PLUMA INC, S-1/A, 1997-02-12

PLUMA INC
S-1/A, 1997-02-12
KNIT OUTERWEAR MILLS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1997

REGISTRATION NO. 333-18755
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

AMENDMENT NO. 2
TO

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PLUMA, INC.

(Exact name of Registrant as specified in its charter)

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NORTH CAROLINA 2253 56-1541893
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or organization) Classification Code Number) identification number)
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801 FIELDCREST ROAD
EDEN, NC 27288
(910) 635-4000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
FORREST H. TRUITT, II
PLUMA, INC.
801 FIELDCREST ROAD
EDEN, NC 27288
(910) 635-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:

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THOMAS T. CRUMPLER, ESQ. ZEB E. BARNHARDT, JR., ESQ. JAMES D. PHYFE, ESQ.
ALLMAN SPRY LEGGETT & CRUMPLER, P.A. WOMBLE CARLYLE SANDRIDGE & RICE, PLLC DAVIS POLK & WARDWELL
380 KNOLLWOOD STREET, SUITE 700 1600 BB&T FINANCIAL CENTER 450 LEXINGTON AVENUE
WINSTON-SALEM, NC 27103 200 W. SECOND STREET NEW YORK, NY 10017
TEL: (910) 722-2300 WINSTON-SALEM, NC 27101 TEL: (212) 450-4000
TEL: (910) 721-3505
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE

[CAPTION]
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TITLE OF CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING PRICE
REGISTERED REGISTERED PER SHARE (1)
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Common Stock,
no par value.............. 3,565,000 $14.00 $49,910,000

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TITLE OF CLASS OF
SECURITIES TO BE AMOUNT OF
REGISTERED REGISTRATION FEE (2)
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Common Stock,
no par value.............. $15,124
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(1) Estimated solely for the purpose of computing the registration fee.
(2) Calculated pursuant to Rule 457 promulgated under the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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(A redherring appears on the left-hand side of this page, rotated 90
degrees. Text follows.)

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS SUBJECT TO COMPLETION
DATED FEBRUARY 12, 1997

3,100,000 SHARES

(PLUMA LOGO)

COMMON STOCK
(NO PAR VALUE)

Of the 3,100,000 shares of the Company's Common Stock (the "Common Stock")
offered hereby (the "Offering"), 2,500,000 shares are being issued and sold by
Pluma, Inc., a North Carolina corporation (the "Company" or "Pluma"), and
600,000 shares are being sold by certain of the Company's shareholders named
herein (the "Selling Shareholders"). The Company will not receive any of the
proceeds from the shares of Common Stock sold by the Selling Shareholders.
Following the Offering, certain officers and the directors of the Company will
beneficially own approximately 40.5% of the outstanding shares of Common Stock.

Prior to this Offering, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$12.00 and $14.00 per share. See "Underwriting" for information relating to the
factors to be considered in determining the initial public offering price of the
Common Stock.

Application has been made for listing of the Common Stock on the New York Stock
Exchange under the symbol "PLU."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
Per Share $ $ $
Total (3) $ $ $

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PROCEEDS TO
SELLING SHAREHOLDERS
Per Share $
Total (3) $
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(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $860,000.
(3) The Company has granted an option to the Underwriters, exercisable within 30
days from the date of this Prospectus, to purchase up to 465,000 additional
shares of Common Stock on the same terms and conditions as set forth above,
solely to cover over-allotments, if any. If such option is exercised in full,
the total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Shareholders will be $ , $ , $ and
$ , respectively. See "Underwriting."

The shares of Common Stock being offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of
the shares of Common Stock offered hereby will be made against payment therefor
on or about , 1997, at the offices of J.P. Morgan Securities Inc., 60
Wall Street, New York, New York.

J.P. MORGAN & CO.
INTERSTATE/JOHNSON LANE
CORPORATION
WHEAT FIRST BUTCHER SINGER

, 1997

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No person is authorized to give any information or to make any representations
not contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Common
Stock in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company or any Selling Shareholder since
the date hereof or that information contained herein is correct as of any time
subsequent to the date hereof.

TABLE OF CONTENTS

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PAGE

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Prospectus Summary.................................... 4

Risk Factors.......................................... 8

Use of Proceeds....................................... 12

Dividend Policy....................................... 12

Dilution.............................................. 13

Capitalization........................................ 14

Selected Financial and Operating Data................. 15

Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 17

Business.............................................. 21

Management............................................ 29
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PAGE

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Certain Relationships and Related Transactions........ 38

Principal Shareholders................................ 40

Selling Shareholders.................................. 42

Description of Capital Stock.......................... 44

Shares Eligible for Future Sale....................... 47

Underwriting.......................................... 48

Legal Matters......................................... 49

Experts............................................... 49

Available Information................................. 49

Index to Financial Statements......................... F-1
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UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

The Company intends to furnish its shareholders with annual reports containing
audited financial statements certified by an independent public accounting firm
and with quarterly reports containing unaudited financial information for the
first three quarters of each fiscal year.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS
SET FORTH IN THE FINANCIAL STATEMENTS OR OTHERWISE NOTED HEREIN, THE INFORMATION
IN THIS PROSPECTUS ASSUMES THAT THERE WILL BE NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND CERTAIN STOCK OPTIONS HELD BY EMPLOYEES AND DIRECTORS
OF THE COMPANY. ALSO, UNLESS OTHERWISE INDICATED HEREIN, ALL INFORMATION WITH
REGARD TO THE CAPITAL STOCK OF THE COMPANY, INCLUDING SHARE AND PER SHARE DATA
AND DIVIDENDS, HAS BEEN RESTATED TO REFLECT ALL STOCK SPLITS THAT OCCURRED PRIOR
TO THE DATE OF THIS PROSPECTUS INCLUDING A 0.736 FOR 1 REVERSE STOCK SPLIT
RECOMMENDED BY THE COMPANY'S BOARD OF DIRECTORS ON JANUARY 28, 1997.

THE COMPANY

Pluma is a vertically integrated manufacturer of high quality fleece and jersey
activewear and as a result, is directly involved in all of its product
manufacturing processes from knitting to packaging and distribution. The Company
is focused on increasing sales and profitability by offering high value products
to a diverse customer base. Pluma sells its products to companies such as
adidas, Nike, Starter and Walt Disney. In addition, the Company sells products
under its own "Pluma," "SANTEE" and "SNOWBANK" brand names to retail and
wholesale customers such as Sam's Club and Frank L. Robinson Company.

Since its incorporation in 1986, Pluma has been an innovator of new products and
styles and has focused on delivering higher quality products. The Company was
one of the first to introduce heavyweight, fuller cut fleece products at
competitive price points and heavyweight cotton jersey products suitable for
outerwear. Today, the Company continues to innovate and recently introduced
pique fleece, 100% cotton fleece and cotton/SpandexTM five-way stretch fleece.
In addition, the Company believes its ability to collaborate with customers in
developing new styles provides a distinct competitive advantage. As a result of
Pluma's flexible manufacturing capabilities, customers often select the Company
as their "manufacturer of choice" for its ability to develop specialized
products that meet customers' cost, quality and delivery criteria.

The Company competes in the growing $37.6 billion retail activewear sector of
the apparel industry. The industry's growth is attributable to several factors.
First, the trends toward increased physical fitness and the "casualization of
America" have resulted in increased acceptance of fleece and jersey apparel as
daily attire. Second, the versatility of fleece and jersey fabric, coupled with
technological advances in product development and manufacturing, has
significantly improved product design and quality, resulting in increased
consumer demand. Finally, basic styles of fleece and jersey activewear are not
primarily driven by fashion trends or fads, contributing to the stability of
product demand.

The Company believes that its business strategy positions it to capitalize on
the growth of the activewear sector. The principal elements of this strategy
are:

PRODUCING HIGH QUALITY PRODUCTS

Pluma is recognized as a manufacturer of high quality products across all of its
price points by today's value-conscious customers. Pluma's fleece and jersey
activewear meet consumer preferences for heavier weights and higher cotton
content. In addition, Pluma's emphasis on quality is demonstrated throughout its
design and manufacturing processes.

INCREASING SALES THROUGH A DIVERSE CUSTOMER BASE

Pluma targets a diverse customer base across multiple markets and distribution
channels. Currently, Pluma's material customers include branded customers such
as adidas, Nike, Reebok and Starter, retailers such as Miller's Outpost and
Sam's Club and entertainment customers such as Busch Gardens, Hard Rock Cafe and
Walt Disney. In addition, the Company sells to wholesale distributors,
screenprinters and embroiderers who sell the Company's products to their
customers. The Company's diverse customer base provides product exposure to many
consumer markets and enables Pluma to balance its production more evenly
throughout the year, thereby improving sales and profitability. See
"Business -- Customers."

DEVELOPING NEW PRODUCTS AND STYLES

Pluma has been an innovator of new products of various fabric weights and
blends, as well as unique styles, that are often designed exclusively for its
customers to meet their individual needs. Typically, new products and styles
command higher prices resulting in better margins. New products manufactured for
one customer frequently become popular with other customers. In
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addition, the ability to customize new product styles that meet stringent
customer standards enables the Company not only to attract new customers but
also to cross-sell its more basic products.

CAPITALIZING ON FLEXIBLE MANUFACTURING CAPABILITIES

Using proprietary equipment and advanced manufacturing processes, Pluma has the
flexibility to shift its knitting, dyeing and sewing operations between various
fabric weights, blends and styles, as well as between fleece and jersey, with
minimal downtime. These capabilities allow Pluma to service effectively and
efficiently its diverse customer base.

INVESTING IN ADVANCED TECHNOLOGIES

The Company continues to upgrade its manufacturing, distribution and management
information systems as proven cost and quality related advances become
available. The Company has made significant investments to improve efficiencies
throughout its manufacturing processes including knitting, dyeing, cutting,
sewing and distribution. As a result, Pluma believes that its manufacturing and
distribution processes are among the most modern in the industry. In addition,
the Company is in the process of implementing a new management information
system to enhance the timing of financial reporting and accuracy of its
controls.

Pluma is a North Carolina corporation, incorporated on December 1, 1986. The
principal executive offices of the Company are located at 801 Fieldcrest Road,
Eden, North Carolina 27288, and its telephone number is (910) 635-4000.

RISK FACTORS

An investment in the Common Stock also involves certain risks associated with
the Company's business including the following: (i) fluctuations in apparel
retail demand; (ii) impact of seasonality; (iii) competition; (iv) dependence on
major customers; (v) dependence on customer financial stability; (vi)
availability and price of raw materials; (vii) financial leverage and (viii)
restrictions imposed on the Company by its revolving credit facility. For a more
complete discussion of these and other risk factors, see "Risk Factors."

THE OFFERING

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COMMON STOCK OFFERED (1):
By the Company.......................................... 2,500,000 shares
By the Selling Shareholders............................. 600,000 shares
TOTAL OFFERING.............................................. 3,100,000 shares
COMMON STOCK OUTSTANDING AFTER THE
OFFERING (1)(2)........................................... 7,815,797 shares
USE OF PROCEEDS TO THE COMPANY.............................. To repay indebtedness. See "Use of Proceeds."
DIVIDEND POLICY............................................. The Company does not expect that a dividend will be paid in the
foreseeable future. See "Dividend Policy."
PROPOSED NEW YORK STOCK EXCHANGE SYMBOL..................... "PLU"
</TABLE>

(1) Assumes the Underwriters' over-allotment option for up to 465,000 shares of
Common Stock is not exercised. See "Underwriting."

(2) Excludes an aggregate of 382,720 shares of Common Stock issuable upon the
exercise of stock options as of the date hereof, at a purchase price of $13.077
per share, granted to certain Company employees and directors pursuant to the
Company's 1995 Stock Option Plan, as defined elsewhere in this Prospectus. See
"Management -- Stock Option Plan."
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SUMMARY FINANCIAL DATA

Statement of Operations Data for each of the years in the three-year period
ended December 31, 1996, and the Balance Sheet Data as of December 31, 1996 and
1995 set forth below have been derived from the Company's audited financial
statements included elsewhere in this Prospectus. The Statement of Operations
Data for each of the years in the two-year period ended December 31, 1993, and
the Balance Sheet Data as of December 31, 1994, 1993 and 1992 are derived from
the Company's audited financial statements which are not included in this
Prospectus.

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YEARS ENDED DECEMBER 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1)(7) 1995(1)(2)(3) 1994 1993 1992
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STATEMENT OF OPERATIONS DATA:
Net sales $127,820 $ 100,710 $97,908 $86,645 $83,569
Gross profit 21,573 19,281 16,499 13,883 14,148
Income from operations 12,424 4,896 9,199 7,628 8,360
Income before income taxes and cumulative effect of accounting
change 9,173 1,766 6,944 5,995 7,586
Income before cumulative effect of accounting change 5,818 1,107 4,350 3,793 4,791
Net income $ 5,818 $ 1,107 $ 4,350 $ 3,867(4) $ 4,791
Earnings per common share and common equivalent -- primary and
fully diluted:
Income before cumulative effect of accounting change $ 1.09 $ .21 $ .83 $ .69 $ .87
Net income $ 1.09 $ .21 $ .83 $ .70 $ .87
Supplemental (5) $ .91
Weighted average number of shares outstanding 5,316 5,316 5,244 5,554 5,537
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AS OF DECEMBER 31,
IN THOUSANDS 1996 1995 1994 1993 1992
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BALANCE SHEET DATA:
Working capital $ 49,901 $ 50,052 $31,926 $29,935 $24,735
Total assets 89,218 88,613 68,554 61,941 52,442
Long-term debt, net of current portion 44,420 50,120 30,465 28,684 22,169
Total shareholders' equity 32,143 26,902 26,373 25,110 21,946
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YEARS ENDED DECEMBER 31,
DOLLARS IN THOUSANDS 1996(1)(7) 1995(1)(2)(3) 1994 1993 1992
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OTHER DATA:
Gross profit as a percentage of net sales 16.9% 19.1% 16.9% 16.0% 16.9%
Income from operations as a percentage of net sales 9.7% 4.9% 9.4% 8.8% 10.0%
Depreciation and amortization $ 3,804 $ 3,440 $ 2,885 $ 2,292 $ 1,753
Capital expenditures 3,399 5,856 4,495 7,086 5,952
EBITDA (6) 16,712 8,627 12,386 9,928 10,695
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(1) In December 1995, the Company brought its sales and marketing functions
in-house in order to increase control and enhance profitability (the "Box
Transaction"). The Company had previously conducted its sales and marketing
activities through an exclusive sales agent, Box & Company ("Box & Company"),
under an arrangement (the "Sales & Marketing Agreement") pursuant to which the
Company paid a commission of 3.0% of net sales plus an allowance for certain
promotional material. Box & Company is a corporation owned by G. Walker Box, a
principal shareholder of the Company and Chairman of the Board. The Company
terminated the Sales & Marketing Agreement as of December 31, 1995, and recorded
a non-recurring charge of $2.0 million, the amount of the termination payment.
The Company's sales and marketing expenses have decreased as a result of the Box
Transaction. For the year ended December 31, 1996, the Company's sales and
marketing expenses as a percent of net sales were 1.3% compared to 5.3% for the
same period in 1995 including the non-recurring charge of $2.0 million for
termination of the Sales & Marketing Agreement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Certain
Relationships and Related Transactions."

(2) Includes a non-recurring charge of $3.3 million to increase the allowance
for doubtful accounts receivable primarily related to the bankruptcy of a
customer. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

(3) Had the Box Transaction occurred at the beginning of 1995, excluding the
two non-recurring charges mentioned in notes (1) and (2), for the year ended
December 31, 1995, selling, general and administrative expenses ("SG&A") would
have been $7.3 million compared to $14.4 million as reported. In addition,
Income from operations, Net income, Earnings per common share and common
equivalent -- primary and fully diluted and EBITDA would have been $12.0
million, $5.5 million, $1.04 and $15.7 million, respectively.

(4) Includes $73,651 of income from the cumulative effect of a change in
accounting for the adoption of SFAS No. 109.

(5) Based upon earnings with adjusted interest expense and adjusted weighted
average number of shares after net proceeds from the Offering are used for
repayment of indebtedness.

(6) Represents earnings before interest expense, income taxes, depreciation and
amortization. EBITDA is commonly used to analyze companies on the basis of
operating performance, leverage and liquidity. EBITDA should not be considered
as a measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of operations and
cash flows.

(7) Includes $83,930 of expense from the change in the method of determining the
cost of inventories, except production supplies, from the FIFO method to the
LIFO method. The effect of the change was to decrease net income by $53,212
($0.01 per share).
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RISK FACTORS

THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS DUE
TO A NUMBER OF FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS. IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED
HEREBY.

FLUCTUATIONS IN APPAREL RETAIL DEMAND

In general, the retail industry has experienced significant changes and
difficulties over the past several years, including consolidation of ownership,
increased centralization of buying decisions, customer order cancellations,
restructuring, bankruptcies and liquidations. As a result of weak apparel
retailing demand during the second half of 1995, the Company experienced lower
than anticipated demand for its products, which resulted in higher inventory
levels. Although the Company believes that demand for the Company's apparel
products has recovered, there can be no assurance that the apparel industry will
not experience weakness in the future.

IMPACT OF SEASONALITY

Typically, demand for fleece products is higher during the third and fourth
quarters than in the first two quarters of each year. As a result, the Company
produces and stores fleece finished goods inventory in order to meet the heavy
demand for delivery in the second half of the year. If, after producing and
storing fleece inventory in anticipation of third and fourth quarter deliveries,
demand is significantly less than expected, the Company may be required to hold
inventory for an extended period of time at the Company's expense, or sell the
excess inventory at reduced prices, thereby reducing profits. The holding of
excess inventory could also necessitate the slowing of production, lower plant
and equipment utilization and lower fixed operating cost absorption resulting in
a negative impact on the Company's results of operations and financial
condition. See "Business -- Seasonality."

COMPETITION

The fleece and jersey activewear industry is highly competitive. The Company
believes that its primary competitors are vertically integrated manufacturers
such as Fruit of the Loom, Inc. ("Fruit of the Loom"), Oneita Industries, Inc.
("Oneita"), Russell Corporation ("Russell"), Sara Lee Corporation ("Sara Lee"),
Tultex Corporation ("Tultex") and VF Corporation ("VF") among others. Certain of
these competitors have greater financial resources and manufacturing,
distribution and marketing capabilities than the Company. The Company's future
success will depend to a significant extent upon its ability to remain
competitive in the areas of quality, price, marketing, product development,
manufacturing, distribution and order processing. There can be no assurance that
the Company will be able to compete effectively in all such areas in the future.
See "Business -- Competition."

In recent years, certain fleece and jersey apparel manufacturers have
overproduced inventory as a result of excess plant and equipment capacity. This
oversupply of inventory has on occasion led to inventory dumping, resulting in
price reductions for fleece and jersey apparel. Such lower prices have had an
adverse effect upon the Company's operating results. The Company believes that
continuation of this practice would have an adverse impact on fleece and jersey
apparel manufacturers, including the Company.

Recently, import protection afforded to domestic manufacturers has been
declining, resulting in increased foreign competition. Over a period of ten
years beginning in 1995, the General Agreement on Tariffs and Trade ("GATT")
eliminates restrictions on imports of apparel. In addition, on January 1, 1994,
the North American Free Trade Agreement ("NAFTA"), which reduces or repeals
trade barriers with Canada and Mexico, became effective. The implementation of
both GATT and NAFTA, as well as other free trade agreements, could result in
increased apparel imports from foreign manufacturers and have an adverse effect
upon the Company.

In general, wholesale distributors warehouse inventory longer than other
distribution channels. Consequently, manufacturers, including the Company, have
extended to wholesale customers longer payment terms. In addition, certain
manufacturers recently began a practice of consigning products to wholesale
distributors for competitive reasons. Should wholesale distributors of fleece
and jersey apparel demand and receive longer payment terms than currently exist,
or should consignment of inventory become common within the industry, the
Company could be adversely impacted by increased inventory costs, delays in
collecting receivables and return of inventory.

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DEPENDENCE ON MAJOR CUSTOMERS

The Company's top ten customers accounted for approximately 75.5% of its net
sales and 65.4% of its accounts receivable for the year ended December 31, 1996
and 75.6% of its net sales and 78.2% of its accounts receivable for the year
ended December 31, 1995. Its top three customers for the year ended December 31,
1996, Sam's Club, adidas and Frank L. Robinson, accounted for 24.1%, 14.7% and
7.2%, respectively, of net sales. For the year ended December 31, 1995, the
Company's top three customers, Sam's Club, Frank L. Robinson and Starter Galt
(formerly Galt/Sand), accounted for 16.1%, 12.8% and 11.4%, respectively, of the
Company's net sales. In the event that any of these customers or any of the
Company's other significant customers were to substantially reduce their orders
or cease buying from the Company, such an occurrence would have a material
adverse effect on the Company's business should the Company be unable to replace
that business with other customers. See "Business -- Customers."

DEPENDENCE ON CUSTOMER FINANCIAL STABILITY

While various retailers and wholesalers, including some of the Company's
customers, experienced financial difficulties in the past few years, which
increased the risk of extending credit to certain customers, the Company's bad
debt experience was limited until 1995. In that year, the Company recognized a
non-recurring charge to income of $3.3 million to increase its allowance for
doubtful accounts receivable from $0.9 million to $4.1 million as of December
31, 1995, related to the anticipated bankruptcy of a major customer, 20/20
Sport, Inc. ("20/20 Sport"), that occurred on February 1, 1996. As a result,
1995 net income was decreased by $2.0 million, from $3.1 million to $1.1
million. In 1996, the Company wrote-off the entire accounts receivable balance
of $3.6 million due from 20/20 Sport. Sales to 20/20 Sport were $2.5 million and
$5.0 million for the years ended December 31, 1996 and 1995, respectively. The
Company has not extended credit to 20/20 Sport since February 1, 1996. The
allowance for doubtful accounts was $0.8 million as of December 31, 1996. The
Company believes its allowance for doubtful accounts is sufficient. However,
there can be no assurance that the Company will not have to increase such
allowances in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

AVAILABILITY AND PRICE OF RAW MATERIALS

The Company purchases raw materials such as yarn, dye stuffs and chemicals used
in manufacturing its products. All of these purchases are made domestically. The
Company is dependent upon the ability of its suppliers to furnish these
materials in sufficient volumes at fair prices and to meet performance, quality
and delivery criteria. Except for contracts periodically entered into by the
Company that obligate yarn suppliers to deliver the cotton portion of yarn at a
fixed price over a period of time, the Company does not have any contracts with
its suppliers that obligate them to continue selling to the Company. The prices
of cotton and polyester have been volatile since 1994. Should shortages of
materials occur or should the prices of these materials rise, the Company's
inability to increase its prices to recover such cost increases could have a
material adverse effect upon the Company. See "Business -- Sources of Raw
Materials."

FINANCIAL LEVERAGE

The Company is and will continue to be leveraged. As of December 31, 1996, the
Company had outstanding indebtedness to First Union National Bank ("FUNB") in
the aggregate amount of $43.6 million pursuant to the terms of a loan agreement
evidencing the Company's revolving credit facility (the "Credit Facility").
Although the Company intends to utilize all of the net proceeds from this
Offering to reduce the outstanding balance of the Credit Facility, an
outstanding balance of approximately $14 million will remain thereon.
Furthermore, the Company anticipates utilizing the Credit Facility in the
future, when necessary, to fund operating and capital expenditures. Therefore,
the Company has incurred and may continue to incur in the future significant
interest expense. The degree to which the Company is leveraged could affect the
Company's ability to obtain additional financing. Also, since the Company's
borrowings are at variable interest rates, an increase in interest rates would
result in higher interest expense. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

RESTRICTIONS IMPOSED BY CREDIT AGREEMENT

The Credit Facility imposes certain operating and financial restrictions on the
Company. At certain times in 1995, the Company was out of compliance with those
financial covenants relating to limitations on (i) the incurrence of additional
indebtedness (which was the result of the promissory note given in the Box
Transaction), (ii) transactions with related parties (resulting from the
Company's contract with Diversified Distributions, Inc. See "Certain
Relationships and Related Transactions"), (iii) capital expenditures (resulting
from the purchase of the Company's sewing plant in Vesta, Virginia. See
"Business -- Properties"), as

<PAGE>

well as financial covenants related to the maintenance of certain debt to equity
and EBITDA to interest expense ratios (resulting from the Box Transaction and
the non-recurring charge for the doubtful accounts receivable attributable to
20/20 Sport). The Company sought waivers in connection with these matters, all
of which were granted. As of December 31, 1996, the Company was in full
compliance with the Credit Facility. However, there can be no assurance that the
Company will not have to seek waivers in the future, and there can be no
assurance that such waivers will be granted. The restrictions and financial
requirements described above and the leveraged position of the Company could
limit the Company's ability to respond to changing business or economic
conditions, or other developments affecting the Company's operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

ENVIRONMENTAL CONTROLS AND OTHER REGULATORY REQUIREMENTS

The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and nonhazardous substances and wastes
used in or resulting from its present and past operations. While the Company
does not expect that compliance with any of such laws and regulations will
adversely affect the Company's operations, there can be no assurance that
environmental regulatory requirements will not become more stringent in the
future or that the Company will not incur significant costs relating to
environmental matters in the future. The Company's operations also are governed
by laws and regulations relating to employee safety and health, principally the
Occupational Safety and Health Act ("OSHA") and regulations thereunder, that,
among other things, establish exposure limitations for cotton dust,
formaldehyde, asbestos and noise and regulate chemical and ergonomic hazards in
the workplace. See "Business -- Environmental Matters."

RELIANCE ON KEY PERSONNEL

The success of the Company's business will be partially dependent upon the
performance of certain members of senior management. The loss of key members of
senior management could have an adverse effect on the Company's business. The
Company's key executive officers are parties to employment contracts. The
Company maintains key man life insurance on certain executives. See
"Management."

CONTROL BY PRINCIPAL SHAREHOLDERS

Upon consummation of the Offering, the officers and directors of the Company as
a group will control (directly or through beneficial ownership) 40.5% (38.3% if
the Underwriters' over-allotment option is exercised in full) of the outstanding
voting securities of the Company. Furthermore, certain family members of these
officers and directors own additional Pluma shares that are not attributable to
these officers and directors. These officers and directors will have the ability
to control the business affairs of the Company (including the perpetuation of
their positions with the Company if 9.6% of other holders of the Common Stock
vote their shares consistently with such officers and directors and the
Underwriters' over-allotment option is not exercised). See "Principal
Shareholders."

ANTITAKEOVER PROVISIONS

The Company's Bylaws and Articles of Incorporation include provisions that may
have the effect of discouraging a nonnegotiated takeover of the Company and
preventing certain changes of control. These provisions, among other things (i)
classify the Company's Board of Directors into three classes serving staggered
three-year terms; (ii) permit the Company's Board of Directors, without further
shareholder approval, to issue up to 1.0 million shares of preferred stock with
rights and preferences determined by the Board of Directors at the time of
issuance; and (iii) create a supermajority vote requirement (66 2/3%) of the
Company's shareholders and directors prior to a sale of the Company's assets or
other change in control of the Company. Such restrictions might, therefore, have
the effect of inhibiting shareholders' ability to realize maximum value for
their shares of Common Stock that might otherwise be realized as a result of a
merger or other event affecting the control of the Company. See "Description of
Capital Stock."

NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF
STOCK PRICE

Prior to this Offering, there has been no public market for the Company's Common
Stock. There can be no assurance that an active trading market in the Common
Stock will develop or be sustained after this Offering. The initial public
offering price will be determined through negotiations among the Company, the
Selling Shareholders and the representatives of the Underwriters based on the
factors described under "Underwriting" and may not be indicative of the market
price of the Common Stock after the Offering. The trading price of the Common
Stock could be subject to significant fluctuations in response to variations in
the

<PAGE>
Company's quarterly operating and financial results, changes in earnings
estimates by research analysts and other events or factors. In addition, the
stock market has in recent years experienced significant price fluctuations.
These fluctuations often have been unrelated to the operating performance of
specific companies. Broad market fluctuations, as well as economic conditions
generally, and in the apparel manufacturing industry specifically, may adversely
affect the market price and liquidity of the Company's Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock, or the availability of substantial
amounts of Common Stock for future sale, could adversely affect the prevailing
market price of the Common Stock. However, the Company, its directors, certain
of its officers and all shareholders who own more than 36,800 shares of Common
Stock have agreed with the Underwriters not to sell shares of Common Stock or
securities convertible into Common Stock, subject to certain limited exceptions,
for 180 days from the date of this Prospectus. See "Shares Eligible for Future
Sale."

DILUTION

Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution in net tangible book value of the Common Stock offered
hereby (based on an assumed initial public offering price of $13.00 per share)
of approximately $5.13 per share ($4.89 per share if the Underwriters'
over-allotment option is exercised in full). See "Dilution."

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of 2,500,000 shares of the Common
Stock offered by the Company (after deducting the underwriting discounts and
estimated expenses associated with the Offering) are estimated to be
approximately $29.4 million ($35.0 million if the Underwriters' over-allotment
option is exercised in full) assuming an initial public offering price of $13.00
per share. The Company intends to use all of such net proceeds to reduce the
Company's outstanding indebtedness to FUNB under the Credit Facility. The
Company's interest rate on the FUNB loan is variable. On December 31, 1996, the
interest rate on the Credit Facility was 6.86%, and the amount outstanding was
$43.6 million. The Company's Credit Facility expires on May 30, 2000. The
proceeds previously drawn under the Credit Facility were used to fund working
capital requirements of the Company and certain purchases of plant and
equipment. The Company will not receive the benefit of that portion of the net
proceeds of this Offering to be paid to Selling Shareholders.

DIVIDEND POLICY

The Company has declared and paid quarterly cash dividends on its Common Stock
since 1991. Quarterly cash dividends paid since January 1994 have been $0.0272
per share. The Company does not anticipate paying a dividend in the foreseeable
future. Any dividend declarations in the future will depend upon the Company's
profitability, financial condition, capital needs, possible lender consent and
other factors deemed relevant by the Board of Directors. The Company's loan
agreement with FUNB prohibits the Company from paying a dividend if such payment
would cause the Company to violate certain financial covenants imposed on the
Company by the loan agreement.

<PAGE>
DILUTION

Purchasers of the Common Stock offered hereby will experience an immediate
dilution in the net tangible book value of their Common Stock from the assumed
initial public offering price. The net tangible book value of the Common Stock
at December 31, 1996, was approximately $32.1 million, or $6.05 per share of
outstanding Common Stock. Net tangible book value per share represents total
assets of the Company (there are no significant intangible assets) less total
liabilities, divided by the number of shares of Common Stock outstanding.

After giving effect to the issuance and sale by the Company of 2,500,000 shares
of Common Stock at an assumed initial public offering price of $13.00 per share
(after deducting the underwriting discount and the estimated expenses associated
with the Offering to be paid by the Company), the pro forma net tangible book
value as of December 31, 1996 would be approximately $61.5 million or $7.87 per
share ($67.1 million or $8.11 per share, assuming the Underwriters'
over-allotment option is exercised in full). This represents an immediate
increase in pro forma net tangible book value of $1.82 per share to existing
shareholders, and an immediate dilution of $5.13 per share to investors
purchasing shares at the initial public offering price.

The following table illustrates this per share dilution:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock $13.00
Net tangible book value per share at December 31, 1996 $ 6.05
Increase attributable to new investors 1.82
Pro forma net tangible book value per share after the Offering 7.87
Dilution in net tangible book value per share to new investors $ 5.13
</TABLE>

The following table sets forth the number of shares of Common Stock purchased
from the Company, the total consideration paid to the Company and the average
price per share paid to the Company by existing shareholders and the investors
purchasing shares of Common Stock in the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders (1) 5,315,797 68.0% $ 5,231,575 13.9% $ .98
New investors 2,500,000 32.0 32,500,000 86.1 13.00
Total 7,815,797 100.0% $37,731,575 100.0%
</TABLE>

(1) If the Underwriters' over-allotment option is exercised in full, the number
of shares held by the new investors will increase to 2,965,000, or 35.8% of the
total number of shares to be outstanding after this Offering, and the number of
shares held by the existing shareholders will be 5,315,797 shares, or 64.2% of
the total number of shares to be outstanding after the Offering.

<PAGE>
CAPITALIZATION

The following table sets forth short-term borrowings and the capitalization of
the Company (i) as of December 31, 1996, and (ii) as adjusted to give effect to
the sale of the shares of Common Stock offered by the Company at an assumed
initial public offering price of $13.00 per share and the application of the
estimated net proceeds to be received by the Company from the Offering to the
reduction of the outstanding balance of the Credit Facility. See "Use of
Proceeds." The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements of the Company included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1996
ACTUAL AS ADJUSTED (1)
<S> <C> <C>
Short-term borrowings, including current portion of long-term debt $ 849,640 $ 849,640
Long-term debt:
Revolving loan 43,569,904 14,204,904
Subordinated debt 849,640 849,640
Total long-term debt, net of current portion 44,419,544 15,054,544
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized, none outstanding -- --
Common stock, no par value, 15,000,000 shares authorized;
5,315,797 shares outstanding; 7,815,797 shares outstanding as adjusted (2) 7,222,550 7,222,550
Paid-in capital -- 29,365,000
Retained earnings 24,920,343 24,920,343
Total shareholders' equity 32,142,893 61,507,893
Total capitalization $ 76,562,437 $ 76,562,437
</TABLE>

(1) Assumes the Underwriters' over-allotment option for up to 465,000 shares of
Common Stock is not exercised. See "Underwriting."

(2) Excludes an aggregate of 382,720 shares of Common Stock issuable upon the
exercise of stock options as of the date hereof at a purchase price of $13.077
per share granted to certain Company employees and directors pursuant to the
Company's 1995 Stock Option Plan, as defined elsewhere in this Prospectus. See
"Management -- Stock Option Plan."

<PAGE>
SELECTED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1)(7) 1995(1)(2)(3) 1994 1993 1992
STATEMENT OF OPERATIONS DATA:
Net sales $127,820 $ 100,710 $97,908 $86,645 $83,569
Cost of goods sold 106,247 81,429 81,409 72,762 69,421
Gross profit 21,573 19,281 16,499 13,883 14,148
Selling, general and administrative expenses 9,149 14,385 7,300 6,255 5,788
Income from operations 12,424 4,896 9,199 7,628 8,360
Other expenses, net 3,251 3,130 2,255 1,633 774
Income before income taxes and cumulative effect of accounting
change 9,173 1,766 6,944 5,995 7,586
Income taxes 3,355 659 2,594 2,202 2,795
Income before cumulative effect of accounting change 5,818 1,107 4,350 3,793 4,791
Cumulative effect of accounting change -- -- -- 74(4) --
Net income $ 5,818 $ 1,107 $ 4,350 $ 3,867(4) $ 4,791
Earnings per common share and common equivalent -- primary and
fully diluted:
Income before cumulative effect of accounting change $ 1.09 $ .21 $ .83 $ .69 $ .87
Net income $ 1.09 $ .21 $ .83 $ .70 $ .87
Supplemental (5) $ .91
Weighted average number of shares outstanding 5,316 5,316 5,244 5,554 5,537
Cash dividends per common share $ .11 $ .11 $ .11 $ .11 $ .08
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AS OF DECEMBER 31,
IN THOUSANDS 1996 1995 1994 1993 1992
BALANCE SHEET DATA:
Working capital $ 49,901 $ 50,052 $31,926 $29,935 $24,735
Total assets 89,218 88,613 68,554 61,941 52,442
Long-term debt, net of current portion 44,420 50,120 30,465 28,684 22,169
Total shareholders' equity 32,143 26,902 26,373 25,110 21,946
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
DOLLARS IN THOUSANDS 1996(1)(7) 1995(1)(2)(3) 1994 1993 1992
OTHER DATA:
Gross profit as a percentage of net sales 16.9% 19.1% 16.9% 16.0% 16.9%
Income from operations as a percentage of net sales 9.7% 4.9% 9.4% 8.8% 10.0%
Depreciation and amortization $ 3,804 $ 3,440 $ 2,885 $ 2,292 $ 1,753
Capital expenditures 3,399 5,856 4,495 7,086 5,952
EBITDA (6) 16,712 8,627 12,386 9,928 10,695
</TABLE>

<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (CONTINUED)

(3) Had the Box Transaction occurred at the beginning of 1995, excluding the two
non-recurring charges mentioned in notes (1) and (2), for the year ended
December 31, 1995, selling, general and administrative expenses ("SG&A") would
have been $7.3 million compared to $14.4 million as reported. In addition,
Income from operations, Net income, Earnings per common share and common
equivalent -- primary and fully diluted and EBITDA would have been $12.0
million, $5.5 million, $1.04 and $15.7 million, respectively.

(4) Includes $73,651 of income from the cumulative effect of a change in
accounting for the adoption of SFAS No. 109.

(5) Based upon earnings with adjusted interest expense and adjusted weighted
average number of shares after net proceeds from the Offering are used for
repayment of indebtedness.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

Incorporated in 1986, Pluma is a vertically integrated manufacturer of high
quality fleece and jersey activewear. Historically, the Company's sales have
been derived predominantly from fleece products. However, since introducing
jersey products in 1990, the Company has increased jersey sales in order to
diversify its product mix, more efficiently utilize its manufacturing base and
reduce the impact of seasonality that is inherent in the fleece industry.
Generally, jersey products are sold at lower price points and generate lower
gross margins than fleece products.

In December 1995, the Company brought its sales and marketing functions in-house
in order to increase control and enhance profitability (the "Box Transaction").
The Company had previously conducted its sales and marketing activities through
an exclusive sales agent, Box & Company ("Box & Company"), under an arrangement
(the "Sales and Marketing Agreement") pursuant to which the Company paid a
commission of 3.0% of net sales plus an allowance for certain promotional
material. Box & Company is a corporation owned by G. Walker Box, a principal
shareholder of the Company and Chairman of the Board. The Company terminated the
Sales and Marketing Agreement as of December 31, 1995, and recorded a
non-recurring charge of $2.0 million, the amount of the termination payment.
Sales and marketing expenses have decreased as a result of the Box Transaction.
For the year ended December 31, 1996, the Company's sales and marketing expenses
as a percent of net sales were 1.3% as compared to 5.3% for the same period in
1995 including the non-recurring charge of $2.0 million for termination of the
Sales & Marketing Agreement. In addition, in December 1995, the Company incurred
a non-recurring charge of $3.3 million to increase the allowance for doubtful
accounts receivable related to the bankruptcy of 20/20 Sport. Had the Box
Transaction occurred as of the beginning of 1995, and excluding the two
non-recurring charges, for the year ended December 31, 1995, SG&A as a percent
of net sales would have been 7.3% as compared to 14.2%, as reported.

The following table presents the major components of the Company's Statements of
Operations as a percentage of net sales:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 83.1 80.9 83.1
Gross profit 16.9 19.1 16.9
Selling, general and administrative expenses 7.2 14.2 7.5
Income from operations 9.7 4.9 9.4
Other expenses, net 2.5 3.1 2.3
Income before income taxes and cumulative effect of accounting change 7.2 1.8 7.1
Income taxes 2.6 .7 2.7
Net income 4.6% 1.1% 4.4%
</TABLE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995

NET SALES. Net sales increased 26.9% to $127.8 million in 1996 from $100.7
million in 1995, an increase of $27.1 million. Gross dozens sold of fleece and
jersey increased 25.2% to 1.6 million dozens in 1996 from 1.3 million dozens in
1995. The increase in net sales was principally attributable to increased sales
of jersey activewear, sales of new products and revenue from the addition of new
customers. Sales of jersey activewear increased by 56.1% to $46.8 million in
1996 from $30.0 million in 1995, an increase of $16.8 million. Sales of new
products accounted for 16.1% of 1996 net sales. Average sales price per dozen
for total products increased 1.0% in 1996 as a result of an increased average
sales price per dozen for fleece that was partially offset by a slight decline
in the average sales price per dozen for jersey products. See
"Business -- Products."

GROSS PROFIT. Gross profit was 16.9% of net sales in 1996 as compared to 19.1%
in 1995. This decrease in gross profit was the result of increased sales of
jersey activewear as a percent of total sales, higher raw material costs, harsh
winter weather causing higher fuel costs, weak demand in the first quarter of
1996, and increased medical and workers' compensation insurance costs due to an
increase in the labor force. As a result of the weak demand in the first quarter
and the harsh winter weather

<PAGE>
mentioned above, the Company experienced lower than expected utilization of its
plant facilities. There can be no assurance that the factors discussed above
will not occur again.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A decreased 36.4% to $9.1
million in 1996 from $14.4 million in 1995. SG&A as a percent of net sales for
1996 was 7.2% compared to 14.2% in 1995. This decrease in SG&A as a percentage
of net sales resulted primarily from bringing sales and marketing functions
in-house.

OTHER EXPENSES, NET. Other expenses, net, increased 3.9% to $3.3 million in 1996
from $3.1 million in 1995, an increase of $0.1 million. This increase was
primarily the result of an increase in interest expense as a result of
additional borrowings to fund higher inventories.

INCOME TAXES. The effective tax rate was 36.6% in 1996 compared to 37.3% in
1995.

YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994

NET SALES. Net sales increased 2.9% to $100.7 million in 1995 from $97.9 million
in 1994, an increase of $2.8 million. Gross dozens sold of fleece and jersey
increased 9.5% to 1.3 million dozens in 1995 from 1.2 million dozens in 1994.
The increase in net sales was principally attributable to increased sales of
jersey activewear, sales of new products and additional revenue from a major
customer. Sales of jersey activewear increased by 89.6% to $30.0 million in 1995
from $15.8 million in 1994, an increase of $14.2 million. Sales of new products
accounted for 12.5% of 1995 net sales. Sales to one major customer, Sam's Club,
increased by $8.7 million. This increase in net sales was offset by a 10.6%
decrease in sales of fleece activewear to $70.6 million in 1995 from $79.0
million in 1994. This decrease was primarily attributable to a general weakness
in demand for back-to-school and holiday seasonal purchasing. Average sales
price per dozen for total products decreased 3.1% in 1995 as a result of
increased sales of jersey products, which generally sell at lower price points
than fleece. However, average sales price per dozen for fleece and jersey each
increased. See "Business -- Products."

GROSS PROFIT. Gross profit was 19.1% of net sales in 1995, as compared to 16.9%
in 1994. This increase in gross profit was a result of efficiency improvements
resulting from computerized purchasing and scheduling controls and higher
utilization of capacity for the first three quarters. This increase in gross
profit was offset primarily by lower than expected utilization of the Company's
plant and equipment in the fourth quarter of 1995, increased sales of jersey
products and increased medical and workers' compensation insurance costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased 97.0% to $14.4
million in 1995 from $7.3 million in 1994, an increase of $7.1 million. SG&A as
a percent of net sales for 1995 was 14.2% compared to 7.5% in 1994. This
increase was due primarily to a non-recurring charge of $3.3 million to increase
the allowance for doubtful accounts receivable related to 20/20 Sport, a
customer that filed for bankruptcy protection in the U.S. Bankruptcy Court in
the Southern District of New York in February 1996 (such amount subsequently has
been written off), and a non-recurring charge of $2.0 million for termination of
the Sales and Marketing Agreement as a result of the Box Transaction. In
addition, compensation costs increased by $0.9 million. Had the Box Transaction
occurred as of the beginning of 1995, and excluding the two non-recurring
charges, for the year ended December 31, 1995, SG&A as a percent of net sales
would have been 7.3% as compared to 14.2%, as reported.

OTHER EXPENSES, NET. Other expenses, net, increased 38.9% to $3.1 million in
1995 from $2.3 million in 1994, an increase of $0.9 million. This increase was
primarily the result of an increase in interest expense as a result of
additional borrowings to fund higher inventories and the absence of the $0.3
million insurance settlement recognized in 1994.

INCOME TAXES. The effective tax rate was 37.3% in 1995 compared to 37.4% in
1994.

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth quarterly unaudited financial information of the
Company for the eight quarters ended December 31, 1996. This information has
been prepared on the same basis as the annual information presented elsewhere in
this Prospectus and, in management's opinion, reflects all adjustments necessary
for a fair presentation of the information for the quarters presented when read
in conjunction with the Company's financial statements and the notes thereto
included elsewhere in this Prospectus. The operating results for any quarter are
not necessarily indicative of the results for any subsequent period or for the
entire fiscal year. The quarterly unaudited financial information below differs
from amounts previously reported by the Company as a result of allocating
certain year-end accruals, including the Company's change in accounting for
inventories, except production supplies, from the FIFO method to the LIFO method
in 1996, to the respective interim periods in which the related charges were
incurred. Except as otherwise indicated, any comparison discussed below reflects
a change from the comparable quarter of the prior year.

<PAGE>

<TABLE>
<CAPTION>
QUARTERS ENDED
IN THOUSANDS, 1995 1996
EXCEPT PER SHARE DATA MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 19,220 $23,141 $ 31,817 $26,532 $ 21,932 $33,887 $ 39,719 $32,282
Cost of goods sold 15,351 18,461 26,204 21,413 19,022 29,759 32,126 25,340
Gross profit 3,869 4,680 5,613 5,119 2,910 4,128 7,593 6,942
Selling, general and administrative
expenses 1,893 2,202 2,557 7,733 2,025 2,298 2,356 2,470
Income (loss) from operations 1,976 2,478 3,056 (2,614) 885 1,830 5,237 4,472
Other expenses, net 595 782 868 885 761 816 909 765
Income (loss) before income taxes 1,381 1,696 2,188 (3,499) 124 1,014 4,328 3,707
Income taxes (benefits) 508 624 805 (1,278) 46 373 1,593 1,343
Net income (loss) $ 873 $ 1,072 $ 1,383 $(2,221) $ 78 $ 641 $ 2,735 $ 2,364
Earnings per common share and
common equivalent -- primary and
fully diluted $ .16 $ .20 $ .26 $ (.41) $ .01 $ .12 $ .51 $ .45
</TABLE>

The activewear business is seasonal. Typically, demand for fleece products is
lower during the first and second quarters of each year, which is partially
offset by increased demand for jersey products in these periods.

Compared to first quarter sales in 1995, first quarter sales in 1996 were $2.7
million higher. This increase was due, in part, to a carryover of additional
demand for jersey and fleece products the Company experienced in the fourth
quarter of 1995. Second quarter and third quarter sales increased $10.7 million
and $7.9 million, respectively, over the prior year's second and third quarters'
sales. The increase in net sales was principally attributable to increased sales
of jersey activewear, sales of new products and revenue from the addition of new
customers. The first and second quarters' gross profit as a percentage of net
sales in 1995 was 20.1% and 20.2%, respectively. The first and second quarters'
gross profit as a percentage of net sales in 1996 decreased to 13.3% and 12.2%,
respectively. This decrease in gross profit was the result of increased sales of
jersey activewear as a percent of total sales, higher raw material costs, harsh
winter weather causing higher fuel costs, lower than expected utilization of the
Company's plant and equipment during 1996 and sales of higher cost inventory
which was manufactured during the fourth quarter of 1995. In the third and
fourth quarters of 1996, gross profit as a percentage of net sales increased to
19.1% and 21.5%, respectively. This increase resulted from improved utilization
as the result of greater demand and higher average sales price per dozen for
fleece products.

During the fourth quarter of 1995, the Company incurred two non-recurring
charges: a $2.0 million termination charge as a result of the Box Transaction
and a $3.3 million increase in the allowance for doubtful accounts due to the
bankruptcy of 20/20 Sport.

The Company has experienced and expects to continue to experience fluctuations
in its quarterly results. The Company's revenues and operating performance are
affected by a number of factors, including, but not limited to, changes in raw
material prices, product mix and the general retailing environment. Therefore,
the Company believes that quarter-to-quarter comparisons of its operating
results are not necessarily indicative of future performance.

LIQUIDITY AND CAPITAL RESOURCES

PRINCIPAL SOURCES OF LIQUIDITY. Principal sources of liquidity have been bank
financing, cash generated from the Company's operations and private placements
of equity securities. Pursuant to a loan agreement executed on May 25, 1995 (the
"Loan Agreement"), the Company entered into the Credit Facility with FUNB in the
amount of the lesser of $55.0 million or the Company's "borrowing base" as
defined in the Loan Agreement. As of December 31, 1996, $43.6 million was
outstanding, leaving $11.4 million available. The Loan Agreement expires on May
30, 2000. The interest rate of the Credit Facility is variable, and, on December
31, 1996, it was 6.86%. The net proceeds of the Offering received by the Company
will be used to reduce the outstanding balance of the Credit Facility to
approximately $14.2 million. See "Use of Proceeds."

The loan agreement evidencing the Credit Facility imposes certain operating and
financial restrictions on the Company including but not limited to limitations
on mergers or other consolidations, acquisition of assets, indebtedness or
incurrence of capital leases, the creation of liens and other encumbrances on
Company assets, the disposition of assets, the payment of dividends (if such
payment

<PAGE>

would create a default under such loan), capital expenditures and investments
and related party transactions. Further, the Company is required under the
Credit Facility to maintain specified financial ratios and levels including (i)
a minimum tangible net worth level the greater of $25.0 million plus an annual
increase of $2.0 million for each calendar year beginning January 1, 1996 or
tangible net worth as of the immediately preceding December 31 less $4.0
million; (ii) a debt to equity ratio of no greater than 2.5 to 1 from January 1
through November 30 of each year and 2.0 to 1 during each December; and (iii) a
requirement that the ratio of the Company's EBITDA (earnings before interest
expense, income taxes, depreciation and amortization) to interest expense for
any four consecutive quarters be no less than 3.5 to 1. The Company's
obligations under the Loan Agreement are secured by substantially all of the
Company's assets.

As of December 31, 1996, the Company's debt to equity ratio was approximately
1.4 to 1. Assuming an initial public offering price of $13.00 per share, after
applying the net proceeds of this Offering, the Company's debt to equity ratio
will be approximately 0.3 to 1.

In 1994, the Company conducted a private placement of Common Stock at $10.686
per share pursuant to Regulation D promulgated under the Securities Act of 1933.
The Company received approximately $1.7 million for 161,920 shares as a result
of that offering. Proceeds from this private placement were used to reduce
outstanding indebtedness.

As of the date hereof, the Company owes $0.8 million on a promissory note given
in January 1994 to Glazier B. Piland, a former officer/shareholder of the
Company, as a portion of the purchase price paid to redeem all of his Pluma
shares. The principal balance of this note, plus interest at 5.0% per annum, is
due in full in January 1998. In the event the Company defaults on this
obligation, it will be required to issue shares of Common Stock to this former
officer/shareholder equal in value to the unpaid amount of the indebtedness plus
any unpaid interest at the time of default.

CASH FLOWS FROM OPERATING ACTIVITIES. For the year ended December 31, 1996, the
Company's operations provided $9.6 million of cash. The principal uses of cash
were repayment of the note payable issued in connection with the Box Transaction
for $2.0 million and additional investments of $1.9 million in inventories and
$0.6 million in accounts receivable. This use was offset by increases of $2.6
million in accounts payable and accrued expenses, consisting primarily of
interest payable and reserves for medical and workers' compensation claims. For
the year ended December 31, 1995, the Company's operations used $10.6 million of
cash. The principal uses of cash were a $14.0 million increase in inventories
and a $2.4 million increase in tax-related assets. Inventories increased
primarily due to lower than expected demand in the fourth quarter of 1995. These
uses were offset by increases in accrued expenses, primarily interest payable
and reserves for medical and workers' compensation claims. For the year ended
December 31, 1994, the Company's operations generated $4.0 million of cash. The
principal use of cash was $5.6 million to fund accounts receivable. Cash flows
from operations are impacted by seasonality and changes in product demand. In
the past, in periods of weak demand, the Company has relied on bank financing to
fund operations. However, the Company believes that cash flows from operations
will be sufficient to cover operations and capital requirements for the next
twelve months.

CASH FLOWS FROM INVESTING ACTIVITIES. In each of the last three years the
Company has invested heavily in plant and equipment to grow its business.
Capital expenditures were $3.4 million for the year ended December 31, 1996.
Capital expenditures were $5.9 million and $4.5 million in 1995 and 1994,
respectively.

CASH FLOWS FROM FINANCING ACTIVITIES. For the year ended December 31, 1996, the
Company had net repayments of borrowings of $5.7 million and paid cash dividends
of $0.6 million. In 1995, the Company had net proceeds from borrowings of $17.4
million to fund operations and investments and paid cash dividends of $0.6
million. In 1994, the Company had net repayments of borrowings of $0.4 million
and paid cash dividends of $0.6 million. In addition, in 1994, the Company had
proceeds of $1.7 million from the issuance of Common Stock and repurchases of
stock totaling $0.8 million.

CAPITAL EXPENDITURES. Additional capital expenditures are expected in future
years to meet continued growth expectations. The Company anticipates expending
approximately $3.0 million in 1997 for additional plant and equipment as well as
approximately $2.0 million for the purchase and implementation of a new
management information system to enhance the timing and accuracy of controls.
See "Business -- Management Information Systems."

<PAGE>
BUSINESS

GENERAL

Pluma is a vertically integrated manufacturer of high quality fleece and jersey
activewear. The Company is focused on increasing sales and profitability by
offering high value products to a diverse customer base. Pluma sells its
products to companies such as adidas, Nike, Starter and Walt Disney. In
addition, the Company sells products under its own "Pluma," "SANTEE" and
"SNOWBANK" brand names to retail and wholesale customers such as Sam's Club and
Frank L. Robinson Company.

Pluma was incorporated in December 1986 by certain principal executive officers
and members of the Board of Directors who had over 100 years of collective
industry experience. They envisioned that the Company could cost effectively
produce higher quality activewear and sell to a more diverse customer base than
was common in the industry. The Company seized the opportunity to produce low
cost, high quality products by developing a manufacturing base with the most
advanced equipment available.

Since its inception, the Company has been an innovator of new products and
styles and has focused on delivering higher quality products. The Company was
one of the first to introduce heavyweight, fuller cut fleece products at
attractive price points and fleecewear with higher cotton content. These
products were well-received by consumers, and the Company rapidly increased
sales and profitability as it expanded its business across broad market
segments. In 1990, the Company began to produce heavyweight cotton jersey
products suitable for outerwear in order to diversify its product mix, more
efficiently utilize its manufacturing base and increase sales and profitability.
Today, the Company continues to be an innovator of new products and recently
introduced pique fleece, 100% cotton fleece and cotton/SpandexTM five-way
stretch fleece.

In addition, the Company believes its ability to collaborate with customers in
developing new styles provides a distinct competitive advantage. As a result of
Pluma's flexible manufacturing capabilities, customers often select the Company
as their "manufacturer of choice" for its ability to develop specialized
products that meet customers' cost, quality and delivery criteria.

INDUSTRY

The Company competes in the growing activewear sector of the apparel industry.
According to a publicly available report by the SPORTING GOODS MANUFACTURERS
ASSOCIATION ("SGMA"), retail sales of activewear increased from $34.4 billion in
1994 to $37.6 billion in 1995. In particular, according to SGMA, industry sales
for fleecewear increased from $4.9 billion to $5.1 billion, while jersey sales
also increased from $11.5 billion to $12.3 billion over the same period. SGMA
estimates that sales of activewear increased approximately 5% in 1996 to $40
billion.

The growth of the fleece and jersey activewear industry is attributable to
several factors. First, the trends toward increased physical fitness and the
"casualization of America" have resulted in fleece and jersey apparel's becoming
more acceptable as daily attire. In particular, the popularity of branded
activewear products from companies such as adidas, Nike and Reebok has also
increased significantly. Second, the versatility of fleece and jersey fabric,
coupled with technological advances in product development and manufacturing,
has significantly improved product design and quality, resulting in increased
consumer demand. Finally, although design detailing may change, basic styles of
fleece and jersey activewear are not primarily driven by fashion trends or fads,
which contributes to the stability of product demand.

In recent years, the fleece and jersey activewear industry has been impacted by
several trends. Consumers are increasingly demanding greater value in the form
of higher quality goods with more variety at fair prices. In particular,
consumers are seeking fuller cut products in heavier, more shrink-resistant
fabrics, with cotton-dominant blends becoming the fabric of choice.

Meanwhile, distribution channels to reach consumers have become more
diversified. Historically, fleece and jersey apparel was distributed
predominantly through department stores, specialty retailers and sporting goods
chains. However today, as value-oriented retailing concepts proliferate, mass
merchandisers, wholesale clubs, discount retailers and other distribution
channels represent a growing customer base for manufacturers. As a result,
retailers are demanding a wider range of products to target specific consumer
markets.

In response to these emerging trends, competitive manufacturers have adjusted
their business strategies. In order to meet consumer demands for higher quality
without increases in pricing, manufacturers have upgraded their production
processes by investing in new equipment and technology. In addition, the
increasing breadth and diversity of distribution channels have required
successful manufacturers to become more flexible in new product development,
manufacturing and distribution to meet customers' requirements. The Company
believes that its growth strategy positions it to capitalize on these industry
trends.

<PAGE>
BUSINESS STRATEGY

The Company is focused on increasing sales and profitability by offering high
value products to a diverse customer base. The principal elements of this
strategy are:

PRODUCING HIGH QUALITY PRODUCTS

Pluma is recognized as a manufacturer of high quality products across all of its
price points by today's value-conscious customers. Examples of Pluma's emphasis
on quality exist throughout its design and manufacturing processes. Pluma's
fleece and jersey activewear meet consumer preferences for heavier weights and
higher cotton content and are fuller cut than industry standards. The Company
incorporates SpandexTM in its ribbed fabric, which enables it to retain shape.
Pluma produces higher stitch count fabrics to reduce shrinkage and increase
softness. Pluma's advanced sewing processes add greater product detail and
durability.

INCREASING SALES THROUGH A DIVERSE CUSTOMER BASE

Pluma targets a diverse customer base across multiple markets and distribution
channels. Currently, Pluma's material customers include branded customers such
as adidas, Nike, Reebok and Starter, retailers such as Miller's Outpost and
Sam's Club and entertainment customers such as Busch Gardens, Hard Rock Cafe and
Walt Disney. In addition, Pluma sells to wholesale distributors, screenprinters
and embroiderers who sell the Company's products to a wide variety of retailers,
ranging from small souvenir and resort stores to large nationwide department
stores. Pluma seeks to grow both by increasing sales to existing customers and
by adding new customers. The Company's diverse customer base provides product
exposure to many consumer markets and enables Pluma to balance its production
more evenly throughout the year, thereby improving sales and profitability.

DEVELOPING NEW PRODUCTS AND STYLES

Pluma is an innovator of new products of various fabric weights and blends, as
well as unique styles, that are often designed exclusively for its customers to
meet their individual needs. Typically, the Company's new products and styles
command higher prices resulting in better margins. Additionally, new products
initially manufactured for a single customer frequently become popular with
other customers. The Company was one of the first to introduce heavyweight,
fuller cut fleece products at attractive price points and fleecewear with higher
cotton content. Pluma was also one of the first to produce heavyweight cotton
jersey products suitable for outerwear. Today, the Company continues to be an
innovator of new products and recently introduced pique fleece, 100% cotton
fleece and cotton/SpandexTM blend five-way stretch fleece. In addition, the
ability to customize efficiently new product styles that meet stringent customer
standards enables the Company not only to attract new customers, but also to
cross-sell its more basic products.

CAPITALIZING ON FLEXIBLE MANUFACTURING CAPABILITIES

Pluma manufactures products that meet customers' cost, quality and delivery
criteria, ranging from highly customized products to more basic fleece and
jersey apparel. Using proprietary equipment and advanced manufacturing
processes, Pluma has the flexibility to shift its knitting, dyeing and sewing
operations between various fabric weights, blends and styles, as well as between
fleece and jersey products, with minimal downtime. These capabilities allow
Pluma to service effectively and efficiently its diverse customer base, thus
maintaining a significant competitive advantage.

INVESTING IN ADVANCED TECHNOLOGIES

The Company continues to upgrade its manufacturing, distribution and management
information systems as proven cost and quality related advances become
available. The Company has made significant investments to improve efficiencies
including (i) upgrading knitting equipment, (ii) adding computerized monitoring
and control systems for its dyeing processes, (iii) improving sewing and cutting
processes with new machines and other modern innovations, such as its patented
tandem sewing table, and (iv) automating and computerizing order processing and
distribution. As a result, Pluma believes that its manufacturing and
distribution processes are among the most modern in the industry. In addition,
the Company is in the process of implementing a new management information
system to enhance the timing and accuracy of its controls.

PRODUCTS

Pluma's high quality fleece and jersey activewear meet consumer preferences for
heavier weights and higher cotton content. The Company's fleece products include
a variety of styles and colors of tops and bottoms in seven and one-half, nine,
ten and eleven ounce weights in cotton/polyester blends ranging from 50%
cotton/50% polyester to 100% cotton. Pluma also manufactures five and one-half
and seven ounce 100% cotton jersey tops and bottoms designed for outerwear.

<PAGE>
The Company believes that certain design and construction features enhance the
quality and appeal of its products relative to most competitors:

(Bullet) Pluma's fleece and jersey tops are fuller cut and heavier weight.

(Bullet) Pluma produces higher stitch count fabrics to reduce shrinkage,
provide a better printing surface and increase softness.

(Bullet) Pluma uses air jet spun yarn for its 50% cotton/50% polyester
fleece fabric to prevent pilling.

(Bullet) All of Pluma's ribbed fabrics contain Spandex(tm) to retain
shape.

(Bullet) Pluma uses greater detail in its sewing processes to enhance
durability and appearance.

(Bullet) Pluma utilizes advanced finishing techniques, including the
application of softeners and napping (brushing), to give its
fleece fabrics more bulk and softer texture.

The sales mix of fleece and jersey products for the three years ended December
31, 1996, in sales, gross dozens sold, excluding close-outs and irregulars, and
the average sales price per dozen is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
IN THOUSANDS, AVG. GROSS AVG.
EXCEPT AVERAGE SALES PRICE PER SALES PRICE/ DOZENS SALES PRICE/
DOZEN SALES DOZEN SALES SOLD DOZEN SALES
GROSS
DOZENS
SOLD
Fleece $ 80,423 871 $ 92.41 $ 70,634 826 $ 85.50 $79,040
<S> <C> <C> <C> <C> <C> <C> <C>
Jersey 46,803 765 61.16 29,989 480 62.43 15,819
Total/Avg. $127,226 1,636 $ 77.79 $100,623 1,306 $ 77.01 $94,859

<CAPTION>
IN THOUSANDS, GROSS AVG.
EXCEPT AVERAGE SALES PRICE PER DOZENS SALES PRICE/
DOZEN SOLD DOZEN
Fleece 900 $ 87.80
<S> <C> <C>
Jersey 293 53.99
Total/Avg. 1,193 $ 79.50
</TABLE>

Historically, the Company's sales have been derived predominantly from fleece
products. However, since introducing jersey products in 1990, the Company has
increased jersey sales in order to diversify its product mix, more efficiently
utilize its manufacturing base and reduce the impact of seasonality that is
inherent in the fleece industry. Generally, jersey products sell at lower price
points and generate lower profit margins than fleece.

As of December 31, 1996 and 1995, the Company had backlog orders of
approximately 320,899 dozens, or approximately $22.7 million, and 353,034 dozens
or approximately $21.9 million, respectively. Backlogs are computed from orders
on hand at the last day of each fiscal period. The Company believes that as a
result of the seasonality and the just-in-time nature of its business, order
backlogs are not a reliable indicator of future sales volume.

SALES AND MARKETING

The Company's sales and marketing efforts are directed by its marketing
department headquartered in Martinsville, Virginia. The sales office is
comprised of nine employees who are involved in day-to-day sales efforts and
customer service activities.

Unlike many of its competitors, Pluma maintains a centralized sales office
organized around customer accounts rather than using a regional sales office
strategy. By maintaining a centralized location, management believes that the
Company can implement better its sales strategy which requires that each of its
salespeople be informed about and involved with all of the Company's market
segments and customers. This structure allows the Company to be more flexible in
responding to customers' needs and to operate more efficiently with a smaller
sales staff.

CUSTOMERS

Pluma targets a diverse customer base which is composed of five primary markets:
branded; retailers; screenprinters and embroiderers; wholesale distributors and
entertainment. As a result of Pluma's ability to customize products according to
its customers' needs, it is focusing on increasing sales to its branded and
retailer customers, which produce higher gross margins.

For the years ended December 31, 1996, 1995 and 1994, Pluma's top ten customers
accounted for 75.5%, 75.6% and 67.6%, respectively, of the Company's net sales
and 65.4%, 78.2% and 74.6%, respectively, of its accounts receivable. For the
year ended December 31, 1996, the Company's top three customers, Sam's Club,
adidas and Frank L. Robinson, accounted for 24.1%, 14.7% and 7.2%, respectively,
of the Company's net sales. For the year ended December 31, 1995, the Company's
top three customers, Sam's Club, Frank L. Robinson and Starter Galt accounted
for 16.1%, 12.8% and 11.4%, respectively, of the Company's net sales.

<PAGE>
For the year ended December 31, 1994, the Company's top three customers, Frank
L. Robinson, Starter Galt and adidas, accounted for 13.2%, 10.4% and 10.1%,
respectively, of the Company's net sales. Pluma provides products to its
customers pursuant to purchase orders on an as-needed basis.

BRANDED

Branded accounts consist of customers such as adidas, Nike, Reebok and Starter.
These accounts require the manufacturer to meet exact specifications, such as
styling, color, screenprinting and embroidery. Products are labeled, packaged
and shipped ready for sale to consumers. The Company's ability to accommodate
the specialized nature of products manufactured for these customers often
results in higher margins. Branded accounts constituted approximately 20.6% of
the Company's net sales for the year ended December 31, 1996 and 10.1% for the
same periods in 1995 and 1994, respectively.

RETAILERS

Retail customers include specialty, high-end and value-oriented retailers. The
Company's largest retail customer in 1996 was Sam's Club, which markets and
sells "Pluma" labeled products. Pluma's other retail customers include Miller's
Outpost, which sells its own private label products manufactured by Pluma or
products with Pluma's "SANTEE" label. The Company believes that this market
segment holds significant opportunity for growth as other value-oriented retail
formats continue to grow in popularity. Retail customers constituted
approximately 33.7% of the Company's net sales for the year ended December 31,
1996 and 27.5% and 21.2% for the same periods in 1995 and 1994, respectively. As
a result of the growth of the Company's business with Sam's Club, coupled with
increased consumer recognition of the "Pluma" brand name, the Company has
granted a license to Kayser Roth Corporation ("Kayser Roth") that allows it to
manufacture and distribute socks to Sam's Club under the "Pluma" brand name. See
"Business -- Trademarks and Licenses."

SCREENPRINTERS AND EMBROIDERERS

Screenprinters and embroiderers include Starter Galt and PM Enterprises among
others. These customers typically purchase basic products to which they add
designs and logos; they then resell these products to a wide variety of
retailers, ranging from small souvenir and resort stores to large, nationwide
department stores. Certain screenprinters and embroiderers resell under Pluma's
"SANTEE" label. Screenprinters and embroiderers constituted approximately 19.7%
of the Company's net sales for the year ended December 31, 1996 and 26.7% and
33.1% for the same periods in 1995 and 1994, respectively.

WHOLESALE DISTRIBUTORS

Wholesale distributors include Frank L. Robinson Company, Skyline and Stardust.
These customers generally purchase goods in large volume for further
distribution to companies such as Guess?, as well as to small customers, which
are typically more difficult for the Company to service. All products sold to
these customers contain Pluma's "SANTEE" label, which is becoming more
recognizable by consumers. Wholesale distributors constituted approximately
17.6% of the Company's net sales for the year ended December 31, 1996 and 22.8%
and 25.7% for the same periods in 1995 and 1994, respectively.

ENTERTAINMENT

Entertainment accounts consist of customers such as Busch Gardens, Hard Rock
Cafe and Walt Disney. This market segment demands a basic product on which
designs are printed or embroidered for souvenir sales. Demand for goods sold to
this market segment is relatively consistent throughout the year. Entertainment
accounts constituted approximately 8.4% of the Company's net sales for the year
ended December 31, 1996 and 12.9% and 9.8% for the same periods in 1995 and
1994, respectively.

MANUFACTURING

Pluma is a vertically integrated manufacturer. The Company's manufacturing
process consists of knitting, dyeing, finishing, cutting and sewing. Using
proprietary equipment and advanced manufacturing processes, Pluma has the
flexibility to shift its knitting, dyeing and sewing operations between various
fabric weights, blends and styles, as well as between fleece and jersey, with
minimal downtime. These capabilities allow Pluma to service effectively and
efficiently its diverse customer base.

Pluma currently manufactures all of its products domestically at sites within
close proximity to each other and uses technologically advanced equipment and
sophisticated production scheduling systems. Several of the Company's
competitors have chosen to move some of their production offshore. The Company,
however, believes that its strategy improves the Company's ability to service
its customers' just-in-time delivery requirements, minimizes transportation
costs and offsets most of the advantages of lower labor cost inherent in
offshore production.

<PAGE>
The Company believes it has the manufacturing capacity to increase sales by
approximately 10% to 15% without any significant capital expenditures based upon
its current product mix and prices. By adding equipment, the Company believes it
has the capacity to increase sales by an additional 30% to 40% without the need
for additional manufacturing space.

Pluma's vertically integrated manufacturing process includes the following:

KNITTING

The Company operates modern, high-speed circular knitting machines that produce
various types of fabric in its manufacturing facilities in Eden, North Carolina.
The circular knitting process eliminates the need for side-seaming, reduces
waste and, consequently, lowers production costs. The Company is in the process
of purchasing new knitting equipment and components that should increase
efficiency in its knitting operations. Proprietary knitting processes enable the
Company to change its production with minimal downtime for setup. The Company
can shift its knitting processes between various fabric blends, weights and
styles, as well as between fleece and jersey fabrics, without significant loss
of utilization. Pluma uses Spandex(tm) in all of its ribbed fabrics to retain
shape and produces high stitch count fabrics, which results in lower shrinkage,
a better printing surface and a softer feel.

DYEING

The Company believes that its computer-controlled, pressurized dyeing operations
in Eden, North Carolina, are state-of-the-art. Computerized controls reduce
processing time and improve control of dyeing cycles, temperatures, water
pressure and chemical usage, thereby producing greater color consistency and
minimizing waste. In addition, the Company's pressurized dyeing process
increases bulking, which reduces shrinkage and color bleeding of its fabrics.

FINISHING

The finishing process consists of extracting, drying, napping (brushing) and
compacting the fabric. The extraction process involves the addition of fabric
softeners to ensure that the fabric retains its softness during the drying
process. Fleece fabrics are then napped to produce a soft and heavy feel. Also,
fabrics are compacted to minimize shrinkage and increase stability.

CUTTING

Pluma's cutting operation in Eden, North Carolina, uses Bierrebi automatic
continuous-cutting machines with computer-controlled hydraulic die-cutting
heads. In addition, Pluma is adding a Gerber cutting system that will interface
with its computerized pattern design process. The Company utilizes these
machines to improve consistency and efficiency and generate less waste. Manual
cutting is used to provide flexibility to process low-volume orders.

SEWING

The Company's sewing facilities are in Eden, North Carolina, and in
Martinsville, Rocky Mount, Chatham, Vesta and Altavista, Virginia. Pluma's
sewing operations begin with the preassembly of component parts utilizing
computerized sewing equipment. Preassembled parts are then sewn using the
Company's proprietary tandem sewing process or conventional sewing. Management
believes that its tandem sewing process is unique and gives the Company a
competitive advantage in sewing operations by enhancing product quality and
manufacturing flexibility.

Pluma's proprietary tandem sewing process utilizes the Company's patented tandem
sewing table. This proprietary equipment allows operators to move rapidly
between sewing steps to reduce further assembly time. The table is easily
adjustable to accommodate different operators' physical characteristics,
minimizing downtime between shifts and thereby facilitating multishift
operations.

The Company engages independent sewing contractors for low volume, special style
products that require specific equipment. These independent contractors also
assist the Company during peak manufacturing periods by providing additional
capacity. Approximately 16.0%, 14.9% and 17.6% of the Company's products were
sewn by independent contractors in 1996, 1995 and 1994, respectively.

The Company hires independent embroidery and screen printing subcontractors to
print or embroider special images on products ordered by certain of its
entertainment and branded accounts. The Company believes that it is more cost
effective to outsource these services.

<PAGE>
PACKAGING AND DISTRIBUTION

Pluma operates a three-building complex in Martinsville, Virginia, which serves
as its central packaging and distribution facility. The complex contains
approximately 462,950 square feet of packing and storage space.

The packaging process includes folding, tagging, bagging, packing and bar
coding. The Company's packaging operation employs automated folding machines and
other technologically advanced equipment that package products efficiently.

Pluma uses computers, scanners, radios, conveyor systems and order pickers to
track, locate and move products within its facilities and to the loading docks
for shipping. One conveyor system links two facilities, thereby significantly
reducing handling time.

The Company leases a fleet of 11 tractors and 63 trailers and owns five trailers
and two trucks to transport materials between plants, as necessary. It relies
upon common carriers for delivery to its customers.

MANAGEMENT INFORMATION SYSTEMS

The Company operates state-of-the-art computer systems for receiving and
tracking customer orders from the moment they are received in the Company's
sales office in Martinsville, Virginia, until final delivery. After a customer's
order is entered in the Company's sales office, it is reviewed at Pluma's main
office in Eden, North Carolina, for customer credit, production scheduling and
delivery. After this process is completed, the order becomes active and is
formally scheduled into production. The Company's proprietary computer program
and sophisticated electronic scanners allow the Company to monitor specific
customer orders during all stages of the manufacturing process from knitting to
sewing and during packaging and distribution.

During 1996, the Company entered into a license agreement with SAP America, Inc.
("SAP") to use SAP's proprietary financial and manufacturing controls software.
The SAP software is highly portable, operates on the newest client-server
platform and can be utilized internationally. In addition to the license
agreement, the Company executed a professional services agreement with SAP for
consultant services to install and implement the software. The SAP system will
upgrade the Company's production planning and scheduling, sales, distribution
and financial systems. The Company believes that this system will enhance its
ability to meet customer demands more efficiently and better manage the growth
of its business. This system is currently being implemented. Management expects
the system to be operational by January 1998.

Pluma is connected via electronic data interchange ("EDI") with Sam's Club and
is exploring the use of a similar system with wholesale distributors and a
number of its suppliers. Additionally, the Company intends to utilize the
Internet to facilitate customer orders, investor relations and direct sales. The
Company's Internet address is http://www.plumainc.com.

SOURCES OF RAW MATERIALS

Pluma purchases yarn, dye stuffs and chemicals that are the principal raw
materials used in its products. Management believes that there is sufficient
availability of raw materials from a number of suppliers at competitive prices
to satisfy current and anticipated needs of the Company.

The Company does not spin its own yarn. Yarn spinning is a capital intensive
operation in which there is substantial domestic and foreign competition. The
Company has stable relationships with its principal yarn suppliers and often
makes advance purchases of yarn based on projected demand. The Company has
contracted to purchase substantially all of its projected yarn needs for 1997.
However, should any or all of these suppliers be unable for any reason to
fulfill their obligations under these yarn contracts, the Company believes that
such an occurrence would not have a material adverse effect on the Company's
business as yarn is available to the Company from other suppliers at comparable
prices.

Pluma maintains a five- to ten-day supply of raw material inventories,
minimizing the need for storage space. During 1996, Pluma's principal yarn
suppliers included Unifi, Inc. (Spun Yarn Division), Parkdale Mills, Inc. and,
Mayo Yarns, Inc., and its principal suppliers of dye and chemicals included
Ciba-Geigy, DyStar and Clairiant (formerly Sandoz). The Company anticipates that
these suppliers, as well as others, will continue to supply the Company with raw
material as needed. See "Risk Factors -- Availability and Price of Raw
Materials."

SEASONALITY

The activewear business is seasonal. Typically, demand for fleece products is
much lower during the first and second quarters of each year and is partially
offset by increased demand for jersey products in these periods. Notwithstanding
the Company's efforts to diversify its products and customer base to create a
more consistent demand for its products throughout the year, the Company
produces and stores fleece finished goods inventory during the first half of
each year. This practice enables the

<PAGE>
Company to meet the heavy demand for delivery during the second half of the
year. See "Risk Factors -- Impact of Seasonality."

COMPETITION

The fleece and jersey activewear industry is highly competitive. Pluma's major
competitors are vertically integrated manufacturers such as Fruit of the Loom,
Oneita, Russell, Sara Lee, Tultex and VF. Certain of these competitors have
greater financial resources and larger manufacturing, distribution and marketing
capabilities than the Company. Among other factors, the Company's future success
will depend to a significant extent upon its ability to remain competitive in
the areas of price, quality, marketing, product development, manufacturing
capabilities, distribution and order processing, which are the principal methods
of competing within the fleece and jersey apparel industry. See "Risk
Factors -- Competition."

ENVIRONMENTAL MATTERS

The Company's operations also are governed by laws and regulations relating to
employee safety and health, principally OSHA and regulations thereunder, which,
among other things, establish exposure limitations for cotton dust,
formaldehyde, asbestos and noise, and regulate chemical and ergonomic hazards in
the workplace. See "Risk Factors -- Environmental Controls and Other Regulatory
Requirements."

PROPERTIES

All of the Company's facilities are located in North Carolina and Virginia. All
buildings are well maintained and several of its facilities have been expanded
since operations commenced therein to accommodate the Company's growth. The
location, approximate size, owned or leased status, year in which operations
commenced and use of the Company's principal facilities are summarized in the
following table:

<TABLE>
<CAPTION>
SQUARE OPERATIONS
LOCATION FOOTAGE OWNERSHIP COMMENCED USE
<S> <C> <C> <C> <C>
Eden, NC 170,900 Owned 1987 Executive offices, sewing, dyeing,
finishing and cutting
Eden, NC 83,900 Owned 1993 Knitting
Eden, NC 20,600 Leased 1996 Outlet store
Eden, NC 18,000 Leased 1987 (1) Sewing
Martinsville, VA 198,000 Leased 1996 Distribution and warehouse
Martinsville, VA 181,600 Leased 1988 Distribution, packaging and
warehouse
Martinsville, VA 83,200 Leased 1994 Packaging, warehouse and management
information systems
Martinsville, VA 43,900 Owned 1988 Sewing
Martinsville, VA 15,600 Leased 1992 Storage
Martinsville, VA 11,500 Leased 1997 Outlet store
Martinsville, VA 3,900 Leased 1996 Marketing and sales office
Rocky Mount, VA 82,000 Owned 1995 Sewing
Chatham, VA 52,000 Owned 1990 Sewing
Vesta, VA 24,000 Owned 1994 Sewing
Altavista, VA 12,000 Leased 1996 Sewing
</TABLE>

(1) The Company leased this facility from 1987 through 1993 and subsequently
executed a new lease for this facility in December 1996.

LABOR

The Company had approximately 2,275 employees at December 31, 1996. Management
considers labor relations to be excellent. The Company has no collective
bargaining agreements; however, some of the Company's competitors located in its
geographic area are unionized, and there can be no assurance that the Company
will not become a target for union organizing activity or party to collective
bargaining agreements in the future. To the extent that unionization increases
the Company's cost of operations, the Company would be impacted adversely from
both an operating and financial standpoint.

<PAGE>
LITIGATION

The Company is not a party to nor is any of its property the subject of any
legal proceedings, the result of which it believes could have a material adverse
impact on its business, properties or financial condition.

TRADEMARKS AND LICENSES

Pursuant to an agreement effective December 4, 1990 (the "Superba Agreement"),
Superba, Inc. ("Superba") granted to the Company the exclusive right and license
to utilize the name "SANTEE" in connection with the manufacture, sale and
distribution of fleece and jersey products. Superba manufactures neckties and
sport shirts and is the sole owner of all trademark and other proprietary rights
in the name "SANTEE." The term of this license is perpetual. The Company paid a
one-time fee of $20,000 in consideration for the grant of the rights described
above and has no continuing obligations for the payment of royalties in
connection with the use of the name "SANTEE." Under the terms of the Superba
Agreement, Superba retained the right to utilize the name "SANTEE" for
commercial purposes, provided such use is not competitive with the Company in
the fleece and jersey apparel industry. Superba is obligated to renew the
trademark registration (at Superba's expense) upon its expiration.

The Company claims common law proprietary rights to the name "Pluma;" however,
at this time, the Company does not own any registered trademark rights to the
name "Pluma." Furthermore there was a registered owner of the name "Peso Pluma."
However, in November 1994, the Company filed a proceeding with the United States
Patent and Trademark Office ("USPTO") alleging that the owner of the name "Peso
Pluma" abandoned its right to such name and requesting that such rights be
canceled. This proceeding was determined favorably to the Company, which has
filed an application with the USPTO for trademark protection related to the name
"Pluma." The Company believes that such protection will be granted in the first
quarter of 1997.

The Company has filed an application with the USPTO for trademark protection for
the trademark "SNOWBANK." The application has been approved pending submission
of an acceptable statement of use after actual use of this trademark has begun,
which will occur in early 1997. "SNOWBANK" will be utilized in connection with
marketing certain styles of the Company's activewear.

On October 24, 1995, the Company entered into a license agreement with Kayser
Roth granting to Kayser Roth a limited exclusive license to use the name "Pluma"
in connection with the manufacture and sale of socks in the United States and
Mexico to Sam's Club (the "Kayser Roth Agreement"). The Company made no
representations to Kayser Roth related to its ownership rights in the name
"Pluma," and has no liability to Kayser Roth or Sam's Club in the event superior
rights to the name "Pluma" are established by another company. The Company
receives a royalty from Kayser Roth equal to 2.0% of net sales of socks bearing
the Pluma label up to $3,000,000 of such sales and 1.5% of all net sales of
socks thereafter (in each case, less customary trade discounts, shipping
charges, returns and allowances and sales taxes). The Kayser Roth Agreement
terminates on December 31, 1998, but is renewable by Kayser Roth for successive
one-year terms thereafter. The Company maintains appropriate quality control
standards in the Kayser Roth Agreement designed to ensure that only quality
products are distributed under the "Pluma" name.

On July 30, 1996, U.S. Patent No. 5,540,160 was issued by the USPTO for the
Company's tandem sewing table. See "Business -- Manufacturing."

<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Set forth below are the names, ages, positions and brief descriptions of
business experience of the Company's executive officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
George G. Wade 63 Chairman Emeritus of the Board, Secretary and Director
G. Walker Box 46 Chairman of the Board of Directors
R. Duke Ferrell, Jr. 44 President, Chief Executive Officer and Director
C. Monroe Light 56 Executive Vice President of Manufacturing and Director
Forrest H. Truitt, II 42 Executive Vice President, Treasurer and Chief Financial Officer
Milton A. Barber, IV 36 Vice President of Sales and Marketing
Nancy B. Barksdale 39 Vice President and Controller
Jeffrey D. Cox 41 Vice President of Manufacturing
David S. Green 46 Vice President of Human Resources
Walter E. Helton 57 Vice President of Operations
Raymond L. Rea 55 Vice President of Manufacturing
Barry A. Bowles 51 Director
Kemp D. Box 42 Director
David C. Jones, D.D.S. 50 Director
William K. Mileski 54 Director
R. Stephens Pannill 50 Director
J. Robert Philpott, Jr. 50 Director
</TABLE>

GEORGE G. WADE, a founder of the Company, served as Chairman of the Company's
Board of Directors until January 1996, when he became Chairman Emeritus. Mr.
Wade served as the Company's President and Chief Executive Officer from January
1987, until he relinquished the titles of Chief Executive Officer and President
in September 1993 to become the Company's Secretary. Mr. Wade is a member of the
Company's Strategic Planning Committee. Mr. Wade was employed by Bassett-Walker,
Inc. from 1956 to 1986.

G. WALKER BOX, a founder of the Company, has served as a member of the Board
since 1987 and became Chairman of the Company's Board of Directors in January
1996. He is a member of the Company's Nominating Committee and Strategic
Planning Committee. Mr. Box was employed by Bassett-Walker, Inc. from 1973 to
1986 when he became the President of Box-Ferrell and Company, the Company's
first exclusive sales agent. Mr. Box is President of Box & Company which served
as the Company's exclusive sales agent from 1991 until December 1995. Mr. Box is
also a member of the Board of Directors of the North Carolina Textile
Foundation. Mr. Box is the brother of Kemp D. Box, a Director of the Company.

R. DUKE FERRELL, JR., a founder of the Company, has been the Company's President
since January 1992 and its Chief Executive Officer since September 1993. He
served as the Company's Executive Vice President and Chief Operating Officer
from 1991 until he became President of the Company and is a member of the Board
of Directors, serving on its Nominating Committee and Strategic Planning
Committee. In 1987, Mr. Ferrell was employed by Box-Ferrell and Company until
his employment by Pluma as Executive Vice President and Chief Operating Officer.
He was employed by Bassett-Walker, Inc. from 1982 to 1986.

C. MONROE LIGHT, a founder of the Company, has been Vice President of
Manufacturing responsible for yarn sourcing and knitting and a Director since
1987. He became an Executive Vice President in January 1996. Mr. Light was
employed from 1960 to 1986 by Bassett-Walker, Inc. He serves on the Company's
Strategic Planning Committee.

FORREST H. TRUITT, II became Vice President, Treasurer and Chief Financial
Officer in March 1996 and became an Executive Vice President in January 1997.
From February 1994 until he joined the Company, Mr. Truitt was a self-employed
financial consultant. Prior to that time, he served as the Chief Financial
Officer of Mayo Yarns, Inc. from September 1993 to February 1994, and Vice
President of Finance and Secretary/Treasurer of Vintage Yarns, Inc. from 1982
until 1993.

<PAGE>
MILTON A. BARBER, IV became Vice President of Sales and Marketing in January
1996. From July 1991 until December 1995, Mr. Barber served as an Assistant Vice
President of Sales and Marketing for Box & Company. Mr. Barber was employed by
Bassett-Walker, Inc. from 1987 until 1991.

NANCY B. BARKSDALE is Vice President and Controller. From 1979 to 1983, Ms.
Barksdale was a staff accountant for Deloitte & Touche LLP. She received her CPA
certification from the Commonwealth of Virginia in 1983. From 1983 until 1987,
Ms. Barksdale was employed by Bassett-Walker, Inc. as Assistant Controller.
Since 1987, Ms. Barksdale has served as Controller for Pluma, and served as
Treasurer from August 1993 until March 1996. She was promoted to Vice President
in January 1996.

JEFFREY D. COX became the Company's Vice President of Manufacturing responsible
for dyeing and finishing operations in January 1996. Before that date, Mr. Cox
served the Company as superintendent of dyeing and finishing from September 1991
through December 1994 and as Assistant Vice President responsible for dyeing and
finishing from January 1995 through December 1995. Prior to joining the Company
in 1991, he was employed at Ciba-Geigy from February 1989 to August 1991.

DAVID S. GREEN is Vice President of Human Resources. Prior to joining the
Company in 1993, Mr. Green had been employed by Sara Lee for 17 years where his
most recent title was Director of Employee Relations at the Martinsville,
Virginia knitwear division.

WALTER E. HELTON is Vice President of Operations responsible for management
information systems and distribution. Before joining the Company in January
1992, Mr. Helton was employed by Sara Lee as Director of Information Systems.

RAYMOND L. REA is Vice President of Manufacturing responsible for all sewing
operations. Prior to his employment with the Company in 1987, Mr. Rea had been
employed by Bassett-Walker, Inc. for 25 years.

BARRY A. BOWLES became a member of the Board of Directors in 1988 and is the
chairman of the Compensation Committee and a member of the Nominating Committee.
Mr. Bowles is Chairman of the Board of Directors of Stanley W. Bowles
Corporation, a general construction contractor by which he has been employed
since 1967.

KEMP D. BOX became a member of the Board of Directors in 1988 and is a member of
the Audit Committee. He is a private investor. Mr. Box is the brother of G.
Walker Box, who is a Director and executive officer of the Company.

DAVID C. JONES, D.D.S. became a member of the Board of Directors in 1994 and has
been engaged in the private practice of orthodontics since 1978. He serves as a
member of the Compensation Committee.

WILLIAM K. MILESKI, a founder of the Company, has served as a member of the
Board of Directors since 1987 and is a member of the Audit Committee. He was
Vice President of the Company responsible for dyeing, finishing and cutting
operations from 1987 until he left the Company in December 1995 to found
Meritage, LLC, a contract garment-dyeing company.

R. STEPHENS PANNILL became a member of the Board of Directors in 1988 and is the
chairman of the Audit Committee and a member of the Nominating Committee. Mr.
Pannill is a private investor.

J. ROBERT PHILPOTT, JR. became a director in April 1996. Mr. Philpott is
President, Treasurer and a director of Philpott, Ball & Company ("Philpott,
Ball") , a private investment banking firm that he co-founded in 1991. Philpott,
Ball has served as a financial adviser to the Company since 1991, providing
corporate financial advisory services and valuations of Company stock from time
to time. Prior to founding Philpott, Ball, Mr. Philpott was a Senior Vice
President and Managing Director of Interstate/Johnson Lane, Capital Markets
Group. Mr. Philpott is a member of the Compensation and Strategic Planning
Committees.

The Board of Directors of the Company (the "Board") is currently composed of ten
directors, four of whom are employees of the Company. The Company's Bylaws
provide that the Board shall be divided into three classes designed to contain a
relatively equal number of members, with the term of each class expiring in
successive years. See "Description of Capital Stock -- Board of Directors."
Subject to the terms of certain employment agreements to which certain of the
executive officers are a party, the Company's executive officers serve at the
discretion of the Board. See "Management -- Employment Agreements, Change of
Control Arrangements."

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors currently has four committees: an Audit
Committee, Compensation Committee, Nominating Committee and Strategic Planning
Committee.

<PAGE>
The Company's Board of Directors established an Audit Committee in March 1994.
The responsibilities of the Audit Committee include recommending to the Board of
Directors the independent public accountants to be selected to conduct the
annual audit of the Company's financial statements, reviewing the proposed scope
of such audit and approving the audit fees to be paid. This committee is also
responsible for reviewing the adequacy and effectiveness of the internal
auditing, accounting and financial controls of the Company with the independent
public accountants and the Company's financial and accounting staff and
reviewing and approving transactions between the Company and its directors,
officers and their affiliates. The Audit Committee consists exclusively of
outside directors who are R. Stephens Pannill (chairman), Kemp D. Box and
William K. Mileski.

The Company's Board of Directors established a Compensation Committee in April
1989. The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee also include administering the
Company's Senior Executive Bonus Plan, Sales Incentive Plan, Non-Qualified
Deferred Compensation Plan and 1995 Stock Option Plan, including selecting the
officers and salaried employees to whom bonuses and stock options will be
granted. The Compensation Committee consists exclusively of outside directors
who are Barry A. Bowles (chairman), David C. Jones, D.D.S. and J. Robert
Philpott, Jr. See "Management -- Compensation Committee, Interlocks and Insider
Participation."

The Company's Board of Directors established a Nominating Committee in January
1994. The Nominating Committee is responsible for making recommendations to the
Board of Directors concerning executive officer appointments. The Nominating
Committee consists of R. Duke Ferrell, Jr. (chairman), Barry A. Bowles, G.
Walker Box and R. Stephens Pannill.

The Company's Board of Directors also established a Strategic Planning Committee
in October 1996. This Committee is responsible for monitoring industry trends
and making recommendations to the Company's Board of Directors regarding Company
actions designed to enable the Company to compete effectively in the future. The
Strategic Planning Committee consists of G. Walker Box, R. Duke Ferrell, Jr., C.
Monroe Light, J. Robert Philpott, Jr. and George G. Wade.

EXECUTIVE COMPENSATION

The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and the four most highly compensated executive officers other than the
Chief Executive Officer (the "Named Officers"), for services rendered to the
Company during 1996, 1995 and 1994:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
(1) UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS (2) OPTIONS (#) COMPENSATION (3)
G. Walker Box 1996(4) $196,500 $ 229,667 -- $ 1,278
Chairman of the Board 1995 -- -- 44,160 --
1994 -- -- -- --

R. Duke Ferrell, Jr. 1996 196,500 229,667 -- 2,200
President, Chief Executive 1995 192,520 118,164 44,160 1,857
Officer and Director 1994 179,925 32,887 -- 1,280

George G. Wade 1996 189,200 221,135 -- 5,428
Chairman Emeritus of the 1995 185,323 80,760 44,160 4,513
Board, Secretary and Director 1994 179,925 26,309 -- 3,023

C. Monroe Light 1996 168,000 196,357 -- 3,304
Executive Vice President of 1995 153,465 66,877 44,160 2,451
Manufacturing and Director 1994 146,157 16,546 -- 2,242

Milton A. Barber, IV 1996(5) 165,000 59,348(6) -- 316
Vice President of Sales 1995 -- -- 14,720 --
and Marketing 1994 -- -- -- --
</TABLE>

<PAGE>
(1) Certain of the Company's executive officers receive personal benefits in
addition to salary and cash bonuses, including car allowances. The aggregate
amount of such personal benefits, however, do not exceed the lesser of $50,000
or 10.0% of the total of the annual salary and bonus reported for the named
executive officer.

(2) Bonuses are reflected in the year in which they are earned and are paid in
the following year.

(3) These amounts represent the Company's contribution to the Company's 401(k)
plan and the payment of premiums on split-dollar life insurance policies owned
by the employee.

(4) On January 1, 1996, G. Walker Box became the Chairman of the Company's Board
of Directors and an employee of the Company. Prior to that date, Mr. Box was not
a paid employee of the Company.

(5) On January 1, 1996, Milton A. Barber, IV became a Vice President of the
Company in charge of sales and marketing. Prior to that date, Mr. Barber was not
employed by the Company.

(6) Mr. Barber is a participant in the Company's Senior Executive Bonus Plan and
Sales Incentive Plan.

PLUMA'S SENIOR EXECUTIVE BONUS PLAN

The Company's Compensation Committee administers Pluma's Senior Executive Bonus
Plan (the "Bonus Plan"), which is designed to create incentive for participants
in the Bonus Plan to increase Company profitability. Participants in the Bonus
Plan are stratified by the Compensation Committee into one of two tiers, based
upon the executive's responsibility, past performance with the Company and
possible impact on Company profitability as a result of his or her executive
position with the Company. Ten executives participated in the Bonus Plan in 1996
(the "Participants").

The "Bonus Pool" available for distribution is determined by reference to the
Company's fiscal year end pre-tax income before bonuses are paid under the Bonus
Plan, as adjusted by adding back to such pre-tax income the Participants' base
salaries paid for the year for which bonuses are calculated. In 1996, a
percentage of this adjusted pre-tax income was the "Compensation Pool" from
which the "Bonus Pool" was determined; however, this percentage could be
increased or decreased, at the discretion of the Compensation Committee, to
adjust for increases or decreases in the number of Participants. The "Bonus
Pool" is equal to the amount of the "Compensation Pool" less the sum of all base
salaries paid to the Participants for the year in which bonuses are calculated.

The Compensation Committee allocates the "Bonus Pool" between the two tiers
described above in a discretionary manner, with consideration given to the
number of Participants in each tier as determined at the sole discretion of the
Compensation Committee. In addition, the Compensation Committee and the Board
may grant to the tier 1 Participants an extraordinary bonus ("Bonus Percentage")
equal to a percentage (as determined by the Compensation Committee) of any
annual pre-tax profits earned in excess of a pre-determined pre-tax profit level
(the "Profit Target"). This Bonus Percentage was 10% of pre-tax profits in
excess of the profit target in 1996, however, the Bonus Percentage shall be
determined annually at the discretion of the Compensation Committee. The Profit
Target is determined in the early part of each fiscal year at the discretion of
the Compensation Committee.

Notwithstanding the formulization of the process used to determine bonuses under
the Bonus Plan, the Compensation Committee is allowed discretion to consider or
disregard extraordinary items, usually of a one-time nature, that might either
increase or decrease the amount of the "Compensation Pool."

PLUMA'S SALES INCENTIVE PLAN

The Company's Compensation Committee administers Pluma's Sales Incentive Plan
(the "Sales Incentive Plan") which is designed to create incentive for the
Company's sales staff to increase customer sales. Each year, the Company's
Compensation Committee establishes a base level of annual sales volume (the
"Sales Threshold") upon which the incentive sales bonus is calculated. At each
fiscal year end, the Company subtracts the Sales Threshold from the Company's
actual total net sales for such year. This difference (the "Bonus Base") is the
base amount upon which bonuses are determined for the Company's salespeople. In
the event the Company's actual net sales for a fiscal year exceed the Sales
Threshold, then each Company salesperson is entitled to the payment of a bonus
determined by multiplying his or her base annual salary by a fraction, the
numerator of which is the Bonus Base and the denominator of which is the Sales
Threshold. The Sales Threshold is determined annually by the Company's Board of
Directors after a recommendation from its Compensation Committee.

<PAGE>
EMPLOYMENT AGREEMENTS, CHANGE OF CONTROL ARRANGEMENTS

Pursuant to employment contracts dated December 19, 1996 (the "Employment
Agreements"), George G. Wade, R. Duke Ferrell, Jr., G. Walker Box, C. Monroe
Light, David S. Green, Walter E. Helton, Raymond L. Rea, Nancy B. Barksdale,
Forrest H. Truitt, II, Jeffrey D. Cox and Milton A. Barber, IV (each an
"employee") are employed by the Company in their various executive capacities.
Each of these Employment Agreements, if not sooner terminated (for reasons of
death, disability, change of control or "for cause"), terminates on December 18,
1998. Thereafter an employee's employment may continue until terminated by the
Company or the employee. Under the Employment Agreements, these individuals are
entitled to annual bonus payments pursuant to Pluma's Senior Executive Bonus
Plan and all benefits made available to other senior executives under any
employee benefit plans including the Company's 401(k) Plan, medical expense
reimbursement plans, group life, health, accident, medical, hospitalization and
disability insurance plans. Currently, no senior executive is the beneficiary of
any such plans not made available to all Pluma employees except for Pluma's
Senior Executive Bonus Plan, Non-Qualified Deferred Compensation Plan, Sales
Incentive Plan (with respect to the Company's salespeople) and the split-dollar
insurance policies referenced in note (3) to the Summary Compensation Table.

The Company or the employee may terminate his or her Employment Agreement upon a
"change of control" of the Company. A change of control shall mean the
occurrence of any one of the following events:

(1) if any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act") (other than the Company, any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan of the Company), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing 50.0% or more of either (a) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Company's Board of Directors ("Voting Securities"), or (b)
the then outstanding shares of the Company (in either such case other than
as a result of acquisition of securities directly from the Company); or

(2) if the majority of those persons who, as of January 1, 1996, constituted
the Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority of
the Board of Directors, provided that any person becoming a director of the
Company subsequent to January 1, 1996, whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent
Directors or Directors chosen by the Incumbent Directors shall be considered
an Incumbent Director; or

(3) if the shareholders of the Company shall approve (a) any consolidation
or merger of the Company where the shareholders of the Company, immediately
prior to the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate 50.0% of the voting shares of the corporation issuing cash
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (b) any sale, lease, exchange or other conveyance, in
a transaction or series of transactions of all or substantially all of the
assets of the Company, or (c) any plan or proposal for the liquidation or
dissolution of the Company.

Upon termination of the Employment Agreements after a "change of control," if
the employee is eligible (as defined below), the Company shall:

(1) Within 30 days after termination, pay to the employee an amount, in
cash, equal to: (a) three times the employee's (i) average annual salary for
the 36-month period prior to such change of control and (ii) any bonuses
received during the 18 months preceding the effective date of the change of
control, less (b) 1/36 of the amount calculated in (a) above for each month
that the employee remains employed with the Company following the effective
date of the change of control; and

(2) Continue the medical, disability and life insurance benefits the
employee was receiving at the time of termination for a period of 36 months
after termination of employment or, if earlier, until the employee has
commenced employment elsewhere and becomes eligible for participation in the
medical, disability and life insurance programs, if any, of the successor
employer. Coverage under the Company's medical, disability and life
insurance programs shall cease with respect to each such program as the
employee becomes eligible for the medical, disability and life insurance
programs, if any, of the successor employer. During the first 18 months of
such 36-month period, the Company shall be responsible for the costs
associated with continued insurance coverage for the employee, but only to
the extent it would have been responsible for such costs if the employee was
still employed by the Company. The employee shall be responsible for the
remaining costs. If

<PAGE>
at the end of 18 months, the employee is still afforded medical, disability
and life insurance coverage under the Company's insurance programs, the
Company shall arrange to provide continued coverage under said programs, but
the employee will be responsible for the total cost of all such continued
coverage after the first 18-month period.

The employee is eligible for the benefits provided above, unless the Company or
the Company's successor, after a change of control, offers the employee a bona
fide employment contract for a term that would expire no earlier than three
years after the effective date of the change of control under the terms of which
the employee would perform the same duties for the same or greater levels of
compensation as were afforded under the terms of the Employment Agreements, and
the employee rejects the offer.

The employee's employment may also be terminated under the Employment Agreement
in the event of death, "for cause" or, at the Company's election, in the event
of the employee's long-term disability. In the event of the death of the
employee during employment, the following payments shall be made to the
employee's designated beneficiary, or, in the absence of such designation, to
the estate or other legal representative of the employee: (i) base salary for
the month in which death occurs, and (ii) such bonuses (if any) as have been
earned and not paid at the time of death. Any rights and benefits the employee
or his/her estate or any other person may have under employee benefit plans and
programs of the Company generally applicable in the event of the employee's
death shall be determined in accordance with the terms of such plans and
programs. Except as provided in the Employment Agreement, neither the employee's
estate nor any other person shall have any rights or claims against the Company
in the event of the death of the employee during employment.

Upon termination for cause, the employee shall receive his or her base salary
only through the date of termination, and neither the employee nor any other
person shall be entitled to any further payments from the Company for salary,
unpaid bonuses or any other amounts. Any rights and benefits the employee may
have under employee benefit plans and programs of the Company generally
following a termination of the employee's employment for cause shall be
determined in accordance with the terms of such plans and programs.

In the event of the employee's disability during his or her employment under the
Employment Agreement, employment may be terminated by the Company. For the first
three months following termination of employment due to disability, the employee
shall be paid the base salary in effect at the time of the commencement of
disability. Thereafter, the employee shall be entitled to benefits in accordance
with and subject to the terms and provisions of the Company's long-term
disability plan for senior management employees, as in effect at the time of the
commencement of disability. If, during the three-month period following a
termination of employment because of disability in which salary continuation
payments are payable by the Company, the employee becomes re-employed (whether
as an employee, partner, consultant or otherwise), any salary or other
remuneration or benefits earned by him or her from such employment or engagement
shall not offset any payments due the employee from the Company as the result of
disability.

The Board of Directors believes that these Employment Agreements will enable key
employees to conduct Company business with less concern for personal economic
risk when faced with a possible change of control. Furthermore, it is the
opinion of Pluma's Board of Directors that these agreements also should enhance
the Company's ability to attract new key executives as needed.

FISCAL YEAR-END OPTION HOLDINGS

The following table sets forth information regarding the exercisable and
unexercisable options to acquire Common Stock held at December 31, 1996 by the
Named Officers.

These values have not been, and may never be, realized, as these options have
not been, and may never be, exercised. Actual gains, if any, upon exercise will
depend on the value of Common Stock on the date of any exercise of options. No
options were exercised in 1996.

<PAGE>
AGGREGATED OPTION EXERCISES IN THE
LAST FISCAL YEAR AND FY-END OPTION VALUES

<TABLE>
<CAPTION>
<S> <C> <C> <C>
UNEXERCISED
IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FY-END (#) FY-END (1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE
G. Walker Box 8,832 35,328 $ --
George G. Wade 44,160 -- --
R. Duke Ferrell, Jr. 8,832 35,328 --
C. Monroe Light 8,832 35,328 --
Milton A. Barber, IV 2,944 11,776 --

NAME UNEXERCISABLE
G. Walker Box $ --
George G. Wade --
R. Duke Ferrell, Jr. --
C. Monroe Light --
Milton A. Barber, IV --
</TABLE>

(1) Value of unexercised in-the-money options at fiscal year-end is the
difference between the exercise or base price of such options and an assumed
initial public offering price of $13.00 per share.

COMPENSATION OF DIRECTORS

Each non-employee director of the Company receives $10,000 annually for serving
as a director, $750 for each board meeting attended and $500 for each meeting of
any committee of the board attended, except that the Chairman of each committee
is paid $750 for each meeting of his committee which he attends. In addition,
directors may be compensated through stock options. See "Stock Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended December 31, 1996, the Company's Compensation
Committee consisted of Barry A. Bowles (chairman), David C. Jones, D.D.S. and J.
Robert Philpott, Jr. Until April 10, 1996, G. Walker Box also served as a member
of this committee.

On December 29, 1995, pursuant to an Agreement of Termination and Release, the
Company terminated the Sales and Marketing Agreement with Box & Company by
paying to Box & Company a cancellation payment in the amount of $2.0 million.
The Company paid Box & Company $1,000 on December 29, 1995, and the balance on
January 30, 1996, pursuant to a promissory note given as a part of the
termination payment. In addition to the $2.0 million termination payment, the
Company paid Box & Company all commissions due under the Sales and Marketing
Agreement for shipments made by the Company to customers prior to December 31,
1995 ("Final Commissions"). The amount of the Final Commissions was $152,418,
which was paid in full on February 5, 1996. Also, as part of the negotiated
settlement related to this termination, Pluma assumed the risk of all customer
returns of products previously shipped (for which commissions had been paid) and
waived any further right of offset against sums due Box & Company as the result
of uncollected accounts receivable due from Pluma's customers (on which
commissions had been paid previously), including the 20/20 Sport accounts
receivable. For a discussion of the 20/20 Sport accounts receivable, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

North Bowles Partnership is a general partnership of which Barry A. Bowles, a
director of Pluma and chairman of its Compensation Committee, owns a 33.0%
general partnership interest.

On June 10, 1989, the Company entered into a lease with North Bowles Partnership
for a building located in Martinsville, Virginia, to operate a distribution
center. On December 1, 1990, this lease was amended to add 67,500 square feet to
the building subject to the original lease. The building now contains 181,550
square feet. Rental expense for 1996 was $52,026 per month, or a total of
$624,312 annually. Rental payments increase with any annual increase in the
Consumer Price Index for Urban Wage Earners and Clerical Workers. The term of
this lease is 20 years. As additional rent, the Company is responsible for
paying 75.0% of the increase in taxes and insurance premium payments due on this
property. This lease grants the Company the option to purchase the distribution
center at the end of the fifth year, tenth year and fifteenth year of the lease
term, as well as at the end of the lease term in June 2009, at a price to be
agreed upon by the parties, or if no agreement can be reached, at a price
determined by appraisers.

On December 1, 1995 the Company entered into a lease with North Bowles
Partnership for a 83,200 square foot building that is being utilized by the
Company as a warehouse, packaging facility and the Company's management
information systems location. Seven hundred square feet of additional office
space was recently added to this facility. Rent is payable in monthly
installments of $14,500. This lease terminates on February 1, 1998.

<PAGE>
On February 1, 1996, the Company entered into a lease with North Bowles
Partnership for a 200,000 square foot building that is being utilized by the
Company as a warehouse and distribution facility. Annual rental on this facility
is $384,000 payable in equal monthly installments of $32,000. This lease
terminates on July 31, 1998. As additional rent, the Company is responsible for
paying any increase in North Bowles Partnership's taxes and insurance premiums
related to the property in excess of 1995 levels.

For the year ended December 31, 1996, the Company paid Stanley Bowles
Corporation $478,646 for services rendered in connection with the installation
of a new conveyor system linking two of the Company's distribution facilities.
This payment included the cost of the equipment, labor and materials utilized
for installation. Stanley Bowles Corporation is a corporation of which Barry A.
Bowles, a director of Pluma and the chairman of its Compensation Committee, owns
20% of the voting stock.

For the year ended December 31, 1996 the Company paid Diversified Distribution,
Inc. $223,338 in fees related to contract services rendered to the Company for
packaging and preparing Company products for shipment. These services were
contracted for on a job-by-job basis as needed during busy delivery times. The
Company has no long-term contract for such services. Barry A. Bowles owns 22.5%
of the Common Stock of Diversified Distribution, Inc.

The Company paid Philpott, Ball $120,000 of advisory fees plus out-of-pocket
expenses during 1996 pursuant to a contract for financial advisory services. The
Company has signed a similar contract, requiring the payment of $120,000 during
1997. Philpott, Ball's advisory services performed or to be performed under
these agreements include negotiating with underwriters regarding pricing of the
Company's stock in a public offering and other matters related thereto,
coordinating selling shareholders in the Company's public offering, assisting in
the preparation of "road-shows" for any public offering, assisting the Company
with strategic planning, executive compensation and benefits, financial
forecasting and acquisition inquiries. J. Robert Philpott, Jr., a director of
the Company, owns 50.0% of the outstanding equity interests in Philpott, Ball.

With reference to all of the transactions described above, the Company followed
its policy set forth in its Bylaws related to transactions with its directors
("Interested Directors"). The Company's Bylaws require that any transaction or
series of transactions between the Company and an Interested Director in which
such Interested Director may receive either directly or indirectly, (through an
entity with which the director is affiliated as a shareholder, partner,
director, officer, employee or agent) compensation or benefits of more than
$25,000 within a twelve-month period be first considered by the Company's Board
of Directors (without the involvement of the Interested Director and any of his
family members who may be directors) and determined by them that the terms of
such transaction(s) are on terms at least equal to, if not better than, terms
which the Company could have received from a party unaffiliated with the
Company. Although transactions in the ordinary course of the Company's business
can be exempted from this requirement, the transactions described above were not
in the ordinary course of business and were on terms at least equal to, if not
better than, the terms the Company could have received from a nonaffiliated
party.

STOCK OPTION PLAN

In May 1995, the Company and its shareholders adopted the Pluma, Inc. 1995 Stock
Option Plan (the "1995 Stock Option Plan"), which provides for the issuance of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 and non-qualified stock options to purchase an aggregate of
up to 515,200 shares of Common Stock. The 1995 Stock Option Plan permits the
grant of options to officers, employees, directors and independent contractors
of the Company and their employees.

The 1995 Stock Option Plan is administered by the Company's Compensation
Committee, of which all voting members are "disinterested persons" within the
meaning of Rule 16b-3 under the Act, as amended (the "Committee"). Each option
is evidenced by written agreement in a form approved by the Committee. No
options granted under the 1995 Stock Option Plan are transferable by the
optionee other than by will or by the laws of descent and distribution, and each
option is exercisable, during the lifetime of the optionee, only by the
optionee.

Under the 1995 Stock Option Plan, the exercise price of an incentive stock
option must be at least equal to 100.0% of the fair market value of the Common
Stock on the date of grant (110.0% of the fair market value in the case of
options granted to employees who hold more than ten percent of the voting power
of the Company's capital stock on the date of grant). The exercise price of a
non-qualified stock option is the same as for incentive stock options. The term
of an incentive or non-qualified stock option is not to exceed ten years (five
years in the case of an incentive stock option granted to a ten percent Pluma
shareholder). The Committee has the discretion to determine the vesting schedule
and the period required for full exercisability of stock options, and all
options granted under the Plan to date have contained a 20.0% per year vesting
schedule, except for options granted to George G. Wade and to a former director,
who became 100% vested in all option shares granted to them under the 1995 Stock
Option Plan at the time of the grant. Upon exercise of any option granted under
the 1995 Stock

<PAGE>
Option Plan, the exercise price may be paid in cash, and/or such other form of
payment as may be permitted under the applicable option agreement, including,
without limitation, previously owned shares of Common Stock.

EMPLOYEE BENEFIT PLANS

In 1991, the Company adopted the Pluma, Inc. 401(k) Retirement Savings Plan (the
"401(k) Plan"), which is intended to be qualified under section 401(k) of the
Internal Revenue Code of 1986, as amended. To be eligible, an employee must have
been employed by the Company for at least one year. The 401(k) Plan permits
employees who have completed one year of service to defer up to 10.0% of their
annual compensation into the 401(k) Plan, provided, the total amount of
compensation deferred in any year does not exceed the maximum amount allowed
under law (which sum is adjusted annually). Additional annual contributions may
be made at the discretion of the Company, and matching contributions may be made
by the Company up to a maximum of 6.0% of a participating employee's annual
compensation. To date, Company matching contributions have equaled $0.35 for
every $1.00 contributed by the employee. Contributions made by the Company vest
after two years of employment.

Effective December 19, 1996, the Company adopted a Non-Qualified Deferred
Compensation Plan for certain selected key executives and for certain of its
Directors. This plan is designed to mirror the 401(k) Plan. Key executive
employees and directors chosen to participate in this plan are selected by the
Compensation Committee of the Company's Board of Directors. The purposes of this
plan is to provide certain directors and selected key executives of the Company
the opportunity to defer elements of their compensation which might not
otherwise be deferrable under other Company plans, including the 401(k) Plan, to
receive the benefit of additions to their deferral comparable to those
obtainable under the 401(k) Plan in the absence of certain restrictions and
limitations in the Internal Revenue Code, and to provide the directors with
benefits similar to the 401(k) Plan (absent certain restrictions and
limitations) were they eligible to participate in such 401(k) Plan.

<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 29, 1995, pursuant to an Agreement of Termination and Release, the
Company terminated the Sales and Marketing Agreement with Box & Company by
paying to Box & Company a termination payment in the amount of $2.0 million. The
Company paid Box & Company $1,000 on December 29, 1995, and the balance on
January 30, 1996, pursuant to a promissory note given as payment for the
termination payment. In addition to the $2.0 million termination payment, the
Company paid Box & Company all commissions due under the Sales and Marketing
Agreement for shipments made by the Company to customers prior to December 31,
1995 ("Final Commissions"). The amount of the Final Commissions was $152,418,
which was paid in full on February 5, 1996. Also, as part of the negotiated
settlement related to the termination, Pluma assumed the risk of all customer
returns of products previously shipped (for which commissions had been paid) and
waived any further right of offset against sums due Box & Company as the result
of uncollected accounts receivable due from Pluma's customers (on which
commissions had been paid previously), including the 20/20 Sport accounts
receivable. For a discussion of the 20/20 Sport accounts receivable, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

North Bowles Partnership is a general partnership of which Barry A. Bowles, a
director of Pluma and a member of its Compensation Committee, owns a 33.0%
general partnership interest.

On December 1, 1995, the Company entered into a lease with North Bowles
Partnership for a 83,200 square foot building that is being utilized by the
Company as a warehouse, packaging facility and management information systems
location. Seven hundred square feet of additional office space was recently
added to this facility. Rent is payable in monthly installments of $14,500. This
lease terminates on February 1, 1998.

On February 1, 1996, the Company entered into a lease with North Bowles
Partnership for a 200,000 square foot building that is being utilized by the
Company as a warehouse and distribution facility. Annual rental on this facility
is $384,000 payable in equal monthly installments of $32,000. This lease
terminates on July 31, 1998. As additional rent, the Company is responsible for
paying any increase in North Bowles Partnership's taxes and insurance premiums
related to the property in excess of 1995 levels.

For the year ended December 31, 1996, the Company paid Stanley Bowles
Corporation $478,646 for services rendered in connection with the installation
of a new conveyor system linking two of the Company's distribution facilities.
This payment included the cost of the equipment and labor and materials utilized
for installation. Stanley Bowles Corporation is a corporation of which Barry A.
Bowles, a director of Pluma and a member of its Compensation Committee, owns 20%
of the voting stock.

For the year ended December 31, 1996, the Company paid Diversified Distribution,
Inc. $223,338 in fees related to contract services rendered to the Company for
packaging and preparing Company products for shipment. These services were
contracted for on a job-by-job basis as needed during busy delivery times. The
Company has no long term contract for such services. Barry A. Bowles owns 22.5%
of the Common Stock of Diversified Distribution, Inc.

<PAGE>

For the year ended December 31, 1996, the Company paid $42,776 to Meritage, LLC
for special contract dyeing services. In addition, in 1996, the Company had
sales of fleece activewear totaling $80,005 to Meritage LLC. Meritage LLC is a
limited liability company principally owned by William K. Mileski, a director
of Pluma and a member of the Company's Audit Committee.

With reference to all of the transactions described above, the Company followed
its policy set forth in its Bylaws related to transactions with its directors
("Interested Directors"). The Company's Bylaws require that any transaction or
series of transactions between the Company and an Interested Director in which
such Interested Director may receive either directly or indirectly, (through an
entity with which the director is affiliated as a shareholder, partner,
director, officer, employee or agent) compensation or benefits of more than
$25,000 within a twelve month period be first considered by the Company's Board
of Directors (without, the involvement of the Interested Director and any of his
family members who may be directors) and determined by them that the terms of
such transaction(s) are on terms at least equal to, if not better than, terms
which the Company could have received from a party unaffiliated with the
Company. Although transactions in the ordinary course of the Company's business
can be exempted from this requirement, the transactions described above were not
in the ordinary course of business and were on terms at least equal to, if not
better than, the terms the Company could have received from a nonaffiliated
party.

<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus and as
adjusted to reflect the sale of the shares offered hereby with respect to (i)
each person known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock, (ii) each of the Company's directors and
the Named Officers and (iii) all directors and executive officers as a group.
Unless otherwise indicated, each of the shareholders has sole voting and
investment power with respect to the shares beneficially owned.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES
BENEFICIALLY
OWNED
AFTER
SHARES TO BE SOLD OFFERING
NAME (1) NUMBER PERCENT (2) NUMBER NUMBER
G. Walker Box 877,185(3)(4) 16.15% -- 794,061(4)
R. Duke Ferrell, Jr. 568,036(3)(5) 10.46% 4,151 513,621(5)
George G. Wade 511,442(6) 9.41% 76,381 423,561
Kemp D. Box 415,974(7)(8) 7.66% -- 383,114(7)
Post Office Box 6822
Columbia, SC 29260
David C. Jones, D.D.S. 378,956(7)(9) 6.98% 25,515 353,441
25 E. Cleveland Ave., Suite E
Martinsville, VA 24112
William K. Mileski 338,238(7)(10) 6.23% 78,304 259,934
Meritage
P.O. Box 1198
Mooresville, NC 28115
C. Monroe Light 298,482(3)(11) 5.49% 17,068 281,414
R. Stephens Pannill 263,226(7)(12) 4.85% 18,985 244,241
835 Colville Road
Charlotte, NC 28207
Barry A. Bowles 150,864(7)(13) 2.78% 10,825 140,039
Stanley W. Bowles Corp.
Post Office Box 4706
Martinsville, VA 24115
Milton A. Barber, IV 18,190(7) .33% -- 18,190
J. Robert Philpott, Jr. --(14) -- -- --
Philpott, Ball & Company
212 S. Tryon Street, Suite 1050
Charlotte, NC 28281
All directors and executive 3,542,155 65.20% 231,229(15) 3,216,302
officers as a group (17 persons)

<CAPTION>
NAME (1) PERCENT (2)
G. Walker Box 10.01%(4)
R. Duke Ferrell, Jr. 6.47%(5)
George G. Wade 5.34%(5)
Kemp D. Box 4.93%(7)
Post Office Box 6822
Columbia, SC 29260
David C. Jones, D.D.S. 4.46%
25 E. Cleveland Ave., Suite E
Martinsville, VA 24112
William K. Mileski 3.28%
Meritage
P.O. Box 1198
Mooresville, NC 28115
C. Monroe Light 3.55%
R. Stephens Pannill 3.08%
835 Colville Road
Charlotte, NC 28207
Barry A. Bowles 1.77%
Stanley W. Bowles Corp.
Post Office Box 4706
Martinsville, VA 24115
Milton A. Barber, IV .23%
J. Robert Philpott, Jr. --
Philpott, Ball & Company
212 S. Tryon Street, Suite 1050
Charlotte, NC 28281
All directors and executive 40.54%
officers as a group (17 persons)
</TABLE>

(1) Except as otherwise noted, the address of each person who is a director,
executive officer, or five percent shareholder of the Company is c/o Pluma,
Inc., 801 Fieldcrest Road, Eden, North Carolina 27288.

(2) Prior to the Offering, the percentages calculated are based on 5,315,797
shares issued and outstanding as of the date hereof plus 117,171 shares subject
to presently exercisable stock options issued under the Company's Stock Option
Plan (the "Option Shares"), a total of 5,432,968 shares. As of the date of the
closing of the Offering, the percentages calculated are based on 7,815,797
shares issued and outstanding plus 117,171 Option Shares, a total of 7,932,968
shares.

(3) Includes 8,832 shares issuable upon the exercise of options that have vested
(does not include 35,328 shares issuable upon the exercise of options that have
not yet vested).

(4) Includes (a) 23,552 shares owned by the George Walker Box Family Trust of
which G. Walker Box is the trustee and has sole voting and investment power; (b)
237,687 shares owned by Box, Ferrell & Co. of which Mr. Box shares voting power
and investment power equally with R. Duke Ferrell, Jr. -- these shares are
included in both Mr. Box's and Mr. Ferrell's beneficially owned shares; (c)
46,758 shares owned by Mr. Box as custodian for his minor children living in his
household; (d) 100,995 shares owned by the George Henry Box, Jr. Revocable Trust
dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting

<PAGE>

and investment power equally with Kemp D. Box -- these shares are included in
both Mr. Box's and Kemp D. Box's beneficially owned shares; and (e) 16,240
shares owned by Mr. Box's wife of which shares Mr. Box disclaims beneficial
ownership. Although Mr. Box individually is not selling any shares of Common
Stock in this Offering, Box Ferrell & Co., a corporation owned 50% by Mr. Box is
selling 50,264 shares of Common Stock and the George Henry Box, Jr. Revocable
Trust of which Mr. Box is a Co-Trustee is selling 32,860 shares of Common Stock
in this Offering and therefore Mr. Box's Beneficially Owned Shares will be
reduced as a result of the Offering.

(5) Includes (a) 237,687 shares owned by Box, Ferrell & Co. of which Mr. Ferrell
shares voting power and investment power equally with G. Walker Box -- these
shares are included in both Mr. Ferrell's and Mr. Box's beneficially owned
shares; (b) 19,636 shares held by Mr. Ferrell as custodian for his minor
children living in his household; (c) 4,740 shares held by Mr. Ferrell's
Individual Retirement Account; and (d) 20,019 shares owned of record by Mr.
Ferrell's wife of which shares Mr. Ferrell disclaims beneficial ownership. Mr.
Ferrell's beneficially owned Shares of Common Stock will be reduced by 50,264
shares as the result of the sale by Box Ferrell & Co. of 50,264 shares of Common
Stock in the Offering.

(6) Includes (a) 44,160 shares issuable upon the exercise of options that are
currently exercisable; and (b) 85,376 shares owned by Mr. Wade's wife. Mr. Wade
disclaims beneficial ownership of the shares owned by his wife. Does not include
589 shares owned by Mr. Wade's adult children who do not reside in his
household.

(7) Includes 2,944 shares issuable upon the exercise of options that are
currently exercisable (does not include 11,776 shares issuable upon the exercise
of options that have not yet vested).

(8) Includes (a) 100,995 shares owned by the George Henry Box, Jr. Revocable
Trust dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting and
investment power equally with G. Walker Box -- these shares are included in both
Mr. Box's and G. Walker Box's beneficially owned shares; (b) 23,552 shares owned
by the Kemp D. Box Family Trust, of which Mr. Box is the trustee and has sole
voting and investment power; (c) 4,465 shares owned by Mr. Box's wife; (d)
18,468 shares owned by Mr. Box's wife as trustee for trusts for her and Mr.
Box's minor children living in Mr. Box's household; and (e) 43,356 shares owned
by Mr. Box's wife as trustee for the Kemp D. Box Descendants' Trust. Mr. Box
disclaims beneficial ownership of all shares beneficially owned by his wife.
Although Mr. Box individually is not selling any shares of Common Stock in this
Offering, the George Henry Box, Jr. Revocable Trust of which Mr. Box is a
co-trustee is selling 32,860 of Common Stock in this Offering and therefore Mr.
Box's beneficially owned Shares of Common Stock will be reduced as a result of
the Offering.

(9) Includes 31,100 shares owned by his Individual Retirement Account, but does
not include 36,108 shares owned by the David C. Jones Foundation, the trustees
of which are Dr. Jones' wife, Karen Jones, and Philip G. Gardner.

(10) Includes 22,080 shares owned by Mr. Mileski's wife of which shares Mr.
Mileski disclaims beneficial ownership. Does not include 3,165 shares owned by
Mr. Mileski's adult children who do not reside in his household.

(11) Includes 58,880 shares owned by Mr. Light's wife of which shares Mr. Light
disclaims beneficial ownership. Does not include 8,689 shares owned by Mr.
Light's adult children who do not reside in his household and 5,888 shares owned
by Mr. Light's grandchildren who do not reside in his household.

(12) Includes (a) all of the 257,600 shares Mr. Pannill owns of record with his
wife as a joint tenant with right of survivorship; and (b) 2,682 shares owned by
Mr. Pannill's wife of which shares Mr. Pannill disclaims beneficial ownership.

(13) Includes 1,472 shares held by Mr. Bowles' Individual Retirement Account.
Does not include 29 shares owned by Mr. Bowles' adult children who do not reside
in his household and does not include 11,482 shares owned by the Barry A. Bowles
Irrevocable Trust of which John L. Gregory III is the trustee.

(14) Does not include 14,720 shares issuable upon the exercise of options that
have not yet vested.

(15) Does not include 50,264 shares sold by Box & Co., a corporation owned
solely by G. Walker Box and R. Duke Ferrell, Jr. and 32,860 shares of Common
Stock being sold by the George Henry Box, Jr. Revocable Trust of which G. Walker
Box and Kemp D. Box are Co-Trustees.

<PAGE>
SELLING SHAREHOLDERS

The Selling Shareholders listed in the table below have agreed to sell the
number of shares of Common Stock set forth opposite their respective names. The
table sets forth information with respect to beneficial ownership of the Common
Stock by the Selling Shareholders immediately prior to the consummation of the
Offering and as adjusted to reflect the sale of shares of Common Stock pursuant
to the Offering. The Selling Shareholder's position, office or other material
relationship with the Company for the last three years is also stated. All
information with respect to beneficial ownership has been furnished by the
respective Selling Shareholders.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
BENEFICIAL
OWNERSHIP
BENEFICIAL OWNERSHIP AFTER
PRIOR TO OFFERING SHARES TO BE SOLD OFFERING
NAME NUMBER PERCENT (1) IN OFFERING NUMBER
M.J. Soffe Company 193,593 3.56% 193,593 0
President, James F. Soffe, former director
William K. Mileski 338,238(2)(3) 6.23% 78,304 259,934
Former Executive Vice President and
current Director
George G. Wade 511,442(4) 9.41% 76,381 423,561
Chairman Emeritus of Board of Directors
and Secretary
George Henry Box, Jr. Revocable Trust, G. 100,995 1.86% 32,860 68,135
Walker Box and Kemp D. Box, Trustees, G.
Walker Box is Chairman of the Board of
Directors, Kemp D. Box is a director
David C. Jones, D.D.S. 378,956(2)(5) 6.98% 25,515 353,441
Director
R. Duke Ferrell, Jr. 568,036(6)(7) 10.46% 4,151 513,621
President, Chief Executive Officer and
Director
R. Stephens Pannill 263,226(2)(8) 4.85% 18,985 244,241
Director
C. Monroe Light 298,482(6)(9) 5.49% 17,068 281,414
Executive Vice President and Director
Barry A. Bowles 150,864(2)(10) 2.78% 10,825 140,039
Director
Box Ferrell & Co. 237,687 4.37% 50,264 187,423
solely owned by G. Walker Box, Chairman of
the Board and R. Duke Ferrell, Jr.,
President and Chief Executive Officer
Stanley Bowles, Jr. 194,843 3.59% 12,470 182,373
David W. Bowles 146,814 2.70% 11,040 135,774
Barbara A. Wade 511,442(11) 9.41% 11,500 499,942
M. T. Associates 126,066 2.32% 10,085 115,981
T. S. Partners 206,447 3.80% 16,516 189,931
S&J Investments 178,162 3.28% 14,253 163,909
Walter G. Light 60,253 1.11% 4,821 55,432
Novellia D. Light 58,880 1.08% 4,710 54,170
John D. Soffe 48,561 .89% 3,680 44,881
Calabras of America, Inc. 37,231 .69% 2,979 34,252

NAME PERCENT (1)
M.J. Soffe Company 0.00%
President, James F. Soffe, former director
William K. Mileski 3.28%
Former Executive Vice President and
current Director
George G. Wade 5.34%
Chairman Emeritus of Board of Directors
and Secretary
George Henry Box, Jr. Revocable Trust, G. .86%
Walker Box and Kemp D. Box, Trustees, G.
Walker Box is Chairman of the Board of
Directors, Kemp D. Box is a director
David C. Jones, D.D.S. 4.46%
Director
R. Duke Ferrell, Jr. 6.47%
President, Chief Executive Officer and
Director
R. Stephens Pannill 3.08%
Director
C. Monroe Light 3.55%
Executive Vice President and Director
Barry A. Bowles 1.77%
Director
Box Ferrell & Co. 2.36%
solely owned by G. Walker Box, Chairman of
the Board and R. Duke Ferrell, Jr.,
President and Chief Executive Officer
Stanley Bowles, Jr. 2.30%
David W. Bowles 1.71%
Barbara A. Wade 6.30%
M. T. Associates 1.46%
T. S. Partners 2.39%
S&J Investments 2.07%
Walter G. Light .70%
Novellia D. Light .68%
John D. Soffe .57%
Calabras of America, Inc. .43%
</TABLE>

(1) Prior to the Offering, the percentages calculated are based on 5,315,797
shares issued and outstanding as of the date hereof plus 117,171 Option Shares,
a total of 5,432,968 shares. As of the date of closing of the Offering, the
percentages calculated are based on 7,815,797 shares issued and outstanding plus
117,171 Option Shares, a total of 7,932,968 shares.

(2) Includes 2,944 shares issuable upon the exercise of options that are
currently exercisable (does not include 11,776 shares issuable upon the exercise
of options that have not yet vested).

(3) Includes 22,080 shares owned by Mr. Mileski's wife of which shares Mr.
Mileski disclaims beneficial ownership. Does not include 3,165 shares owned by
Mr. Mileski's adult children who do not reside in his household.

<PAGE>
(4) Includes (a) 44,160 shares issuable upon the exercise of options that are
currently exercisable; and (b) 85,376 shares owned by Mr. Wade's wife. Mr. Wade
disclaims beneficial ownership of the shares owned by his wife. Does not include
589 shares owned by Mr. Wade's adult children who do not reside in his
household.

(5) Includes 31,100 shares owned by his Individual Retirement Account, but does
not include 36,108 shares owned by the David C. Jones Foundation, the trustees
of which are Dr. Jones' wife, Karen Jones, and Philip G. Gardner.

(6) Includes 8,832 shares issuable upon the exercise of options that have vested
(does not include 35,328 shares issuable upon the exercise of options that have
not yet vested).

(7) Includes (a) 237,687 shares owned by Box, Ferrell & Co. of which Mr. Ferrell
shares voting power and investment power equally with G. Walker Box -- these
shares are included in both Mr. Ferrell's and Mr. Box's beneficially owned
shares; (b) 19,636 shares held by Mr. Ferrell as custodian for his minor
children living in his household; (c) 4,740 shares held by Mr. Ferrell's
Individual Retirement Account; and (d) 20,019 shares owned of record by Mr.
Ferrell's wife of which shares Mr. Ferrell disclaims beneficial ownership. Mr.
Ferrell's beneficially owned shares of Common Stock will be reduced by 50,264
shares as the result of the sale by Box Ferrell & Co. of 50,264 shares of Common
Stock in the Offering.

(8) Includes (a) all of the 257,600 shares Mr. Pannill owns of record with his
wife as a joint tenant with right of survivorship; and (b) 2,682 shares owned by
Mr. Pannill's wife of which shares Mr. Pannill disclaims beneficial ownership.

(9) Includes 58,880 shares owned by Mr. Light's wife of which shares Mr. Light
disclaims beneficial ownership. Does not include 8,689 shares owned by Mr.
Light's adult children who do not reside in his household and 5,888 shares owned
by Mr. Light's grandchildren who do not reside in his household.

(10) Includes 1,472 shares held by Mr. Bowles' Individual Retirement Account.
Does not include 29 shares owned by Mr. Bowles' adult children who do not reside
in his household and does not include 11,482 shares owned by the Barry A. Bowles
Irrevocable Trust of which John L. Gregory III is the trustee.

(11) Includes 381,906 shares owned by Mrs. Wade's husband, George G. Wade,
Chairman Emeritus of the Company's Board of Directors, as well as 44,160 shares
issuable upon the exercise of Mr. Wade's options which are currently
exercisable.

<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 16,000,000 shares,
consisting of 15,000,000 shares of Common Stock, no par value, and 1,000,000
shares of preferred stock, no par value (the "Preferred Stock"). The following
summary description of the capital stock of the Company does not purport to be
complete and is subject to the detailed provisions of and is qualified in its
entirety by reference to the Company's Articles of Incorporation and Bylaws and
to the applicable provisions of the North Carolina Business Corporation Act.

COMMON STOCK

As of the date hereof, 5,315,797 shares of the Company's Common Stock are issued
and outstanding to 154 shareholders. Upon completion of this Offering, it is
anticipated that 7,815,797 shares of Common Stock will be issued and outstanding
(8,280,797 shares if the Underwriters' over-allotment option is exercised in
full).

Holders of the Common Stock are entitled to receive dividends when and as
declared by the Board of Directors out of funds legally available therefor. The
Company has declared and paid quarterly cash dividends on its Common Stock since
1991. Quarterly cash dividends paid since January 1994 have been $0.0272 per
share. However, the Company has not established a dividend policy to follow
subsequent to this Offering and does not expect that a dividend will be declared
and paid in the foreseeable future. See "Dividend Policy." Holders of the Common
Stock have no preemptive rights to purchase additional shares, which rights, if
they existed, would entitle a shareholder to maintain his or her proportionate
percentage interest in the Company by purchasing additional shares at any time
the Company issues any additional shares. Furthermore, the shares of Common
Stock being sold hereby have no conversion, sinking fund or redemption rights.
Holders of the Common Stock are entitled to share on a prorated basis in the
assets of the Company legally available for distribution to shareholders in the
event of the Company's liquidation, dissolution or winding up. The Common Stock
offered hereby will be, when issued, fully paid and nonassessable. Each holder
of shares of the Common Stock is entitled to one vote for each share of the
Common Stock held of record on all matters submitted to a vote of shareholders,
including the election of directors. Pursuant to the provisions of the North
Carolina General Statutes that will apply to the Company, a shareholder of the
Company following the Offering will not have the right to vote his shares
cumulatively, in the election of directors.

Except as set forth below, the vote of holders of a majority of the shares of
Common Stock voted at a meeting of the shareholders shall be sufficient to take
or authorize action upon any matter that may properly come before a meeting of
the shareholders. Notwithstanding the preceding sentence, the Company's Bylaws
provide that a vote of holders of 66 2/3% of the Company's Common Stock (as well
as the Board of Directors) shall be required for the authorization of (a) any
consolidation or merger of the Company where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own, directly or indirectly, shares
representing in the aggregate at least 50.1% of the voting shares of the
corporation issuing cash and/or securities in the consolidation or merger (or of
its ultimate parent corporation, if any), (b) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by a party as a single plan) of all or substantially all of the assets
of the Company or (c) any plan or proposal for the liquidation or dissolution of
the Company.

The above-referenced provisions of the Company's Bylaws are designed to
encourage any person interested in acquiring the Company to negotiate with and
obtain the approval of a large majority of the Company's Board of Directors and
a large majority of its shareholders, thus possibly slowing down an unfriendly
takeover attempt and initiating more discussion and analysis before the
occurrence of a "change in control" of the Company. These provisions may,
however, discourage a future acquisition of the Company not approved by the
Board of Directors in which shareholders might receive the maximum value for
their shares or which a substantial number and perhaps even a majority of the
Company's shareholders believe to be in the best interests of all shareholders.
As a result, shareholders who might desire to participate in such a "change of
control" transaction may not have the opportunity to do so. See "Risk
Factors -- Antitakeover Provisions."

Application has been made for listing of the Common Stock on the New York Stock
Exchange under the symbol "PLU." The transfer agent and registrar for the
Company's Common Stock will be First Union National Bank of North Carolina, 2
First Union Center, Charlotte, North Carolina.

<PAGE>
PREFERRED STOCK

As of the date of this Prospectus, no shares of Preferred Stock were
outstanding. The Board of Directors is authorized to issue Preferred Stock in
one or more series and to determine, with respect to any such series, the
designations, powers, preferences and rights of such series, including: (i) the
number of shares of the series, which number the Board of Directors may
thereafter (except where otherwise provided in the preferred stock designation)
increase or decrease (but not below the number of shares thereof then
outstanding); (ii) whether dividends, if any, will be cumulative or
noncumulative and the dividend rate of the series; (iii) the dates at which
dividends, if any, will be payable; (iv) the redemption rights and price or
prices, if any, for shares of the series; (v) the terms and amounts of any
sinking fund provided for the purchase or redemption of shares of the series;
(vi) the amounts payable, and the preferences, if any, on shares of the series
in the event of any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company; (vii) whether the shares of the series will be
convertible into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security; (viii) the conversion price or
prices or rate or rates, and any adjustments thereof, the date or dates as of
which such shares shall be convertible and all other terms and conditions upon
which such conversion may be made; (ix) restrictions on the issuance of shares
of the same series or of any other class or series; (x) the voting rights, if
any, of the holders of such series and (xi) such other powers, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, as the Board of Directors
shall determine.

The Company believes that the ability of the Board of Directors to issue one or
more series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's shareholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded.

Although the Board of Directors has no intention at the present time of doing
so, it could issue a series of Preferred Stock that could, depending on the
terms of such series, impede the completion of a merger, tender offer or other
takeover attempt. The Board of Directors will make any determination to issue
such shares based on its judgment as to the best interests of the Company and
its shareholders. The Board of Directors, in so acting, could issue Preferred
Stock having terms that could discourage an acquisition attempt through which an
acquiror may be able to change the composition of the Board of Directors,
including a tender offer or other transaction that some, or a majority, of the
Company's shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then current
market price of such stock.

BOARD OF DIRECTORS

The Company's Board of Directors currently consists of ten directors and is
divided into three classes designed to contain a relatively equal number of
members. The terms of office of the directors are staggered so that the terms of
office of no more than approximately one-third of the directors expire in any
one year. The classification system of electing directors may discourage a third
party from making a tender offer or otherwise attempting to obtain control of
the Company and may maintain the incumbency of the Board of Directors, as it
generally makes it more difficult for shareholders to replace a majority of the
Board of Directors.

The number of directors constituting the Board of Directors shall not be less
than nine or more than twelve. The Board of Directors has the right to increase
the number of directors, provided the number of such directors is not greater
than twelve. A majority of the Board of Directors then in office has the sole
authority to fill any vacancies on the Board of Directors.

CERTAIN PROVISIONS OF NORTH CAROLINA STATUTES AND OF THE COMPANY'S BYLAWS

The North Carolina General Statutes ("NCGS") provide in the North Carolina
Shareholder Protection Act (the "Shareholder Act") a mechanism designed to
prevent a two-phase tender offer for shares of a publicly held North Carolina
corporation which attempts to force shareholders to sell their shares in the
first phase of any such tender offer in order to avoid the risk of receiving a
lower price in the second phase of the offer. The Shareholder Act's purpose is
to assure a fair price for all shareholders of a corporation subject to a
"change of control," merger or other business combination. Generally, the
Shareholder Act requires the vote of 95.0% of the voting shares of a publicly
held corporation to approve a business combination unless the shareholders of
such corporation who have their shares purchased in the business combination
receive a "fair price" equal to the highest of (i) the highest per share price
ever paid by anyone who is a part of an acquiring "other entity," (ii) a price
that exceeds the market price when the second phase of the acquisition is
announced by the same percentage as the highest price paid by any member of the
"other entity" exceeds the market price immediately before the commencement of
acquisition of the

<PAGE>
corporation's shares by the other entity or (iii) a price computed by
multiplying the corporation's annual earnings per share by the price/earnings
multiple, if any, of the acquiring "other entity." Furthermore, certain
procedural requirements must be met.

As allowed by the Shareholder Act, the Company's Board of Directors intends to
amend the Company's Bylaws immediately after the Offering is completed exempting
the Company from the requirements and provisions of the Shareholder Act. This
could allow for a two-phase tender offer for the Company's shares that could
result in a lower price to shareholders who sell their Pluma shares in the
second phase of any such tender offer. Furthermore, the elimination of the
Shareholder Act may allow for a successful hostile takeover of the Company that
is not favored. However, the Company's Board of Directors believes that the
Shareholder Act is too broad in its application and could work to block a
business combination transaction desired by virtually all of the Company's
shareholders.

The Control Share Acquisition Act, promulgated under the NCGS, generally
prohibits a person who acquires "control shares" in a "control share
acquisition" from voting its shares so acquired unless such voting rights are
granted by a majority of all outstanding voting shares of the Company exclusive
of the shares acquired by the person acquiring "control shares." The voting
rights to be granted to the acquiring person must be granted at a shareholders
meeting for which there are special notice requirements, and such meeting could
be held within 50 days after the shareholders receive certain information from
the acquiring person. Thus, a normal tender offer is delayed by at least 50 days
since the acquiring person would not want to purchase shares he could not
subsequently vote. Although it appears that this act might inhibit an
acquisition of the Company that a majority of the shareholders desires, it could
also be viewed as an assistance to a person engineering a hostile takeover of
the Company. In any event, as allowed by the Control Share Acquisition Act, the
Company's Board of Directors has amended the Company's Bylaws exempting the
Company from the requirements and provisions of this act.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Bylaws of the Company provide that any person who at any time serves or has
served as director, officer, employee or agent of the Company, shall have a
right to be indemnified by the Company to the fullest extent permitted by law
against (a) liability and litigation expenses, including reasonable attorney's
fees incurred in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
and whether or not brought by or on behalf of the Company, seeking to hold him
liable by reason of the fact that he is or was acting in such capacity, and (b)
reasonable payments made by him in satisfaction of any judgment, money decree,
fine, penalty or settlement for which he may become liable in any such action,
suit or proceeding.

The Securities and Exchange Commission has taken the position that insofar as
indemnification from liabilities of officers and directors of a Company arising
under the Securities Act of 1933, as amended, may be permitted, the Company has
been informed that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
of 1933, as amended, and is, therefore, unenforceable.

<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding 7,815,797
shares of Common Stock. 3,100,000 shares sold in this Offering (3,565,000 shares
if the Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restrictions or further registration under the Securities Act.

The 5,315,797 shares of Common Stock currently held by the existing shareholders
were issued and sold by the Company in private transactions in reliance upon
exemptions from the registration provisions of the federal securities laws.
After the Offering, 4,715,797 of these shares of Common Stock (the "Restricted
Shares") will be subject to certain restrictions under Rule 144 of the
Securities Act. The Restricted Shares may not be resold in the absence of
registration under the Securities Act or unless an exemption from such
registration requirements exists, including exemptions provided by Rule 144
under the Securities Act. In general, under Rule 144 as currently in effect,
a person who has beneficially owned Restricted Shares for at least two years,
including "affiliates" of the Company, would be entitled to sell in broker's
transactions or to market makers within any three-month period a number of
shares that does not exceed the greater of 1.0% of the then outstanding shares
of Common Stock (approximately 78,158 shares after giving effect to the
Offering) or the average weekly trading volume of the Common Stock on the New
York Stock Exchange during the four calendar weeks preceding the date of such
sale. Sales under Rule 144 are also subject to certain manner of sale
restrictions and notice requirements and to the availability of current public
information concerning the Company. In addition, a person (or persons whose
shares are aggregated) who is not an "affiliate" of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned such
shares for at least three years would be entitled to sell such shares under
Rule 144(k) without regard to the availability of current public information,
volume limitations, manner of sale provisions or notice requirements. This
rule will allow the Company's existing shareholders who are not "affiliates"
and who have not signed the agreement referenced below (and who collectively
will own 350,299 shares of the Common Stock, or 4.5% of the issued and
outstanding shares of Common Stock) to freely trade their shares without
restriction immediately upon completion of this Offering. Certain other
shareholders of the Company who are affiliates, but have not signed the
agreement referenced below, will be permitted to freely trade their shares
(totaling 402,370 shares of Common Stock, or 5.15% of the issued and outstanding
shares of the Common Stock) 90 days after the Company becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended.
Beginning 180 days after the date of this Prospectus, the current holders of the
Restricted Shares who have signed the agreement referenced below will be
eligible to sell a portion of such shares pursuant to Rule 144, subject to the
manner of sale, volume, notice and information requirements of Rule 144. The
above is a summary of Rule 144 and is not intended to be a complete description
thereof.

Additionally, shares issued or issuable upon exercise of options granted by the
Company prior to the date of this Prospectus also may be eligible for sale in
the public market pursuant to Rule 701 under the Act. In general, Rule 701
permits resales of shares issued pursuant to certain compensatory benefit plans
and contracts commencing 90 days after the issuer becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, in
reliance upon certain provisions of Rule 144. Non-affiliates are permitted to
sell without having to comply with the public information, holding period,
volume limitations or notice provisions of Rule 144 and affiliates are permitted
to sell without having to comply with the holding period provisions of Rule 144.
If all the requirements of Rule 701 are met, 117,171 shares of Common Stock
issuable upon exercise of currently outstanding options which will then be
vested will be eligible for sale commencing 90 days after the date of this
Prospectus.

The Company, its directors, certain executive officers and all shareholders who
own more than 36,800 shares of Common Stock have agreed that they will not,
directly or indirectly, offer, sell, offer to sell, contract to sell, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock or other capital stock of
the Company, for a period of 180 days after the date of this Prospectus, without
the prior written consent of J.P. Morgan Securities Inc., on behalf of the
Underwriters, except that the Company may grant options to purchase shares of
Common Stock under the 1995 Stock Option Plan. See "Management -- Executive
Compensation, Stock Option Plan."

Prior to this offering, there has been no market for the Common Stock and no
precise predictions can be made as to the effect, if any, that sales of shares
or the availability of such shares for sale in the public market will have on
the market prices prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices and impair the Company's ability to raise capital
through the sale of equity securities.

<PAGE>
UNDERWRITING

Under the terms and subject to the conditions set forth in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Company and
the Selling Shareholders have agreed to sell to the Underwriters named below,
and each of such Underwriters, for whom J.P. Morgan Securities Inc.,
Interstate/Johnson Lane Corporation and Wheat, First Securities, Inc. are acting
as representatives, has severally agreed to purchase from the Company and the
Selling Shareholders, the respective number of shares of Common Stock set forth
opposite their names below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
J.P. Morgan Securities Inc.
Interstate/Johnson Lane Corporation
Wheat, First Securities, Inc.

Total......................................................................... 3,100,000
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. Under the terms
and conditions of the Underwriting Agreement, the Underwriters are obligated to
take and pay for all such shares of Common Stock, if any are taken.

The Underwriters propose initially to offer the shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the Common Stock, the public
offering price and such concession may be changed.

The Company has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
465,000 additional shares of Common Stock from the Company, at the initial
public offering price, less the underwriting discount. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if any.
To the extent that the Underwriters exercise their option, each Underwriter will
have a firm commitment, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares of Common Stock initially offered hereby.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

Each of the Company, its directors, certain executive officers and each of the
shareholders who own 36,800 or more shares of Common Stock has agreed, with
certain limited exceptions, not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock, any options for the sale of Common Stock,
or any securities convertible into or exchangeable or exercisable for any such
shares, for a period of 180 days after the date of this Prospectus, without the
consent of J.P. Morgan Securities Inc.

Prior to this Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock offered hereby has been
determined by agreement among the Company, the Selling Shareholders and the
Underwriters. Among the factors considered in making such determination were the
history of and the prospects for the industry in which the Company competes, an
assessment of the Company's management, the present operations of the Company,
the historical results

<PAGE>
of operations of the Company and the trend of its revenues and earnings, the
prospects for future earnings of the Company, the general condition of the
securities markets at the time of the offering and the prices of similar
securities of generally comparable companies.

Application has been made for listing of the Common Stock on the New York Stock
Exchange under the symbol "PLU." There can be no assurance that an active
trading market will develop for the Common Stock or that the Common Stock will
trade in the public market subsequent to the offering at or above the initial
public offering price.

At the Company's request, the Underwriters have reserved up to 155,000 shares of
Common Stock for sale at the initial public offering price to the Company's
employees and other persons having business relationships with the Company. The
number of shares of Common Stock available for sale to other members of the
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters on
the same basis as the other shares offered hereby.

LEGAL MATTERS

Certain legal matters in respect to the validity of the shares of Common Stock
offered hereby will be passed upon for the Company by Allman Spry Leggett &
Crumpler, P.A., Winston-Salem, North Carolina. Certain legal matters will be
passed upon for the Underwriters by Davis Polk & Wardwell. Davis Polk & Wardwell
may rely on Allman Spry Leggett & Crumpler, P.A. as to matters of North Carolina
law.

EXPERTS

The financial statements included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and have been so included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.

AVAILABLE INFORMATION

A Registration Statement on Form S-1 relating to the Common Stock offered hereby
has been filed by the Company with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus with respect to the
contents of any contract or any other document referred to herein are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. For
further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to the Registration Statement and to the
exhibits and schedules thereto. A copy of the Registration Statement may be
inspected by anyone without charge and may be obtained at prescribed rates at
the Commission at the Public Reference Section of the Commission, maintained by
the Commission at its principal office located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information that is filed electronically with the Commission.

<PAGE>
PLUMA, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................................... F-2
Balance Sheets as of December 31, 1996 and 1995........................................................................ F-3
Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994.......................................... F-4
Statements of Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994................................ F-5
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.......................................... F-6
Notes to Financial Statements.......................................................................................... F-7
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

Shareholders and Board of Directors of Pluma, Inc.:

We have audited the accompanying balance sheets of Pluma, Inc. as of December
31, 1996 and 1995, and the related statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pluma, Inc. at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE LLP
Winston-Salem, North Carolina

January 28, 1997

F-2

<PAGE>
PLUMA, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash $ 291,488 $ 596,429
Accounts receivable (less allowance -- 1996, $817,080; 1995, $4,069,763)
(note 5) 22,545,795 21,939,763
Income taxes receivable -- 1,057,783
Deferred income taxes (note 9) 1,509,535 2,296,429
Inventories (notes 3 and 5) 34,025,895 32,169,247
Other current assets 627,576 148,130
Total current assets 59,000,289 58,207,781
Property, plant and equipment (note 5):
Land 599,978 599,978
Land improvements 678,160 662,885
Buildings and improvements 14,078,626 13,516,551
Machinery and equipment 31,753,681 28,966,411
Total property, plant and equipment 47,110,445 43,745,825
Less accumulated depreciation 17,468,062 13,682,273
Property, plant and equipment, net 29,642,383 30,063,552
Other assets 575,662 341,787
TOTAL $89,218,334 $88,613,120
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (notes 5 and 16) $ 849,640 $ 849,640
Note payable -- related party sales agency (note 13) -- 1,999,000
Accounts payable 4,456,770 2,828,781
Income taxes payable 371,500 --
Accrued expenses, including related party sales agency -- 1995, $152,418
(notes 4 and 13) 3,421,181 2,478,081
Total current liabilities 9,099,091 8,155,502
Long-term debt (notes 5 and 16) 44,419,544 50,120,280
Deferred income taxes (note 9) 3,556,806 3,435,020
Commitments and contingencies (notes 10 and 12)

Shareholders' equity (notes 7, 8 and 17):
Preferred stock, no par value, 1,000,000 shares authorized -- --
Common stock, no par value, 15,000,000 shares authorized, shares issued and
outstanding -- 1996, 5,315,797; 1995, 5,315,797 7,222,550 7,222,550
Retained earnings 24,920,343 19,679,768
Total shareholders' equity 32,142,893 26,902,318
TOTAL $89,218,334 $88,613,120
</TABLE>

See notes to financial statements.

F-3

<PAGE>
PLUMA, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales including related party customers -- 1994, $2,313,230
(notes 13 and 14) $127,820,319 $100,710,495 $97,907,504
Cost of goods sold (notes 11 and 13) 106,247,340 81,429,370 81,408,677
Gross profit 21,572,979 19,281,125 16,498,827
Selling, general and administrative expenses including related party sales
agency -- 1995, $3,327,307; 1994, $3,181,467 (notes 10, 13 and 15) 9,149,039 12,384,876 7,300,187
Termination fee (note 13) -- 2,000,000 --
Total selling, general and administrative expenses 9,149,039 14,384,876 7,300,187
Income from operations 12,423,940 4,896,249 9,198,640
Other income (expenses):
Interest expense (note 5) (3,735,468) (3,421,385) (2,556,134)
Other income (expenses) 484,058 291,261 (10,794)
Casualty gain (note 11) -- -- 312,733
Total other expenses, net (3,251,410) (3,130,124) (2,254,195)
Income before income taxes 9,172,530 1,766,125 6,944,445
Income taxes (benefit) (note 9):
Current 2,445,471 2,029,624 1,888,986
Deferred 908,680 (1,370,488) 705,008
Total income taxes 3,354,151 659,136 2,593,994
Net income $ 5,818,379 $ 1,106,989 $ 4,350,451
Earnings per common share and common equivalent --
primary and fully diluted $ 1.09 $ .21 $ .83
Weighted average number of shares outstanding 5,315,797 5,315,797 5,244,060
</TABLE>

See notes to financial statements.

F-4

<PAGE>
PLUMA, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
(NOTES 7 AND 17) PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 5,551,420 $3,771,345 $ 347,941 $20,990,301 $25,109,587
Sale of common stock 161,920 110,000 1,620,300 -- 1,730,300
Repurchase of common stock (397,543) (270,070) (347,941) (3,630,190) (4,248,201)
Net income -- -- -- 4,350,451 4,350,451
Dividends ($.11 per share) -- -- -- (569,004) (569,004)
Balance, December 31, 1994 5,315,797 3,611,275 1,620,300 21,141,558 26,373,133
Stock split -- 3,611,275 (1,620,300) (1,990,975) --
Net income -- -- -- 1,106,989 1,106,989
Dividends ($.11 per share) -- -- -- (577,804) (577,804)
Balance, December 31, 1995 5,315,797 7,222,550 -- 19,679,768 26,902,318
Net income -- -- -- 5,818,379 5,818,379
Dividends ($.11 per share) -- -- -- (577,804) (577,804)
Balance, December 31, 1996 5,315,797 $7,222,550 $ -- $24,920,343 $32,142,893
</TABLE>

See notes to financial statements.

F-5

<PAGE>
PLUMA, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,818,379 $ 1,106,989 $ 4,350,451
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for depreciation and amortization 3,804,481 3,439,559 2,885,179
Other, net (105,154) 13,260 70,406
Increase in accounts receivable (606,032) (499,523) (5,629,265)
(Increase) decrease in income taxes receivable 1,057,783 (1,057,783) 436,752
(Increase) decrease in deferred income taxes 908,680 (1,370,488) 705,008
Increase in inventories (1,856,648) (14,046,154) (523,378)
Increase (decrease) in accounts payable 1,627,989 (1,577,237) 1,595,554
Increase in accrued expenses 943,100 1,435,387 107,071
Increase (decrease) in note payable -- related party sales agency (1,999,000) 1,999,000 --
Net cash provided by (used in) operating activities 9,593,578 (10,556,990) 3,997,778
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (3,398,804) (5,855,714) (4,494,511)
Other, net (221,175) (17,342) (48,418)
Net cash used in investing activities (3,619,979) (5,873,056) (4,542,929)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- -- 1,926,223
Repayments of long-term debt (849,640) (14,102,575) (1,997,132)
Borrowings from note payable -- Bank 20,000,000 5,000,000 4,418,133
Repayments of note payable -- Bank (20,000,000) (5,000,000) (4,418,133)
Net borrowings from (repayments of) revolving loan (4,851,096) 31,557,000 (371,000)
Payment of dividends (577,804) (577,804) (569,004)
Proceeds from sale of common stock -- -- 1,730,300
Repurchase of common stock -- -- (849,640)
Net cash provided by (used in) financing activities (6,278,540) 16,876,621 (130,253)
Net increase (decrease) in cash (304,941) 446,575 (675,404)
Cash, beginning of period 596,429 149,854 825,258
Cash, end of period $ 291,488 $ 596,429 $ 149,854
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,860,064 $ 2,538,550 $ 2,556,134
Income taxes $ 1,430,000 $ 3,212,641 $ 1,327,000
Noncash financing activities -- A subordinated promissory note was issued in exchange for common stock of $3,398,561 during
1994 (notes 5 and 7).
</TABLE>

See notes to financial statements.

F-6

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION

Pluma, Inc. (the "Company") is a vertically integrated manufacturer of high
quality fleece and jersey activewear. The Company is focused on increasing sales
and profitability by offering high value products to a diverse customer base.
The Company sells its products, either directly or through its distributors, to
a number of highly recognized companies such as adidas, Nike, Starter Galt and
Walt Disney. In addition, it sells products under its own "Pluma," "SANTEE" and
"SNOWBANK" brand names to retail and wholesale customers such as Sam's Club and
Frank L. Robinson Company. The Company operates in a single business segment.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTS RECEIVABLE -- Accounts receivable is reduced by an allowance to the
amount expected to be collected with a charge against net income. Specific
accounts that are considered to be uncollectible are written off by reducing
accounts receivable and the allowance.

INVENTORIES -- Beginning in 1996, raw materials, work-in-progress and finished
goods inventories are valued at the lower of cost, as determined by the last-in,
first-out ("LIFO") method, or market. Production supplies are valued at the
lower of cost, as determined by the first-in, first-out ("FIFO") method, or
market. Prior to 1996, all inventories were valued at the lower of cost, as
determined by the FIFO method, or market. Inventory cost includes material and
conversion costs.

PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated at cost
and is depreciated using the straight-line method for financial reporting
purposes and accelerated method for income tax purposes. Maintenance and repairs
are charged to income and betterments are capitalized.

The average estimated useful lives of property for purposes of computing
depreciation are:

<TABLE>
<S> <C>
Land improvements 15 years
Buildings and improvements 39 years
Machinery and equipment 10 years
</TABLE>

SELF-INSURANCE RESERVES -- Self-insurance reserves represent the estimated
liability on medical and workers' compensation claims reported to the Company
plus reserves for claims incurred but not yet reported and the estimated
settlement expenses related to these claims. The liabilities for claims and
related settlement expenses are determined using "case basis" evaluations and
statistical analysis and represent estimates of the ultimate net cost of all
losses incurred through the balance sheet date. The Company's policy is to
discount its workers' compensation reserves at a discount rate not to exceed a
risk-free rate of return on U.S. government securities of similar duration as
the reserves being discounted. Although considerable variability is inherent in
such estimates, management believes that the liabilities for unpaid claims and
related settlement expenses are adequate. The estimates are continually reviewed
by management and, as adjustments to these liabilities become necessary, such
adjustments are reflected in current operations. Self-insurance reserves are
included in accrued expenses.

INCOME TAXES -- Income taxes are provided on pre-tax earnings as reported in the
financial statements. Deferred income taxes result from temporary differences
between the amounts of assets and liabilities for financial reporting purposes
and such amounts as measured for income tax purposes.

STOCK OPTIONS -- In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 is
effective for transactions entered into in fiscal years that begin after
December 15, 1995. This statement adopts a "fair value based method" of
accounting for employee stock option plans or similar stock-based compensation
plans. Under the fair value based method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service or vesting period. The statement does allow entities to continue to
measure compensation using the "intrinsic value based method" of APB No. 25
provided that they make pro forma disclosures on net income and earnings per
common share as if the fair value based method of accounting had been applied.
The Company has elected to continue to follow APB No. 25 (note 8).

F-7

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

TREASURY STOCK -- Under the state laws of North Carolina, shares of stock
repurchased by the Company are considered authorized but unissued shares, and
are reflected as such in the financial statements.

EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT -- Primary earnings per common
share and common equivalent amounts are based on the weighted average number of
shares actually outstanding plus shares that would be outstanding assuming
exercise of dilutive stock options, all of which are considered to be common
stock equivalents. The number of shares that would be issued from the exercise
of stock options has been reduced by the number of shares that could have been
purchased from the proceeds at the average market price of the Company's stock.
The number of shares used in the computations were 5,315,797 for 1996, 5,315,797
for 1995 and 5,244,060 for 1994. The effect of fully diluting earnings per share
amounts is not material.

REVENUE RECOGNITION -- The Company recognizes the sale of goods when the goods
are shipped or ownership is assumed by the customer. Sales are recognized net of
estimated returns and allowances.

CAPITALIZED SOFTWARE COSTS -- The Company capitalizes certain computer software
costs which are amortized utilizing the straight-line method over the economic
lives of the related products not to exceed five years.

ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from these estimates.
For the year ended December 31, 1995, the statement of operations includes a
provision for doubtful accounts receivable which totals $3,250,071 principally
related to 20/20 Sport, a customer that filed for bankruptcy protection. The
Company wrote-off this account in 1996.

RECLASSIFICATIONS -- Certain 1995 and 1994 amounts have been reclassified to
conform with 1996 presentation.

NEW ACCOUNTING STANDARD -- In 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", which requires that long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and to
long-lived assets and certain identifiable intangibles to be disposed of, be
reported at the lower of carrying amount or fair value less cost to sell. An
entity shall review long-lived assets and certain identifiable intangibles to be
held and used for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss recognized in accordance with this standard shall be measured as
the amount by which the carrying amount of the asset exceeds the fair value of
the asset. Since adoption, no material impairment losses have been recognized.

(3) INVENTORIES

Inventories at December 31, 1996 and 1995 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
At FIFO cost:
Raw materials $ 1,279,512 $ 695,225
Work-in-progress 3,297,522 2,641,316
Finished goods 30,037,951 28,718,963
Production supplies 608,824 725,911
35,223,809 32,781,415
Excess of FIFO over LIFO cost (83,930) --
35,139,879 32,781,415
Excess of cost over market (1,113,984) (612,168)
Total $34,025,895 $32,169,247
</TABLE>

During 1996, the Company changed its method of determining the cost of
inventories, except production supplies, from the FIFO method to the LIFO
method. The Company believes the LIFO method more closely relates current costs
with current sales

F-8

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

in periods of rising prices. The effect of the change was to decrease net income
for 1996 by $53,212 ($0.01 per share). The change had no effect on prior years
because inventories under the FIFO method at December 31, 1995, as previously
reported, were the amount of the beginning 1996 inventories under the LIFO
method. Accordingly, pro forma results for prior years under the LIFO method are
not applicable.

If the cost of all inventories had been determined by the FIFO method, which
approximates current cost, the cost of inventories would have been $83,930
greater at December 31, 1996.

(4) ACCRUED EXPENSES

Accrued expenses at December 31, 1996 and 1995 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
Salaries, commissions and bonuses $ 1,042,786 $ 663,672
Interest 758,239 882,835
Insurance 1,369,549 738,172
Other 250,607 193,402
Total $ 3,421,181 $ 2,478,081
</TABLE>

(5) LONG-TERM DEBT

Long-term debt at December 31, 1996 and 1995 consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
Revolving loan $ 43,569,904 $ 48,421,000
Subordinated debt 1,699,280 2,548,920
Total 45,269,184 50,969,920
Less current maturities 849,640 849,640
Long-term debt $ 44,419,544 $ 50,120,280
</TABLE>

On May 25, 1995, the Company renegotiated the revolving loan in its entirety.
All term loans and the prior revolving loan were consolidated into one revolving
loan (the "Loan Agreement") with a maximum borrowing limit of $55,000,000. The
revolving line of credit is subject to defined borrowings based on eligible
assets as defined in the Loan Agreement. Interest is computed daily and payable
quarterly at the lowest borrower selected rate of (a) prime rate minus 25 basis
points, (b) certificates of deposit contract rate or (c) monthly LIBOR contract
rate. The selected rate of interest is determined monthly and is subject to
defined adjustments pursuant to the interest coverage ratio. At December 31,
1996 and 1995, the interest rate was 6.86% and 7.04%, respectively. A fee is
payable quarterly based on the product of the unused commitment margin times the
difference between the committed amount during the prior quarter and the average
daily balance of the loans outstanding during such quarter.

Among the various provisions, limitations and restrictions contained in the Loan
Agreement, the Company must meet specified tangible net worth, debt to equity
ratio and interest coverage ratio requirements. Under the Loan Agreement, the
Company is restricted in the amount of its capital expenditures, indebtedness to
certain other parties, or redemption of its stock that would create an event of
default. In the event of default, unless a waiver is obtained, the Company is
prohibited from paying dividends. The Loan Agreement may be terminated at any
time upon the occurrence of an event of default. The Company retains the right
to remedy certain events of default within 10 days after notice. The Company was
in compliance with all covenants as of December 31, 1996. The Company was in
violation of the indebtedness and capital leases, transactions with related
persons,

F-9

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

capital expenditures, liabilities to equity ratio, and interest coverage ratio
covenants and obtained waivers for these violations as of December 31, 1995. The
Company was in compliance with all other covenants.

Long-term debt is collateralized by substantially all accounts receivable,
inventories and property.

The Company issued a promissory note dated January 28, 1994 to a former
officer/shareholder in connection with the repurchase of his stock (see note 7).
This note matures on January 31, 1998 and requires annual payments of $849,640.
Interest on the unpaid principal balance is paid quarterly at an annual rate of
5.0%, since May 1, 1994. The promissory note is subordinated to the Loan
Agreement. The Company's obligations under the promissory note are secured by
the shares repurchased from the former officer/shareholder. In the event the
Company is in default under the terms of the promissory note, the former
officer/shareholder will be entitled to have the Company's Common Stock
re-issued to him. The number of shares to be re-issued in the event of default
will be determined by dividing the amount due under the note at the time of such
default by the fair value of the Company's Common Stock shares at such time.

Future aggregate annual payments on long-term debt are $849,640, $849,640, and
$43,569,904 for 1997, 1998 and 2000, respectively.

(6) NOTE PAYABLE -- BANK

On April 16, 1996, the Company borrowed $10,000,000 at the rate of monthly LIBOR
plus 150 basis points. During September 1996, the Company repaid the April 1996
note and borrowed $10,000,000 bearing interest at the rate of monthly LIBOR plus
120 basis points. The principal was repaid during November 1996 (note 17).

(7) CAPITAL STOCK

On January 28, 1997, the Board of Directors declared a 0.736-for-one reverse
common stock split for shareholders of record on February 3, 1997. On June 27,
1995, the Board of Directors declared a two-for-one common stock split for
shareholders of record on October 1, 1995. The shares were issued on November
27, 1995. All references in the accompanying financial statements to the number
of common shares and per share amounts reflect the stock split and reverse stock
split.

On July 22, 1996, the Company amended its Articles of Incorporation changing the
par value of Common Stock from $1.00 per share to Common Stock having no par
value and authorizing 1,000,000 shares of no par value Preferred Stock.

In December of 1995, the shareholders of the Company adopted an amendment to the
Articles of Incorporation to increase the Company's authorized shares of Common
Stock from 8,000,000 to 15,000,000, which was effective January 10, 1996.

During the years ended December 31, 1996, 1995 and 1994, the Company held stock
exchanges under the terms of its Stock Transfer and Redemption Agreement adopted
by the Company on June 10, 1991. Numerous transactions among authorized parties
(as defined in the agreement) took place under these exchanges. The Company did
not repurchase shares during 1996, 1995 and 1994 under the Stock Transfer and
Redemption Agreement.

On January 28, 1994, the Company repurchased 397,543 shares of Common Stock
owned by a former officer/shareholder at $10.686 per share. Approximately twenty
percent of the purchase price, or $849,640, was paid in cash with the balance to
be paid under terms of a promissory note (note 5).

During the year ended December 31, 1994, the Company conducted a private
placement of Common Stock. The Company received $1,730,300 (161,920 shares
issued at $10.686 per share) as a result of the stock offering.

(8) STOCK OPTIONS

In October 1995, the Company adopted the 1995 Stock Option Plan in which
515,200 shares of the Company's Common Stock may be issued. The exercise price
of the options may not be less than the fair value of the Common Stock on the
date of grant. The options granted become exercisable at such time or times as
shall be determined by the Compensation Committee of the Board of Directors
(the "Committee"). The Committee may at any time accelerate the exercisability
of all or any portion of any stock option. These options expire, if not
exercised, ten years from the date of grant. Participants in

F-10

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

the Plan may be independent contractors or employees of independent
contractors, full or part-time officers and other employees of the Company, or
independent directors of the Company.

In October 1995 and April 1996, the Company granted 379,776 and 32,384 options,
respectively, to purchase Common Stock at an exercise price of $13.077 per
share of which 117,171 and 58,880 options are exercisable as of December 31,
1996 and 1995, respectively. 29,440 options were forfeited as of December 31,
1995. The remaining 265,549 options become exercisable in 20% increments on the
anniversary dates of the grants as follows:

<TABLE>
<CAPTION>
YEAR SHARES
<S> <C>
1997 64,768
1998 64,768
1999 64,768
2000 64,768
2001 6,477
Total 265,549
</TABLE>

The Company applies APB No. 25 and related interpretations in accounting for
the 1995 Stock Option Plan. Accordingly, no compensation cost has been
recognized since the exercise price approximates the fair value of the stock
price at the grant dates. Had compensation cost been determined based on the
fair value at the grant dates consistent with the method of SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995
<S> <C> <C>
Net income:
As reported $ 5,818,379 $ 1,106,989
Pro forma 5,679,877 444,500
Earnings per share:
As reported $ 1.09 $ .21
Pro forma 1.07 .08
</TABLE>

A summary of the status of the Company's 1995 Stock Option Plan as of December
31, 1996 and 1995, and changes during the years ending on those dates is
presented below:

<TABLE>
<CAPTION>
WEIGHTED- AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Outstanding, January 1, 1995 -- --
Granted 379,776 $ 13.077
Forfeited (29,440) 13.077
Outstanding, December 31, 1995 350,336 13.077
Granted 32,384 13.077
Outstanding, December 31, 1996 382,720 13.077
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
Options exercisable at year end $ 117,171 $ 58,880

Weighted average fair value of options
granted during the year $ 6.60 $ 3.04
</TABLE>

F-11

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

At December 31, 1996, the outstanding options have a weighted average remaining
contractual life of 8.9 years. All outstanding options and exercisable options
have an exercise price of $13.077.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: dividend yield of
0.8% and 1.2%; expected volatility of 40.9% and 41.2%, risk-free interest rates
of 5.9% and 6.8%; and expected lives of 5 years for both years.

(9) INCOME TAXES

The provision for income tax expense for the years ended December 31, 1996,
1995 and 1994 consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Current federal income tax expense $2,178,903 $ 1,808,190 $1,658,236
Current state income tax expense 266,568 221,434 230,750
Total current income tax expense 2,445,471 2,029,624 1,888,986
Deferred federal income tax expense (benefit) 809,689 (1,202,587) 637,156
Deferred state income tax expense (benefit) 98,991 (167,901) 67,852
Total deferred income tax expense (benefit) 908,680 (1,370,488) 705,008
Total income tax expense $3,354,151 $ 659,136 $2,593,994
</TABLE>

The provision for income taxes differs from the amount computed by applying the
U.S. federal income tax rate (34%) because of the effect of the following items:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Income taxes computed at U.S. federal statutory rate $3,118,660 $600,482 $2,361,111
State income taxes, net of federal income tax effect 243,027 47,473 196,862
Other, net (7,536) 11,181 36,021
Total income tax expense $3,354,151 $659,136 $2,593,994
</TABLE>

F-12

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Deferred income taxes result from temporary differences between the tax basis
of assets and liabilities and their reported amounts in the financial
statements. Significant components comprising the Company's net deferred tax
assets and liabilities were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
<S> <C> <C>
Deferred tax liabilities:
Current -- Prepaid insurance $ (74,642) $ (54,287)
Long-term -- Property, plant and equipment (3,556,806) (3,435,020)
Total deferred tax liabilities (3,631,448) (3,489,307)
Deferred tax assets:
Current --
Bad debt reserve 196,951 1,328,963
Medical reserve 170,823 73,276
Uniform capitalization 634,729 699,121
Returns reserve 102,443 162,545
Workers' compensation reserve 220,585 86,811
LIFO market write-down 258,646 --
Total deferred tax assets 1,584,177 2,350,716
Net deferred tax liability $(2,047,271) $(1,138,591)
</TABLE>

(10) LEASES

At December 31, 1996, the Company was committed to pay rentals under various
noncancelable operating leases with lease terms in excess of one year as
follows:

<TABLE>
<S> <C>
Year ending December 31,
1997 $ 1,875,457
1998 1,390,164
1999 1,066,478
2000 1,006,990
2001 929,884
Thereafter 5,257,869
Total $11,526,842
</TABLE>

Lease agreements frequently include renewal options and require that the
Company pay for utilities, taxes, insurance and maintenance expenses. Options
to purchase are also included in some lease agreements.

Rental expense under all leases accounted for as operating leases was
$2,145,061, $1,730,932 and $1,414,971 for the years ended December 31, 1996,
1995 and 1994, respectively (see note 13).

(11) INSURANCE SETTLEMENT

On August 17, 1994, a tornado partially destroyed one of the Company's leased
warehouses and substantially damaged finished goods inventory. The inventory
loss was covered by insurance. Insurance and salvage proceeds were $1,763,431.
Most of the proceeds are reflected as a reduction of cost of goods sold
($1,450,698) to offset expense and inventory losses incurred as a result of the
storm. The proceeds in excess of inventory costs and miscellaneous expenses are
reflected in the financial statements as other income ($312,733).

F-13

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(12) COMMITMENTS AND CONTINGENCIES

The Company has Employment Agreements with its senior executive officers, the
terms of which expire December 1998. Upon termination of an Employment
Agreement after a change of control in the Company, as defined, the Company
would be liable for a maximum of three times the eligible employee's, as
defined, (i) average annual salary, as defined, and (ii) any bonuses, as
defined. In addition, under the Employment Agreements, the senior executive
officers are entitled to annual incentive bonus payments if specified
management goals are attained under Pluma's Bonus Plan.

The Company maintains a Sales Incentive Plan payable to the sales staff if
specified sales volume is reached.

Arising out of the conduct of its business, on occasion, various claims, suits
and complaints have been filed or are pending against the Company. In the
opinion of management, all matters are adequately covered by insurance or, if
not covered, are without merit or are of such kind, or involve such amounts, as
would not have a material effect on the financial position or results of
operations of the Company if disposed of unfavorably.

(13) RELATED PARTY TRANSACTIONS

During the years ended December 31, 1995 and 1994, sales commissions of
$3,327,307 and $3,181,467, respectively, at a rate of 3.0% of the aggregate
sales price of orders shipped by the Company, plus marketing reimbursements,
were paid to the Company's sales agency, a company owned by a certain
shareholder and director of the Company. At December 31, 1995, $152,418 was due
the sales agency. During December 1995, the Company entered into an agreement
for the termination of the sales contract with the sales agency. Under the
terms of this agreement, the Company paid the sales agency $1,000 on December
29, 1995 and $1,999,000 with a promissory note that was paid in full in January
1996. Since December 31, 1995, the Company has not paid commissions to the
sales agency for sales subsequent to December 31, 1995. Selling, general and
administrative expenses would have been $12,384,876 if the cost of terminating
the sales agreement were excluded for the year ended December 31, 1995. The
Company will be liable for any returns or uncollectible accounts resulting from
sales prior to December 31, 1995. The sales agency and the Company have
released and discharged each other from any and all past, present and future
actions.

The Company has various operating leases from certain shareholders. The leases
have terms of approximately one to 14 years with aggregate monthly payments of
$98,751, $65,254 and $63,150 in the years ended 1996, 1995 and 1994,
respectively. Total operating lease expense for 1996, 1995 and 1994 was
$1,144,193, $773,600, and $507,120, respectively. As of December 31, 1996,
future minimum lease payments under these operating leases totaled $8,603,330.

The Company leased sewing equipment and accessories from relatives of an
officer/director. Lease payments under these leases were $28,650 in 1994.
Equipment under these leases was purchased by the Company for $98,384 during
1994 after the leases expired.

A contractor performed miscellaneous work totaling $478,646, $31,032 and
$40,358 for the years ended December 31, 1996, 1995 and 1994, respectively.
Certain shareholders of the Company are affiliated with the contractor.

The president of one of the Company's major customers was re-elected to the
Board of Directors at the annual shareholders' meeting in April 1995. The
Company had sales in 1994 of $2,313,230 to this customer. These sales were
consummated on terms equivalent to those that prevail in arm's-length
transactions.

During 1996 and 1995, the Company made payments totaling $223,338 and $247,324,
respectively, for contract services rendered to the Company for packaging and
preparing Company products for shipment. A director/shareholder is affiliated
with this contractor.

During 1996, the Company contracted for fabric dyeing totaling $42,776 with a
contractor owned by a director of the Company. The Company had sales to this
contractor in 1996 of $80,005 and had a balance due of $67,096 at December 31,
1996.

During 1996, the Company made payments to a contractor totaling $121,395 for
advisory fees. A director/shareholder is affiliated with this contractor. At
December 31, 1996, $10,014 was due this contractor.

F-14

<PAGE>
PLUMA, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

(14) SALES TO MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

A substantial amount of sales and receivables are to relatively few customers.
Credit limits, ongoing credit evaluations and account monitoring procedures are
utilized to minimize the risk of loss. Collateral is generally not required.

In 1996, two customers accounted for approximately 24.1% and 14.7%,
respectively, of net sales. In 1995, three customers accounted for
approximately 16.1%, 12.8% and 11.4%, respectively, of net sales. In 1994,
three customers accounted for approximately 13.2%, 10.4% and 10.1%,
respectively, of net sales.

(15) 401(K) RETIREMENT SAVINGS PLAN

The Company maintains a 401(k) retirement savings plan for the benefit of its
employees who have completed at least one year of service and have attained age
21. The amount of the Company's annual matching contribution is discretionary,
and the Company currently funds accrued profit sharing expenses.

During 1996, 1995 and 1994, the Company contributed $161,461, $129,378 and
$121,279, respectively, to the 401(k) retirement savings plan.

(16) FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value. The carrying amount of cash, accounts receivable and trade accounts
payable is a reasonable estimate of fair value. The fair value of long-term
debt is estimated based on quoted market prices. At December 31, 1996, the
carrying value and the fair value of long-term debt totaled $45,269,184 and
$44,458,592, respectively. All financial instruments are held for purposes
other than trading.

(17) EVENTS SUBSEQUENT TO DECEMBER 31, 1996

On January 28, 1997, the Board of Directors declared a 0.736-for-one reverse
common stock split for shareholders of record on February 3, 1997 (note 7).

F-15

<PAGE>

(PLUMA LOGO)
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than underwriting
discounts and commissions incurred or to be incurred in connection with the
issuance and sale of the Common Stock being registered (all amounts are
estimated except the Securities and Exchange Commission registration fee, the
National Association of Securities Dealers, Inc. filing fee and Nasdaq National
Market listing fee).

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................................... $ 15,124
National Association of Securities Dealers, Inc. filing fee............................... 5,491
New York Stock Exchange listing fee....................................................... 57,500
Blue sky fees and expenses................................................................ 10,000
Printing expenses......................................................................... 100,000
Legal fees and expenses................................................................... 300,000
Accounting fees and expenses.............................................................. 300,000
Investment advisor's fee.................................................................. 60,000
Transfer agent and registrar fees......................................................... 11,500
Miscellaneous............................................................................. 385
Total............................................................................ $860,000
</TABLE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULE.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT

<C> <S>
1.1* Form of Underwriting Agreement

3.1* Amended and Restated Articles of Incorporation

3.2* Bylaws as amended

5.1* Opinion of Allman Spry Leggett & Crumpler, P. A.

10.1* Lease Agreement dated June 10, 1989, by and between North Bowles Partnership and Pluma, Inc. and amendment
thereto dated December 1, 1990

10.2.1* Lease Agreement dated February 1, 1996, by and between North Bowles Partnership and Pluma, Inc.

10.2.2* Lease Agreement dated December 1, 1995, by and between North Bowles Partnership and Pluma, Inc.

10.3* License Agreement dated December 4, 1990, by and between Superba, Inc. and Pluma, Inc.

10.4* Loan and Security Agreement dated May 25, 1995, between First Union National Bank of North Carolina and Pluma,
Inc.

10.5* Promissory Note in the principal amount of $55,000,000 dated May 25, 1995 by Pluma, Inc. in favor of First Union
National Bank of North Carolina

10.6* Promissory Note in the principal amount of $10,000,000 dated April 16, 1996 in favor of First Union National
Bank of North Carolina.

10.7* Trademark License Agreement dated July 2, 1996, by and between Pluma, Inc. and Kayser Roth Corporation

10.8.1* Agreement and Release dated September 16, 1993, by and between Glazier B. Piland and Pluma, Inc.

10.8.2* Stock Redemption Agreement dated September 16, 1993, between Pluma, Inc. and Glazier B. Piland

10.8.3* Amendment to Stock Redemption Agreement dated October 21, 1993, between Pluma, Inc. and Glazier B. Piland

10.8.4* Promissory Note in the principal amount of $3,398,560.88 dated January 28, 1994 by Pluma, Inc. to Glazier B.
Piland

10.8.5* Security Agreement dated January 28, 1994, by and between Pluma, Inc. and Glazier B. Piland
</TABLE>

II-1

<PAGE>

<TABLE>
<C> <S>
10.8.6* Subordination Agreement by and among Glazier B. Piland, First Union National Bank and Pluma, Inc. dated January
28, 1994.

10.9.1* Agreement of Termination and Release dated December 29, 1995, by and between Box & Company, Inc. and Pluma, Inc.

10.9.2* Promissory Note in the principal amount of $1,999,000.00 dated December 29, 1995 by Pluma, Inc. to Box &
Company, Inc.

10.9.3* Assignment of Lease dated as of December 29, 1995 by and between Box & Company, Inc. and Pluma, Inc.

10.10* Lease Agreement dated April 1, 1995, by and between Tultex Corporation and Box & Company, Inc.

10.11* Adoption Agreement #005 Nonstandardized Code (section mark)401(k) Profit Sharing Plan by Pluma, Inc. to First
Union National Bank of North Carolina dated November 30, 1993 and Amendments thereto

10.12* 1995 Stock Option Plan of Pluma, Inc.

10.13* Form of Incentive Stock Option Agreement by and among Pluma, Inc. and the Named Officers

10.14* Form of Nonstatutory Stock Option Agreement by and among Pluma, Inc. and its Directors

10.15* Pluma, Inc. Non-Qualified Deferred Compensation Plan

10.16* Pluma, Inc. Senior Executive Bonus Plan

10.17* Pluma, Inc. Sales Incentive Plan

10.18.1* License Agreement dated October 9, 1996 between SAP America, Inc. and Pluma, Inc. for license to utilize SAP R/3
Software

10.18.2* Professional Services Agreement dated October 9, 1996 between SAP America, Inc and Pluma, Inc. for installation
of R/3 Software

10.19.1* Consulting Agreement dated January 17, 1996, between Philpott, Ball & Company and Pluma, Inc.

10.19.2* Consulting Agreement dated December 6, 1996 between Philpott, Ball & Company and Pluma, Inc.

10.20* Form of Sale and Purchase Agreement dated May 10,1995, by and between Sara Lee Corporation and Pluma, Inc. for
approximately 42 acres of improved real estate located in Rocky Mount, Virginia

10.21* Form of Employment Agreement by and among Pluma, Inc. and R. Duke Ferrell Jr., G. Walker Box, George G. Wade, C.
Monroe Light, David S. Green, Walter Helton, Raymond Rea, Nancy Barksdale, Forrest H. Truitt, II, Milton A.
Barber and Jeffrey D. Cox

11.1** Statement re: Computation of Per Share Earnings

23.1 Consent of Deloitte & Touche LLP.

23.2* Consent of Allman Spry Leggett & Crumpler P.A. (to be included in the opinion filed herewith as Exhibit 5).

24* Power of Attorney included as the signature page hereto
</TABLE>

* Previously filed

** Can be clearly determined from the material contained in the Registration
Statement

(b)Financial Statements

Financial Statements filed as part of this Registration Statement are listed
in the Index to Financial Statements as page F-1.

II-2

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Winston-Salem, State of North Carolina, on February 12, 1997.

PLUMA, INC.

By: /s/ R. DUKE FERRELL, JR.
R. DUKE FERRELL, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>

GEORGE G. WADE * Chairman Emeritus of the Board of Directors February 12, 1997
GEORGE G. WADE

G. WALKER BOX * Chairman of the Board of Directors February 12, 1997
G. WALKER BOX

/s/ R. DUKE FERRELL, JR. President, Chief Executive Officer and February 12, 1997
R. DUKE FERRELL, JR. Director

C. MONROE LIGHT * Executive Vice President and Director February 12, 1997
C. MONROE LIGHT

FORREST H. TRUITT, II * Executive Vice President of Finance February 12, 1997
FORREST H. TRUITT, II (Principal Financial Officer)

NANCY B. BARKSDALE * Vice President (Principal Accounting Officer) February 12, 1997
NANCY B. BARKSDALE

WILLIAM K. MILESKI * Director February 12, 1997
WILLIAM K. MILESKI

BARRY A. BOWLES * Director February 12, 1997
BARRY A. BOWLES

KEMP D. BOX * Director February 12, 1997
KEMP D. BOX

R. STEPHENS PANNILL * Director February 12, 1997
R. STEPHENS PANNILL
</TABLE>

II-3

<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
DR. DAVID C. JONES * Director February 12, 1997
DR. DAVID C. JONES

J. ROBERT PHILPOTT, JR. * Director February 12, 1997
J. ROBERT PHILPOTT, JR.

* By: /s/ R. DUKE FERRELL, JR. Attorney in Fact
R. DUKE FERRELL, JR.
ATTORNEY IN FACT
</TABLE>

II-4

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE

<C> <S> <C>
1.1* Form of Underwriting Agreement

3.1* Amended and Restated Articles of Incorporation

3.2* Bylaws as amended

5.1* Opinion of Allman Spry Leggett & Crumpler, P. A.

10.1* Lease Agreement dated June 10, 1989, by and between North Bowles
Partnership and Pluma, Inc. and amendment thereto dated December 1, 1990

10.2.1* Lease Agreement dated February 1, 1996, by and between North Bowles
Partnership and Pluma, Inc.

10.2.2* Lease Agreement dated December 1, 1995, by and between North Bowles
Partnership and Pluma, Inc.

10.3* License Agreement dated December 4, 1990, by and between Superba, Inc. and
Pluma, Inc.

10.4* Loan and Security Agreement dated May 25, 1995, between First Union
National Bank of North Carolina and Pluma, Inc.

10.5* Promissory Note in the principal amount of $55,000,000 dated May 25, 1995
by Pluma, Inc. in favor of First Union National Bank of North Carolina

10.6* Promissory Note in the principal amount of $10,000,000 dated April 16, 1996
in favor of First Union National Bank of North Carolina.

10.7* Trademark License Agreement dated July 2, 1996, by and between Pluma, Inc.
and Kayser Roth Corporation

10.8.1* Agreement and Release dated September 16, 1993, by and between Glazier B.
Piland and Pluma, Inc.

10.8.2* Stock Redemption Agreement dated September 16, 1993, between Pluma, Inc.
and Glazier B. Piland

10.8.3* Amendment to Stock Redemption Agreement dated October 21, 1993, between
Pluma, Inc. and Glazier B. Piland

10.8.4* Promissory Note in the principal amount of $3,398,560.88 dated January 28,
1994 by Pluma, Inc. to Glazier B. Piland

10.8.5* Security Agreement dated January 28, 1994, by and between Pluma, Inc. and
Glazier B. Piland

10.8.6* Subordination Agreement by and among Glazier B. Piland, First Union
National Bank and Pluma, Inc. dated January 28, 1994.

10.9.1* Agreement of Termination and Release dated December 29, 1995, by and
between Box & Company, Inc. and Pluma, Inc.

10.9.2* Promissory Note in the principal amount of $1,999,000.00 dated December 29,
1995 by Pluma, Inc. to Box & Company, Inc.

10.9.3* Assignment of Lease dated as of December 29, 1995 by and between Box &
Company, Inc. and Pluma, Inc.

10.10* Lease Agreement dated April 1, 1995, by and between Tultex Corporation and
Box & Company, Inc.

10.11* Adoption Agreement #005 Nonstandardized Code(section mark)401(k) Profit
Sharing Plan by Pluma, Inc. to First Union National Bank of North Carolina
dated November 30, 1993 and Amendments thereto

10.12* 1995 Stock Option Plan of Pluma, Inc.

10.13* Form of Incentive Stock Option Agreement by and among Pluma, Inc. and the
Named Officers
</TABLE>

<PAGE>

<TABLE>
<C> <S> <C>
10.14* Form of Nonstatutory Stock Option Agreement by and among Pluma, Inc. and
its Directors

10.15* Pluma Inc. Non-Qualified Deferred Compensation Plan

10.16* Pluma, Inc. Senior Executive Bonus Plan

10.17* Pluma, Inc. Sales Incentive Plan

10.18.1* License Agreement dated October 9, 1996 between SAP America, Inc. and
Pluma, Inc. for license to utilize SAP R/3 Software

10.18.2* Professional Services Agreement dated October 9, 1996 between SAP America,
Inc and Pluma, Inc. for installation of R/3 Software

10.19.1* Consulting Agreement dated January 17, 1996, between Philpott Ball &
Company and Pluma, Inc.

10.19.2* Consulting Agreement dated December 6, 1996 between Philpott, Ball &
Company and Pluma, Inc.

10.20* Form of Sale and Purchase Agreement dated May 10,1995, by and between Sara
Lee Corporation and Pluma, Inc. for approximately 42 acres of improved real
estate located in Rocky Mount, Virginia

10.21* Form of Employment Agreement by and among Pluma, Inc. and R. Duke Ferrell,
G. Walker Box, George G. Wade, C. Monroe Light, David S. Green, Walter
Helton, Raymond Rea, Nancy Barksdale, Forrest H. Truitt, II; Milton A. Gus
Barber and Jeffrey D. Cox

11.1** Statement re: Computation of Per Share Earnings

23.1 Consent of Deloitte & Touche LLP

23.2* Consent of Allman Spry Leggett & Crumpler P.A. (to be included in the
opinion filed herewith as Exhibit 5)

24* Power of Attorney included as the signature page hereto
</TABLE>

* Previously Filed

** Can be clearly determined from the material contained in the Registration
Statement

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 2 to Registration Statement No.
333-18755 of Pluma, Inc. of our report dated January 28, 1997 appearing in the
Prospectus, which is a part of such Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP
Winston-Salem, North Carolina

February 12, 1997