Settlement Agreements with Procter & Gamble and Kimberly-Clark Approved

Paragon Announces Second Quarter Results Norcross, Ga. (PROTEXT) - Paragon Trade Brands, Inc. (OTC Bulletin Board: PGNFQ) today announced that the Bankruptcy Court for the Northern District of Georgia has approved Paragon's settlement agreements with The Procter & Gamble Company (NYSE: PG) (P&G) and Kimberly-Clark Corporation (NYSE: KMB) (K-C). The approval of the two agreements will assist the Company in moving forward with the formulation and filing of a stand-alone plan of reorganization that embodies the terms of the settlements. At the same time, Paragon expects to pursue the auction process approved by the Bankruptcy Court in connection with a proposed investment by Wellspring Capital Management LLC to acquire Paragon as part of a plan of reorganization. Pursuant to the Bankruptcy Court's order, competing bids to the Wellspring proposal are due no later than August 30, 1999 and an auction is scheduled to take place on September 2, 1999. Announcing its results for the quarter ended June 27, 1999, Paragon reported a loss of $8.4 million, or $.70 per share, compared to net earnings of $3.4 million, or $.28 per share for the second quarter of 1998. Net sales for the quarter were $117.8 million, compared to $127.0 million for the second quarter of 1998. Earnings before interest, taxes, depreciation and amortization and bankruptcy costs (EBITDA) for the second quarter totaled $3.4 million. For the six months ended June 27, 1999, the Company reported a loss of $15.6 million or $1.31 per share, compared to net earnings of $9.4 million or $.79 per share, for the same period last year. Net sales for the six months were $244.1 million, compared to $265.3 million for the same period last year. EBITDA for the six months ended June 27, 1999 totaled $6.2 million. The Company believes that the decrease in sales was due to a number of factors, including increased consumer preference for premium priced products in a strong overall economy, increased consumer preference for the mechanical closure system offered by one of the national brand competitors and increased pricing and promotional pressures by all of the Company's competitors. While the Company has been developing products to compete effectively with these trends, the startup and rollout have taken longer and cost more than expected. In addition, operating results were impacted by higher unit fixed costs resulting from lower volume, by royalty payments to P&G and K-C under the terms of the respective license agreements, and by expenses associated with the closing of the Company's manufacturing facility in Brampton, Ontario. Selling, General and Administrative (SG&A) expense was negatively impacted by increased promotional, information technology and sales and marketing expenses. In addition, depreciation and amortization charges included in SG&A increased over the same period last year as a result of the installation by the Company in November 1998 of the SAP R-3 enterprise resource planning system. In early July 1999, the Bankruptcy Court approved modifications to the terms of the Company's $75 million debtor- in-possession credit facility with the Chase Manhattan Bank extending the facility's maturity date to March 26, 2000. Commenting on the second quarter results, Chief Executive Officer, Bobby Abraham, said, "The second quarter results were weaker than we anticipated due to lower volume from delayed new product rollouts, higher costs related to new products, startup inefficiencies and royalties payable to P&G and K-C. Despite these factors, we have not had to draw on our $75 million credit facility with the Chase Manhattan Bank." Mr. Abraham added, "We believe that a number of initiatives the Company has in place, including our rollout of a new mechanical closure system and Destination Store Brand programs scheduled to launch in the second half of the year, will help us grow sales volume during the second half of 1999. In addition, the Bankruptcy Court's approval of the settlement agreements, which will assist the Company in moving forward with a plan for emergence from Chapter 11, should also have a positive impact on our ability to attract new customers." Paragon Trade Brands is the leading manufacturer of store brand infant disposable diapers in the United States and, through its wholly owned subsidiary, Paragon Trade Brands (Canada) Inc., is the leading marketer of store brand infant disposable diapers in Canada. Paragon manufactures a line of premium and economy diapers, training pants, and feminine care and adult incontinence products, which are distributed throughout the United States and Canada, primarily through grocery and food stores, mass merchandisers, warehouse clubs, toy stores and drug stores that market the products under their own store brand names. Paragon has also established international joint ventures in Mexico, Argentina, Brazil and China for the sale of infant disposable diapers and other absorbent personal care products. As of July 9, 1999, the common shares of the Company began trading on the National Association of Securities Dealers, Inc. (NASD) Over-the Counter (OTC) Bulletin Board under the symbol PGNFQ. Statements made in this press release, other than those concerning historical information, should be considered forward- looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the Company's forward-looking statements. Factors which could affect the Company's financial results, including, but not limited to: the Company's Chapter 11 filing; increased raw material prices and product costs; new product and packaging introductions by competitors; increased price and promotion pressure from competitors; new competitors in the market; Year 2000 compliance issues; and patent litigation, are described in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof, and which are made by management pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. PARAGON TRADE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED EARNINGS STATEMENTS (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA) (Unaudited) Thirteen Weeks Ended Twenty-Six Weeks Ended June 27,1999 June 28, 1998 June 27, 1999 June 28, 1998 Sales, net of discounts and allowances $117,848 $126,991 $244,092 $265,288 Cost of sales 103,380 102,344 212,917 213,143 Gross profit 14,468 24,647 31,175 52,145 Selling, general and administrative expense 19,707 19,900 41,150 38,952 Research and development expense 935 1,129 1,943 2,531 Total expenses 20,642 21,029 43,093 41,483 Plant closure expenses 1,491 --- 1,491 --- Operating profit (loss) (7,665) 3,618 (13,409) 10,662 Other income, net 1,162 1,213 1,926 2,271 Earnings (loss) before income taxes and bankruptcy costs (6,503) 4,831 (11,483) 12,933 Bankruptcy costs 2,538 1,160 4,464 2,806 Earnings (loss) before income taxes (9,041) 3,671 (15,947) 10,127 Provision for (benefit from) income taxes (656) 302 (343) 752 Net earnings (loss) $(8,385) $3,369 $(15,604) $9,375 Basic earnings (loss) per share $(.70) $.28 $(1.31) $.79 Average common shares outstanding 11,949 11,928 11,949 11,931 PARAGON TRADE BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS) (Unaudited) Assets As of As of June 27, 1999 December 27, 1998 Cash and short-term investments $23,293 $22,625 Receivables 55,177 79,156 Inventories 50,207 53,282 Current portion of deferred income taxes 3,258 4,260 Other current assets 5,269 4,323 Total current assets 137,204 163,646 Net property, plant and equipment 126,483 125,826 Assets held for sale 1,463 4,691 Goodwill 31,860 32,819 Investment in and advances to unconsolidated subsidiaries 91,548 88,784 Other assets 13,784 13,521 Total assets $402,342 $429,287 Liabilities and Shareholders' Deficit Accounts payable $ 37,827 $ 44,849 Accrued liabilities 30,267 33,646 Total current liabilities 68,094 78,495 Liabilities subject to compromise 406,423 406,859 Other long-term liabilities 4,882 5,773 Total liabilities 479,399 491,127 Total shareholders' deficit (77,057) (61,840) Total liabilities and shareholders' deficit $402,342 $429,287 ots Original Text Service: Paragon Trade Brands, Inc. Internet: http://www.newsaktuell.de Contact: Alan J. Cyron, Executive Vice President and Chief Financial Officer of Paragon Trade Brands, Inc., (USA) 678-969-5200, or Kurt P. Ross or Guy B. Lawrence, (USA) 212-308-3333, or kpross1@msn.com, both of K.P. Ross, Inc., for Paragon Trade Brands, Inc. Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. Protext is a commercial service providing distribution of press releases from clients, who are identified in the text of Protext reports and who bear full responsibility for their contents. PROTEXT