Industry Report Underscores Grim Conditions In 2003

The American Textile Manufacturers Institute’s (ATMI’s) annual business and economic report paints
a dismal picture of 2003 and lays much of the blame at the feet of Chinese imports and the failure
of the Bush administration to address the industry’s trade and economic problems.

Looking ahead, industry officials say 2004 may not be much better, and it could well be a
make or break year for US textiles.

In 2003, the textile industry lost 10 percent of its workforce, as more than 50 plants were
shuttered in what ATMI called the industry’s second worst performance in half a century. Overall,
textile and apparel imports rose 7 percent to $85.7 billion, with textiles alone increasing by 6
percent to $17 billion. Exports of textiles and apparel were down by 2 percent and exports of
textiles alone were up by only 1 percent. That resulted in a textile and apparel trade deficit of
$70 billion.

Imports from China rose some 85 percent last year, making China the largest supplier of
textiles and apparel, accounting for 19 percent of the market. China is now twice as large as
Mexico, which is the number two supplier.

In the overall economic picture, corporate sales were down 3 percent to $47 billion, but
profits on the reduced sales were up 70 percent over 2002. The profit increase, however, is from a
comparatively small base of $400 million. The annual business review showed that: Textile
employment continued its long-term contraction in 2003. Looking at the past fifty years, last years
ten percent rate of decline in employment was second only to the 13 percent rate the industry
suffered in 2001. Textile Mill and Textile Product Mill employment combined fell to 428,000 workers
at year-end 2003, which represented a loss of 50,000 industry jobs from year-end 2002. Textile mill
shipments, as defined by the North American Industrial Classification System (NAICS) Category 313
(Fabric, Yarn, Thread, and Finishing), fell in 2003 by another eight percent to $39.8 billion.
Textile corporate sales also declined in 2003. After a modest three percent gain in 2002, sales
fell three percent last year to $47 billion. Textile corporate sales are the sales of corporations
whose largest percentage of revenue comes from textile operations as defined by NAICS categories
313 (Textile Mills) and 314 (Textile Product Mills) combined. Consistent data for this series only
go back to fourth quarter 2000. As financially weak mills were closed, less productive operations
were shut down and payrolls were trimmed, the U.S. textile industry managed to operate in the black
in 2003. After-tax corporate profits for Textile Mills and Textile Product Mills combined were $700
million (or 1.5% of sales), which represents an improvement over 2002 results, which were hammered
by a huge loss in the fourth quarter. During 2003, the Textile Mill workweek was consistently below
that of the comparable month in 2002. This decreased activity pulled the average industry workweek
for 2003 down by one hour and 36 minutes from 2002. Following a modest decline in 2002, the
producer price index (PPI) for selected textile mill products rose one percent in 2003. Within the
aggregate index last year, the PPI for yarn was up nearly one percent from the prior year, while
that for broadwoven greige fabric fell by 0.5 percent. Last year’s decline in broadwoven greige
fabric prices was the smallest in five years. Total fiber consumption on the cotton spinning
system, where yarn for most apparel and home furnishings use is produced, fell ten percent in 2003,
the sixth consecutive annual decline. The drop brought consumption last year to a low not seen
since the early 1980s. This contraction in the consumption of raw material is the result of a
consolidation which saw the industry lose more than 1,600,000 ring spindles, nearly 300,000
open-end rotors, and 27,000 air-jet positions since the end of 2000. Led by a huge increase in
shipments from China, imports of yarn, fabric, and made-ups jumped nine percent in 2003, following
a huge 26 percent surge during the previous year. Besides China, such large Asian exporters as
India and South Korea added to the flood of low-cost textiles that entered the U.S. market. As the
dollar weakened against non-Asian currencies, total U.S. exports of yarn, fabric, and made-ups
managed a very modest one percent gain last year. Although exports to most major destinations, such
as Canada, Mexico, and the EU, were down, export growth to the CBI countries helped offset the
declines to other destinations. Note: For details of the U.S. textile industrys 2003 performance as
compared with 2002, see the following textile industry benchmarks. The U.S. government statistical
agencies have completed the transition from reporting data on a Standard Industrial Classification
(SIC) basis to reporting on the new North American Industrial Classification System (NAICS) basis.
Data reported in prior years on an SIC basis are not directly comparable to those reported on a
NAICS basis as the industry definitions have been changed. SIC 22 Textile Mills included yarn,
fabric, finishing, vertical apparel knitting, carpet, tire cord, ropeandcordage, and miscellaneous
industrial products. NAICS 313 Textile Mills includes yarn, fabric, and finishing, while NAICS 314
Textile Product Mills includes carpet, tire cord, ropeandcordage, miscellaneous industrial
products, and cut-and-sewn home furnishings and industrial textile products. TEXTILE INDUStrY
BENCHMARKS 2002-2003Prepared by the American Textile Manufacturers InstituteFiber Consumption On
Cotton System (Billion Pounds)2002 4.552003 4.10% Change 2002-2003 -10Shipments (Billion $)Textile
Mills (NAICS 313)2002 43.22003 39.8% Change 2002-2003 -8Textile Products (NAICS 314)2002 34.22003
34.9% Change 2002-2003 +2Corporate Sales (NAICS 313and314) (Billion $)2002 48.52003 47.0% Change
2002-2003 -3Profits After Taxes (NAICS 313and314) (Billion $)2002 .42003 0.7% Change 2002-2003
+70Earnings On Sales (Percent)Textiles (NAICS 313and314)2002 0.52003 1.5All Manufacturing2002
3.22003 5.1Employment (Year End)Textiles (NAICS 313and314)2002 478,0002003 428,000% Change
2002-2003 -10All Manufacturing2002 15,034,0002003 14,521,000% Change 2002-2003 -3Average Workweek
In Hours (NAICS 313)2002 40.72003 39.1% Change 2002-2003 -4Hourly Earnings (NAICS 313and314)
(Annual Average $)2002 11.732003 12.00% Change 2002-2003 +2Weekly Earnings (NAICS 313and314)
(Annual Average $)2002 476.702003 469.41% Change 2002-2003 -2Index Of Hours Worked
(2002=100)Textiles (NAICS 313)2002 1002003 87.6% Change 2002-2003 -12All Manufacturing2002 1002003
95.4% Change 2002-2003 -5Producer Price Index (1982=100)Textiles2002 121.12003 121.9% Change
2002-2003 +1All Commodities2002 131.12003 138.0% Change 2002-2003 +5TextileandApparel Imports
(Millions Customs $)2002 79,9092003 85,691% Change 2002-2003 +7Textiles Only2002 16,0992003 17,030%
Change 2002-2003 +6TextileandApparel Exports (Million FAS $)2002 15,7552003 15,455% Change
2002-2003 -2Textiles Only2002 10,2692003 10,394% Change 2002-2003 +1TextileandApparel Trade Balance
(Million $)2002 (65,154)2003 (70,236)% Change 2002-2003 +9Textiles Only2002 (5,830)2003 (6,636)%
Change 2002-2003 +14TextileandApparel Imports (Million SME)2002 38,2882003 41,906% Change 2002-2003
+9Textiles Only2002 21,0322003 22,989% Change 2002-2003 +9All 2003 data were estimated from latest
year-to-date information supplied by the U.S. Department of Commerce and the Bureau of Labor

January 2004