Fiscal year (FY) 2006 sales totaled $1.1 billion, compared with FY 2005 sales of $985.8
million, an increase of 9.1 percent. Operating income totaled $97 million, representing 9.2 percent
of 2006 sales, compared with $78.9 million, representing 8.5 percent of sales for 2005, excluding
results from the European fabrics business and certain one-time items during 2006. Including those
results, operating income in 2006 decreased 11.7 percent to $72.4 million, from $82 million in
2005. Net income for 2006 totaled $10 million, or 18 cents per diluted share, compared with 2005
net income of $1.2 million, or 2 cents per share.

“We are pleased to report one of the best fourth quarters in our history, finishing a year
of continuously improving performance,” said Daniel T. Hendrix, president and CEO.

“In light of our 2006 results and the difficult business environment, we have made the
strategic decision to focus on our chemical-based PET [polyethylene terephthalate] resin and
polyester fiber businesses,” said Tom Duff, chairman and CEO. “This will allow us to capitalize on
our two world-class facilities, which utilize some of the latest technology to produce
high-quality, value-added products.” Duff noted the company has restructured its management group
and divested its European PET resins business, and is exploring further strategic moves involving
its European fibers and Engineering Resins businesses in order to improve its financial picture.

The US Base Chemicals and Polymers business employs some 900 associates. The deal includes
Huntsman’s olefins and polymers manufacturing assets located at five US facilities in Texas,
Michigan and Illinois. The company will retain its Port Neches, Texas, facility, location of its
Performance Products division and the captive ethylene unit, which will receive ethylene and
propylene from Flint Hills and provide feedstock for Huntsman’s downstream derivative units.

According to Peter R. Huntsman, president and CEO, Huntsman Corp., the sale is part of
Huntsman’s strategy to divest its commodity petrochemical businesses and focus on the manufacture
and marketing of differentiated products — which serve such diverse industries as chemicals,
textiles, footwear, automotive, aviation, paints and coatings, and furniture, among others.

“Our entire product line will now experience higher growth rates and much lower sensitivity
to energy costs,” Huntsman said. “Looking forward, we have transformed our business into one
producing highly innovative products that serve an expanding global economy.”

“The assets, skills and capabilities of this operation will complement FHR’s existing
framework,” said Jeff Ramsey, vice president of chemicals, FHR, “We are acquiring an experienced
team, a robust technical service and development capability, and a global customer service function
that is focused on creating value.”

“We had representative garments tested at independent laboratories and they were found to
have actual cashmere content significantly less than that stated on the labels,” said Kenneth
Shimizu, CCMI’s Japan representative. CCMI — which conducts monitoring and enforcement activities
to protect the integrity of cashmere and camel hair textile products — provided the testing results
to the retailers, who contacted the garment importers, who then tested products yet to be
delivered.

Mislabeled cashmere products originating in China have been found not only in Japan, but
also in the United States and Europe, according to Karl Spilhaus, president, CCMI. He said
retailers and importers should have garments tested at CCMI-approved analytical laboratories, as
inexperienced laboratories will fail to identify fine-micron Chinese native sheep wool that may
have been treated deliberately with harsh chemicals that damage the fiber structure. He added that
yak fiber, which is difficult to identify as well, has also been found in woven cashmere products
originating both in China and in Europe.

“These problems could have been avoided by sufficient attention, on the part of the
importers, to the quality of the articles sourced in China,” Spilhaus said, while at the same time
commending the Japanese retailers and importers for taking responsibility once the mislabeling was
discovered.

In January 2007, Malden Mills filed for Chapter 11 protection under the US Bankruptcy Code
in order to facilitate a sale to Boston-based turnaround investment specialist Gordon Brothers
Group, for $44 million
(See “
Malden
Mills Board Approves Sale To Gordon Brothers,”). The sale was subject to higher and better
offers, and Chrysalis subsequently entered a competing bid, which ultimately was approved as the
stalking horse bid.