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From the President Our business was very good in 1988. We achieved record sales and earnings. But 1989 does not look so good. Prices for woven greige fabrics^ are down considerably, polyester prices have increased twice this year to near record levels, and our other manufacturing costs are increasing, too. Our Greige Fabric inventories are high and will remain so until our customers experience better business. We have already adjusted some operating schedules to keep our inventories at manageable levels. We are experiencing some difficulty in securing adequate quantities of man-made fibers and yams. There is a shortage of polyester staple, and this shortage is anticipated to continue through 1990. This is an industry-wide problem brought about by reduced production of polyester by industry suppliers, greater demands from mills for polyester, and greater demands from other industries for the raw materials required to manufacture polyester. Our knit division continues to have difficulty in securing sufficient yarns to meet the demands of its customers. This shortage is caused by demand being greater than supply and is also expected to continue for the near future. In spite of these problems, we are making every effort to see that we have sufficient raw materials to keep our plants operating at optimum levels, and we believe we will be successful. It is important for all of us to produce the best quality product we can, always be conscious of costs, and keep waste to a minimum. These goals are of utmost importance if we are to remain competitive. Increased quality production, waste, and cost containment are several areas which should concern us everyday. We must also be concerned about the number of medical accidents in our plants. Our safety goal is to reduce medicals by 25 percent during 1989, as compared to 1988. This is a challenging but attainable goal. Each of us must take the time to do our job safely in order to reduce unnecessary accidents. Our accident costs are excessively high, and we must work harder to bring these costs down. Our life insurance and health plan is a very costly benefit for our employees. In 1989, we project our costs to exceed $4-5 million. This benefit is funded by contributions from you and the company. All of us should strive to use our Health Care Plan wisely and only when medically necessary. By doing this, we can be sure that your health care plan will continue to be among the best in the Textile Industry. Our Company is positioning itself to meet the challenges of the next decade. We have had more technological advances in the last ten years than in the previous fifty. All of these have been necessary to remain competitive, improve the work environment and better serve our customers. There is still much to be done. Company-wide, in 1989 we are committing approximately $17 million dollars to modernize and expand our manufacturing base. Approximately $12 million of this will be allocated to Qinton Plant No. 2 to install 110 Air Jet Weaving Machines and Auxiliary Equipment, and $2 million will to go our knit division to continue the expansion program started there last year. Spring is an exciting time for most of our employees — especially those with children who are completing their high school, college or other educational careers. This year we have received many applications for educational assistance through the Qinton Foundation. Our Grants Advisory Committee will be meeting soon to determine our 1989 Award Recipients. We are also pleased with the favorable response and participation in our Literacy and Adult Education Programs. As our industry enters the decade of the 90's, education will play a more important role in manufacturing. We will require greater skills and more education than ever before, and we are pleased that so many of our employees are taking advantage of these programs. Thank you for your everyday efforts, your loyalty and dedication. G. Thaddeus Williams Clinton Mills combines North American Lace Qinton Mills, Inc.,announced March 17 plans to consolidate its North American Lace Co. (NALCO) operations, Oxford, North Carolina, into its recently expanded Greensboro, North Carolina, Elastic Fabrics of America facility. Lace production will be relocated to the Greensboro, North Carolina, plant and marketed by Elastic Fabrics of America through their various sales locations. EFA's lace manufacturing capability has been expanded to serve the Company's complete vertical needs. Clinton Mills, Inc., is a leading producer of greige woven fabrics, marketing a broad range of fabrics to the apparel, home furnishings and industrial markets. Clinton, through its Elastic Fabrics of America division, purchased the 86- year old North America Lace Co., in February of last year. In addition to lace, the Elastic Fabrics of America divisionmanufacturesdyed and finished elasticized knit fabrics primarily for use in intimate apparel, swimwear and active wear. The consolidation will be complete by late May. Illiteracy still a problem Until recently, America has had justifiable pride in its education system and its high rate of literacy. But in our present society, with its emphasis on technology and communications, some of our traditional views are changing. Last year, one out of five American adults was functionally illiterate. Twenty-seven million cannot read well enough to complete a tax form or job application. Thirty-five million more are considered "marginally illiterate" — unable to read and understand beyond a sixth grade level. Between now and the close of the century, basic literacy will be required of adultsentering the work force. Three out of four jobs created by 1990 will require more than a high school- diploma. No one can afford to ignore this growing national problem. But there are things you can do—as individuals and as parents—to help turn it around. As individuals: • Leam more about illiteracy in your community. Call your United Way and find out which United Way-sponsored agencies have programs that address illiteracy. Become involved in these programs. • Be a volunteer tutor for a young person or an immigrant who is learning to read. • When you are looking for a gif t for a teenager,consider a book that features a favorite subject. • Write your congressional representative and share your concern about illiteracy in America. • Form a task force to address illiteracy in your own community. As parents: • Know the grade level at which your children read. Schools test every child in reading and the results are readily available. If your child needs extra help in reading, look into special programs offered by the school or contact a volunteer placement agency to find a tutor. • Limit the amount of time children watch television. Encourage them to watch educational programs — and to check out library books that follow up on those programs. • Take your children to the library and encourage them to get their own library cards. Then have them choose their own books and check them out. Encourage teenagers to study and conduct research at the library. • Setanexamplebyreadingyourself. When they are young, read to your children and encourage them to read to you. Question them to see if they understand what they've read. As they get older, encourage them to set aside some time each night for reading. • Work with your children's school to encourage reading and writing skills. Start a book-publishing center that will publish students' best-written stories ... or publish these stories in a school newsletter. CM to match education contributions Effective February 27,1989, Qinton Mills will match only those qualifying contributions to schools for educational purposes. The Company will not match any future payments for athletic programs, athletic scholarships funds, athletic See Contributions Page 3 2 ClothMaker