim brought against the Company resulting in a product recall program or a final judgment in excess of its insurance coverage could have a material adverse effect on the Company.

Not applicable.

PART II

The Company’s common stock is quoted on the OTC Markets Group Inc. over-the-counter “OTCQB” marketplace tier under the symbol “ITXN.” The OTCQB marketplace tier includes securities of companies in the OTC Markets Group Inc. electronic quotation system that are registered and current in their reporting with the applicable regulatory authority, such as the SEC. As a result of the significant concentration of stock ownership by affiliates of WLR, as described elsewhere herein, there is only a limited public trading market in the Company’s common stock. There can be no assurances that an active trading market in the Company’s common stock will develop and, if it does develop, will be sustained. The following table sets forth the range of high and low bids on the common stock during each quarter within the years ended December 31, 2014 and 2013, respectively, as reported by the OTC Markets Group Inc. The prices in the table reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

As of February 28, 2015, there were approximately 350 holders of record of the Company’s common stock.

To date, the Company has not paid any cash dividends to its stockholders and does not currently have plans to do so in the foreseeable future. The Company intends to use earnings to fund its significant debt repayment obligations. Further, the Company’s various credit agreements (as described below) and certain other agreements by which the Company is bound may, from time to time, restrict the Company’s ability to pay dividends.

Equity Compensation Plan Information

In connection with the Merger, the Company assumed the Equity Incentive Plan (the “Equity Incentive Plan”) and the Stock Option Plan for Non-Employee Directors (the “Directors’ Plan”) of Former ITG. No further grants of equity awards are authorized to be made under either of these plans. As of December 31, 2014, a total of 189,025 and 33,587 shares may be issued under outstanding awards at a weighted average exercise price of $10.10 under each of the Equity Incentive Plan and the Directors’ Plan, respectively.

On April 1, 2008, the board of directors approved the Company’s 2008 Equity Incentive Plan (the “2008 Equity Plan”). Effective as of June 9, 2008, the stockholders of the Company approved and ratified the adoption of the 2008 Equity Plan. A total of 3,000,000 shares of the Company’s common stock and 1,000,000 shares of Series B convertible preferred stock (the “Series B Preferred Stock”) have been reserved for issuance under the 2008 Equity Plan. There have been no awards issued under the 2008 Equity Plan.

Overview 

Our Company

International Textile Group, Inc. (“ITG,” the “Company,” “we,” “us” or “our”) is a global, diversified textile manufacturer headquartered in Greensboro, North Carolina, with operations principally in the United States, Mexico, and China. The Company believes it is one of the world’s largest and most diversified producers of denim fabrics and the largest producer of better denim fabrics for products distributed through department stores and specialty retailers. In addition, the Company believes it is one of the largest worsted wool manufacturers and commission printers and finishers in North America, and is a leading developer, marketer and manufacturer of other fabrics and textile products.

The Company is organized and managed primarily according to product categories and manufacturing processes rather than by markets or end-use customers. The Company currently has four operating segments that are reported to the chief operating decision maker (“CODM”) and three reportable segments that are presented herein. The bottom-weight woven fabrics segment consists of heavy weight woven fabrics with a high number of ounces of material per square yard, including woven denim fabrics, synthetic fabrics, worsted and worsted wool blend fabrics used for government uniform fabrics for dress U.S. military uniforms, airbag fabrics used in the automotive industry, and technical and value added fabrics used in a variety of niche industrial and commercial applications, including highly engineered materials used in numerous applications and a broad range of industries, such as for fire service apparel, ballistics materials, filtration, military fabrics and outdoor awnings and covers. The commission finishing segment consists of textile printing and finishing services for customers primarily focusing on decorative fabrics and specialty prints as well as government uniform fabrics primarily for battle fatigue U.S. military uniforms. The all other segment consists of expenses related to transportation services and other miscellaneous items. As a result of various transactions, the Company’s former narrow fabrics business, the Cone Denim de Nicaragua business and the ITG-PP business in Vietnam are presented as discontinued operations in the Company’s consolidated statements of income for all periods presented in this report.

Strategy

ITG’s strategy is to be the preeminent global supplier of solution-based, value-added performance products and services for the textile supply chain. Combined with capabilities in the U.S. Mexico, and China, the Company’s facilities are a key part of the Company’s comprehensive global supply chain solution that is intended to allow the Company to seamlessly supply products and related services to customers worldwide. We believe geographically aligning with our customers is a critical component of our success.

Business and Industry Trends

The textile industry in general has seen a slowdown or leveling off of imports of textile products into the U.S. from other countries over the last few years due to, among other things, a narrowing of labor, energy and production cost differentials, rising shipping costs, slowing pace of economic growth in China and an increased interest in U.S.-produced goods. While improved consumer confidence, the easing of certain government budget constraints, and increased capital investment by companies in recent periods led to some modest increases in sales in 2013 and early 2014, competitive pressures, consolidations at the retail level affecting certain of our customers, the end of or reduction of certain of our military programs, and uncertainty regarding longer-term macroeconomic growth prospects and the overall economic environment have negatively affected certain of our businesses, primarily in the second half of 2014. The global economic environment continues to be uncertain and volatile. Uncertainty regarding unemployment levels, further government and municipal deficit reduction measures, including potential further reductions in U.S. Department of Defense spending, and the prospects for sustained economic recovery continue to negatively impact consumer, military and municipal spending, which has had, and could continue to have, adverse effects in the significant markets in which we operate and on our businesses. The Company has taken, and expects to continue to take, steps to counter this continued economic uncertainty. These actions include, among other things, negotiating higher sales prices for certain products, negotiating new working capital and other financing arrangements, focusing on new product development, implementing cost saving initiatives and sourcing decisions, and a focus on consistent productivity improvements.

The Company’s bottom-weight woven fabrics segment has historically entered into firm purchase commitments for cotton and wool commodity raw materials used in the manufacture of apparel fabrics. Such non-cancellable firm purchase commitments are secured to provide the Company with a consistent supply of a commercially acceptable grade of raw materials necessary to meet operating requirements as well as to meet the product specifications and sourcing requirements of anticipated future customer orders. Prices for cotton and wool, principal raw materials for the Company’s products, have declined in recent periods from historical highs. However, prices continue to fluctuate. Petroleum prices have fluctuated over the last two years, and the price of the primary synthetic fibers and dyes and chemicals used in the Company’s products, nylon and polyester, is heavily influenced by petroleum prices, resulting in fluctuations in the Company’s gross margins.

In response to higher raw material costs in the open market or under our committed purchase contracts, we attempt to increase sales prices in order to maintain sufficient margins. While we attempt to pass on increased raw material costs to our customers, if the Company incurs increased raw material or other costs that it is unable to recoup through price increases, or experiences interruptions in its raw materials supply, our business, results of operations, financial condition and cash flows may be adversely affected.

Restructuring Charges

Restructuring charges for 2014 included severance and other termination benefits and related costs of $3.0 million related to the restructuring of the Company’s executive structure, as well as severance and other termination benefits of $0.1 million due to workforce reductions at our worsted wool fabric manufacturing facility in Mexico. The 2013 restructuring recoveries are primarily related to the expiration of COBRA benefits of $0.1 million related to employees at the Company’s White Oak denim facility, partially offset by workforce reductions at the Company’s Carlisle finishing facility in the amount of $0.1 million.

Results of Operations

Net sales and income (loss) from continuing operations before income taxes for the Company’s reportable segments are presented below (in thousands). The Company evaluates performance and allocates resources based on profit or loss before interest, income taxes, restructuring and impairment charges, certain unallocated corporate expenses, and other income (expense) - net. Intersegment sales and transfers are recorded at cost or at arms’ length when required by certain transfer pricing rules. Intersegment net sales for 2014 and 2013 were primarily attributable to commission finishing sales of $0.3 million and $0.5 million, respectively.

Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013

Consolidated: Consolidated net sales in 2014 and 2013 were $595.4 million and $600.1 million, respectively. The decrease in sales was primarily due to lower volume resulting from competitive pressures in the denim and airbag fabrics businesses, lower volume with worsted wool retail customers, and governmental budget constraints and program changes affecting certain municipal and foreign military uniform fabrics businesses, as well as lower selling prices and a less favorable product mix primarily in the U.S. government, worsted wool and synthetic fabrics businesses. These decreases were partially offset by sales volume increases in the commission finishing segment due to an increase in the government uniform business, as well as increased demand and new product implementation in the synthetic and technical fabrics businesses and higher selling prices and an improved product mix primarily in the denim and technical fabrics businesses.

Gross profit in 2014 was $71.4 million, or 12.0% of net sales, compared to $75.9 million, or 12.6% of net sales, in 2013. Gross profit margins decreased primarily due to lower sales volumes, lower prices and a less favorable product mix in the U.S. government, worsted wool and airbag fabrics businesses and higher manufacturing costs in the Company’s bottom-weight woven fabrics segment due to lower production, partially offset by higher sales volume in the Company’s synthetic fabrics, commission finishing and technical fabrics businesses, higher selling prices and an improved product mix primarily in the technical fabrics business, and lower raw material costs and favorable impacts from changes in foreign currency exchange rates. Operating income in 2014 was $25.8 million compared to $36.8 million in 2013. Operating income decreased in 2014 as compared to the prior year primarily due to the lower gross profit margins described above as well as higher restructuring charges of $3.1 million and higher selling and administrative expenses of $3.6 million, each as described below.

Bottom-weight Woven Fabrics: Net sales in the bottom-weight woven fabrics segment were $563.2 million in 2014 compared to $578.3 million in 2013. The decrease in sales of $15.1 million was primarily due to lower volume of $25.2 million primarily resulting from competitive pressures in the denim and airbag businesses, lower volume from worsted wool retail customers and governmental budget constraints and program changes affecting certain municipal and foreign military uniform fabrics businesses, as well as lower selling prices and a less favorable product mix of $3.4 million in the U.S. government, worsted wool and synthetic fabrics businesses. Such declines were partially offset by higher sales volumes of $10.7 million due to increased demand and new product implementation in the synthetic and technical fabrics businesses, as well as $2.6 million resulting from higher selling prices and an improved product mix primarily in the denim and technical fabrics businesses.

Income in the bottom-weight woven fabrics segment was $34.4 million in 2014 compared to $42.7 million in 2013. The decrease in income was primarily due to $14.3 million of lower sales volumes, $3.8 million of higher manufacturing costs due to lower production, lower prices and a less favorable product mix of $5.4 million primarily in the U.S. government, worsted wool and synthetic fabrics businesses and higher incentive compensation expense of $1.3 million. These decreases were partially offset by lower raw material and energy costs of $7.5 million, higher sales volume in the Company’s synthetic and technical fabrics business of $5.8 million, higher selling prices and an improved product mix of $0.4 million primarily in the technical fabrics business as well as favorable impacts from changes in foreign currency exchange rates of $2.8 million.

Commission Finishing: Net sales in the commission finishing segment were $31.7 million in 2014 compared to $21.3 million in 2013. The increase was due to sales volume increases of $8.5 million primarily resulting from increased sales to certain U.S. and foreign militaries as a result of the settlement of certain political issues as well as the easing of certain government budget constraints, and a more favorable product mix of $1.9 million. Income in the commission finishing segment was $1.5 million in 2014 compared to a loss of $0.8 million in 2013 with such improvement primarily due to the higher sales volume and an improved product mix, partially offset by higher energy and labor costs.

All Other: Net sales in the all other segment were $0.9 million in 2014 and $1.0 million in 2013, which primarily represented sales in the Company’s transportation business.

SELLING AND ADMINISTRATIVE EXPENSES: Consolidated selling and administrative expenses (including amounts allocated to the Company’s reportable segments discussed above and bad debt expense or recoveries) were $45.8 million in 2014 and $42.2 million in 2013. As a percentage of net sales, this expense was 7.7% in 2014 compared to7.0% in 2013. Selling and administrative expenses increased in 2014 primarily due to higher employee medical and prescription drug claims of $3.1 million and higher incentive compensation expense of $0.9 million. Other increases in travel and disability expenses of $0.3 million were partially offset by lower outside sales commission expense, lower professional fees, lower sample and testing expenses, and lower bad debt expense of $0.8 million.

OTHER OPERATING INCOME—NET: Other operating income–net includes grant income from the U.S. Department of Commerce Wool Trust Fund of $3.0 million in each of 2014 and 2013. The Company records such grant income upon confirmation of the availability of funds from this trust. Other operating income-net in 2014 and 2013 also includes net gains related to the disposal of miscellaneous property and equipment of $0.4 million in 2014 and $0.1 million in 2013.

RESTRUCTURING CHARGES: Restructuring charges in 2014 included severance and other termination benefits and related costs of $3.0 million related to the restructuring of the Company’s executive structure, as well as severance and other termination benefits of $0.1 million due to workforce reductions at our worsted wool fabric manufacturing facility in Mexico. Restructuring charges in 2013 were primarily related to workforce reductions at the Company’s Carlisle commission finishing facility in the amount of $0.1 million, partially offset by the expiration of COBRA benefits related to certain prior year restructuring plans of $0.1 million.

INTEREST EXPENSE: Interest expense was $28.8 million in 2014 in comparison with $30.7 million in 2013. The decrease was primarily due to the cancellation, as of December 31, 2013, of $21.9 million in principal and accrued interest of the Company’s related party Tranche B Notes under the Stipulation and Settlement Agreement, lower outstanding balances on the Company’s U.S. revolving credit facility as a result of the application of proceeds from the sale of Summit Yarn in August 2014, and the repayment of $16.7 million of the Company’s Tranche A senior subordinated notes in March 2013, partially offset by higher outstanding balances on the remaining Tranche B senior subordinated notes outstanding. Non-cash payable in-kind interest expense was $18.1 million and $19.0 million in 2014 and 2013, respectively, including $18.1 million and $18.5 million, respectively, of non-cash related party interest expense.

OTHER INCOME (EXPENSE)—NET: In 2014 the Company recorded a gain of $9.4 million on the sale of its 50% equity interests in its Summit Yarn joint ventures. In 2014 the Company recorded a net recovery of $0.9 million in third party legal fees not related to current operations and recorded a $3.8 million recovery of such legal fees under the Stipulation and Settlement Agreement, resulting in a net gain of $4.7 million. In 2013 the Company paid or accrued $7.1 million in legal fees not related to current operations. Other income (expense) - net in 2014 and 2013 also included foreign currency exchange losses of $0.1 million and $2.3 million, respectively, related to the Company’s operations in Mexico and China.

INCOME TAX (EXPENSE) BENEFIT: Income tax expense was $3.5 million in 2014 in comparison with an income tax benefit of $10.4 million in 2013. The income tax benefit in 2013 resulted primarily from major tax reforms in Mexico (as discussed below), deferred income tax benefits from the Company’s subsidiaries in Mexico resulting from certain statutory income tax rate changes, certain foreign exchange effects resulting in lower taxable earnings in Mexico, and management's determination to release certain income tax valuation allowances under accounting principles generally accepted in the United States of America (“GAAP”). In December 2013, Mexico enacted income tax reform legislation which, among other things, established the corporate income tax rate at 30%, repealed the flat tax regime, and repealed certain consolidation filing provisions. Such changes resulted in a net deferred income tax benefit of approximately $10.0 million in 2013 due to the release of various uncertain income tax positions primarily related to consolidation filing provisions, as well as changes in statutory rates and certain other regulations. In addition, in 2013 the Company recognized a $16.8 million deferred tax asset related to additional net operating losses resulting from positions taken by the Company for claims filed against certain assets in Vietnam and the related impact on certain of the Company’s income tax returns filed during 2013, with the benefit of such losses fully offset by an increase of $16.8 million in the valuation allowance, resulting in a zero net effect on the Company’s consolidated financial statements. In certain foreign jurisdictions, the Company’s subsidiaries have operated under tax incentive programs that provided reduced or zero tax rates for certain subsidiaries for certain periods that remain currently open for examination by local authorities. The Company has recorded valuation allowances to reduce the U.S. and certain foreign deferred tax assets for the portion of the tax benefit that management considers that it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of these deferred tax assets will be dependent upon the generation of future taxable income in the jurisdictions in which these deferred tax assets were recognized.

DISCONTINUED OPERATIONS: Loss from discontinued operations in 2014 included $6.4 million related to the Narricot business and $0.1 million related to the planned disposition of the assets of the idled ITG-PP facility. Loss from discontinued operations in 2013 included $5.7 million related to the Narricot business, $6.0 million related to the idled CDN facility and $0.1 million related to the idled ITG-PP facility. Loss from the Narricot business in 2014 included an impairment charge of $4.0 million primarily as a result of continued negative cash flows, the lack of significant increase in product sales, and projected losses in this segment. Loss from the Narricot business in 2013 included an impairment charge of $2.0 million primarily due to reduced sales and continued negative operating results arising from certain then-current government budget pressures and a slower than expected increase in other product sales.

Liquidity and Capital Resources

The Company has a significant amount of debt outstanding and will require substantial cash flows to service this debt in future periods. A substantial portion of the Company’s debt, $81.2 million at December 31, 2014, is payable by various of the Company’s subsidiaries organized in foreign jurisdictions and is non-recourse to the ITG parent company. In addition, a substantial portion of the Company’s debt, $160.9 million at December 31, 2014, is payable to related parties (certain entities affiliated with WLR). On June 30, 2014, the Company extended the maturity date of such related party debt to June 30, 2019.

The Company amended or refinanced certain credit agreements in the fourth quarter of 2014 that extended the maturities of certain instruments to 2019 and lowered interest rates on outstanding debt in the U.S. In January 2015, the Company’s subsidiaries in Mexico refinanced their outstanding term loans by entering into new term loan agreements due in January 2020, including a new five year $7.0 million term commitment for the purchase of machinery and equipment which can be drawn upon until January 2016; as of the date hereof no amount has been drawn on this additional commitment.

The following table presents a summary of the Company’s debt obligations payable to unrelated third parties as of December 31, 2014 (in thousands). Amounts in the column labeled “U.S.” represent debt guaranteed by, or otherwise with recourse to, the ITG parent company. Amounts in the column labeled “International” represent debt of various of the Company’s international subsidiaries, but not guaranteed by, or with recourse to, the ITG parent company.

The ITG parent company (U.S.) has also guaranteed an additional $6.0 million of certain of the above international debt through stand-by letters of credit which is not included in the table above.

Notwithstanding the non-recourse nature of a significant portion of the debt in the table above, the failure by any of the Company’s international subsidiaries to timely meet their respective obligations when due could also materially adversely impact the Company’s ability to maintain foreign operations, and result in the Company incurring significant non-cash impairment or other charges or have a material adverse effect on the Company’s ability to execute on its strategy.

During 2014, the Company’s principal sources of funds consisted of proceeds from net sales, the sale of its equity interest in Summit Yarn, the sale of the net assets of the Narricot business, and term loans and short term borrowings under bank financing facilities. In April 2014 and January 2015, a wholly-owned subsidiary of the Company in Mexico obtained $7.5 million and $7.0 million, respectively, of additional third-party financing for the purchase of new machinery and equipment. The Company’s principal uses of cash during 2014 were to fund operations related to working capital needs, capital expenditures, pension plan contributions, and payment of principal, interest and fees on various indebtedness, and the Company expects that its future cash uses will be for similar matters. Based on current expectations, we believe that the cash on hand, cash flow expected to be generated by our operations and funds available under our credit facilities and short-term borrowings should be sufficient to service our debt payments requirements, to satisfy our day-to-day working capital needs and to fund our planned capital expenditures, with improvements expected due to the elimination of the Narricot business and resulting net cash outflows. Any material deterioration in our results of operations, however, may result in our losing the ability to borrow under our U.S. revolving credit facility or replenish our short-term borrowings currently in place. Our success in generating future cash flows will depend, in part, on our ability to increase our sales, manage working capital efficiently, continue to reduce operating costs at our plants, and increase selling prices to offset any increase in raw material or other costs in all segments of our business.

In the event that the Company or one of its subsidiary borrowers is not able to timely meet its obligations under any financing agreement, a lender or other secured party may have rights to proceed against any collateral securing such obligations. The Company has estimated that the fair value of the collateral securing its obligations is sufficient to satisfy such debt obligations. However, the Company expects that if it is not timely able to meet its obligations under a financing agreement, it will seek to amend those agreements, or enter into replacement financing arrangements to satisfy its obligations. There can be no assurances as to the availability of any necessary long-term financing and, if available, that any potential source of long-term financing would be available on terms and conditions acceptable to the Company. The inability to complete any necessary financings at times, and on terms, acceptable to the Company, or the exercise of any available remedies by lenders, which could result in the acceleration of such indebtedness or, in some instances, the right to proceed against the underlying collateral, would negatively affect the Company’s ability to execute on its strategy and have a material adverse effect on the Company’s financial condition and future results of operations.

Comparison of Cash Flows for Year Ended December 31, 2014 to Year Ended December 31, 2013

OPERATING ACTIVITIES: Net cash provided by operating activities was $32.4 million in 2014 compared to $20.3 million in 2013. Higher accounts receivable collections due to lower days sales outstanding, lower cash interest payments, cash received as a part of the Stipulation and Settlement Agreement, lower contributions to the Company’s defined benefit pension plan and lower income tax payments were partially offset by increased accounts payable payments as a result of timing of payments to vendors.

INVESTING ACTIVITIES: Net cash provided by investing activities was $1.8 million in 2014 compared to net cash used in investing activities of $6.9 million in 2013. In 2014, the Company received net cash proceeds of $9.6 million and $4.2 million from the sale of Summit Yarn and the Narricot business, respectively. In 2014 and 2013, the Company received net cash proceeds of $0.7 million and $0.2 million, respectively, from the sale of other property, plant and equipment. Investing activities in 2014 and 2013 included $0.4 million and $0.5 million, respectively, of distributions from the Company’s unconsolidated affiliates. Capital expenditures and deposits related to purchases of equipment were $13.0 million in 2014 and $7.6 million in 2013. Higher capital expenditures and the deposits for equipment primarily related to upgrading equipment at our facilities, mainly in Mexico, to support our manufacturing and cost reduction efforts in the bottom-weight woven segment. As we continue with our upgrading and cost reduction plans, we expect to spend between $10.0 million and $12.0 million on capital expenditures during 2015.

FINANCING ACTIVITIES: Net cash used in financing activities of $28.3 million in 2014 reflects mainly the net repayment of borrowings under revolving lines of credit of $22.2 million primarily using proceeds from the sale of Summit Yarn, the sale of the Narricot business and proceeds from the payment as a part of the Stipulation and Settlement Agreement, the repayment of term loans and capital lease obligations of $15.1 million, proceeds from the issuance of term loans of $9.5 million, net short-term bank borrowings of $0.6 million related mainly to the Company’s denim operations, and the payment of financing fees of $0.9 million. Net cash used in financing activities of $12.9 million in 2013 reflects mainly repayment of term loans and capital lease obligations of $18.4 million, proceeds from increased bank revolving lines of credit of $4.6 million, proceeds from the issuance of new term loans of $13.3 million, net proceeds from short-term bank borrowings of $5.3 million related primarily to the Company’s operations in China, the payment of financing fees of $0.8 million, and the repayment of the principal amount of certain Notes of $16.7 million using proceeds primarily from the refinanced bank debt and related activities.

See Item 3, “Legal Proceedings”, and Notes 8 and 13 of the Notes to Consolidated Financial Statements included herein for a discussion of the Company’s long-term debt, short-term borrowings and preferred stock.

Commitments

As of December 31, 2014, the Company had raw material and service contract commitments totaling $38.4 million and capital expenditure commitments of less than $0.1 million. ITG plans to fund these obligations from cash generated from operations and, depending upon limitations in its various loan agreements and to the extent available to the Company, from a combination of borrowings under its 2011 Credit Agreement and other external sources of financing as management deems appropriate. ITG believes that future external financings may include, but may not be limited to, additional borrowings under existing, or any new, credit agreements, the issuance of equity or debt securities or additional funding from certain entities affiliated with WLR, depending upon the availability and perceived cost of any such financing at the appropriate time. ITG cannot provide any assurances that any financing will be available to it upon acceptable terms, if at all, at any time in the future.

At December 31, 2014, the frozen Burlington Industries defined benefit pension plan had an actuarially determined projected benefit obligation in excess of plan assets of approximately $12.0 million. The Company contributed $2.5 million to this plan during fiscal year 2014, and $3.3 million in 2013. The Company estimates making total contributions in the range of $2.2 million to $2.8 million in 2015. Actual future contributions will be dependent upon, among other things, plan asset performance, the liquidity of the plan assets, actual and expected future benefit payment levels (which are partially dependent upon employment reductions, if any, which may occur during any business restructuring) and other actuarial assumptions.

Off-Balance Sheet Arrangements

As of December 31, 2014, the Company and various consolidated subsidiaries of the Company were borrowers under various bank credit agreements (collectively, the “Facilities”). Certain of the Facilities are guaranteed by either the Company and/or various consolidated subsidiaries of the Company. The guarantees are in effect for the duration of the related Facilities. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 460, “Guarantees,” provides guidance on the disclosures to be made by a guarantor about its obligations under certain guarantees that it has issued and specific disclosures related to product warranties. The Company does not provide product warranties within the disclosure provisions of FASB ASC 460. The Company did not have any off-balance sheet arrangements that were material to its financial condition, results of operations or cash flows as of December 31, 2014 or 2013, except as noted below.

In 2011, the Company entered into a Guaranty of Payment (as amended and restated, the “Guaranty”) in favor of WLR Recovery Fund IV, L.P. (“Fund IV”), an affiliate of WLR who, together with certain investment entities controlled by him (collectively, the “WLR Affiliates”), is our controlling stockholder. Pursuant to the Guaranty, the Company has guaranteed the prompt payment, in full, of the reimbursement obligations of Fund IV under certain letter of credit agreements to which Fund IV was a party and under which Fund IV agreed to be responsible for certain obligations of ITG-PP, up to a total amount of $15.5 million. Under the 2011 Credit Agreement, the lenders (i) were entitled to receive payment under a $3.7 million evergreen standby letter of credit executed by Fund IV (the “Fund IV LC”), or (ii) the Company’s investments in ITG-PP discussed above were required to be repaid to the Company by ITG-PP no later than one month prior to the March 31, 2016 expiration date of the Fund IV LC. In August 2014, the Company entered into Consent and Amendment No. 11 to the 2011 Credit Agreement which provided, among other things, for the termination of the Fund IV LC. On October 14, 2014, the Fund IV LC was terminated and an additional $1.2 million of principal amount of Tranche B Notes were issued in satisfaction of the Company’s obligations thereunder for accrued guaranty fees.

Cone Denim (Jiaxing) Limited has outstanding short-term working capital loans from various Chinese financial institutions, including approximately $2.4 million guaranteed by a $2.8 million standby letter of credit with a WLR Affiliate pursuant to the Guaranty. The obligations of the Company are payable in cash or, if cash is not permitted to be paid pursuant to the terms and conditions of the 2011 Credit Agreement and related documentation, then such amounts are payable in additional Tranche B Notes. Also pursuant to the Guaranty, the Company is required to pay a per annum amount equal to 10% of the amount of any such outstanding letters of credit. In 2014 and 2013, the Company incurred guarantee fees of $0.6 million and $0.7 million, respectively.

Derivative Instruments

Derivative instruments used periodically by the Company for foreign currency, cotton, wool and natural gas purchases consist primarily of forward purchase contracts. The Company does not utilize financial instruments for trading or other speculative purposes. The Company has historically qualified for the “normal purchases exception” under GAAP for derivatives related to its cotton and wool forward purchase contracts and certain of its natural gas contracts and, as a result, these derivative instruments are not marked to market in the Company’s consolidated financial statements. The Company monitors its risk associated with the volatility of certain foreign currencies against its functional currency, the U.S. dollar. The Company periodically uses certain derivative financial instruments to reduce exposure to the volatility of certain foreign currencies and has designated such instruments as cash flow hedges under hedge accounting rules in 2014 and 2013. The Company did not designate its natural gas forward purchase contracts as hedges for any of the periods presented herein. The fair value of derivative liabilities recognized in the December 31, 2014 and 2013 consolidated balance sheets were $0.6 million and $0.3 million, respectively. The total amount of net gains (losses) on derivative instruments recognized in the consolidated statements of income was a gain of less than $0.1 million in 2014 and a gain of $0.1 million in 2013. The amount of loss, net of income taxes, recognized in other comprehensive income (loss) related to the effective portion of derivative instruments was $0.5 million in 2014 and $0.2 million in 2013.

Seasonality

The strongest portion of the consumer apparel sales cycle is typically March through November as customers target goods to be sold at retail for the back-to-school fall, holiday and spring seasons. Consumer apparel fabric sales have become increasingly seasonal, as well, as customers have begun to rely more upon contract sewing and have sought to compress the supply cycle to mirror retail seasonality. Sales in the Company’s other businesses are generally not seasonal and can vary based on numerous factors. Our consolidated net sales from continuing operations in each of the first, second, third and fourth quarters of 2014 represented 24%, 26%, 26% and 24%, respectively, of our total net sales from continuing operations for the year.

Working capital requirements vary throughout the year. Working capital generally increases during the first half of the year as inventory builds up to support peak shipping periods and then moderates during the second half of the year, particularly during the fourth quarter, as those inventories are sold and accounts receivable are collected. Cash provided by operating activities is generally higher in the second half of the year due to generally higher earnings during that period and reduced working capital requirements.

Critical Accounting Policies, Assumptions and Use of Estimates

Management’s Discussion and Analysis of the Company’s Financial Condition and Results of Operations is based upon the Company’s consolidated financial statements. The consolidated financial statements of the Company are prepared in conformity with GAAP. The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make decisions that impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to the valuation of trade receivables, inventories, goodwill and other intangible assets, impairment of long-lived assets, income taxes, and insurance costs, among others. These estimates and assumptions are based on managements’ best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including an evaluation of the current global economic climate. Management monitors economic conditions and other factors and adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile foreign currency and equity values and uncertainties in the global economic environment have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ from these estimates under different assumptions or conditions. Changes in these estimates resulting from changes in one or more of these factors, or in the general economic environment or any other relevant factor will be reflected in the financial statements in the period in which such change occurs. The Company’s management believes the critical accounting policies listed below are the most important to the fair presentation of the Company’s financial condition and results of operations. These policies require the most significant judgments and estimates of the Company’s management in the preparation of the Company’s consolidated financial statements.

Revenue Recognition. Sales are recorded upon shipment or delivery, depending on when title and the risks and rewards of ownership passes, to unaffiliated customers, collectability is reasonably assured and pricing is fixed or determinable. The Company classifies amounts billed to customers for shipping and handling in net sales, and costs incurred for shipping and handling in cost of sales in the consolidated statement of income. Accruals are made for sales and other allowances based on the Company’s experience. Taxes assessed by a governmental authority that are imposed directly on a revenue-producing transaction are presented on a net basis in the consolidated statements of income.

Accounts Receivable, Net. Trade accounts receivable are recorded at the invoiced amount and bear interest in certain cases that is recognized as the interest is received. The Company continuously performs credit evaluations of its customers, considering numerous inputs including, but not limited to, each customer’s financial position; past payment history; cash flows; management capability; historical loss experience; and general and industry economic conditions and prospects. The Company estimates its allowance for doubtful accounts based on a combination of historical and current information regarding the balance of accounts receivable, as well as the current composition of the pool of accounts receivable. The Company determines past due status on accounts receivable based on the contractual terms of the original sale. Accounts receivable that management believes to be ultimately uncollectible are written off upon such determination. While our credit losses have historically been within our calculated estimates, it is possible that future losses could differ significantly from those estimates. The Company records sales returns as a reduction to sales, cost of sales, and accounts receivable and an increase to inventory based on return authorizations for off-quality goods. Returned products that are recorded as inventories are valued based upon expected realizability. We do not believe the likelihood is significant that materially higher bad debt losses or sales returns will occur based on prior experience.

Inventories. Inventories represent direct materials, labor and overhead costs incurred for products not yet delivered or returned. Inventories are valued at the lower of cost or market value using the FIFO method. ITG reviews its inventory on a quarterly basis to identify excess or slow moving products, discontinued and to-be-discontinued products, and off-quality merchandise. For those items in inventory that are so identified, ITG estimates their market value based on historical and expected realization trends. This evaluation requires forecasts of future demand, market conditions and selling prices. If the forecasted market value is less than cost, ITG writes down its inventory to reflect the lower value of that inventory. This methodology recognizes inventory exposures at the time such losses are evident rather than at the time goods are actually sold. However, if actual market conditions and selling prices were less favorable than we project, additional inventory write downs may be necessary.

Valuation of Long-lived Assets. In accordance with FASB ASC 360, “Property, Plant, and Equipment”, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. For assets held and used, an impairment may occur if projected undiscounted cash flows are not in excess of the carrying value of the assets. In such cases, additional analysis is conducted to determine the amount of loss to be recognized. The impairment loss is determined by the difference between the carrying amount of the asset and the fair value measured by the estimated future discounted cash flows or prices for similar assets. The analysis requires estimates of the amount and timing of projected cash flows and, where applicable, judgments associated with, among other factors, the appropriate discount rate. Such estimates are critical to determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed to be necessary. The Company reviews the estimated useful lives of intangible assets when impairment testing is performed. If events and circumstances warrant a change in the estimated useful life, the remaining carrying amount is amortized over the revised estimated useful life. Should business conditions deteriorate, which could impact our estimates of future cash flows and fair value, there exists the potential that additional impairment charges could be required, which charges could have a material adverse effect on our consolidated financial statements.

Goodwill, Intangible Assets and Deferred Charges. Goodwill represents the excess of cost over the fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of FASB ASC 350, “Intangibles-Goodwill and Other”. The Company performs its annual goodwill impairment testing as of October 1 of each fiscal year, and the Company also tests goodwill for impairment between annual tests if events occur or circumstances change that raise questions about recoverability.

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives. The Company continually monitors conditions that may affect the carrying value of its intangible assets. When conditions indicate a potential impairment of such assets, the Company evaluates the estimated fair value of the assets. When the estimated fair value of an asset is less than the carrying value of the asset, the impaired asset is written down to its estimated fair value, with a charge to operations in the period in which impairment is determined. Should future business conditions deteriorate, which could impact our estimates of future cash flows and fair value, there exists the potential that additional impairment charges could be required, which charges could have a material adverse effect on our consolidated financial statements.

Costs incurred in connection with financing activities are deferred and amortized over the lives of the respective financing instruments using the straight-line method, which approximates the effective interest rate method, and are charged to interest expense. Recognition of such deferred costs may be accelerated upon certain modifications or exchanges of the underlying financing instruments.

Insurance. Insurance liabilities are recorded based upon the claim reserves established through actuarial methods and estimates, as well as historical claims experience, demographic factors, severity factors, expected trend rates and other actuarial assumptions. To mitigate a portion of its insurance risks, the Company maintains insurance for individual claims exceeding certain dollar limits. Provisions for estimated losses in excess of insurance limits are provided at the time such determinations are made. The accruals associated with the exposure to these liabilities, as well as the methods used in such evaluations, are reviewed by management for adequacy at the end of each reporting period and adjustments, if any, are currently reflected in earnings. Actual costs may vary from these estimates.

Commitments and Contingencies. Liabilities for loss contingencies, including environmental remediation costs not within the scope of FASB ASC 410, “Asset Retirement and Environmental Obligations”, arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred in connection with loss contingencies, net of estimated insurance recoveries, are expensed as incurred. Any recoveries of costs from third parties, which are probable of realization, are separately recorded as assets, and are not offset against the related liability, in accordance with FASB ASC 210-20, “Balance Sheet - Offsetting”. The Company accrues for losses associated with environmental remediation obligations not within the scope of FASB ASC 410 when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value.

Income Taxes. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions, the most significant of which are Mexico and China. Income taxes are accounted for under the rules of FASB ASC 740, “Income Taxes”, and a full income tax provision is computed for each reporting period. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the change in rate. A valuation allowance is provided for deferred income tax assets when, in the opinion of management, it is more likely than not that some or all of its deferred income tax assets will not be realized. In evaluating the expected future realization of its deferred income tax assets, ITG considers both positive and negative evidence related to expected future reversals of existing taxable temporary differences, projections of future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback years, and potential tax-planning strategies. The Company records interest and penalties related to income tax settlements in income tax expense in the consolidated statement of income. Significant judgments are required in order to determine the realizability of the deferred income tax assets. Changes in the expectations regarding the realization of deferred income tax assets could materially impact income tax expense in future periods. For uncertain income tax positions on the Company’s income tax returns, the Company first determines whether it is more likely than not that each income tax position would be sustained upon audit. The Company then estimates and measures any tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities. If the Company later modifies its evaluations, the Company records the related changes in the tax provision during the period in which such determinations are made.

For a discussion of recently adopted accounting pronouncements that are of significance, or potential significance, to the Company, see “Recently Adopted Accounting Pronouncements” in Note 1 to the Company’s consolidated financial statements included elsewhere herein.

For a discussion of recently issued accounting pronouncements that are of significance, or potential significance, to the Company, see “Recently Issued Accounting Pronouncements” in Note 1 to the Company’s consolidated financial statements included elsewhere herein.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item appears in Items 15(a) (1) and (2) of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management, under the supervision and with the participation of its principal executive and principal financial officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of such date.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by Exchange Act Rule 13a-15(f), for the Company. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the direction of the Company’s principal executive officer and principal financial officer, management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 in accordance with the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that such internal control over financial reporting was effective as of December 31, 2014.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the permanent exemption from the internal control audit provided for certain filers under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

None.

PART III

ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors

The following table provides the names, ages and positions of the individuals who currently serve as members of the board of directors, or as executive officers, of the Company. On March 18, 2015, Stephen W. Bosworth and Dr. Daniel D. Tessoni, each members of the board of directors, tendered their resignations as directors effective April 1, 2015. 

Kenneth T. Kunberger is the President and Chief Executive Officer, and a director of the Company. He has held this position since May 2014. Previously, he was Chief Operating Officer of the Company, a position he held since December 2011. Prior to that, he served as President of ITG Apparel & Specialty Fabrics Group for the Company, a position he held since January 2009 and prior to that, was President of the Burlington Worldwide division of ITG from the completion of the Merger to January 2009. Prior thereto, he held that position with Former ITG from its inception in August 2004. Prior to that, he served as Executive Vice President, Sales and Marketing, of the Sportswear and Casualwear divisions of Burlington Industries from 1998 to 2002, as President of Burlington Industries Worldwide-North America division from 2002 to 2004, and as President of Burlington Industries’ Apparel Fabrics division in 2004. Through his more than 30 years of experience in the textile industry, Mr. Kunberger has significant experience with, and an understanding of, the management of multi-location, global operations, including specifically with respect to manufacturing, marketing and sales issues and the operational and organizational issues involved. In addition, as our chief executive officer, he is uniquely able to advise the board of directors on the opportunities and challenges of managing the Company, as well as its day-to-day operations and risks.

Robert E. Garren is Vice President, Human Resources and Corporate Communications of the Company. Mr. Garren has been Vice President, Human Resources and Corporate Communication of ITG since the completion of the Merger. Prior thereto, he held those positions with Former ITG from its inception in August 2004. Prior to that, he served as Vice President, Human Resources and Corporate Communications of Burlington Industries from 2003 to 2004 and as Director of Compensation and Benefits of Burlington Industries from 1998 to 2003.

Craig J. Hart is Vice President and Treasurer of the Company. Mr. Hart joined ITG in December 2007 from Remy International, Inc., a manufacturer of various electrical and automotive components and parts, where he had served as Treasurer since 2004. Mr. Hart joined Remy International, Inc. in February 1997. Previously, he worked for Pontarelli Builders, a contractor and construction company, as Director of Financial Services and prior thereto, at a family wealth management office in Chicago, IL in various financial roles.

Neil W. Koonce is Vice President, General Counsel and Secretary of the Company. Mr. Koonce has been the Vice President and General Counsel of the Company since the completion of the Merger and has been the Secretary of the Company since January 2012. Prior to the Merger, he was the Vice President and General Counsel of Former ITG from its inception in August 2004. Mr. Koonce served as General Counsel of Cone Mills Corporation from 1987 to 1989, General Counsel and Vice President of Cone Mills Corporation from 1989 to 1999 and Vice President, General Counsel and Secretary of Cone Mills Corporation from 1999 to 2004.

Gail A. Kuczkowski is Executive Vice President and Chief Financial Officer. She has held these positions since December 2011. Previously, she held the position of Vice President and Chief Accounting Officer since joining the Company in January 2008. On April 17, 2009, Ms. Kuczkowski was also designated as the officer performing the functions of the principal financial officer of the Company. Prior to joining the Company, Ms. Kuczkowski served as Director, Global Accounting at INVISTA, an integrated fiber and polymers business, from September 2006 and as Assistant Corporate Controller from May 2004 until September 2006. Prior thereto, she served as Chief Financial Officer for US/Canada of KoSa, a producer of commodity and specialty polyester fibers, polymers and intermediates, from December 2002 to May 2004. Ms. Kuczkowski began her career at Price Waterhouse (now PricewaterhouseCoopers), a public accounting and financial consulting firm.

James W. Payne is President of the Carlisle Finishing LLC business segment and his responsibilities also currently include the manufacturing operations of Burlington Finishing and effective November 1, 2014, Safety Components facilities of the Company. Mr. Payne’s responsibilities also included Narricot Industries LLC until the business was sold in September 2014. Mr. Payne has been the President of the Carlisle Finishing LLC business since January 2007. Previously he was President of the Carlisle Finishing division and held that position since the completion of the Merger. Prior to that, Mr. Payne was the President of the Carlisle Finishing division of Former ITG since 2005 and Executive Vice President of the Carlisle Finishing division of Former ITG from August 2004 to 2005. Prior to that, he served as Executive Vice President of the Carlisle Finishing division of Cone Mills from 1997 to 2004.

Jeffrey H. Peck is President of the Burlington Worldwide Group and has served in this role since January 2012. Previously he oversaw the Apparel and Specialty Fabrics division and was responsible for the worsted and specialty fabrics markets for the Company, a position he had held since January 2009. Prior to that, Mr. Peck was Executive Vice President for the Burlington Worldwide division of ITG, responsible for the synthetic and specialty fabrics apparel markets from 2007 to 2009. Prior to that, he served as Managing Director of the Burlington WorldWide operations in Asia and was based in Hong Kong for a two-year assignment. Prior to that, Mr. Peck served as Executive Vice President of the Burlington WorldWide division of Former ITG. Prior to that, he held a similar position for Burlington Industries from 2001 to 2004.

Stephen W. Bosworth has been a member of the board of directors of the Company since the completion of the Merger, and as mentioned above, has tendered his resignation from the board of directors effective April 1, 2015. Prior to the Merger, Mr. Bosworth was a member of the board of directors of Former ITG since December 2004. He served as Dean of The Fletcher School of Law and Diplomacy at Tufts University, Medford, Massachusetts, from February 2001 to 2013. He is currently a senior fellow at the Kennedy School of Government, Harvard University. He served as the Special Representative for North Korea Policy for the Secretary of State from 2009 until October 2011. Mr. Bosworth also served as United States Ambassador to the Republic of Korea from November 1997 to February 2001 and prior to that Mr. Bosworth served as the Executive Director of the Korean Peninsula Energy Development Organization, an inter-governmental organization established by the United States, the Republic of Korea and Japan to address issues concerning North Korea. Mr. Bosworth’s experience in foreign service, international diplomacy, and education has been of substantial importance to the board of directors and the Company in addressing the international growth aspects of the Company’s business.

William P. Carmichael has been a director of the Company since November 2012. Mr. Carmichael, a private consultant, co-founded The Succession Fund in 1998 to provide an exit strategy to owners of privately held companies. This Fund was sold in 2007. Prior to forming The Succession Fund, Mr. Carmichael worked for Price Waterhouse (now PricewaterhouseCoopers) for four years, and has twenty-six years of experience in various financial positions with global consumer product companies. Mr. Carmichael currently serves on the boards of directors of The Finish Line, Inc., and as Chairman of the Columbia Funds, Tri-Continental Corporation and Columbia Seligman Premium Technology Growth Company. Mr. Carmichael also served on the following boards, Cobra Electronics Corporation until August 2014, McMoRan Exploration from June 2010 to 2013, and Simmons Bedding from 2004 to 2010. Mr. Carmichael is a member of the advisory council of NYSE Governance Services. Mr. Carmichael brings to the Company considerable expertise in investments and in mergers and acquisitions in small and middle market companies, which we believe provides significant insight to the Company. In addition, Mr. Carmichael’s experience serving on the board of directors of several other public companies allows us to leverage his experiences with respect to, among other things, appropriate oversight and related board actions.

Michael J. Gibbons has been a director of the Company since December 2005 and the Chief Financial Officer of W.L. Ross & Co. LLC (“WLR LLC”) since July 2002. From 1996 to July 2002, Mr. Gibbons was a Senior Manager of the Hedge Fund/Investment Partnership specialty practice group of Marcum LLP, a public accounting and financial consulting firm. Mr. Gibbons is licensed as a certified public accountant in the State of New York and graduated from Pace University with a B.A. in Business Administration. Mr. Gibbons’ current service as a Chief Financial Officer, as well as his previous experience in public accounting and financial consulting, provides an appropriate platform for him to advise and consult with the board of directors and the Company’s Audit Committee on financial related matters.

John W. Gildea has been a director of the Company since February 2012. Mr. Gildea founded Gildea Management Company, a management company specializing in investments in middle market companies in the United States and Europe, in 1984. Mr. Gildea currently serves on the board of directors of Misonix, Inc., Sothic Capital, a UK based distressed fund, and Country Pure, a private company. He also served on the board of directors of America Service Group Inc. from 2006 to 2011 and Sterling Chemicals, Inc. from 2002 to 2011. Mr. Gildea brings to the Company considerable expertise in investments in middle market companies in the United States and Europe, which we believe provides significant insight to the Company. In addition, Mr. Gildea’s experience serving on the board of directors of several other public companies allows us to leverage his experiences with respect to, among other things, appropriate oversight and related board actions.

Harvey L. Tepner has been a director of the Company since December 2012 and a Principal of WLR LLC since 2008.  Prior to joining WLR LLC, Mr. Tepner was an investment banker focusing on corporate restructurings and troubled company mergers and acquisitions at several investment banking firms including Compass Advisers, Loeb Partners Corporation, Dillon, Read & Co. Inc. and Rothschild Inc.  He began his career with Price Waterhouse in Canada.  Mr. Tepner’s experience as a private equity investor and investment banker and his overall expertise in business strategy, corporate development, finance, mergers and acquisitions, and corporate governance is beneficial to the board of directors and to the Company.  Mr. Tepner also serves as a director of Core-Mark Holdings, Inc., Plascar Participacoes Industriais S.A., and several private companies controlled by WLR LLC. Mr. Tepner is a Chartered Accountant and Chartered Professional Accountant (Canada).

Dr. Daniel D. Tessoni has been a director of the Company since May 2005, and as mentioned above, has tendered his resignation from the board of directors effective April 1, 2015. Dr. Tessoni holds a Ph.D. in accounting and finance from Syracuse University, is an assistant professor of accounting at the Saunders College of Business at the Rochester Institute of Technology in Rochester, New York, and has been a member of the accounting faculty since 1974. He is licensed as a certified public accountant in the State of New York. He is also the owner of Value Based Management Associates, through which he provides financial training and consulting services to a wide variety of publicly and privately held companies. Dr. Tessoni is director of Genesee Regional Bank, a community bank in Rochester, New York. He serves as the chair of its audit committee and is a member of the compliance and loan review committees. Dr. Tessoni is a director of Western New York Energy, an ethanol producing company located in upstate New York. He chairs the audit committee and serves on the compensation and risk committees. Dr. Tessoni served as a director of ACC Corp., a multinational provider of telecommunication services, from 1987 until its acquisition by Teleport Communications Group Inc. (now part of AT&T) in 1998, and was the chair of its audit committee and a member of its executive, compensation and nominating committees and several special committees. He is a member of the Board of Trustees of Paul Smith’s College, where he chairs the audit, finance and investment committees, Dr. Tessoni’s experience and expertise in finance and accounting matters has been beneficial to the board of directors and to the Company. Dr. Tessoni’s public company board experience has also contributed to his familiarity with current issues and has assisted in identifying and addressing appropriate governance practices for the Company.

David L. Wax has been a director of the Company since the completion of the Merger. Prior to that, Mr. Wax was a member of the board of directors of Former ITG since its inception in August 2004. He is a Managing Director of WLR LLC, a position he has held since 2000. Mr. Wax has served as a director of OCM India Limited since January, 2013. Prior to that time, he was a Managing Director at Rothschild, Inc., an investment banking firm, where he was active in restructurings and workouts for over 10 years. Before joining Rothschild, Mr. Wax was with Bankers Trust for 15 years. Mr. Wax has considerable international business and investment banking experience. The Company believes his experiences and skills benefit the board of director’s discussions related to financing and strategic opportunities.

The term of office of each executive officer expires when a successor is elected and qualified. There was no, nor is there presently, any arrangement or understanding between any officer or director and any other person (except directors or officers acting solely in their capacities as such) pursuant to which the officer or director was selected.

Director Qualifications

The Company believes the members of its board of directors have the proper mix of relevant experience and expertise given the Company’s businesses and organizational structure, together with a level of demonstrated integrity, judgment, leadership and collegiality, to effectively advise and oversee management in executing the Company’s strategy.

Nominating Committee; Nominating Procedure

The Company’s board of directors does not have a standing nominating committee (and consequently does not have a nominating committee charter), and all directors participate in the consideration of director-nominees. The Company believes that it is not necessary to have a standing nominating committee because of the fact that the WLR Affiliates, through its affiliates, own approximately 82% of the outstanding common stock and approximately 84% of the voting power of the Company and, therefore, have the ability to control the election of all directors. The board of directors of the Company does not currently have a formal policy for stockholder recommendations for director-nominees for the aforementioned reasons.

Audit Committee

The Company’s board of directors has a standing audit committee currently composed of three directors, Dr. Daniel D. Tessoni (chair), Michael J. Gibbons and David L. Wax. Effective April 1, 2015, upon Dr. Tessoni's resignation from the board of directors, the audit committee will be composed of three directors, William P. Carmichael (chair), Michael J. Gibbons and David L. Wax. The Company’s board of directors has determined that Dr. Tessoni and Mr. Carmichael are audit committee financial experts (within the meaning of Item 407(d) of Regulation S-K, promulgated under the Exchange Act) with respect to the Company. In making such determination, the board took into consideration, among other things, the express provision in Item 407(d) of Regulation S-K that the designation of a person as an audit committee financial expert shall not impose any greater responsibility or liability on that person than the responsibility and liability imposed on such person as a member of the audit committee and the board of directors, nor shall it affect the duties and obligations of other audit committee members or the board. The common stock of the Company is not traded on the New York Stock Exchange (the “NYSE”) or any other national securities exchange; however, the Company’s board of directors has determined that Dr. Tessoni and Mr. Carmichael are independent within the meaning of NYSE Rule 303A.02 and Rule 10A-3(b) promulgated under Section 10A of the Exchange Act.

Code of Ethics

The Company has adopted a code of ethics, the Standard of Business Conduct that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or any persons performing similar functions, as well as to its directors and other employees. A copy of this code of ethics has been filed as an Exhibit to this Form 10-K.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Exchange Act, the Company’s directors and executive officers, and any persons who beneficially own more than 10% of the Company’s common stock, are required to file initial reports of ownership and reports of certain changes in ownership with the SEC. Based solely upon our review of copies of such reports, we believe that our directors and executive officers, and beneficial owners of more than 10% of our common stock, timely complied with all applicable filing requirements for our 2014 fiscal year.

Stockholder Communications with the Board of Directors

The Company currently does not have a formal process for stockholders to send communications to the board of directors. Because the Company’s public stockholder base is small, the Company’s board of directors believes a formal process is unnecessary.

ITEM 11.     EXECUTIVE COMPENSATION
     

The Company’s board of directors has a standing compensation committee currently composed of Mr. Bosworth (chair), Mr. Wax, and Dr. Tessoni. Effective April 1, 2015, upon the resignation of Mr. Bosworth and Dr. Tessoni from the board of directors, the compensation committee will be composed of John W. Gildea (chair), Mr. Wax and Mr. Tepner. The common stock of the Company is listed on the OTC Markets Group Inc. (formerly known as Pink OTC Markets Inc.) over-the-counter “OTCQB” marketplace tier and not on the NYSE or any other exchange; however, the Company’s board of directors has determined that Mr. Bosworth, Dr. Tessoni and Mr. Gildea are independent within the meaning of NYSE Rule 303A.02.

The general functions of the compensation committee include approval (or recommendation to the board of directors) of the compensation arrangements for the Company’s senior management, directors and other key employees, review of benefit plans in which officers and directors are eligible to participate, and the making of grants under the Company’s equity compensation plans. The Company’s compensation committee does not have a charter.

Summary Compensation Table

The following table sets forth information regarding the compensation of the Named Executive Officers, consisting of our current principal executive officer, retired principal executive officer, and the other two most highly compensated individuals who served as executive officers at December 31, 2014.

Summary Compensation Table

Notes:

Employment Agreements, Termination of Employment Arrangements and Change of Control Payments

The Company has entered into an employment agreement with Mr. Kunberger. The employment agreement provides that Mr. Kunberger will be eligible to receive severance payments in the event of a termination without “cause” or resignation for “good reason” (both as defined in the employment agreement). In the event of a termination without cause or resignation with good reason, Mr. Kunberger would be entitled to a prorated portion of his target bonus amount (as specified in the employment agreement) for the year in which the termination occurs and to payments equal to two times his base salary, car allowance, and club dues benefit, plus two times the average of his previous two years’ annual bonus. Mr. Kunberger would also receive an amount equal to the COBRA premiums for himself and any eligible dependents, with a full gross-up for all applicable federal, state, and local taxes, for the period he and/or his dependents remain eligible for COBRA, but not to exceed eighteen months from the termination date. These severance payments would be due to Mr. Kunberger as outlined above in the event of termination without cause, for good reason, or in connection with a change of control of the Company, as defined in the employment agreement. In addition to the severance payments noted above, any unvested equity awards for Mr. Kunberger would become fully vested and the holding requirement would cease to apply in the event of a change of control of the Company.

In addition, the Company has entered into severance agreements with Mr. Peck and Ms. Kuczkowski which provide that they will be eligible to receive severance payments equal to eighteen months base salary in the event of termination without “cause” or resignation for “good reason” (both as defined in the severance agreement).

Benefit Plans

The Company maintains a tax-qualified Section 401(k) defined contribution plan. Under this plan, the Company provides a matching contribution of 100% of the first 3% of a participant’s eligible compensation which is contributed to this plan, and 50% of the next 2% of the participant’s eligible contributed compensation up to the federal limits on earnings and contributions. The Company does not maintain any active, ongoing nonqualified deferred compensation plan.

The Company maintains a legacy defined benefit pension plan, the Retirement System of Burlington Industries LLC and Affiliated Companies (the “Plan”), covering certain employees of the Company and its affiliated companies. The Plan was amended effective October 1, 2003 to suspend employee contributions and to prevent participation of new members, effectively “freezing” the Plan. The Plan provides an annual benefit payable to an eligible participant at age 65 equal to the greater of (a) the sum of (i) the number of years of the member’s continuous participation prior to October 1, 1984, multiplied by the sum of 0.75% of the first $12,000 of such participant’s annual salary at September 30, 1984, plus 1.5% of the excess over $12,000, and (ii) one-half of the participant’s contributions after September 30, 1984, (b) one-half of the participant’s total contributions or (c) an amount determined under applicable Federal law requiring a minimum return on a participant’s personal contributions. This benefit represents a life annuity with a guaranteed minimum return on personal contributions and may, at the participant’s election, be paid as a lump sum.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information with respect to all unexercised stock options and vested restricted stock grants as of December 31, 2014 previously awarded to the Named Executive Officers under the Company’s equity incentive and stock option plans adopted in 2005. No other equity awards to the Named Executive Officers were outstanding as of December 31, 2014.

Director Compensation

The Company has available for use a combination of cash and stock-based incentive compensation to attract and retain certain qualified candidates to serve on its board. In setting director compensation, the Company considers the significant amount of time that directors expend in fulfilling their duties as directors as well as the expertise and knowledge required. Compensation levels are reviewed periodically by the board of directors and adjusted as deemed appropriate. Executive officers who serve as directors of the Company are not entitled to additional compensation for such services. In addition, the board of directors of the Company has deemed it appropriate that only non-employee directors who are not affiliated with WLR should receive compensation for service as a member of the Board. Each non-employee director not affiliated with WLR receives an annual retainer of $40,000 for services as a director. In addition to this retainer, each of those directors receives $1,500 per day for all board and committee meetings attended in person, and $750 per day for all board and committee meetings attended by telephone or video conference. Further, the Chair of the Audit Committee receives an annual retainer of $10,000 and the Chair of the Compensation Committee receives an annual retainer of $5,000. All fees are paid on a quarterly basis. The Company also reimburses non-employee directors for expenses incurred in attending board and committee meetings.

In addition, from time to time, certain of the Company’s directors may be entitled to certain additional compensation for providing services to the Company other than in the ordinary course of their service as a director.

The amounts set out in the table below consist of all amounts paid to non-employee members of the Company’s board of directors for their service as a board member of the Company in 2014. The Committee chose not to make any equity-based awards in 2014.

2014 Director Compensation (1)

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The following table sets forth certain information with respect to the beneficial ownership of shares of ITG common stock, Series C preferred stock (the “Series C Preferred Stock”) and Series A convertible preferred stock (the “Series A Preferred Stock”) as of March 15, 2015 by (1) each person (including any group deemed a “person” under Section 13(d)(3) of the Exchange Act) known to ITG to beneficially own more than 5% of ITG’s common stock, (2) each of ITG’s Named Executive Officers, (3) each of ITG’s directors and (4) all directors and current executive officers of ITG as a group. Information relating to beneficial ownership is based upon “beneficial ownership” concepts set forth in rules of the SEC. Under those rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of, or to direct the disposition of, such security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership (such as by exercise of options) within 60 days. Under such rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may disclaim any beneficial interest. Except as indicated in notes to the table, directors and executive officers possessed sole voting and investment power with respect to all of their respective shares in the table. Shares not outstanding which are subject to options exercisable within 60 days by persons in the group or a named individual are deemed to be outstanding for the purpose of computing the percentage of outstanding shares of common stock owned by the group or such individual.

This table is based, in part, upon information supplied to ITG by its officers, directors and principal stockholders, and Schedules 13D filed with the SEC, as applicable.

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NOTES:

The information required to be disclosed in this Item 12 by Item 201(d) of Regulation S-K is included in Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in this Form 10-K.

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Wilbur L. Ross, Jr., our controlling stockholder and who served as the Chairman of our Board of Directors until November 2014, is Chairman and Chief Strategy Officer of WLR LLC. Michael J. Gibbons, David L. Wax, and Harvey L. Tepner, each members of our board of directors, are chief financial officer, managing director, and principal, respectively, of WLR LLC.

WLR LLC may from time-to-time provide advisory services to the Company (consisting of consulting and advisory services in connection with strategic and financial planning, investment management and administration and other matters relating to our business and operations of a type customarily provided by sponsors of U.S. private equity firms to companies in which they have substantial investments, including any consulting or advisory services that the Company’s board of directors reasonably requests). In return for such services, WLR LLC may charge a quarterly management fee of $0.5 million and is reimbursed for any reasonable out-of-pocket expenses (including expenses of third-party advisors retained by WLR LLC). Per the Note Purchase Agreement, as amended, the payment of the management fees may not occur while a default or event of default has occurred and is continuing or would arise as a result of such payment, or at any time while payable in-kind (“PIK”) interest on the Company’s Tranche A senior subordinated notes (see Note 8 “Long-Term Debt and Short-Term Borrowings”) was unpaid. As a result, WLR LLC did not charge the Company for management fees in 2014 or 2013. At December 31, 2014, $2.5 million related to management fees was payable to WLR LLC on a non-interest bearing basis.

The Company has entered into a marketing and service arrangement with OCM India Limited (“OCM”), which is owned by certain affiliates of WLR. Under the arrangement, the Company provides certain operations, marketing and service assistance to OCM in exchange for a service fee. In 2014, the Company received $0.2 million from OCM for service fees and sales commissions.

From time to time, the WLR Affiliates have purchased or received as PIK Interest Tranche B Notes. The Company also issued additional Tranche B Notes of $1.2 million in 2014 to Fund IV in connection with the Guaranty as described below. Under the Stipulation and Settlement Agreement, $21.9 million in principal and accrued interest of the Tranche B Notes outstanding as of December 31, 2013 was cancelled, together with all additional interest that accrued on such notes from December 31, 2013 through August 29, 2014. The largest aggregate principal amount outstanding under the Tranche B Notes during 2014 was $173.5 million. The Company has not repaid any principal on any of the Tranche B Notes, and all interest on the Tranche B Notes to date has been accrued or converted to additional principal amounts. At December 31, 2014, $160.9 million aggregate principal amount of Tranche B Notes was outstanding with an interest rate of 12.0%, including interest that has been converted to principal.

Also under the Stipulation and Settlement Agreement, $11.4 million (11,475 shares) and $257.6 million (10,304,963 shares) of Series C Preferred Stock and Series A Preferred Stock, respectively, and certain related dividends in arrears were cancelled.

The Company has obligations under an amended Guaranty of Payment (as amended and restated, the “Guaranty”) in favor of Fund IV. Pursuant to the Guaranty, the Company has guaranteed the prompt payment, in full, of the reimbursement obligations of Fund IV under certain letter of credit agreements to which Fund IV was a party and under which Fund IV agreed to be responsible for certain obligations of ITG-PP, up to a total amount of $15.5 million. Under the 2011 Credit Agreement, the lenders (i) were entitled to receive payment under a $3.7 million evergreen standby letter of credit executed by Fund IV (the “Fund IV LC”), or (ii) the Company’s investments in ITG-PP discussed above were required to be repaid to the Company by ITG-PP no later than one month prior to the March 31, 2016 expiration date of the Fund IV LC. In August 2014, the Company entered into Consent and Amendment No. 11 to the 2011 Credit Agreement which provided, among other things, for the termination of the Fund IV LC. On October 14, 2014, the Fund IV LC was terminated and an additional $1.2 million of principal amount of Tranche B Notes were issued in satisfaction of the Company’s obligations thereunder for accrued guaranty fees. Cone Denim (Jiaxing) Limited has outstanding short-term working capital loans from various Chinese financial institutions, including approximately $2.4 million guaranteed by a $2.8 million standby letter of credit with a WLR Affiliate pursuant to the Guaranty. The obligations of the Company are payable in cash or, if cash is not permitted to be paid pursuant to the terms and conditions of the 2011 Credit Agreement and related documentation, then such amounts are payable in additional Tranche B Notes. Also pursuant to the Guaranty, the Company is required to pay a per annum amount equal to 10% of the amount of any such outstanding letters of credit. In 2014 and 2013, the Company incurred guarantee fees of $0.6 million and $0.7 million, respectively.

The Company, Fund IV and General Electric Capital Corporation, the agent under the Company’s 2011 Credit Agreement, have entered into a support agreement pursuant to which the lenders under the 2011 Credit Agreement can draw upon an evergreen standby letter of credit in the amount of $20.0 million (the “WLR LC”) executed by Fund IV if the Company’s excess availability (as defined in the 2011 Credit Agreement) falls below certain predefined levels; no such amounts have been drawn by the lenders as of December 31, 2014. The WLR LC terminates on March 31, 2016, On December 18, 2014, the Company entered into Amendment No. 12 to the 2011 Credit Agreement. This amendment provides for, among other things, future reductions of the WLR LC of up to $5.0 million, or termination of the WLR LC, based upon amounts of the term loan repaid under the 2011 Credit Agreement, the maintenance of a specified fixed charge coverage ratio, the level of average excess availability, and certain other conditions.

Director Independence

The common stock of the Company is not traded on the NYSE or any other national securities exchange; however, for purposes of determining director independence, the Company has adopted the independence definitions as set out in Section 303A.02 of the New York Stock Exchange's Listed Company Manual. Based on the independence standards and all of the relevant facts and circumstances, the Company’s board of directors determined that Mr. Bosworth, Mr. Carmichael, Mr. Gildea and Dr. Tessoni had no material relationship with the Company and thus are independent under Section 303A.02 of the listing standards of the NYSE.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company’s independent registered public accounting firm for the Company’s 2014 and 2013 fiscal years was Grant Thornton LLP. The following table provides information on the fees billed to the Company by Grant Thornton LLP and other member firms of Grant Thornton International Ltd. for its services to the Company during the Company’s fiscal years ended December 31, 2014 and 2013.

In the above table, in accordance with applicable SEC rules, “audit fees” are fees billed by the independent registered public accounting firm for professional services for the audit of the consolidated financial statements included in the Company’s Annual Report on Form 10-K, including audits of the foreign subsidiary statutory reports of the Company’s foreign subsidiaries for their respective fiscal years, and reviews of financial statements included in the Company’s quarterly reports on Form 10-Q, or for services that are normally provided by auditors in connection with statutory and regulatory filings or engagements. In the above table, “tax fees” are fees billed by the independent registered public accounting firm to the Company for tax compliance work for certain of the Company’s foreign subsidiaries for their respective fiscal years.

The audit committee of the Company’s board of directors has established a policy requiring its approval of all audit, and any non-audit, services prior to the provision of these services by the Company’s independent registered public accounting firm. Pursuant to this policy, the audit committee annually approves a detailed request for annual audit and other permitted services up to specified dollar limits. In determining whether to pre-approve permitted services, the audit committee considers whether such services are consistent with SEC rules and regulations. If the Company’s management believes additional services are necessary or that the dollar amount of previously approved services must be increased, management must seek specific prior approval for these services from the audit committee. To ensure prompt handling of unexpected matters, the Company’s audit committee has delegated to its chairperson the authority to pre-approve permissible non-audit services and fees and to amend or modify pre-approvals that have been granted by the entire audit committee. A report of any such actions taken by the committee chairperson must be provided to the audit committee at the audit committee meeting following such action. None of the services described above were approved by the audit committee pursuant to the exception provided by Rule 2-01(c)(7)(i)(C) of Regulation S-X of the SEC during either of the periods presented.

PART IV

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*     Management contract or compensatory plan or arrangement

SIGNATURES

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

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