Paragon Announces Third Quarter Results Sales Volume Up From Prior Quarter

Norcross, Ga. (PROTEXT) - Paragon Trade Brands, Inc. (OTCBulletin Board: PGNFQ) today reported a loss of $5.2 million, or$.44 per share, for the quarter ended September 26, 1999,compared to net earnings of $4.0 million, or $.34 per share forthe third quarter of 1998. Net sales for the quarter were $128.5million, compared to $137.0 million for the third quarter of1998. Third quarter net earnings reflect the positive net impactof a $1.3 million transfer price adjustment with a foreignaffiliate. Earnings before interest, taxes, depreciation andamortization and bankruptcy costs, ("EBITDA"), for the thirdquarter totaled $5.9 million. Sales volume in the third quarter improved over the secondquarter reflecting the impact of the rollout of the Company'snewly launched Destination Store Brand programs. As a result,third quarter sales increased 9% from $117.8 million in thesecond quarter to $128.5 million. Earnings were affected by thecombination of added costs for the Destination Store Brandprograms, manufacturing inefficiencies and added royalties. For the nine months ended September 26, 1999, the Companyreported a net loss of $20.8 million or $1.74 per share, comparedto net earnings of $13.4 million or $1.12 per share, for the sameperiod last year. Net sales for the nine months were $372.6million, compared to $402.3 million for the same period lastyear. EBITDA for the nine months totaled $10.5 million. The net sales trend for the nine month period continues toreflect the impact of a number of factors, including increasedconsumer preference for premium priced products in a strongoverall economy and increased competitive pressures. With thelaunch of new Destination Store Brand programs, the Company isshipping new products to compete more effectively with thesetrends. Operating results continued to be impacted byunderutilized manufacturing capacity, royalty payments to P&G andK-C, increased product costs and manufacturing inefficiencies dueto the new product start-ups. Increased selling, general andadministrative (SG&A) expense reflects increased marketing andpromotional expenses as well as the amortization of informationtechnology investments. Commenting further, Chief Executive Officer, Bobby Abraham,said, "We are pleased that third quarter sales have picked up.Nevertheless, we expect fourth quarter earnings to be affected byslower sales and the added costs of machine changeovers as weextend the roll out of our new products. We do expect increasedsales and manufacturing efficiencies to improve earnings during2000 as we put behind us the disruptive environment of operatingin Chapter 11." Chapter 11 As has previously been reported, on October 15, 1999, theCompany announced that it has accepted a commitment by WellspringCapital Management LLC to acquire Paragon as part of a plan ofreorganization and has filed, along with its Official Committeeof Unsecured Creditors, as a co-proponent, an amended plan ofreorganization and disclosure statement in the United StatesBankruptcy Court for the Northern District of Georgia forprotection under Chapter 11 of the United States Bankruptcy Code. Commenting on the Chapter 11 filing and the status of theCompany's reorganization, Mr. Abraham noted, "We are encouragedby the significant progress we have made in the process ofemerging from Chapter 11. With the acceptance of the WellspringCommitment in October and the filing of our plan ofreorganization and disclosure statement, we believe that we arewell on our way to completing the reorganization process. Withour disclosure statement hearing now set for November 17, 1999,we believe we are on track to emerge from Chapter 11 asexpeditiously as possible." Paragon Trade Brands is the leading manufacturer of storebrand infant disposable diapers in the United States and, throughits wholly owned subsidiary, Paragon Trade Brands (Canada) Inc.,is the leading marketer of store brand infant disposable diapersin Canada. Paragon manufactures a line of premium and economydiapers, training pants, feminine care and adult incontinenceproducts, which are distributed throughout the United States andCanada, primarily through grocery and food stores, massmerchandisers, warehouse clubs, toy stores and drug stores thatmarket the products under their own store brand names. Paragonhas also established international joint ventures in Mexico,Argentina, Brazil and China for the sale of infant disposablediapers and other absorbent personal care products. Statements made in this press release, other than thoseconcerning historical information, should be considered forward-looking statements. Such statements are subject to certain risksand uncertainties that could cause actual results to differmaterially from those expressed in the Company's forward-lookingstatements. Factors which could affect the Company's financialresults, including, but not limited to: the Company's Chapter 11filing; increased raw material prices and product costs; newproduct and packaging introductions by competitors; increasedprice and promotion pressure from competitors; new competitors inthe market; Year 2000 compliance issues; and patent litigation,are described in the Company's Annual Report on Form 10-K filedwith the Securities and Exchange Commission. Readers arecautioned not to place undue reliance on the forward-lookingstatements contained herein, which speak only as of the datehereof, and which are made by management pursuant to the "safeharbor" provisions of the Private Securities Litigation ReformAct of 1995.

PARAGON TRADE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED EARNINGS STATEMENTS

(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)

(Unaudited

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

Sept. 26, Sept. 27, Sept. 26, Sept. 27,

1999

1998

1999

1998 Sales, net of discounts and allowances

$128,507 $ 136,993 $372,599 $ 402,281 Cost of sales

110,200 109,081 323,117

322,224 Gross profit

18,307

27,912 49,482

80,057 Selling, general and administrative expense

20,945

22,003 62,095

60,955 Research and development expense

840

913

2,783

3,444 Total expenses

21,785

22,916 64,878

64,399 Plant closure expense

36

---

1,527

--- Operating profit (loss)

(3,514)

4,996 (16,923)

15,658 Other income, net

909

1,226

2,835

3,497 Earnings (loss) before income taxes and bankruptcy costs

(2,605)

6,222 (14,088)

19,155 Bankruptcy costs

2,612

1,724

7,076

4,530 Earnings (loss) before income taxes

(5,217)

4,498 (21,164)

14,625 Provision for (benefit from) income taxes

18

474

(325)

1,226 Net earnings (loss) (5,235)

4,024 (20,839)

13,399 Basic earnings (loss) per share

$(.44)

$.34 $(1.74)

$1.12 Average common shares outstanding

11,950

11,938 11,949

11,934

PARAGON TRADE BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLAR AMOUNTS IN THOUSANDS)

(Unaudited)

As of

As of

September 26, 1999 December 27, 1998 Assets Cash and short-term investments

$9,652

$22,625 Receivables

76,718

79,156 Inventories

49,086

53,282 Current portion of deferred income taxes

3,349

4,260 Other current assets

2,378

4,323 Total current assets

141,183

163,646 Net property, plant and equipment

129,975

125,826 Assets held for sale

1,017

4,691 Goodwill

31,380

32,819 Investment in and advances to unconsolidated subsidiaries 91,885

88,784 Other assets

14,004

13,521

Total assets

$409,444

$429,287 Liabilities and Shareholders' Deficit Accounts payable

48,952

$ 44,849 Accrued liabilities

30,925

33,646 Total current liabilities

79,877

78,495 Liabilities subject to compromise

406,919

406,859 Other long-term liabilities

4,941

5,773 Total liabilities

491,737

491,127 Total shareholders' deficit (82,293)

(61,840) Total liabilities and shareholders' deficit

$409,444

$429,287 otsOriginal Text Service: Paragon Trade Brands, Inc. Internet:http://www.newsaktuell.de Contact: Kurt P. Ross or Guy B.Lawrence of K.P. ROSS, INC., (USA) 212-308-3333, orkpross1@msn.com, for Paragon Trade Brands, Inc., or Alan J.Cyron, Executive Vice President and Chief Financial Officer ofParagon Trade Brands, Inc., (USA) 678-969-5200

Subscribers please note that material bearing the slug"PROTEXT" is not part of CTK's news service and is not to bepublished under the "CTK" slug. Protext is a commercial serviceproviding distribution of press releases from clients, who areidentified in the text of Protext reports and who bear fullresponsibility for their contents.

PROTEXT