UNITED STATES
                                        SECURITIES AND EXCHANGE COMMISSION
                                              Washington, D.C. 20549

                                                     FORM 10-K

         [X] ANNUAL REPORT PURSUANT TO SECTION 13  OR  15(d) OF  THE  SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended    September 30, 1997

         [  ]  TRANSACTION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF THE
         SECURITIES  EXCHANGE ACT OF 1934

For the transition period from ___________________ to ________________________

                                          Commission File Number 0-21548

                                             SYNTHETIC INDUSTRIES L.P.
-------------------------------------------------------------------------------
                         (Exact name of Registrant as specified in its charter)

           Delaware                                                 13-3397585
-------------------------------- --------------------------- ------------------
(State or other jurisdiction

(I.R.S. Employer
 of incorporation or organization)

Identification No.)

         309 LaFayette Road, Chickamauga, Georgia                 30707
-------------------- ---------------------------------------------------------
            (Address of principal executive offices)           (Zip Code)

                                                   (706) 375-3121
-------------------------------------------------------------------------------
                           (Registrant's telephone number, including area code)

               Securities  registered  pursuant to Section 12(b) of the Act:

                                                Name of each exchange on which
                           Title of class                  registered
                              None

               Securities  registered  pursuant to Section 12(g) of the Act:

                                       Units of Limited Partnership Interest
                                                 (Title of Class)

         Indicate  by check mark  whether  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                                              Yes   X   No ____

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         The units are not publicly traded. Hence, the aggregate market value is
not determinable.

         The number of units outstanding as of December 8, 1997 was 800.

                        DOCUMENTS INCORPORATED BY REFERENCE

         Portions  of the annual  report on Form 10-K for the fiscal  year ended
September 30, 1997 of Synthetic Industries,  Inc., a Delaware  corporation,  are
incorporated by reference herein.
<PAGE>


PART I


ITEM 1.  BUSINESS


General

         Synthetic  Industries L.P. (the "Partnership") is a limited partnership
organized  under  the laws of the  state of  Delaware.  In  December  1986,  the
Partnership  acquired all of the issued and outstanding shares (the "Shares") of
the capital stock of Synthetic  Industries,  Inc., a Delaware  corporation  (the
"Company").  The Partnership  currently owns  approximately 67% of the Company's
common  stock,  par value  $1.00 per share (the  "Common  Stock").  The  Company
manufactures  and markets a wide range of  polypropylene-based  fabric and fiber
products designed for industrial  applications.  The information set forth under
the heading "Business" in the Form 10-K of the Company for the fiscal year ended
September 30, 1997 (the "Form 10-K") is incorporated herein by reference.

         Since its  organization  in 1986,  the  Partnership  has  conducted  no
business  except (i) engaging in the  transactions  described in a  confidential
offering  memorandum  dated January 16, 1987, as  supplemented,  relating to the
offering and sale of units of limited  partnership  interest in the  Partnership
(the  "Units");  and (ii)  owning  and  voting  the  Shares.  The  Partnership's
principal  executive  offices are located at 309  LaFayette  Road,  Chickamauga,
Georgia 30707, and its telephone number is (706) 375-3121.

     The sole  general  partner of the  Partnership  is SI  Management  L.P.,  a
Delaware limited partnership  ("Management L.P." or the "General Partner").  The
sole general partner of Management L.P. is Synthetic Management G.P. ("Synthetic
G.P.").  Synthetic  G.P. is a Georgia  general  partnership  whose  partners are
controlled by certain members of the Company's senior management. See "Directors
and  Executive  Officers - Partners of  Synthetic  G.P." Since their  respective
dates of the formation,  neither  Synthetic G.P. nor Management L.P. has engaged
in any business,  other than  Synthetic  G.P.  acting as the general  partner of
Management  L.P. and Management  L.P. acting as the general partner of Synthetic
L.P.


ITEM 2.  PROPERTIES

         The Partnership does not own or lease any physical properties.

         The  information  set forth under the heading  "Properties" in the Form
10-K is incorporated herein by reference.


ITEM 3.  CLAIMS AND LEGAL PROCEEDINGS

       In connection with the proposed dissolution of the Partnership,  pursuant
to an  Agreement  and Plan of  Withdrawal  and  Dissolution  (the  "Plan"),  the
Partnership,  the General  Partner,  one director  and certain of the  Company's
officers  who are  affiliated  with the General  Partner  have been named in two
putative  class  action  lawsuits  filed  by  certain  limited  partners  of the
Partnership.  In the first action, to which the Company is not a party, filed on
February 11, 1997 in the Delaware Court of Chancery and thereafter amended,  the
plaintiffs have alleged, among other things, breach of the defendants' fiduciary
duty to the limited  partners,  that the Plan is unlawfully  coercive,  that the
General Partner has allegedly failed to satisfy certain conditions  precedent to

<PAGE>

the right of  limited  partners  to amend  the  partnership  agreement  and that
certain  amendments  necessary  to  implement  the Plan violate the terms of the
partnership  agreement.  The plaintiffs  seek,  among other  equitable and legal
remedies,  removal  of the  General  Partner,  dissolution  of the  Partnership,
appointment of a liquidating  trustee, to enjoin  implementation of the Plan and
compensatory  damages in an undetermined  amount. On October 23, 1997, the Court
preliminarily  enjoined the  implementation  of the Plan,  although the Plan was
subsequently  approved by limited  partners on November 7, 1997.  On November 7,
1997,  the  Delaware  Supreme  Court  accepted the  defendants'  petition for an
expedited appeal of this  injunction,  and oral argument on the appeal was heard
on December 2, 1997. The defendants have denied the allegations of the plaintiff
and are vigorously contesting the lawsuit.

    The second  lawsuit  was filed in the U.S.  District  Court of the  Northern
District of California on May 1, 1997, and thereafter amended. The plaintiff has
alleged in his amended complaint various federal securities and proxy violations
allegedly  arising  out of the joint proxy  statement  and  prospectus  that was
mailed to limited  partners in connection  with the  solicitation of proxies for
the vote on the Plan and other related  documents.  The plaintiff also added the
Company as a named  defendant,  alleging  that all  defendants  acted in concert
with,  and as agents of, each other;  however,  the  plaintiff  made no specific
independent  allegations with respect to the Company. The plaintiff seeks, among
other equitable and legal remedies, to enjoin the implementation of the Plan and
unspecified  damages.  On  November  6,  1997,  the  Court  granted  in part the
plaintiff's   motion  for  a   temporary   restraining   order   enjoining   the
implementation of the Plan. The plaintiff's motion for a preliminary  injunction
has been  briefed and an oral  argument  was heard on  December  19,  1997.  The
defendants  have denied the  allegations  of the  plaintiff  and are  vigorously
contesting the lawsuit.

    The  Partnership  is a  principal  stockholder  of the  Company  and certain
members of the Company's  management  control the General Partner.  See "Certain
Relationships  and Related  Transactions."  Based on the Company's review of the
allegations  made in the above action to date, the Company does not believe that
the ultimate  resolution of either action will have a material adverse effect on
the Company's results of operations or financial condition.

The Company and its subsidiaries are parties to litigation  arising out of their
business  operations.  Most of such  litigation  involves  claims  for  personal
injury,  property  damage,  breach of  contract  and claims  involving  employee
relations  and certain  administrative  proceedings.  The Company  believes such
claims are adequately  covered by insurance or do not involve a risk of material
loss to the Company.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


On November 1, 1997, a special meeting of the limited  partners was held to vote
upon the approval of a proposed  dissolution of the  Partnership  pursuant to an
Agreement and Plan of Dissolution (the "Plan"). Out of 800 limited partner units
outstanding,  565.75 units, or 70.72% voted in favor of the Plan,  108.25 units,
or 13.53% voted against the Plan, and 4.875 units, or 0.61%, abstained.


<PAGE>


                                                      PART II



ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
           AND RELATED STOCKHOLDER MATTERS

    There is no  established  trading  market for the Units.  In  addition,  the
limited  partnership  agreement of the  Partnership  (the  "Limited  Partnership
Agreement") places  restrictions on the  transferability of Units. No transferee
of all or any part of a Unit may be  admitted  to the  Partnership  as a limited
partner  ("Limited  Partner")  without the written  consent of Management  L.P.,
which consent may be withheld in the absolute  discretion of Management L.P. The
Limited  Partnership  Agreement  also provides that the transfer of the whole or
any  portion  of a Unit shall not be  effective  to entitle  the  transferee  to
receive distributions of cash or other property from the Partnership  applicable
to the Unit acquired by reason of such transfer, unless Management L.P. consents
in writing to such transfer.

    The Partnership has made no distributions of any kind since its organization
in 1986.  The Company is currently  restricted  under a loan  agreement with its
senior lenders and an indenture  relating to the Company's  senior  subordinated
notes due 2007 from paying cash  dividends,  or making  certain  type of capital
distributions.


ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data presented below for, and as of the
end of, each of the fiscal  years in the five year period  ended  September  30,
1997 have been derived from the audited  consolidated  financial  statements  of
Synthetic Industries L.P. The consolidated  financial statements as of September
30, 1997 and 1996 and for the three-year period ended September 30, 1997 and the
independent  auditors'  report thereon are included in Item 8 of this Form 10-K.
Dollars are in thousands, except limited partnership units outstanding.
<TABLE>
<CAPTION>

                                                           Year Ended September 30,
                                      1997           1996           1995           1994          1993
                                    ------         ------         ------          -----        ------
<S>                                  <C>           <C>            <C>           <C>           <C>  
Summary of Operations Data:
Net sales                            $345,572      $299,532       $271,427      $234,977       $210,516
Gross profit                          112,385        91,211         76,721        82,672         68,335
Operating income                       50,291        37,813         28,687        41,007         29,921
Income from continuing operations
  before provision for income taxes,
  minority interest in subsidiary net income
  and extraordinary item               29,552        14,341          5,436        20,257          8,134
Income from continuing operations
  before minority interest in subsidiary net
  income and extraordinary item        17,011         7,441          1,936        11,657          3,662
Income from continuing operations
  attributable to limited partners      3,165         7,367          1,917        11,540          3,625
Income  from discontinued operations        -             -              -            -           1,420
Extraordinary item - loss from early
  extinguishment of debt             (11,950)             -              -             -         (8,892)
Cumulative effect of accounting change      -             -              -             -         (8,500)
Net income (loss)                       3,197         7,441          1,936        11,657        (12,310)

Income from continuing operations
per limited partnership unit            $3.96         $9.21           $2.40        $14.43         $4.53
Limited partnership units outstanding     800           800            800           800            800





                                                              As of September 30,
                                       1997            1996           1995          1994           1993
                                      -----          ------         ------        ------         ------

Balance Sheet Data:
Working capital                       $88,032       $63,418        $69,041       $44,116        $42,057
Total assets                          394,795       323,756        312,302       287,935        260,374
Long-term debt                        220,464       194,353        192,048       172,490        164,723
Partners' Capital                      68,876        65,185         57,758        55,819         44,425
</TABLE>
<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

     As previously  discussed,  since its  organization  in 1986 and  subsequent
admission of Limited Partners,  the Partnership has conducted no business except
owning and voting the Shares. As a result of its public offering of Common Stock
in November  1996,  the Company  currently has 8,656,250  shares of Common Stock
outstanding,  of which  approximately  67% are owned by the Partnership.  As the
Partnership has no independent operations or assets other than its investment in
the Company, the Partnership's  financial statements are substantially identical
to those of the Company,  with the exception of the minority interest and $1,800
due the Company for  expenses  paid by the Company on behalf of the  Partnership
relating to the Plan.  As a result,  the  discussion  and  analysis of financial
condition and results of operations presented below relates to the operations of
the Company,  except as disclosed.  Accordingly,  all  references to fiscal year
refer to the Company's fiscal year which ends on September 30th.

     The  following  discussion  of  the  financial  condition  and  results  of
operations of the Company  should be read in  conjunction  with the  information
contained in the Consolidated Financial Statements, including the notes thereto.
The  following  discussion  includes  forward-looking  statements  that  involve
certain risks and uncertainties.  See "Forward-Looking  Statements." Dollars are
in thousands, except per share data.

Overview

     The Company's net sales in recent years have  increased due to a variety of
factors,  including  generally  increasing  sales volumes as a result of growing
demand  for the  Company's  products  and the  Company's  ability  to expand its
markets through development of new products.

     While the  Company's  sales have grown in each year,  the  Company's  gross
profit has fluctuated due to a variety of factors,  primarily related to changes
in the price of  polypropylene.  Polypropylene is the basic raw material used in
the manufacture of substantially all of the Company's products today, accounting
for  approximately 50% of the Company's cost of sales. The Company believes that
the selling  prices of many of its products  have  adjusted over time to reflect
changes in polypropylene prices.

     The price of  polypropylene  is determined by the supply and demand for the
product. Historically, the creation of additional capacity has helped to relieve
supply and pricing  pressures  although there can be no assurance that this will
continue to be the case. In fiscal 1997 supply  increased  faster than demand, a
trend that the Company  expects to continue  into fiscal  1998.  According  to a
September  1997  report by  Chemical  Data  Inc.,  a monthly  petrochemical  and
plastics analysis publication, annual polypropylene capacity in North America as
of December  31, 1996 was 12.6  billion  pounds per year,  up from 11.4  billion
pounds at December 31, 1995.  Total average annual  capacity is expected to rise
to 14.1 billion  pounds per year for calendar  1997,  and to 18.2 billion pounds
per year by the year 2000, a 10% compounded  growth rate. Demand is projected to
increase from 4% to 9% from current levels through the year 2000.

<PAGE>

     The following table sets forth the Partnership's  percentage  relationships
to net sales of certain statements of operations items:
<TABLE>
<CAPTION>
                                                                         Year Ended September 30,
                                                                1997               1996              1995

             <S>                                               <C>                <C>               <C>   
             Net sales.................................        100.0%             100.0%            100.0%
             Cost of sales.............................         67.5               69.5              71.7
                                                                ----               ----              ----
                Gross profit...........................         32.5               30.5              28.3
             Selling expenses..........................          9.2                9.2               9.0
             General and administrative
                     expenses..........................          8.0                7.8               7.8
             Amortization of intangibles...............          0.7                0.9               0.9
                                                                 ---                ---               ---
               Operating income........................         14.6               12.6              10.6
             Interest expense..........................          5.8                7.6               8.3
             Amortization of deferred
                      financing costs..................          0.2                0.2               0.3
                                                                 ---                ---               ---
               Income before provision for income
                   taxes, minority interest in subsidiary
                       net income and extraordinary item                            8.6               4.8   2.0
             Provision for income taxes................          3.6                2.3               1.3
                                                                 ---                ---               ---
               Income before minority interest in
                       subsidiary net income and
                       extraordinary Item..............          5.0%               2.5%              0.7%
                                                                 ====               ====              ====
</TABLE>


Results of Operations


Fiscal 1997 Compared to Fiscal 1996

     Net sales for fiscal 1997 were  $345,572  compared  to $299,532  for fiscal
1996,  an increase of $46,040,  or 15.4%.  Carpet  backing sales for fiscal 1997
were $166,219  compared to $146,491 for fiscal 1996, an increase of $19,728,  or
13.5%. This increase was primarily due to higher unit volume in both primary and
secondary carpet backing.  Construction and civil engineering  product sales for
fiscal 1997 were  $114,611  compared to $97,043 for fiscal 1996,  an increase of
$17,568,  or 18.1%.  This  increase was  primarily  due to an 10.5%  increase in
Fibermesh(R)  sales  and a  22.3%  increase  in  geosynthetic  sales.  Technical
textiles sales for fiscal 1997 were $64,742 compared to $55,998 for fiscal 1996,
an increase of $8,744,  or 15.6%,  of which the  Spartanburg  Acquisition  added
approximately $8,600.

     Gross profit for fiscal 1997 was  $112,385,  compared to $91,211 for fiscal
1996, an increase of $21,174,  or 23.2%. As a percentage of sales,  gross profit
increased to 32.5% from 30.5%.  This increase was due to increased sales volume,
slightly  higher average  selling  prices and growth of higher margin  business,
coupled with slightly lower average polypropylene costs as compared to the prior
year.

      The Company's  improvement in gross profit  performance  also reflects its
diversification  strategy for its products as well as its primary raw  material.
The Company  expects  that  construction  and civil  engineering  and  technical
textiles will continue to be of increasing  importance to the Company's  overall
sales.  Reflecting the success of this strategy,  sales of carpet  backing,  the
Company's  core product line,  have  decreased  from 50.5% of total net sales in
fiscal  1993 to  approximately  47% of pro forma  fiscal  1997  total net sales,
adjusted to reflect for the Spartan Acquisition.  In addition, the Company plans
to expand its polyester-based  product offerings,  particularly in high strength
geotextiles and furniture and bedding construction products.

     Selling  expenses  for fiscal  1997 were  $31,801  compared  to $27,488 for
fiscal 1996, an increase of $4,313, or 15.7%. This increase was primarily due to
increased expenditures  associated with higher sales volume as well as increased
marketing expenses. As a percentage of sales, selling expenses remained at 9.2%.
<PAGE>

     General  and  administrative  expenses  the  Company  for fiscal  1997 were
$26,562 compared to $22,657 for fiscal 1996, an increase of $3,905, or 17.2%. As
a percentage of sales,  general and administrative  expenses increased from 7.6%
to 7.7%. The increase in general and  administrative  expenses was primarily due
to infrastructure  expenditures,  to support anticipated Company growth, coupled
with an increase in research and market  development costs from $2,942 in fiscal
1996 to $4,208 in fiscal 1997. Any costs associated with modifying the Company's
computer systems to be year 2000 compliant have been expensed as incurred. Costs
incurred to date  relating to year 2000 issues have not been  material  and have
not had a material impact on the financial  statements.  Future costs associated
with year 2000 issues are not expected to be  material.  Included in general and
administrative  expenses for the Partnership is approximately  $1,139,  which is
due the Company,  for expenses incurred on behalf of the Partnership relating to
the Plan.

     Operating  income for fiscal  1997 was  $51,430 as  compared to $38,474 for
fiscal  1996,  an increase  of  $12,956,  or 33.7%.  As a  percentage  of sales,
operating  income  increased  to 14.9% in fiscal 1997 from 12.8% in fiscal 1996.
This increase was primarily due to improved gross profits,  partially  offset by
slightly higher selling,  general and administrative costs. Operating income for
the  Partnership  for fiscal 1997 was $50,291,  which  includes  the  additional
general  and  administrative  expenses  related to the  Plan.

     Interest expense for fiscal 1997 was $20,084 compared to $22,773 for fiscal
1996, a decrease of $2,689, or 11.8%, due to lower average interest rates on the
outstanding debt.

     The effective income tax rate before the effect of the  extraordinary  item
was 41% and 46% in fiscal 1997 and 1996, respectively.  The higher rate for 1996
was due  primarily  to the  effect  of  nondeductible  expenses,  including  the
amortization of goodwill, on lower income in fiscal 1996.

     Income before extraordinary item for the Company in fiscal 1997 was $18,150
compared to $8,102 for fiscal  1996,  an increase  of $10,048.  Earnings  before
interest,  taxes,  depreciation and amortization  ("EBITDA") for fiscal 1997 was
$69,011  compared to $54,074 for fiscal 1996, an increase of $14,937,  or 27.6%.
The increase in the Company's income before  extraordinary  item, as well as its
EBITDA,  was  primarily  due to  the  factors  discussed  above.  Income  before
extraordinary  item  for  the  Partnership  was  $15,147,   which  includes  the
minority's  interest in  subsidiary  net income and the  additional  general and
administrative expenses related to the Plan.


Fiscal 1996 Compared to Fiscal 1995

     Net sales for fiscal 1996 were  $299,532  compared  to $271,427  for fiscal
1995,  an increase of $28,105,  or 10.4%.  This  increase was  primarily  due to
increased  sales of  carpet  backing  and  construction  and  civil  engineering
products.  Carpet  backing  sales for  fiscal  1996 were  $146,491  compared  to
$133,025 for fiscal 1995,  an increase of $13,466,  or 10.1%.  This increase was
the  result of higher  unit  volume in primary  and  secondary  carpet  backing,
partially  offset  by lower  average  selling  prices.  Construction  and  civil
engineering  product sales for fiscal 1996 were $97,043  compared to $82,933 for
fiscal  1995,  an increase of $14,110,  or 17.0%.  This  increase  was due to an
increase in sales of  geotextile  and  erosion  control  fabrics of $13,018,  or
30.7%,  resulting  primarily from nonwoven sales in the landfill and roadway and
building site  markets.  Technical  textiles  sales for fiscal 1996 were $55,998
compared to $55,469 for fiscal 1995, a increase of $529, or 1.0%.
<PAGE>

     Gross  profit for fiscal  1996 was  $91,211  compared  to $76,721 in fiscal
1995, an increase of $14,490,  or 18.9%. As a percentage of sales,  gross profit
increased to 30.5% from 28.3%. This was primarily due to higher sales volume and
lower  average  polypropylene  prices as compared  to the prior year,  partially
offset by lower average selling prices.

     Selling  expenses  for fiscal  1996 were  $27,488  compared  to $24,273 for
fiscal 1995, an increase of $3,215, or 13.2%. This increase was primarily due to
increased expenditures  associated with higher sales volume as well as increased
marketing expenses.  These expenses were related to the Company's expectation of
higher  sales  in 1997  resulting  from  the  completion  of the  1996  capacity
expansion  program.  As a percentage of sales,  selling expenses  increased from
9.0% to 9.2%.

     General and  administrative  expenses  for fiscal 1996 for the Company were
$22,657 compared to $21,195 for fiscal 1995, an increase of $1,462,  or 6.9%. As
a percentage of sales,  general and administrative  expenses decreased from 7.8%
to 7.6%. In fiscal 1995, general and administrative  expenses included a pre-tax
charge of $2,852  related to an increase in the allowance for doubtful  accounts
taken to  establish  a reserve for a carpet  backing  customer  who  experienced
severe  financial  difficulties.  Without this  charge,  fiscal 1995 general and
administrative  expenses  as a  percentage  of sales  would have been 6.8%.  The
increase  in  general  and   administrative   expenses  was   primarily  due  to
infrastructure  expenditures,  which  included an  increased  investment  in the
Company's information technology department to support company growth.  Included
in general and administrative expenses for the Partnership was $661 related to a
withdrawn Common Stock offering, such amount being due the Company.

     Operating income for the Company for fiscal 1996 was $38,474 as compared to
$28,687 for fiscal 1995,  an increase of $9,787,  or 34.1%.  As a percentage  of
sales,  operating  income increased to 12.8% in fiscal 1996 from 10.6% in fiscal
1995. This was primarily due to factors  discussed  above.  Operating income for
the  Partnership  for fiscal 1996 was $37,813,  which  includes  the  additional
general and administrative expenses discussed above.

     Total interest  expense for fiscal 1996 was $22,773 compared to $22,514 for
fiscal 1995,  an increase of $259,  or 1.2%,  due to higher  average  total debt
outstanding.

     The  effective  income  tax rate was 46% and 64% in  fiscal  1996 and 1995,
respectively.  The decrease  was  primarily  due to the effect of  nondeductible
expenses,  including the  amortization of goodwill,  on higher taxable income in
fiscal 1996.

     Net income for fiscal 1996 was $8,102  compared to net income of $1,936 for
fiscal  1995,  an  increase  of $6,166,  or 318.5%.  EBITDA for fiscal  1996 was
$54,074  compared to $42,887 for fiscal 1995, an increase of $11,187,  or 26.1%.
The increase in net income, as well as EBITDA, was primarily due to higher sales
volumes and lower  average raw material  cost offset by slightly  lower  average
selling prices,  higher manufacturing costs associated with plant shutdowns as a
result of the winter ice storms in 1996 and  increased  selling  and general and
administrative costs. Net income for fiscal 1996 for the Partnership was $7,441,
which  includes the additional  general and  administrative  expenses  discussed
above.


Liquidity and Capital Resources

     To finance its capital expenditures program and fund its operational needs,
the  Company  has relied  upon cash  provided  by  operations,  supplemented  as
necessary by bank lines of credit and long-term indebtedness.  Net cash provided
by (used in) operating activities was $25,129,  $31,421, and ($35) for the years
ended September 30, 1997, 1996 and 1995, respectively.
<PAGE>

     Net cash  provided by operating  activities  for the Company in fiscal 1997
consisted  primarily  of net income of $6,200,  a pretax  extraordinary  loss of
$19,431,  and  noncash  charges of  $21,026,  as well as an increase in accounts
payable of $6,803, which financed increases in accounts receivable and inventory
of  $9,687  and  $13,634,  respectively.   These  working  capital  requirements
increased  primarily due to higher sales volume in the fourth  quarter of fiscal
1997  as  compared  to the  comparable  period  in the  prior  year,  as well as
increased  units in  finished  goods and raw  materials,  to  support  continued
anticipated sales growth.

     Net cash  provided  by (used in)  operating  activities  for the Company in
fiscal 1996 and 1995 resulted  primarily from net income of $8,102,  and $1,936,
respectively,  after deducting non-cash charges of $20,723,  and $17,945 and net
working  capital  charges  of  approximately  $2,596,  and  ($19,916),  for each
respective  period.  The increase in cash provided by operating  activities  for
fiscal 1996 as compared to fiscal 1995 was  principally  due to  fluctuations in
net income and the Company's working capital requirements.  The changes included
reduced inventory and accounts payable balances in 1996 resulting primarily from
lower inventory quantities and lower polypropylene costs.

     On February 11,  1997,  the Company  issued  $170,000  aggregate  principal
amount of 9 1/4% Senior  Subordinated Notes due February 15, 2007 (the "Notes"),
which represent unsecured  obligations of the Company.  The Notes are redeemable
at the option of the Company at any time on or after  February 15,  2002,  at an
initial  redemption  price of 104.625% of their  principal  amount together with
accrued interest,  with declining redemption prices thereafter.  Interest on the
Notes are  payable  semi-annually  on February 15 and August 15 in the amount of
$7,863.

     On November 1, 1996,  the Company  received net  proceeds of  approximately
$34,000 (after payment of  underwriting  discounts and commissions and expenses)
from the sale of  2,875,000  shares of Common  Stock in an  underwritten  public
offering (the "Offering").  These proceeds,  together with the proceeds received
from the issuance of the Notes, were utilized primarily to retire  approximately
$133,000 of the Company's 12 3/4% Senior  Subordinated  Debentures due 2002 (the
"Debentures"),  pay the  related  call  premium  and  prepayment  costs and fees
associated  with the  refinancing of $15,920,  pay debt issuance costs of $5,525
and to repay approximately $21,900 of certain outstanding indebtedness under the
Company's Fourth Amended and Restated  Revolving Credit and Security  Agreement,
dated as of October 20, 1995, as subsequently  amended,  among the Company,  the
lenders  party  thereto and  BankBoston,  as agent (the "Credit  Facility").  In
connection  therewith,  the Company  recorded an  extraordinary  loss of $11,950
during the second quarter of fiscal 1997.

     On December 1, 1997, the Company  redeemed the remaining  $7,403  aggregate
principal  amount of the  Debentures  at a  redemption  price of 106.375% of the
principal  amount thereof,  together with accrued  interest as of the redemption
date.

     The net proceeds from financing and operating activities were also utilized
to fund capital  expenditures  of  approximately  $54,000 and to acquire certain
assets of the Spartan  Technologies  division of Spartan Mills for approximately
$9,400.  Capital expenditures planned for fiscal 1998 are approximately  $41,000
primarily  to expand the  capacity of the  Company's  manufacturing  facilities,
subject to prevailing market conditions. Capital expenditures in fiscal 1996 and
1995 were approximately $34,200 and $13,300, respectively.

     The Credit  Facility  provides for  potential  borrowing  capacity of up to
$85,000  and is  comprised  of maximum  term loan  borrowings  of $45,000  and a
revolving credit loan portion (the  "Revolver") of up to $40,000.  The term loan
balance at September  30, 1997 was $25,000,  of which $10,000 is payable in 1999
and  $15,000 is payable  in 2000.  The  lenders  under the Credit  Facility  are
BankBoston,  Sanwa Business Credit Corporation, and South Trust Bank of Georgia,
N.A.  The  Revolver  provides  for  availability  based on a  borrowing  formula
consisting of 85% of eligible accounts receivable and 50% of eligible inventory,
subject to certain  limitations and reserves which include the remaining balance
due under the  Debentures of  approximately  $7,400.  At September 30, 1997, the
maximum  amount  available  for  borrowing  under the Revolver was $17,838.  The
Credit Facility expires on October 1, 2001.

     The  Credit  Facility  permits  borrowings  which  bear  interest,  at  the
Company's  option,  (i) for domestic  borrowings based on the lender's base rate
(8.50% at September  30, 1997) or (ii) for  Eurodollar  borrowings  based on the
Interbank  Eurodollar rate at the time of conversion plus 2.0% or 1.75% for term
loan or revolver advances, respectively (7.44% to 7.63% at September 30, 1997).
<PAGE>

     In fiscal  1996,  the  Credit  Facility  permitted  borrowings  which  bore
interest,  at the Company's  option,  (i) for domestic  borrowings  based on the
lender's  base  rate  plus  .75%  (9.00%  at  September  30,  1996)  or (ii) for
Eurodollar  borrowings  based on the  Interbank  Eurodollar  rate at the time of
conversion plus 2.5% or 2.75% for term loan or revolver  advances,  respectively
(8.09% to 9.25% at September 30, 1996).

     The Credit Facility  provides for borrowings  under letters of credit of up
to $3,000,  which  borrowings  reduce amounts  available under the Revolver.  At
September 30, 1997, no letters of credit were outstanding under the facility and
$1,892 was outstanding at September 30, 1996.

     At  September  30,  1997,  the  Company's  total  outstanding  indebtedness
amounted to $221,182.  Such indebtedness consists of borrowings under the Credit
Facility of $38,420,  $170,000 aggregate  principal amount of the Notes,  $7,403
aggregate  principal  amount of the  Debentures,  an  outstanding  capital lease
obligation  of $4,083 dated as of May 28,  1996,  and a mortgage  obligation  of
$1,276.  Cash  interest  paid during  fiscal  1997,  1996 and 1995 was  $23,642,
$23,176, and $22,334, respectively.

     On December  18,  1997,  the Company and its lenders,  with  BankBoston  as
agent, entered into a new five-year credit facility (the "New Credit Facility").
The  New  Credit  Facility   consists  of  up  to  a  $40  million  asset  based
securitization program, with amounts borrowed through a newly formed subsidiary,
Synthetic  Industries Funding  Corporation,  (the  "Securitization"),  and a $60
million senior secured revolver  facility (the "New  Revolver").  Securitization
and  New  Revolver  borrowings  are  collateralized  by the  Company's  accounts
receivables and substantially  all of the assets of the Company,  excluding real
property, respectively.

     Interest on the Securitization is based on the applicable  commercial paper
rate in effect plus a spread.  The New Revolver  permits  borrowings  which bear
interest,  at the Company's  option,  (i) for domestic  borrowings  based on the
lender's base rate or (ii) for Eurodollar  borrowings based on a spread over the
Interbank   Eurodollar  rate  at  the  time  of  conversion.   Spreads  for  the
Securitization  and the Eurodollar  borrowings are determined by the operational
performance of the Company.  At September 30, 1997, the interest rates under the
Securitization  and the Eurodollar  borrowings  would have been 6.23% and 7.09%,
respectively.

     The New Credit Facility  contains  covenants  related to the maintenance of
certain   operating  rations  and  limitations  as  to  the  amount  of  capital
expenditures.  The  Company's  ability to pay  dividends  on its common stock is
restricted by both the New Credit Facility and the Notes. At September 30, 1997,
the  availability  under the New Credit  Facility would have been  approximately
$45,000.

     Based on current levels of operations and anticipated growth, the Company's
management  expects net cash from operations to provide  sufficient cash flow to
satisfy  the  debt  service   requirements  of  the  Company's   long-term  debt
obligations,   including  the  Credit  Facility  and  lease  agreements,  permit
anticipated  capital   expenditures  and  fund  the  Company's  working  capital
requirements for the next twelve months.


Inflation and Seasonality

     The  Company  does not believe  that its  operations  have been  materially
affected by  inflation  during the three most  recent  fiscal  years.  While the
Company  does not  expect  that  inflation  will  have a  material  impact  upon
operating results,  there is no assurance that its business will not be affected
by inflation in the future.

     The Company's sales and income have  historically  been higher in the third
and fourth  quarters  of its fiscal  year.  While sales and income in the carpet
backing and technical textile product lines are not greatly affected by seasonal
trends,  sales of construction and civil  engineering  products are lower in the
first and second  quarters of any given fiscal year due to the impact of adverse
weather   conditions  on  the  construction  and  civil   engineering   markets.
Consequently, as sales from construction and civil engineering products continue
to increase as a percentage of the Company's  total sales,  the  seasonality  of
these  products'  sales will  affect  total sales and income of the Company to a
greater degree.
<PAGE>



Quarterly Financial Information

Presented  below  is a  summary  of  the  Partnership's  unaudited  consolidated
quarterly financial information for the years ended September 30, 1997 and 1996:
(Amounts in thousands of dollars except limited partnership units outstanding)
<TABLE>
<CAPTION>

                                                                        Three Months Ended
Fiscal 1997                                      December 31        March 31          June 30        September 30
-----------                                      -----------        --------          -------        ------------
<S>                                                     <C>              <C>              <C>               <C>     
Net sales                                               $70,857          $75,358          $99,112           $100,245
Operating income                                          7,332            9,391           17,711             15,857
Income before extraordinary item                            589            5,650            5,015              3,893
Net income (loss)                                           589      (a) (6,300)            5,015              3,893
Income (loss) per limited partnership unit                 0.73       (a) (7.80)             6.21               4.82
Weighted average units outstanding                          800              800              800                800


Fiscal 1996
Net sales                                               $64,608          $64,609          $82,843            $87,472
Operating income                                          3,356            5,735           14,521             14,201
Net income (loss)                                       (1,897)            (410)            5,093              4,655
Income (loss) per limited partnership unit               (2.35)           (0.51)             6.30               5.76
Weighted average units outstanding                          800              800              800                800

<FN>

(a)  Includes an extraordinary loss of $11,950, or $1.37  per  share,  from  the
     early   extinguishment  of debt. See Note 9.

</FN>
</TABLE>


Recent Accounting Pronouncements

     In February 1997,  the Financial  Accounting  Standards  Board (the "FASB")
issued Statement of Financial  Accounting Standard No. 128, "Earnings Per Share"
("SFAS 128").  Under the new standard,  which must be adopted for periods ending
after  December 15, 1997, the Company will be required to change the method used
to compute  earnings per share and to restate  prior periods  presented.  A dual
presentation of basic and diluted earnings per share will be required. The basic
earnings per share  calculation,  which will replace primary earnings per share,
will  exclude  the  dilutive  impact of stock  options  and other  common  share
equivalents.  The diluted  earnings  per share  calculation,  which will replace
fully diluted  earnings per share,  will include common share  equivalents.  The
adoption of SFAS 128 will not have a material  impact on earnings  per share for
the three years ended September 30, 1998.

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
No. 131,  "Disclosures about Segments of an Enterprise and Related  Information"
("SFAS 131"),  which must be adopted for fiscal years  beginning  after December
15, 1997.  Under the new standard,  companies will be required to report certain
information  about  operating  segments in  consolidated  financial  statements.
Operating  segments  will be  determined  based on the  method  that  management
organizes  its   businesses  for  making   operating   decisions  and  assessing
performance.  SFAS 131 also  requires  companies to report  certain  information
about their products and services,  the geographic  areas in which they operate,
and their major customers.  The Company is currently  evaluating the effect,  if
any, of implementing SFAS 131.

<PAGE>


Forward Looking Statements

     The  discussion  of the  Company's  business and  operations in this report
includes in several instances  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934, as amended,  which are based upon management's
good faith assumptions relating to the financial,  market,  operating, and other
relevant  environments  that will exist and affect the  Company's  business  and
operations  in the future.  No assurance can be made that the  assumptions  upon
which management based its forward-looking  statements will prove to be correct,
or that the  Company's  business  and  operations  will not be  affected  in any
substantial  manner by other factors not currently  foreseeable by management or
beyond the Company's control.  All forward-looking  statements involve risks and
uncertainties,  including  those  described in this report,  and such statements
shall be deemed in the future to be modified in their  entirety by the Company's
public pronouncements, including those contained in all future reports and other
documents filed by the Company with the Securities and Exchange Commission.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Information  with  respect  to this  Item  is  contained  in the  Company's
consolidated  financial statements indicated in the Index in Part IV, Item 14 of
this Annual Report on Form 10-K and is incorporated herein by reference.


ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

         None.


<PAGE>


                                                      PART III

ITEM 10. Executive Officers and Directors of the Company

     Synthetic G.P. is the sole general partner of Management L.P., which is the
sole  general  partner  of the  Partnership.  By virtue of these  relationships,
Synthetic G.P. controls the management and affairs of the Partnership.

     The  general  partners  of  Synthetic  G.P.  are  the  following   Delaware
corporations:   Chill  Investments,   Inc.,  Beckman  Investments,  Inc.,  Freed
Investments,  Inc., Kenner Investments,  Inc., and Wright Investments, Inc. Each
of Leonard Chill, Jon P. Beckman, W. Wayne Freed, Ralph A. Kenner and W. Gardner
Wright,  Jr. is the sole  director  and the  controlling  stockholder  of one of
Synthetic G.P.'s general partners,  and an executive officer of the Company. Mr.
Chill also serves as director of the Company.

The  following  table  sets forth  certain  information  concerning  each of the
executive officers and directors of the Company:
<TABLE>
<CAPTION>

                 Name                        Age                         Position and Offices Held

<S>                                          <C>       <C>                                               
Leonard Chill                                65        President, Chief Executive Officer and Director

Joseph F. Dana                               50        Chief Operating Officer, General Counsel and Director

Joseph Sinicropi                             43        Chief Financial Officer and Secretary

W. Wayne Freed                               62        Vice President - Market Development

Ralph Kenner                                 53        Vice President - Manufacturing

C. Ted Koerner                               48        Vice President - General Manager Construction/Civil
                                                       Engineering Products Group

John Michael Long                            54        Vice President - General Manager Technical Textiles
                                                       Group

William Gardner Wright, Jr.                  68        Vice President - General Manager Carpet Backing

Robert J. Breyley                            68        Vice President - Fibermesh(R)Division

Bobby Callahan                               55        Controller

W. O. Falkenberry, Jr.                       55        Vice President - Human Resources

Richard E. Hingson                           42        Vice President - Technical Services

Lee J. Seidler (1)                           62        Director

William J. Shortt (1)                        72        Director

Robert L. Voigt (1)                          79        Director
<FN>

(1)      Member of Compensation Committee and Audit Committee.
</FN>
</TABLE>

         Directors of the Company are elected each year at the annual meeting of
stockholders. The Company's officers serve at the discretion of the Board.

         Leonard Chill, age 65, joined the Company in December 1973 as President
and was appointed Chief Executive  Officer in 1986. He has been a director since
1986.  From 1967 until joining the Company,  he held a number of positions  with
Thiokol  Corporation in its Fibers Division,  including that of General Manager.
Mr. Chill is also the sole director and sole  stockholder  of one of the general
partners of  Synthetic  Management  G.P.,  the entity  which is the sole general
partner of the general partner of the Partnership.  In addition,  Mr. Chill is a
director of Synthetic Textiles Ltd.

         Joseph F. Dana,  age 50, was  appointed  Chief  Operating  Officer  and
General Counsel on May 21, 1997. Prior to joining the Company, Mr. Dana had been
engaged in the  private  practice  of law for over  twenty  years and had been a
member of the law firm Watson & Dana, LaFayette, Georgia, since its formation in
1978,  serving  as general  counsel to the  Company  since  1987.  He has been a
Director since 1993.

         Joseph  Sinicropi,  age  43,  joined  the  Company  in  1995  as  Chief
Accounting  Officer.  He was named  Chief  Financial  Officer and  Secretary  in
February 1996.  Prior to joining the Company,  he was an audit senior manager in
the international accounting firm of Deloitte & Touche LLP from 1985 to 1995.

     W.  Wayne  Freed,  age 62,  joined  the  Company  in 1981 and  became  Vice
President  --  Market  Development  in  1987.  Prior  thereto,  he had 28  years
experience in the textile industry. Mr. Freed is also the sole director and sole
stockholder of one of the general partners of Synthetic Management G.P.

         Ralph Kenner,  age 53, has been Vice President --  Manufacturing  since
1984. He joined the Company in 1974 as Director, Industrial Relations and served
in that capacity until 1976. In 1976, he was appointed  Plant Manager and served
in that  capacity  until 1984.  Mr.  Kenner is also the sole  director  and sole
stockholder of one of the general partners of Synthetic Management G.P.

         C. Ted  Koerner,  age 48,  joined the  Company in 1990 and became  Vice
President -- Construction Products Division in 1993. He was named Vice President
-- General Manager of the Construction/Civil Engineering Products Group in 1995.
Prior  thereto,  Mr.  Koerner  was an  engineer  with  the  Ohio  Department  of
Transportation;  a sales engineer, product supervisor and regional engineer with
Armco Steel Corporation; and a sales manager with National Seal Corporation.

         John Michael Long, age 54, was Vice President -- Nonwoven  Fabrics from
1991 to 1996 at which time he was named Vice President -- General Manager of the
Technical  Textiles  Group.  Prior  thereto,  he held a  variety  of  managerial
positions with Spartan Mills, a  manufacturer  of nonwoven  geotextile  fabrics.
During  his last  five  years at  Spartan,  he was Vice  President  and  General
Manager.

         William  Gardner  Wright,  Jr., age 68, was Vice President -- Marketing
and Sales from 1983 to 1996 at which  time he was named  Vice  President-General
Manager of the Carpet Backing  Division.  From 1977 until 1983, he was President
of Synca  Marketing  Corp., a textile sales agency which served as a sales agent
for the  Company's  primary  carpet  backing,  as well as the  products of other
manufacturers.  Mr.  Wright is a  director  of the Sun Trust  Bank of  Northwest
Georgia. Mr. Wright is also the sole director and sole stockholder of one of the
general partners of Synthetic Management G.P.

         Robert J.  Breyley,  age 68, joined the Company in 1984 and became Vice
President -- Fibermesh(R)  Division in December 1984.  Prior thereto,  he held a
variety of managerial  positions with Master Builders,  Inc., a leading concrete
admixtures  supplier.  During his last six years with  Master  Builders,  he was
Senior Vice President of Sales and Marketing.  Mr. Breyley retired on October 3,
1997.

         Bobby  Callahan,  age 55,  joined  the  Company  in 1977  and has  been
Controller since 1980. Prior thereto, he held a variety of financial  management
positions in the carpet industry.

         W.O.  Falkenberry,  Jr.,  age 55,  joined  the  Company in 1993 as Vice
President -- Human Resources.  Prior thereto, he was Director of Human Resources
with the Champion  Products  Division of the Sara Lee  Corporation  from 1989 to
1993.

         Richard  E.  Hingson,  age 42,  joined  the  Company in 1984 as Quality
Control Manager and became  Technical  Director in 1989. He was promoted to Vice
President -  Technical  Services in 1997.  Prior  thereto,  he held a variety of
managerial positions with Amoco Fabrics Company, a producer of polypropylene and
polyethylene yarns and fabrics.

     Lee J. Seidler,  age 62, was professor of accounting  and Price  Waterhouse
professor of auditing at New York  University.  Dr. Seidler was Senior  Managing
Director  at  Bear,  Stearns  & Co.  Inc.  from  1981 to 1989.  He is  presently
associated  with Bear,  Stearns & Co. Inc. as Managing  Director  Emeritus.  Dr.
Seidler is a director of the Shubert Foundation,  The Shubert Organization,  and
Players International,  Inc. and has been a director of SafeCard Services,  Inc.
and Eastbank, N.A. He has been a Director since 1993.

         William J. Shortt, age 72, retired from Johnson & Johnson in 1989. From
1977 to 1989, he was Director of Government  and Trade  Relations,  Southeast at
Johnson & Johnson.  Mr.  Shortt has also been a director of  Standard  Telephone
Company,  Standard Group Inc., and First National Bank of Habersham. He has been
a Director since 1993.

     Robert L. Voigt,  age 79,  served as a consultant  to Dixie Yarns Inc. from
1985  until  his  retirement  at the end of 1991.  Mr.  Voigt  also  served as a
director of Dixie Yarns,  Inc. from 1981 to 1987.  He has been a Director  since
1993.


ITEM 11.  Renumeration of Directors and Officers

Director Compensation

         Outside  directors receive $15,000 per annum for services as a director
and $800 per meeting  attended.  Directors  who are members of management do not
receive any meeting attendance fees or additional  compensation for service as a
director or service on committees of the Board. All directors are reimbursed for
reasonable  out-of-pocket  expenses incurred in connection with their attendance
at meetings of the Board and its committees on which they serve.

         Under the Company's 1994 Stock Option Plan for  Non-Employee  Directors
(the "Directors' Plan"),  Messrs.  Dana, Seidler,  Shortt and Voigt were granted
non-qualified  stock  options (the  "Directors'  Options")  to purchase  28,906,
57,813, 19,271 and 19,271 shares of Common Stock,  respectively.  The Directors'
Plan does not provide for any further grants of options thereunder.

         The  purchase  price of the  shares  of  Common  Stock  subject  to the
Directors'  Options was  determined by reference to the fair market value of the
Common Stock, as determined by the Compensation  Committee,  at the time Messrs.
Dana,  Seidler,  Shortt and Voigt became members of the Board.  As of October 1,
1996,  100% of the number of shares of Common  Stock  subject  to each  Director
Option are vested and are exercisable.  As a Company employee,  Mr. Chill is not
eligible  to  participate  in  the  Directors'  Plan.  In  the  event  that  the
outstanding  shares of Common  Stock are  changed  by reason of  reorganization,
merger,   consolidation,   recapitalization,   reclassification,   stock  split,
combination  or exchange of shares and the like, or dividends  payable in Common
Stock, an appropriate adjustment shall be made by the Committee in the aggregate
number of shares of Common Stock  available under the Directors' Plan and in the
number of shares and price per share subject to outstanding  Directors' Options.
The term of each Directors' Option is ten years from the date of grant.

Committees and Meetings of the Board

         The Board has established a Compensation Committee, composed of Messrs.
Seidler, Shortt and Voigt, which establishes salary,  incentives and other forms
of  compensation  and  administers the Company's 1994 Stock Option Plan and 1996
Stock Option Plan and other incentive  compensation and benefit plans applicable
to the Company's  officers.  The Board has also  established an Audit Committee,
composed of Messrs. Seidler, Shortt and Voigt, which recommends to the Board the
selection  of  independent  auditors,  and  reviews the scope and results of the
audit and other services provided by the independent auditors.

     During  the year  ended  September  30,  1997,  the Board held a total of 9
meetings,  the Audit  Committee held 2 meetings and the  Compensation  Committee
held 2 meetings.

Compensation Committee Interlocks and Insider Participation

     During  fiscal  1997  and  1996,  the  Company  paid  legal  fees  totaling
approximately $241,000 and $232,000,  respectively,  to the law firm of Watson &
Dana.  Until May 21, 1997, Mr. Dana, a director of the Company,  was a member of
Watson & Dana and a member  of the  Compensation  Committee.  Effective  May 21,
1997, Mr. Dana became employed as Chief Operating Officer and General Counsel of
the  Company.  Mr. Dana  continues  to be a director of the  Company,  but is no
longer a member of the Compensation Committee.

Executive Compensation

         The following  table sets forth  information  regarding  aggregate cash
compensation, stock option awards and other compensation earned by the Company's
Chief  Executive  Officer and the four other most highly  compensated  executive
officers  for  services  rendered  in all  capacities  to the  Company  and  its
subsidiaries in the fiscal years 1995 to 1997.

                          Summary Compensation Table

         The following table sets forth  information  regarding the compensation
paid during each of the Company's last three completed fiscal years to the Chief
Executive  Officer  of the  Company  and  each of the  other  four  most  highly
compensated executive officers of the Company as of September 30, 1997.
<TABLE>
<CAPTION>


                                                                                            All Other
                                                                                               Compen-
                                                                                             sation($)
                                 Fiscal               Annual Compensation               Long-Term Comp-
                                 Year                                                    Ensation Awards
           Name and              Ended                                  Other Annual       Securities      All Other
      Principal Position         Sep. 30,    Salary($)   Bonus($)     Compensation($)      Unerlying     Compensation
                                                                                           Options(#)
<S>                                 <C>         <C>          <C>           <C>                          <C>       
Leonard Chill                       1997        $270,13      $144,70       $2,168        --             $  10,1741
Chief Executive Officer and         1996        254,871      118,119           --        --                  9,9241
President                           1995        254,871       89,939        4,668        --                10,0441

Ralph Kenner                        1997        $154,71     $ 69,768       $5,771        --             $   4,7502
Vice President-- Manufacturing      1996        145,973       55,063           --        --                  4,1702
                                    1995        145,973       41,926        2,344        --                  4,4822

William Gardner Wright, Jr.
Vice President-- General Manager--  1997        $249,83     $ 91,800       $  427        --             $   4,7502
Carpet Backing Division             1996        235,664       81,920           --        --                  4,1702
                                    1995        235,664       70,238          304        --                  4,0052

Robert J. Breyley                   1997        $141,70     $ 47,656       $   --        --             $   4,7502
Vice President-- Fibermesh(R)       1996        141,720       48,144           --        --                  4,1702
Division                            1995        141,720       49,500           --        --                  3,3292

W. Wayne Freed                      1997        $161,54     $ 46,980       $6,842        --             $   4,7502
Vice President--Market              1996     152,400142,000   37,123           --        --                  4,1702
Development                         1995                      28,267        1,808        --                  4,0902


---------------------
<FN>

(1)      These  amounts  consist  of $5,424 of  insurance  premiums  paid by the
         Company under a term life  insurance  policy in each of 1997,  1996 and
         1995,  and $4,750,  $4,500 and $4,620  contributed by the Company under
         its 401(k) plan in 1997, 1996 and 1995, respectively.

(2)      These  amounts  represent the annual  contribution  made by the Company
         under its 401(k) Plan in the respective year.
</FN>
</TABLE>

Option Exercises and Holdings

         The  following  table  sets  forth  information  with  respect  to  the
executive  officers  named in the  Summary  Compensation  Table  concerning  the
exercise of options  during fiscal 1997 and  unexercised  options held as of the
end of fiscal 1997,  which include grants made under the Company's 1994 and 1996
Stock Option Plans.
<TABLE>
<CAPTION>

                                  Aggregated Option Exercises in Last Fiscal Year
                                         and Fiscal Year-end Option Values


                                  Shares                      Number of Securities           Value of Unexercised
                                Acquired on      Value       Underlying Unexercised          In-the-Money Options
            Name               Exercise (#)   Realized ($)    Options at FY-End (1)             at FY-End (2)
                                                                          Unexercisable   Exercisable    Unexercisable
                                                            Exercisable

<S>                                                               <C>             <C>       <C>              <C>       
Leonard Chill                      --             --              63,922          81,360    $1,168,494       $1,487,261
Ralph Kenner                       --             --              21,821          32,050       398,888          585,874
William Gardner Wright, Jr         --             --              21,821          32,050       398,888          585,874
Robert J. Breyley                  --             --               4,843           4,843        88,530           88,530
W. Wayne Freed                     --             --              21,821          32,050       398,888          585,874

--------------------
<FN>

(1)      Any shares of Common  Stock  received  upon the exercise of options are
         subject to "lock-up"  agreements  with the  underwriters  of the Common
         Stock Offering.

(2)      Based on the  September  30,  1997 price  ($29.00  per share)  less the
         exercise price ($10.72 per share) payable for such shares.
</FN>
</TABLE>


Description of Certain Employment Agreements

         Each of Messrs.  Chill, Freed, Kenner and Wright (the "Executives") are
employed by the Company pursuant to individual  employment  agreements effective
as of September 6, 1996 (the  "Effective  Date").  The term of employment  under
these  agreements is three years from the Effective Date;  provided that on each
anniversary of the month following the first Effective Date, and each successive
month, the term is automatically  extended for one successive month, providing a
minimum  remaining  term  of two  years,  unless  either  party  terminates  the
agreement by written  notice.  The current  annual  salaries for Messrs.  Chill,
Freed,  Kenner and Wright pursuant to these  agreements are $270,163,  $161,544,
$154,731 and  $249,803,  respectively,  and are subject to annual  review by the
Board.

         The Company has the right to terminate the  Executive's  employment for
"cause" or "without cause", in each case as defined in the applicable employment
agreement.  In the event that an Executive is terminated by the Company "without
cause,"  other than  following a "Change in Control"  (as  defined  below),  the
Executive  is  entitled  to receive his base salary at the rate in effect on the
date of  termination  of  employment  for a period of two years from the date of
termination,  any unpaid, accrued amounts under the annual incentive plan, a pro
rata payment under the annual incentive plan for the termination year, a payment
equal to the  three  year  average  of  incentive  payments  received  under the
Company's  annual incentive plan and any stock option rights due through the end
of the term. Under each employment agreement,  a "Change in Control" occurs when
(i) any person or group  becomes the  beneficial  owner of capital  stock of the
Company  representing 35% of all the voting stock, (ii) the members of the Board
on the Effective Date cease to constitute a majority of the Board,  or (iii) the
Company  combines  with  another  entity and a person holds more than 35% of the
voting  stock  of  the  Company  or the  Company's  directors,  as of  the  date
immediately  before  such  combination,  constitute  less than a majority of the
board of directors of the combined entity.

         If the Executive is terminated by the Company  "without cause" prior to
the  occurrence  of a Change in  Control  and it can be shown  such  termination
occurred  in  connection  with,  prior to or in  anticipation  of the  Change in
Control, or if the termination  resulted from a Change in Control, the Executive
is entitled to (i) a lump sum payment equal to two times the Executive's  annual
base  salary  and  annual  incentive  plan for the year in which  the  Change in
Control  occurs or the prior year,  whichever is greater,  (ii) unpaid,  accrued
amounts under the annual incentive plan and a payment that equals the average of
the incentive  payment received by the Executive under the annual incentive plan
for the immediately  preceding three years and (iii) certain other  supplemental
insurance  coverages,  for a  maximum  of 18  months  (the  "Change  in  Control
Provision"). In the event of a Change in Control, whether or not the Executive's
employment  continues  with the Company,  all options  granted to such Executive
under any of the Management  Plans (as defined below) shall vest  immediately on
the date of the Change in Control.

         In  the  event  that  an  Executive's   employment  is  terminated  for
disability  or death,  the  Executive (or his estate) is to be paid (a) his base
salary at the rate in effect on the date of termination until the earlier of six
months from the date of  termination  or the date of  commencement  of long term
disability payments,  if applicable,  and (b) any unpaid,  accrued amounts under
the annual  incentive  plan,  and will receive any stock option  rights to which
such Executive would otherwise be entitled. In the case of termination by reason
of death, the executive is also entitled to a payment under the annual incentive
plan equal to the pro rata amount due for the termination year.


                     REPORT OF THE COMPENSATION COMMITTEE OF
                THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

Compensation Program

         The Company's  compensation  program for all executives,  including the
executive officers named in the Summary  Compensation  Table, is administered by
the  Compensation   Committee  (the  "Committee")  of  the  Company's  Board  of
Directors.  The Committee  currently consists of three members,  all of whom are
non-employee  directors.  Set forth below is a report submitted by the Committee
addressing the Company's executive compensation program for fiscal 1997.

         The  Committee  believes  that  executive  compensation  should  reward
long-term value created for stockholders and reflect the business strategies and
long-range  plans  of the  Company.  The  guiding  principles  with  respect  to
compensation  are (i) to provide a competitive  package that enables the Company
to attract,  motivate and retain the key  executives  needed to  accomplish  its
corporate  goals;  (ii) to integrate  compensation  programs  with the Company's
annual and long-term  business  objectives  and  strategy;  and (iii) to provide
variable   compensation   opportunities   that  are  directly  linked  with  the
performance  of the  Company  and that  align  executive  remuneration  with the
interests  of  the  stockholders.   In  connection  with  this  philosophy,  the
compensation package of the executive employees of the Company consists of three
components: a base salary, an annual incentive bonus and long-term incentives in
the form of stock  options.  The  Committee is  responsible  for  reviewing  the
Company's   compensation  program  to  ensure  that  pay  levels  and  incentive
opportunities  are competitive and reflect the performance of the Company.  Each
component of the executive compensation program is described below.

Base Salary

         The factors  considered in determining the appropriate salary are level
of  responsibility,  prior  experience  and  accomplishments,  and the  relative
importance  of  the  job  in  terms  of  achieving  corporate  objectives.  Each
executive's  salary is reviewed  annually.  Adjustments may be recommended based
upon individual  performance,  inflationary and competitive  factors and overall
corporate results.

         In setting base salaries for fiscal 1997,  the  Committee  attempted to
establish  base  salary  levels  consistent  with the  median  base  salary  for
executives  in  similar  positions  within  a peer  group  of  approximately  24
companies of similar size and market  orientation.  The Chief Executive Officer,
after consultation with the senior human resources  executive of the Company and
the Chief Financial Officer,  reviewed with the Committee a proposed 1997 salary
plan  for the  Company's  executive  officers,  following  which  the  Committee
approved the proposed 1997 plan at the October 29, 1996 meeting.

Annual Incentive Compensation

         Cash bonuses are paid annually based upon  individual  performance  and
relevant corporate performance measures, including operating income and customer
satisfaction.  These performance  measures vary depending upon the executive and
the  related  line of  business.  Bonuses  are paid only if the  Company has met
certain  targets  established by the Board at the beginning of the year.  Target
awards are established  for each position as a percentage of base salary,  based
on competitive  salary data, and performance is assessed at the end of the year.
Whether  or not an  executive  officer  earns a bonus in any year is based  upon
actual  corporate  performance  relative  to  the  targets  established  at  the
beginning  of the year and on  individual  performance.  Partial  bonuses may be
awarded if minimum corporate  performance  measures are achieved.  For executive
officers, the percentage of base salary payable as bonus ranges from 15% to 45%.

         The Committee  administers the Company's incentive program,  recommends
to the Board  the  aggregate  amount  of  incentive  compensation  and  approves
individual  officer  awards.  The Board  approves  the  aggregate  amount of the
incentive compensation awards to all participants.

Stock Options

         The  Company  has,  on  certain  occasions,  awarded  stock  options to
executive officers to provide competitive  compensation packages and because the
Company  believes it is important that all of its key executive  officers have a
strong  economic  interest  in  maximizing  stock  price  appreciation,  thereby
aligning their interests with the Company's stockholders. Option exercise prices
are set at 100% of fair market value on the date of the grant and options expire
after 10 years. The stock options granted by the Committee vest at a rate of 25%
per year  beginning  one  year  after  the  grant  date in  order  to  encourage
management  continuity and better tie  compensation to long-term stock value. In
fiscal  1997,  the Company  granted  options to certain  newly hired or promoted
executive  officers and certain other  officers who  previously had only nominal
stock  holdings in the Company.  The Company did not grant any of the  executive
officers named in the Summary Compensation Table any options in fiscal 1997.

Compensation of Chief Executive Officer

         In connection with the Company's initial public offering on November 1,
1996, the Company entered into an employment  agreement with Mr. Chill effective
as of September 6, 1996.  Accordingly,  Mr. Chill's fiscal 1997 compensation was
largely determined by the terms of that employment  agreement.  The terms of Mr.
Chill's employment agreement provide for a base salary of $270,163 per annum and
a bonus  determined by the Committee  with  reference to the  performance of Mr.
Chill  and the  performance  and  results  of  operations  of the  Company.  The
Committee  considered certain  performance goals and achievements in determining
the bonus for Mr. Chill for fiscal 1997. The  Committee's  determination  of Mr.
Chill's  bonus for fiscal  1997 was based on the  factors  cited  above and such
bonus and his  salary  reflect  the  overall  responsibilities  inherent  in his
position as President and Chief Executive Officer.

Other Compensation Policies

         Section  162(m) of the Internal  Revenue Code of 1986,  as amended (the
"Code"),  limits the tax deduction that the Company may take with respect to the
compensation  of  certain  executive   officers,   unless  the  compensation  is
"performance based" as defined in the Code. The Company has not adopted a policy
with  respect to  qualifying  compensation  paid to its  executive  officers for
deductibility   under  Section  162(m)  since  no  executive  officer  currently
receives,  or has  received,  taxable  compensation  in excess of $1 million per
year.

                          STOCK PRICE PERFORMANCE GRAPH

     Set forth is a line graph  comparing  the yearly  percentage  change in the
cumulative  total  stockholder  return  (change  in  year-end  stock  price plus
reinvested dividends) on the Company's Common Stock against the cumulative total
return of the  Standard & Poor's 500 Stock  Index and the peer group  index from
November 1, 1996 to September 30, 1997.


 ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         As at December 8, 1997, no person or group is known to the  Partnership
to be the  beneficial  owner of more than five  percent  (5%) of the Units.  The
general partners of Synthetic G.P. and their respective  stockholders do not own
any Units.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     SI  Management  L.P.  is the  sole  general  partner  of  the  Partnership.
Synthetic  Management  G.P. is the sole general partner of SI Management L.P. By
virtue of these relationships, Synthetic Management G.P. controls the management
and affairs of the Partnership and therefore,  the Company. The Partnership owns
5,781,250  shares  of Common  Stock,  or  approximately  67% of the  issued  and
outstanding  shares of Common Stock,  and  therefore,  holds the voting power to
determine the outcome of all matters upon which stockholders vote.

     The general  partners of Synthetic  Management  G.P. are the following five
Delaware corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed
Investments,  Inc., Kenner Investments,  Inc. and W.G. Wright Investments,  Inc.
Each of Messrs.  Chill,  Beckman,  Freed, Kenner and Wright is the sole director
and the sole stockholder of one of Synthetic Management G.P.'s general partners.
For further information  concerning Messrs. Chill, Freed, Kenner and Wright, see
"Executive Officers and Directors of the Company."

         The Company and the Partnership have entered into a Registration Rights
Agreement  pursuant to which the  Company  has agreed  that upon  request of the
Partnership  the Company will register  under the  Securities Act and applicable
state  securities laws the sale of the Common Stock owned by the Partnership and
as to which registration has been requested. The Company's obligation is subject
to certain  limitations  relating to a minimum amount required for registration,
the timing of a registration and other similar matters. The Company is obligated
to pay any  registration  expenses  incidental to such  registration,  excluding
underwriters'  commissions and discounts.  In connection with the Offering,  the
Company incurred approximately $650,000 of such incidental registration expenses
in the behalf of the  Partnership.  The above  description  is  qualified in its
entirety by reference to the Registration Rights Agreement,  a copy of which has
been  filed as an  exhibit  to  Amendment  No. 1 to the  Company's  Registration
Statement  on Form S-1  (File  No.  333-9377),  filed  with the  Securities  and
Exchange Commission on September 13, 1996.

     In  connection  with the  Offering  on November  1, 1996,  the  Partnership
entered  into a  "lock-up"  agreement  with  Bear  Stearns  & Co.,  Inc.  ("Bear
Stearns")  with  respect to the sale of its  5,781,250  shares of Common  Stock.
Under this "lock-up" agreement, the Partnership agreed, with certain exceptions,
not to sell or  otherwise  dispose of any  shares of Common  Stock  without  the
consent of Bear  Stearns for a period of 270 days after  November  1, 1996,  and
thereafter  until December 31, 1997,  unless pursuant to an underwritten  public
offering.  After  December  31,  1997,  the  Partnership  is  entitled  to sell,
distribute or otherwise  dispose of its shares of Common Stock. The Company does
not, however, anticipate that the Partnership will sell or distribute any of its
shares of Common Stock unless and until the Agreement and Plan of Withdrawal and
Dissolution  (the "Plan") of the Partnership has been implemented or terminated,
as the case may be.

    On September  19,  1997,  the Company and the  Partnership  entered into the
Plan.  Pursuant to the Plan, the  Partnership is to be dissolved in two separate
phases.  The first phase is to be an underwritten  public offering of the number
of shares of Common Stock that limited  partners  have elected to sell,  and the
second  phase  is to be one to three  liquidating  distributions  of the  unsold
portions of the Partnership's  shares of Common Stock,  beginning 180 days after
the completion of the public offering. On November 7, 1997, the limited partners
approved the adoption of the Plan.  However,  the implementation of the Plan has
been  enjoined by courts in  Delaware  and  California  in  connection  with two
lawsuits  filed by certain  limited  partners  of the  Partnership  against  the
Partnership  and its  General  Partner  among  others.  See  "Claims  and  Legal
Proceedings." Among other equitable and legal remedies, the plaintiff is seeking
the removal of the General Partner and the liquidation of the  Partnership.  The
Company is not currently  involved in these  proceedings  and does not presently
possess any contractual rights with respect to their ultimate resolution. If, in
connection  with these lawsuits,  the General Partner is removed or resigns,  or
the Partnership is liquidated under a court-appointed  receiver, there can be no
assurance that the resulting sale and/or distribution of the Partnership's share
of Common Stock will be made in the same or similar manner as that  contemplated
by the Plan. The General Partner has denied the allegations of the plaintiff and
is  vigorously  contesting  the  lawsuits;  however,  in the event of an adverse
ruling,  the  Company  cannot  predict  the volume and price at which the Common
Stock trades might be affected.

     Lee J. Seidler,  a director of the Company,  is presently  associated  with
Bear,  Stearns & Co. Inc. as Managing  Director  Emeritus  and from time to time
receives  fees in  connection  with  consulting  and referral  services to Bear,
Stearns & Co. Inc.,  including  the  Offering  and the offering of  $170,000,000
aggregate  principal  amount of the Notes.  Dr.  Seidler has received from Bear,
Stearns & Co. Inc., in connection with such services,  approximately $200,000 in
fiscal 1997.

         Jon P.  Beckman,  a former  executive  officer  of the  Company  and an
affiliate  of the General  Partner,  is being  retained as a  consultant  to the
Company. Pursuant to his consulting agreement with the Company, Mr. Beckman will
receive,  until January 31, 2000, or upon earlier  termination of his consulting
agreement,  $125,000  per  year and  various  insurance  coverages,  and will be
authorized to exercise all stock options  awarded to him,  subject to applicable
vesting provisions. Under this agreement, Mr. Beckman is required to provide the
Company with 20 hours of consultation  per month,  has released the Company from
any liability  resulting  from his employment and has also agreed not to compete
against the Company.

         The Company  leases  office space under a five-year  lease with William
Gardner Wright, Jr., one of the Company's  executive  officers.  The term of the
lease  expires on September  30, 1998 and the rent is  approximately  $4,000 per
month, which the Company believes is within prevailing market rates.

         Pursuant to a licensing  agreement with the Company, W. Wayne Freed, an
executive officer of the Company,  receives royalties related to the manufacture
and sale of a  certain  product  for which Mr.  Freed  owns all of the U.S.  and
foreign patents.  Under this agreement,  Mr. Freed received royalties of $12,646
and $12,269 in fiscal 1997 and 1996, respectively,  and will continue to receive
such royalties until 2012 or the earlier termination of the licensing agreement.

     During  fiscal  1997  and  1996,  the  Company  paid  legal  fees  totaling
approximately $241,000 and $232,000,  respectively,  to the law firm of Watson &
Dana.  Until May 21, 1997, Mr. Dana, a director of the Company,  was a member of
Watson & Dana and a member  of the  Compensation  Committee.  Effective  May 21,
1997, Mr. Dana became employed as Chief Operating Officer and General Counsel of
the  Company.  Mr. Dana  continues  to be a director of the  Company,  but is no
longer a member of the Compensation Committee.

                                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
            AND REPORTS ON FORM 8-K


(a)   Index to Consolidated Financial Statements:
                                                             Page No. of
                                                          Financial Statement
      (1)   Financial Statements:

            Independent Auditors' Report                          F-1
            Consolidated Balance Sheets                           F-2
            Consolidated Statements of Operations                 F-3
            Consolidated Statements of Changes in
               Stockholders' Equity                               F-4
            Consolidated Statements of Cash Flows                 F-5
            Notes to Consolidated Financial Statements            F-6


(b) The  Partnership  did not file a Current  Report on Form 8-K during the last
quarter of the fiscal year covered by this Annual Report.

(c)   Exhibits:  See Exhibit Index immediately following Item 14.

(d)   No additional financial statements are required to be filed.

                                                   EXHIBIT INDEX


Location in
Sequential
Page Numbering
System

                      The following are the Exhibits as required by Item 14 (c).
1    2.1  Acquisition  Agreement  dated  November  21,  1986  between  Synthetic
     Industries,  Inc., Synthetic Industries Limited, Polyweave Corporation, the
     shareholders of Synthetic  Industries,  Inc.,  Synthetic Industries Limited
     and SI Holding Inc. including exhibits thereto.

1    2.2 Plan and Agreement of Merger dated December 4, 1986.

2    2.3 Asset  Purchase  Agreement  dated  October 12, 1990  between  Synthetic
     Industries, Inc. and Chicopee.

10   3.1 Certificate of Incorporation of Synthetic  Industries,  Inc. (including
     all amendments to date) filed with the Secretary of the State of Delaware.

10   3.2 Amended and Restated By-Laws of Synthetic  Industries,  Inc. (including
     all amendments to date).

4    4.1 Form of Indenture between Synthetic Industries,  Inc. and United States
     Trust  Company  of New York,  Trustee,  in respect  to the  12-3/4%  Senior
     Subordinated Debentures due 2002.

18   4.2 Supplemental Form of Indenture between Synthetic  Industries,  Inc. and
     United States Trust Company of New York, Trustee, in respect to the 12-3/4%
     Senior Subordinated Debentures due 2002.

18   4.3 Supplemental  Indenture dated as of February 11, 1997 between Synthetic
     Industries, Inc. and United States Trust Company of New York, Trustee, with
     respect to the 12 3/4% Senior Subordinated Debentures due 2002.

16   4.4 Indenture dated as of February 11, 1997 between  Synthetic  Industries,
     Inc. and United Stated Trust Company of New York, Trustee,  with respect to
     the 9 1/4% Senior Subordinated Notes due 2007.

16   4.5 Registration  Rights Agreement,  dated as of February 11, 1997, between
     Synthetic Industries, Inc. and Bear Stearns & Co. Inc.

12   4.6 Registration  Rights Agreement,  dated as of October 31, 1996,  between
     Synthetic Industries, Inc. and Synthetic Industries, L.P.

9    10.1 Fourth Amended and Restated  Revolving  Credit and Security  Agreement
     dated as of October 20, 1995 among  Synthetic  Industries,  Inc., The First
     National Bank of Boston and other Lenders listed on Schedule I thereto, and
     The First National Bank of Boston, as agent on behalf of the Lenders.

9    10.2  Amendment No. 1 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of December 1, 1995

11   10.3  Amendment No. 2 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of February 14, 1996.

9    10.4  Amendment No. 3 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of March 16, 1996.

2    10.5 US Patent No. 4,867,614, Reinforced Soil and Method (Exp. December 13,
     2003).

2    10.6 US Patent  No.  4,790,691,  Fiber  Reinforced  Soil and  Method  (Exp.
     December 13, 2003).

2    10.7 US Patent No.  5,007,766,  Shaped  Barrier  for  Erosion  Control  and
     Sediment Collection (Exp. April 16, 2008).

1    10.8 Lease  agreement  dated  November  22, 1971  between  Murray Sobel and
     Synthetic Industries, Inc. (including all amendments to date).

1    10.9 Lease  agreement  dated  February 13, 1969,  between  Murray Sobel and
     wife,  Marcela S. Sobel,  and Joseph F.  Decosimo,  Frank M.  Thompson  and
     Murray  Sobel,  Trustees and  Synthetic  Industries,  Inc.  (including  all
     amendments to date).

2    10.10  Lease  agreement  dated  December  17,  1990  between  Chicopee  and
     Synthetic Industries, Inc.

2    10.11 Lease agreement dated January 17, 1991 between Herchel L. Webster and
     Allie Ree Webster and Synthetic Industries, Inc. (the "Lumite Lease").

6    10.12 Amendment to the Lumite Lease dated October 1, 1992.

2    10.13  Consulting  Agreement  dated July 23, 1991 between Texpro Limitada y
     Cia S.C.A. and Synthetic Industries, Limited.

7    10.14 Supply Contract between Eastman Chemical Products, Inc. and Synthetic
     Industries, Inc. dated December 13, 1991.

13   10.15 Agreement dated September 6, 1996 between Leonard Chill and Synthetic
     Industries, Inc.

13   10.16  Agreement  dated  September  6,  1996  between  W.  Wayne  Freed and
     Synthetic Industries, Inc.

13   10.17  Agreement  dated  September  6, 1996  between  Ralph A.  Kenner  and
     Synthetic Industries, Inc.

13   10.18 Agreement dated September 6, 1996 between W. Gardner Wright,  Jr. and
     Synthetic Industries, Inc.

13   10.19  Agreement dated September 6, 1996 between John M. Long and Synthetic
     Industries, Inc.

13   10.20  Agreement  dated  September 6, 1996  between  Charles T. Koerner and
     Synthetic Industries, Inc.

13   10.21  Agreement  dated  September 6, 1996  between  Joseph  Sinicropi  and
     Synthetic Industries, Inc.

13   10.22  Agreement  dated  September  6, 1996 between  W.O.  Falkenberry  and
     Synthetic Industries, Inc.

13   10.23  Agreement  dated  September  6,  1996  between  Bobby  Callahan  and
     Synthetic Industries, Inc.

8    10.24 1994 Stock Option Plan for Non-Employee Directors

8    10.25 1994 Stock Option Plan

11   10.26 1996 Stock Option Plan

11   10.27 Incentive Compensation Plan Fiscal Year 1994/1995

11   10.28 Incentive Compensation Plan Fiscal Year 1995/1996

13   10.29 Amendment No. 4 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of September 27, 1996.

14   10.30 Amendment No. 5 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of October 28, 1996.

15   10.31 Amendment No. 6 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of January 29, 1997.

20   10.32 Amendment No. 7 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of April 30, 1997.

20   10.33 Amendment No. 8 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of June 30, 1997.

21   10.34 Amendment No. 9 to the Fourth Amended and Restated  Revolving  Credit
     and Security Agreement dated as of November 21, 1997.

19   10.35 Asset Sale  Agreement  by and  between  Spartan  Mills and  Synthetic
     Industries, Inc. dated as of February 27, 1997.

19   10.36  Lease   Agreement  by  and  between   Spartan  Mills  and  Synthetic
     Industries, Inc. dated as of February 27, 1997.

17   10.37  Agreement  of Plan of  Withdrawal  and  Dissolution  by and  between
     Synthetic  Industries  L.P.  and  Synthetic  Industries,  Inc.  dated as of
     September 19, 1997.

19   10.38  Agreement  dated May 21, 1997 between  Joseph F. Dana and  Synthetic
     Industries, Inc.


2    21. List of Subsidiaries of Synthetic Industries, Inc.

                      22.  Consent of Deloitte & Touche LLP

                      27.  Financial Data Schedule

--------------
1    Filed as an exhibit to the  Company's  Registration  Statement  on Form S-1
     (33-11479) as filed with the Securities and Exchange  Commission on January
     23, 1987 and incorporated herein by reference.

2    Filed as an exhibit to the  Company's  Registration  Statement  on Form S-1
     (33-51206) as filed with the Securities  and Exchange  Commission on August
     24, 1992 and incorporated herein by reference.

3    Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 1993 and incorporated herein by reference.

4    Filed as an exhibit to the Company's Amendment No. 3 to the Registration on
     Form S-1 (33-51206) as filed with the Securities and Exchange Commission on
     December 4, 1992 and incorporated herein by reference.

5    Filed as an exhibit to the Partnership's  Registration Statement on Form 10
     (0-21548) as filed with the Securities and Exchange Commission on April 16,
     1993 and incorporated herein by reference.

6    Filed  as  an  exhibit  to  the  Partnership's   Amendment  No.  1  to  the
     Registration  Statement on Form 10  (0-21548) as filed with the  Securities
     and  Exchange  Commission  on August 10,  1993 and  incorporated  herein by
     reference.

7    Pursuant to an order dated October 19, 1992,  the  Securities  and Exchange
     Commission granted confidential  treatment with respect to certain portions
     of this exhibit under Rule 406 of the Securities Act of 1933, as amended.

8    Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 1994 and incorporated herein by reference.

9    Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 1995 and incorporated herein by reference.

10   Filed as an exhibit to the  Company's  Registration  Statement  on Form 8-A
     (0-12357) as filed with the Securities  and Exchange  Commission on October
     24, 1996 and incorporated herein by reference.

11   Filed as an exhibit to the  Company's  Registration  Statement  on Form S-1
     (333-09377) as filed with the Securities and Exchange  Commission on August
     1, 1996 and incorporated herein by reference.

12   Filed  as an  exhibit  to  Amendment  No. 1 to the  Company's  Registration
     Statement on Form S-1 (333-09377) as filed with the Securities and Exchange
     Commission on September 13, 1996 and incorporated herein by reference.

13   Filed  as an  exhibit  to  Amendment  No. 2 to the  Company's  Registration
     Statement on Form S-1 (333-09377) as filed with the Securities and Exchange
     Commission on October 2,1996 and incorporated herein by reference.

14   Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 1996 and incorporated herein by reference.

15   Filed as an exhibit to the Company's  Quarterly Report on Form 10-Q for the
     quarter ended December 31, 1996 and incorporated herein by reference.

16   Filed as an exhibit to the  Company's  Registration  Statement  on Form S-4
     (File No.  333-23167) as filed with the Securities and Exchange  Commission
     on March 12, 1997 and incorporated herein by reference.

17   Filed as Annex A to the joint Proxy Statement and Prospectus forming a part
     of  Amendment  No. 3 to the  Company's  Registration  Statement on Form S-4
     (File No.  333-28817) as filed with the Securities and Exchange  Commission
     on September 17, 1997.

18   Filed  as an  exhibit  to  Amendment  No. 1 to the  Company's  Registration
     Statement on Form S-4 (File No. 333-28817) as filed with the Securities and
     Exchange Commission on August 8, 1997.

19   Filed  as an  exhibit  to  Amendment  No. 3 to the  Company's  Registration
     Statement on Form S-4 (File No. 333-28817) as filed with the Securities and
     Exchange Commission on September 17, 1997.

20   Filed as an exhibit to the Company's  Quarterly Report on Form 10-Q for the
     quarter ended June 30, 1997 and incorporated herein by reference.

21   Filed as an exhibit  to the  Company's  Annual  Report on Form 10-K for the
     fiscal year ended September 30, 1997 and incorporated herein by reference.

22   Filed herewith




<PAGE>








INDEPENDENT AUDITORS' REPORT


To the Partners of Synthetic Industries L.P.
Chickamauga, Georgia


We have  audited  the  accompanying  consolidated  balance  sheets of  Synthetic
Industries  L.P.  and  subsidiary  as of  September  30, 1997 and 1996,  and the
related consolidated statements of operations,  changes in partners' capital and
cash flows for each of the three years in the period ended  September  30, 1997.
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 consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of Synthetic  Industries  L.P. and
subsidiary at September 30, 1997 and 1996,  and the results of their  operations
and their cash flows for each of the three years in the period  ended  September
30, 1997 in conformity with generally accepted accounting principles.




/S/ Deloitte & Touche LLP


Deloitte & Touche LLP

New York, New York
November 14, 1997



<PAGE>



                            SYNTHETIC INDUSTRIES L.P.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
     (In thousands of dollars, except limited partnership units outstanding)
<TABLE>
<CAPTION>

                                                                                          September 30,
                  ASSETS                                                               1997           1996
                                                                                     --------       ------

<S>                                                                              <C>               <C>
CURRENT ASSETS:
  Cash.......................................................................    $      340        $   103
  Accounts receivable, net (Note 4)..........................................        60,031         47,861
  Inventory (Note 5).........................................................        54,139         39,142
  Other current assets (Note 6)..............................................        15,402         14,655
                                                                                  ---------       --------

      TOTAL CURRENT ASSETS...................................................       129,912        101,761

PROPERTY, PLANT AND EQUIPMENT, net (Note 7)..................................       182,102        137,974

OTHER ASSETS (Note 8)........................................................        82,781         84,021
                                                                                  ---------       --------

                                                                                   $394,795       $323,756

          ........LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Accounts payable...........................................................      $ 27,030       $ 20,227
  Accrued expenses and other current liabilities.............................        11,613         10,026
  Income taxes payable (Note 10).............................................            52          1,407
  Interest payable...........................................................         2,467          6,024
  Current maturities of long-term debt (Note 9)..............................           718            659
                                                                                 ----------    -----------

         TOTAL CURRENT LIABILITIES...........................................        41,880         38,343

LONG-TERM DEBT (Note 9)......................................................       220,464        194,353

DEFERRED INCOME TAXES (Note 10)..............................................        28,430         25,875

MINORITY INTEREST IN SUBSIDIARY..............................................        35,145              -


COMMITMENTS AND CONTINGENCIES (Note 14)

PARTNERS' CAPITAL (Note 12)
  General Partner Capital ...................................................           688            649
  Limited Partners' Capital, 800 Units issued and outstanding................        68,188         64,536
                                                                                  ---------      ---------

      TOTAL PARTNERS' CAPITAL................................................        68,876         65,185
                                                                                  ---------      ---------

                                                                                   $394,795       $323,756
</TABLE>

                                  See notes to consolidated financial statements

<PAGE>



                            SYNTHETIC INDUSTRIES L.P.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
     (In thousands of dollars, except limited partnership units outstanding)

<TABLE>
<CAPTION>


                                                                                    Year ended September 30,
                                                                         1997             1996                1995
                                                                    --------------   --------------       --------
<S>                                                                       <C>               <C>              <C>
Net sales...............................................................  $ 345,572         $299,532         $271,427
                                                                          ---------         --------         --------
Costs and expenses:
  Cost of sales ........................................................    233,187          208,321          194,706
  Selling expenses......................................................     31,801           27,488           24,273
  General and administrative expenses...................................     27,701           23,318           21,195
  Amortization of excess of purchase price over net
      assets acquired and other intangibles.............................      2,592            2,592            2,566
                                                                           --------         --------         --------

                                                                            295,281          261,719          242,740
                                                                            -------         --------         --------

 Operating income.......................................................     50,291           38,813           28,687
                                                                           --------        ---------         --------

Other expenses:
  Interest expense, net.................................................     20,085           22,773           22,514
  Amortization of deferred financing costs..............................        654              699              737
                                                                           --------          -------         --------

                                                                             20,739           23,472           23,251
                                                                            -------         --------         --------
Income before provision for income taxes, minority interest in
 subsidiary net income and extraordinary item...........................     29,552           14,341            5,436

Provision for income taxes (Note 10)....................................     12,541            6,900            3,500
                                                                           --------         --------         --------

Income before minority interest in subsidiary net income and
 extraordinary item.....................................................     17,011            7,441            1,936

Minority interest in subsidiary net income..............................      1,864                -                -
                                                                           --------      -----------     ------------

Income before extraordinary item........................................     15,147            7,441            1,936

Extraordinary item - Loss from early
  extinguishment of debt (net of tax
  benefit of $7,481) (Note 9)...........................................     11,950                -                -
                                                                             ------      -----------      -----------

NET INCOME..............................................................    $ 3,197          $ 7,441          $ 1,936
                                                                            =======          =======          =======

Net income attributable to:

  General partner.......................................................    $    32           $   74           $    19
  Limited partners......................................................      3,165            7,367             1,917
                                                                          ---------         --------          --------
                                                                          $   3,197          $ 7,441          $ 1,936
                                                                          =========          =======          =======

Net income per limited partnership unit ................................ $      3.96        $   9.21         $    2.40
                                                                         ===========        ========         =========

Limited partnership units outstanding ..................................        800              800              800
                                                                                ===              ===              ===
</TABLE>





                                  See notes to consolidated financial statements

<PAGE>



                            SYNTHETIC INDUSTRIES L.P.
                                 AND SUBSIDIARY
             CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                            (In thousands of dollars)

<TABLE>
<CAPTION>



                                                                                                                  Total
                                                          General                        Limited                Partners'
                                                         Partner                        Partner               Capital


<S>                                                          <C>                     <C>                         <C>     
Balance, October 1, 1994................................     $ 556                   $ 55,263                    $ 55,819

Net income..............................................        19                      1,917                       1,936

Foreign currency translation............................       -                            3                           3
                                                          --------                 ----------                  ----------

Balance, September 30, 1995.............................       575                     57,183                      57,758

Net income..............................................        74                      7,367                       7,441

Foreign currency translation............................       -                          (14)                        (14)
                                                          --------                 -----------                 -----------

Balance, September 30, 1996.............................       649                     64,536                      65,185

Net income..............................................        32                      3,165                       3,197

Equity from the Offering................................         5                        424                         429

Foreign currency translation............................         2                         63                          65
                                                           -------                -----------                 -----------

Balance, September 30, 1997.............................   $   688                   $ 68,188                    $ 68,876
                                                           =======                   ========                    ========
</TABLE>
















                                  See notes to consolidated financial statements

<PAGE>


                                             SYNTHETIC INDUSTRIES L.P.
                                                  AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (In thousands of dollars)
<TABLE>
<CAPTION>
                                                                                   Year ended September 30,
                                                                              1997              1996       1995
                                                                             ------            -----      -----
<S>                                                                        <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income............................................................   $  3,197         $  7,441         $  1,936
  Adjustments to reconcile net income to cash provided by operations:
    Minority interest in subsidiary net income..........................      1,864                -                -
    Extraordinary loss on early extinguishment of debt..................     19,431                -                -
    Depreciation and amortization.......................................     18,236           16,299           14,937
    Deferred income taxes...............................................      2,270            3,400             (355)
    Provision for bad debts.............................................        520            1,024            3,363
  Change in operating assets and liabilities, net of acquisition:
    Accounts receivable.................................................     (9,993)            (943)         (12,212)
    Inventory...........................................................    (13,634)           6,451          (13,076)
    Other current assets................................................        236             (647)          (1,469)
    Accounts payable....................................................      6,803           (3,801)           5,254
    Accrued expenses and other current liabilities......................      1,111            2,648              434
    Income taxes payable................................................     (1,355)             (48)             973
    Interest payable....................................................     (3,557)            (403)             180
                                                                          ----------      -----------        --------
      Net cash provided by (used in) operating activities...............     25,129           31,421              (35)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment............................    (53,980)         (29,253)         (13,313)
  Acquisition of business...............................................     (9,354)               -                -
                                                                             -------    ------------      -----------
    Net cash used in investing activities ..............................    (63,334)         (29,253)         (13,313)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under term loan............................................          -           19,500           11,000
  Repayments under term loan............................................    (20,000)            (500)          (6,000)
  Borrowings (repayments) under revolving credit line...................      9,427          (20,734)           8,598
  Issuance of 9 1/4% Senior subordinated notes..........................    170,000                -                -
  Redemption of 12 3/4% Senior subordinated debentures..................   (132,597)               -                -              
  Prepayment costs on early extinguishment of debt......................    (15,920)               -                -              
  Proceeds from underwritten public offering............................     33,681                -                -              
  Repayments of capital lease obligation and other long-term debt.......       (660)            (342)             (36)
  Debt issuance costs...................................................     (5,525)            (101)            (221)
                                                                           ---------       ----------        ---------
    Net cash provided by (used in) financing activities.................     38,406           (2,177)          13,341
      Effect of exchange rate changes on cash...........................         36                2               (2)
                                                                        -----------      -----------       ---------- 

NET INCREASE (DECREASE) IN CASH.........................................        237               (7)              (9)

CASH AT BEGINNING OF PERIOD.............................................        103              110              119
                                                                          ---------        ---------         --------

CASH AT END OF PERIOD...................................................   $    340         $    103         $    110
                                                                           ========         ========         ========

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid during the year for:
  Interest .............................................................   $ 23,642         $ 23,176         $ 22,334
  Income taxes..........................................................      4,145            3,548            2,882

SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY
Capital lease obligation incurred for purchase of equipment.............$         -         $  5,000      $         -
</TABLE>

                                  See notes to consolidated financial statements

<PAGE>





                            SYNTHETIC INDUSTRIES L.P.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        (In thousands of dollars, except share and per share information)


1.   ORGANIZATION

     Synthetic  Industries,  L.P. (the  "Partnership") is a limited  partnership
     organized  under the laws of Delaware.  In December 1986,  the  Partnership
     acquired all of the issued and outstanding shares of Synthetic  Industries,
     Inc. (the "Company").  The Company manufactures and markets a wide range of
     polypropylene-based  fabric  and fiber  products  designed  for  industrial
     applications.  The  Company's  diverse mix of products  are marketed to the
     floor covering, construction and technical textile markets for such end-use
     applications  as carpet backing,  geotextiles,  erosion  control,  concrete
     reinforcement and furniture construction fabrics.

     On June 9,  1997,  the  Company  and the  Partnership  filed a Joint  Proxy
     Statement and  Prospectus to approve a Plan of Withdrawal  and  Dissolution
     for the Partnership.  For a further description, see Part II, Item 5 (Other
     Information) which is incorporated herein by reference.

     Since  its  organization  in  1986  and  subsequent  admission  of  limited
     partners,  the  Partnership  has  conducted no business  except  owning and
     voting the shares of the  Company.  As a result of its public  offering  of
     Common Stock in November 1996, the Company  currently has 8,656,250  shares
     of Common Stock  outstanding,  of which  approximately 67% are owned by the
     Partnership.  As the  Partnership  has no independent  operations or assets
     other than its  investment  in the  Company,  the  Partnership's  financial
     statements are  substantially  identical to those of the Company,  with the
     exception of the minority  interest and certain expenses  recognized by the
     Partnership associated with a withdrawn common stock offering. As a result,
     the footnote  information  presented  below relates to that of the Company,
     except as disclosed.  Accordingly,  all  references to fiscal year refer to
     the Company's fiscal year which ends on September 30th.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of consolidation

     The consolidated  financial  statements include the accounts of the Company
     and its  subsidiaries,  all of which  are  wholly  owned.  All  significant
     intercompany transactions and balances have been eliminated.




     Revenue recognition

     Revenue from product sales is recognized at the time of shipment.


     Foreign currency translation

     The assets and  liabilities of foreign  subsidiaries  are translated at the
     fiscal  year-end  rates of  exchange,  and the  results of  operations  are
     translated at the average rates of exchange for the years presented.  Gains
     or losses resulting from translating foreign currency financial  statements
     are accumulated in the cumulative  translation  adjustments  account in the
     stockholders'  equity  section  of the  accompanying  consolidated  balance
     sheets.  Foreign  currency  transaction  gains and losses are  included  in
     results of operations.  Foreign currency  realized and unrealized gains and
     losses for the years presented were not material.


     Inventory

     Inventory  is  stated at the lower of cost,  determined  using  the  first-
     in, first-out method, or market.

     Property, plant and equipment

     Property,   plant  and  equipment  is  stated  at  cost  less   accumulated
     depreciation   and   amortization.   Depreciation   is   provided   on  the
     straight-line method based on estimated useful lives, as follows:

                                   Building and improvements          25 years
                                   Machinery and equipment            14 years

     Leasehold improvements are amortized over the shorter of the useful life of
     the asset or the term of the lease.  Expenses for repairs,  maintenance and
     renewals are charged to operations as incurred.  Expenditures which improve
     an asset or extend its useful life are  capitalized.  When  properties  are
     retired  or  otherwise  disposed  of,  the  related  cost  and  accumulated
     depreciation and amortization are removed from the accounts and any gain or
     loss is included in the results of operations.

     Capitalized  interest is charged to machinery  and  equipment and amortized
     over the lives of the related assets.  Interest  capitalized  during fiscal
     1997, 1996 and 1995 was $838, $392 and $729, respectively.


     Income taxes

     The Company accounts for income taxes using an asset and liability approach
     in  accordance  with  Statement of Financial  Accounting  Standards No. 109
     ("SFAS 109").  Under SFAS 109, deferred income taxes are recognized for the
     tax consequences of temporary differences by applying enacted statutory tax
     rates  applicable  to future  years to  differences  between the  financial
     statement  carrying  amounts  and the tax  bases  of  existing  assets  and
     liabilities.  The  effect  on  deferred  taxes of a change  in tax rates is
     recognized in the statement of operations  for the period that includes the
     enactment date.


     Excess of purchase price over net assets acquired

     The excess of purchase  price over net assets  acquired is  amortized  on a
     straight-line  basis over a period of 40 years.  Excess of  purchase  price
     over net assets acquired is assessed for recoverability on a regular basis.
     In evaluating the value and future benefits of goodwill, its carrying value
     would be reduced by the excess,  if any, of the balance  over  management's
     best estimate of undiscounted  future operating income before  amortization
     of the related intangible assets over the remaining amortization period.


     Deferred financing and intangible assets

     Deferred  financing  costs are  amortized  over periods from 5 to 12 years.
     Intangible   assets  consist   primarily of  a  Fibermesh(R)  trademark and
     patents  on  civil   engineering   products,   which  are  amortized  on  a
     straight-line basis over 40 and 15 years, respectively.


     Income per limited partnership unit

     Income per  limited  partnership  unit is based upon the  weighted  average
     number of units  outstanding  during each  respective  year.  Net income is
     allocated to the General Partner,  the Limited  Partners,  and the minority
     interest based on their respective ownership percentages.


     Use of 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  reporting  period.  Actual  results  could  differ  from those
     estimates.


     Recent accounting pronouncements

     In February 1997,  the Financial  Accounting  Standards  Board (the "FASB")
     issued Statement of Financial  Accounting  Standard No. 128,  "Earnings Per
     Share"  ("SFAS  128").  Under the new  standard,  which must be adopted for
     periods  ending after  December  15, 1997,  the Company will be required to
     change the method used to compute  earnings per share and to restate  prior
     periods  presented.  A dual  presentation of basic and diluted earnings per
     share will be required.  The basic  earnings per share  calculation,  which
     will replace primary  earnings per share,  will exclude the dilutive impact
     of stock options and other common share  equivalents.  The diluted earnings
     per share calculation, which will replace fully diluted earnings per share,
     will include  common share  equivalents.  The adoption of SFAS 128 will not
     have a material  impact on  earnings  per share for the three  years  ended
     September 30, 1998.

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
     No.  131,   "Disclosures  about  Segments  of  an  Enterprise  and  Related
     Information" ("SFAS 131"), which must be adopted for fiscal years beginning
     after December 15, 1997. Under the new standard, companies will be required
     to report certain  information  about  operating  segments in  consolidated
     financial  statements.  Operating  segments will be determined based on the
     method  that  management  organizes  its  businesses  for making  operating
     decisions and assessing  performance.  SFAS 131 also requires  companies to
     report  certain   information  about  their  products  and  services,   the
     geographic  areas in which they  operate,  and their major  customers.  The
     Company is currently  evaluating the effect,  if any, of implementing  SFAS
     131.


     Research and development

     The  Company's  research  and market  development  is focused  primarily on
     development and as such the Company engages in product design,  development
     and performance  validation to improve existing  products and to create new
     products.  The Company expended $4,208,  $2,942, and $2,795 in fiscal 1997,
     1996, and 1995,  respectively.  Research and development costs are expensed
     as incurred and included in general and administrative expenses.

     Reclassification of prior financial statements

     Certain  reclassifications  have been  made to  previous  years'  financial
     statements to conform with 1997 classifications.

     Proceeds received from the underwritten public offering

     The $33,681 net proceeds  received  from the November 1, 1996 Offering were
     used to repay certain outstanding indebtedness.


     BUSINESS ACQUISITION

     On February 27, 1997,  the Company  acquired  certain assets of the Spartan
     Technologies   division   of   Spartan   Mills  (the   "Acquisition")   for
     approximately  $9,400.  The  acquisition  has been  accounted for using the
     purchase  method of accounting,  and,  accordingly,  the purchase price has
     been allocated to the net assets acquired (accounts receivable,  inventory,
     and property,  plant and  equipment)  based on the fair market value (which
     approximated cost) at the date of acquisition. The operating results of the
     acquired  business  have been  included in the  consolidated  statement  of
     operations  from the date of  acquisition.  The  Acquisition did not have a
     material impact on the Company's financial statements.


4.  ACCOUNTS RECEIVABLE

     Accounts receivable are presented net of the doubtful allowances of $2,707,
     $3,036 and $4,053 for fiscal  1997,  1996 and 1995,  respectively.  Amounts
     written off against  established  allowances were $849, $2,041 and $511 for
     the years ended September 30, 1997, 1996 and 1995, respectively.

     The Company grants  uncollateralized  trade terms to most U.S. customers. A
     majority of the Company's  carpets backing sales are with customers located
     in the state of Georgia.  As of  September  30, 1997 and 1996,  $26,126 and
     $21,916,  respectively of the Company's accounts  receivable  balances were
     due from  customers  located  in this  state.  Net  sales  to one  customer
     represented  approximately  20% of  consolidated  net  sales  for  1997 and
     approximately   18%  of   consolidated   net   sales  for  1996  and  1995,
     respectively.


5.   INVENTORY
<TABLE>
<CAPTION>
                                                                      September 30,
                                                              1997                 1996
                                                              ----                 ----

                  <S>                                       <C>                 <C>     
                  Finished goods............................$ 33,572            $ 22,555
                  Work in process.........................     7,427               7,937
                  Raw materials...........................    13,140               8,650
                                                            --------             -------

                                                        $  54,139               $ 39,142
</TABLE>


6.   OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
                                                                     September 30,
                                                               1997                1996
                                                               ----                ----

                  <S>                                       <C>                 <C>     
                  Prepaid supplies........................  $  9,003            $  7,250
                  Deferred tax assets (Note 10)...........     5,050               4,765
                  Other...................................     1,349               2,640
                                                           ---------           ---------
                                                             $15,402             $14,655
</TABLE>



7.   PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                                                     September 30,
                                                             1997                 1996
                                                             ----                 ----

                  <S>                                       <C>                 <C>     
                  Land....................................  $  4,585            $  4,458
                  Buildings and improvements..............    35,398              29,298
                  Machinery and equipment and
                    leasehold improvements................   232,277             179,386
                                                             -------            --------

                                                             272,260             213,142
                  Accumulated depreciation................    90,158              75,168
                                                            --------            --------

                                                            $182,102            $137,974
</TABLE>

Depreciation expense on property,  plant and equipment was $14,990,  $13,008 and
$11,634 in fiscal 1997, 1996 and 1995, respectively.





8.   OTHER ASSETS
<TABLE>
<CAPTION>

                                                                 September 30,
                                                              1997               1996
                                                              ----               ----

           <S>                                               <C>                <C>
           Excess of purchase price
              over net assets acquired...................... $99,818             $99,818
           Intangible assets..............................     3,546               3,546
           Deferred financing costs........................   11,651              12,331
                                                           ---------           ---------

                                                             115,015             115,695
           Accumulated amortization........................   32,234              31,674
                                                            --------             -------

                                                            $ 82,781            $ 84,021
                                                            ========            ========

</TABLE>

The excess of purchase price over net assets acquired arose from the December 4,
1986  purchase of the  Company's  Common Stock by Synthetic  Industries  L.P., a
Delaware  limited  partnership.  This  acquisition  was  accounted for using the
purchase method of accounting.  Accordingly, the purchase price was allocated to
the net assets  acquired based on estimates by independent  appraisals and other
valuations  of fair  market  value as of  December  4, 1986,  and  resulted in a
purchase price in excess of net assets acquired of $99,818.

In conjunction with  refinancing of long-term debt (Note 9), deferred  financing
costs  of  $5,525  were  incurred.  Previously  incurred  costs  of  $6,205  and
associated  amortization  of $2,686  were  written  off,  the effect of which is
included in the extraordinary loss from early extinguishment of debt.

Amortization  expense was  $3,246,  $3,291 and $3,303 in fiscal  1997,  1996 and
1995, respectively.


9.   LONG-TERM DEBT
<TABLE>
<CAPTION>


                                                                                     September 30,
                                                                                  1997         1996
       <S>                                                                     <C>              <C>
       Credit facility:
         Revolving credit portion                                              $  13,420         $3,993
         Term loan portion                                                        25,000         45,000
       9 1/4% senior subordinated notes, due 2007                                170,000              -
       12 3/4% senior subordinated debentures, due 2002                            7,403        140,000
       Capital lease obligation (Note 14)                                          4,083          4,698
       Other                                                                       1,276          1,321
                                                                                --------       --------
                                                                                 221,182        195,012
       Less current portion                                                          718            659
                                                                                --------       --------

       Total long-term portion                                                 $ 220,464       $194,353
                                                                               =========       ========
</TABLE>

Credit Facility

On October 20, 1995,  the Company and its lenders  entered into a Fourth Amended
and  Restated  Revolving  Credit  Agreement  (as  amended to date,  the  "Credit
Facility").  The Credit  Facility,  with a termination  date of October 1, 2001,
provided for  potential  borrowing  capacity of up to $85,000  comprised of term
loan borrowings of $45,000 and a revolving  credit loan portion (the "Revolver")
of $40,000.  The term loan balance at September  30, 1997 was $25,000,  of which
$10,000 is payable in 1999 and $15,000 is payable in 2000. The Revolver provides
for  availability  based on a borrowing  formula  consisting  of 85% of eligible
accounts  receivable  and  50%  of  eligible   inventory,   subject  to  certain
limitations  and  reserves  which  include the  remaining  balance due under the
Debentures of $7,403. At September 30, 1997, availability under the Revolver was
$17,838.

The Credit Facility  permits  borrowings  which bear interest,  at the Company's
option,  (i) for domestic  borrowings  based on the lender's base rate (8.50% at
September  30, 1997) or (ii) for  Eurodollar  borrowings  based on the Interbank
Eurodollar  rate at the time of  conversion  plus 2.0% or 1.75% for term loan or
revolver advances, respectively (7.44% to 7.63% at September 30, 1997).

In fiscal 1996, the Credit Facility permitted borrowings which bore interest, at
the Company's  option,  (i) for domestic  borrowings  based on the lender's base
rate plus .75% (9.0% at September  30, 1996) or (ii) for  Eurodollar  borrowings
based on the Interbank  Eurodollar  rate at the time of conversion  plus 2.5% or
2.75%  for term  loan or  revolver  advances,  respectively  (8.09%  to 9.25% at
September 30, 1996).

The Credit  Facility  provides for  borrowings  under letters of credit of up to
$3,000,  which  borrowings  reduce  amounts  available  under the  Revolver.  At
September 30, 1997, no letters of credit were outstanding under the facility.

The Credit  Facility is  collateralized  by  substantially  all of the Company's
assets and contains  covenants  related to the maintenance of certain  operating
and  working  capital  levels  and  limitations  as to  the  amount  of  capital
expenditures.  The  Company's  ability to pay  dividends  on its common stock is
restricted by both the Credit Facility and the indenture  relating to the Senior
Subordinated Debentures discussed above.


Senior Subordinated Debentures and Notes

On February 11, 1997, the Company issued $170,000 in aggregate  principal amount
of 9 1/4% Senior  Subordinated  Notes due 2007 (the  "Notes"),  which  represent
unsecured  obligations of the Company. The Notes are redeemable at the option of
the Company at any time on or after February 15, 2002,  initially at 104.625% of
their amount,  together with accrued interest,  with declining redemption prices
thereafter.  Interest on the Notes is payable  semi-annually  on February 15 and
August 15.

In connection with the issuance of the Notes, the Company redeemed approximately
$132,600 principal amount of its 12 3/4% Senior Subordinated Debentures due 2002
(the  "Debentures")  at a redemption  price of 111.07% of the  principal  amount
thereof.  In addition,  the Company repaid $20,000 of its outstanding  term loan
borrowings as of March 5, 1997. In connection with the early  extinguishment  of
debt, the Company recorded an extraordinary  loss of $11,950  (representing call
premium and prepayment fees of $15,920 and write off of deferred financing costs
of $3,511,  net of an income tax benefit of $7,481) during the second quarter of
fiscal 1997.

On  December  1,  1997 the  Company  redeemed  the  remaining  $7,403  aggregate
principal amount of Debentures  outstanding at a redemption price of 106.375% of
the  principal  amount  thereof,  together  with  accrued  interest  as  of  the
redemption date.

Aggregate Minimum Payments and Fair Value

     Approximate aggregate minimum annual payments due on long term debt and the
capital lease,  for the subsequent five years are as follows:  1998, $718; 1999,
$10,783; 2000, $29,273; 2001, $1,971; 2002, $177,483; and thereafter, $954.

The fair value of the  Company's  Notes is estimated to be $176,375 at September
30,  1997.  The fair  value of the  Debentures  are  estimated  to be $7,875 and
$149,800 at September 30, 1997 and 1996, respectively. The fair values are based
on quoted  market prices for the Notes and  Debentures  in the  over-the-counter
market.









10.  INCOME TAXES

The sources of the  Company's  income  before  provision for income taxes are as
follows:
<TABLE>
<CAPTION>

                                             Year Ended September 30,
                                 1997                   1996                  1995
                                 ----                   ----                  ----

<S>                            <C>                    <C>                    <C>   
United States                  $29,609                $14,083                $4,546
Foreign                          1,082                    919                   890
                                 -----                    ---                 -----  
Earnings before income taxes   $30,691                $15,002                $5,436
                               =======                =======                ======
</TABLE>



The provision for income taxes contributable to the amounts shown above consists
of the following:
<TABLE>
<CAPTION>
                                                                          Year Ended September 30,
                                                                     1997                1996             1995
                                                                     ----                ----             ----
          <S>                                                        <C>               <C>              <C> 
          Current:
              Federal............................................    $8,796            $2,600           $  3,180
              State..............................................     1,120               600                400
              Foreign............................................       355               300                275
                                                                   --------          --------           --------
                                                                     10,271             3,500              3,855
                                                                     ------           -------            -------
          Deferred:
              Federal............................................     1,900             3,200               (218)
              State..............................................       370               200               (137)
                                                                   --------          --------           ---------
                                                                      2,270             3,400               (355)
                                                                    -------           -------           ---------

          Total .................................................   $12,541            $6,900             $3,500
                                                                    =======            ======             ======
</TABLE>

As described in Note 9, the Company  recorded a current tax benefit of $7,481 in
fiscal 1997 as a result of the early extinguishment of debt.







A reconciliation  of US income tax computed at the statutory rate and actual tax
expense is as follows:
<TABLE>
<CAPTION>
                                                                           Year Ended September 30,
                                                                   1997                  1996               1995
                                                                   ----                  ----               ----

          <S>                                                       <C>                <C>                <C>   
          Amount computed at statutory rate......................   $10,742            $5,250             $1,900

          State and local taxes less applicable
            federal income tax benefit...........................       998               550                270

          Amortization of goodwill...............................       873               873                873

          Other nondeductible expenses...........................       181               115                210

          Other, net.............................................      (253)              112                247
                                                                 -----------         --------           --------
                                                                    $12,541            $6,900             $3,500
                                                                    =======            ======             ======
</TABLE>

The tax effects of significant  items  comprising the Company's net deferred tax
liability are as follows:
<TABLE>
<CAPTION>

                                                                           September 30,
                                                                     1997                          1996
                                                                     ----                          ----

          <S>                                                       <C>                          <C>    
          Property, plant and equipment..........................   $27,345                      $24,819
          Trademarks and patents.................................     1,085                        1,056
                                                                     ------                       ------

          Total deferred tax liabilities.........................    28,430                       25,875
                                                                     ------                       ------


          Accounts receivable....................................     1,018                          996
          Inventory..............................................       815                          626
          Accrued expenses.......................................     2,013                        1,829
          AMT credit carryforward (no expiration date)...........     1,204                        1,314
                                                                    -------                       ------

          Total deferred tax assets..............................     5,050                        4,765
                                                                    -------                     --------

          Net deferred tax liability.............................   $23,380                      $21,110
                                                                 ==========                      =======
</TABLE>


11.  RETIREMENT PROGRAMS

     For US  employees,  the Company  maintains a trusteed  profit-sharing  plan
     ("Plan") which is qualified  under Section  401(k) of the Internal  Revenue
     Code.  All  full-time  employees  over the age of 21 who have been employed
     continuously  for at least one year are eligible for  participation  in the
     Plan. The Company may, but has not elected to,  contribute a portion of its
     profits to the Plan,  as  determined  by the Board of  Directors.  Employer
     contributions  vest over 1 to 5 years.  The  Company  has  elected to match
     employee  contributions  to the Plan on a 50% basis but not to exceed 3% of
     the  employee's  annual  compensation.  During fiscal years 1997,  1996 and
     1995, the Company contributed $1,098, $999 and $921, respectively. The Plan
     provides for the Company to bear the expense of the  administration  of the
     Plan. Pension expense on the foreign plans is not significant.


12. STOCK OPTIONS

     Director's plan

     In August 1994,  the Company  adopted a stock option plan (the  "Director's
     Plan")  pursuant  to which  non-qualified  stock  options  to  purchase  an
     aggregate  of  125,261  shares of Common  Stock  were  granted  to the four
     non-employee  Directors  of the Company at an  exercise  price of $6.83 per
     share which was  determined  by  reference  to the fair market value of the
     Company's  equity at the time such  Directors  joined the Board.  The stock
     options  are fully  vested  as of  October  1,  1996 and have a term  which
     expires on August 4, 2004.  The  Director's  Plan does not  provide for any
     further grants or options thereunder.


     Management plan

     The  Company's  1994  and  1996  Stock  Option  Plans  (collectively,   the
     "Management  Plans") for its key  employees,  provided  for the granting of
     incentive  stock  options  ("ISOs"),  as  provided  in Section  422A of the
     Internal  Revenue  Code,  and  non-qualified  stock  options.  The  maximum
     aggregate  number of shares of Common  Stock  that may be issued  under the
     1994 Plan and the 1996 Plan is 491,413 and 289,062 , respectively.

     At September 31, 1997 and 1996,  there were  outstanding  options under the
     Management   Plans  for  the  purchase  of  688,636  and  513,136   shares,
     respectively,  at prices  ranging  from $10.72 to $21.375 per share.  Stock
     option transactions during 1997, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>

                                       Shares reserved                        Shares
                                         for issuance          Shares                                            Weighted
                                          under the           granted        available              Price       average
                                       Management Plans                      for                                  price
                                                                              grant
<S>                                             <C>            <C>            <C>                   <C>            <C>   
     Initial grant December 14,                 491,413        316,697        174,716               $10.72         $10.72
     1994
--------------------------------- ---------------------- -------------- -------------- -------------------- --------------
     Balance at September 30,                   491,413        316,697        174,716               $10.72         $10.72
     1995
          Options granted                       289,062        196,439                              $10.72         $10.72
--------------------------------- ---------------------- -------------- -------------- -------------------- --------------
     Balance at September 30,                   780,475        513,136        267,339               $10.72         $10.72
     1996
          Options granted                             -        175,500                                             $18.77
                                                                                            $17.875-$21.375
--------------------------------- ---------------------- -------------- -------------- -------------------- --------------
     Balance at September 30,                   780,475        688,636         91,839                              $12.77
     1997                                                                                   $10.720-$21.375
</TABLE>


     At September  30, 1997,  207,458  options  were  exercisable  at a weighted
     average exercise price of $10.72 per share.

     The purchase  price of the shares of Common Stock  subject to options under
     the  Management  Plans  must be no less than the fair  market  value of the
     Common  stock at the date of grant;  provided,  however,  that the purchase
     price of shares of Common Stock subject to ISOs granted to any optionee who
     owns shares  possessing  more than 10% of the combined  voting power of the
     Company ("Ten Percent  Shareholder') must not be less that 110% of the fair
     market value of the Common Stock at the date of the grant. The maximum term
     of an option may not  exceed  ten years from the date of the grant,  except
     with respect to ISOs granted to Ten Percent  Shareholders which must expire
     within five years of the date of grant.

     The  Company has elected to  continue  measuring  stock-based  compensation
     using the intrinsic value approach under APB Opinion No. 25 and has adopted
     the  disclosure-only   provision  of  Statement  of  Financial   Accounting
     Standards No. 123, "Accounting for Stock-Based  Compensation" ("SFAS 123").
     Accordingly,  no  compensation  expense has been recognized for the options
     described  above.  Had  compensation  costs for the options been determined
     based on the fair value on the grant date consistent with the provisions of
     SFAS 123,  the  Company's  net income and income per share  would have been
     changed to the following pro forma amounts:

                                        1997          1996   
                                            ----          ----
      Pro forma net income                 $6,009        $8,012
      Pro forma income per share             0.69          1.35                 

     The fair  values  for both  years  were  determined  using a  Black-Scholes
     option-pricing model with the following weighted average assumptions:

                                            1997                 1996
                                            ----                 ----
       Dividend yield                       None                 None
       Volatility                           33%                  33%   
       Risk-free interest rate          6.4% to 6.8%         5.8% to 6.7%
       Expected life                      4 years              4 years
       

13. RELATED PARTY TRANSACTIONS

     Synthetic  Industries,  L.P. (the  "Partnership")  owns 5,781,250 shares of
     Common Stock, or approximately 67% of the issued and outstanding  shares of
     Common Stock. Four of the Company's executive officers, including its chief
     executive officer,  and a former executive officer are sole stockholders of
     corporations  which  indirectly  control  the sole  general  partner of the
     Partnership.

     The  Company  and  the  Partnership  entered  into  a  Registration  Rights
     Agreement pursuant to which the Company has agreed that upon request of the
     Partnership  the  Company  will  register  under  the  Securities  Act  and
     applicable  state securities laws the sale of the Common Stock owned by the
     Partnership and as to which registration has been requested.  The Company's
     obligation is subject to certain  limitations  relating to a minimum amount
     required for  registration,  the timing of a registration and other similar
     matters.  The  Company  is  obligated  to  pay  any  registration  expenses
     incidental to such registration,  excluding  underwriters'  commissions and
     discounts.  In  connection  with the November 1, 1996  underwritten  public
     offering  the  Company  incurred  approximately  $650  of  such  incidental
     expenses.

     On September  19,  1997,  the Company and the  Partnership  entered into an
     Agreement and Plan of Withdrawal and Dissolution of the  Partnership  ("the
     Plan").  Pursuant to the Plan,  the  Partnership  is to be dissolved in two
     separate phases.  The first phase is to be an underwritten  public offering
     of the number of shares of Common Stock that limited  partners have elected
     to  sell,  and  the  second  phase  is  to  be  one  to  three  liquidating
     distributions of the unsold portions of the Partnership's  shares of Common
     Stock,  beginning 180 days after the completion of the public offering.  On
     November 7, 1997, the limited  partners  approved the adoption of the Plan.
     However,  the  implementation  of the Plan has been  enjoined  by courts in
     Delaware and  California in connection  with two lawsuits  filed by certain
     limited partners of the Partnership against the Partnership and its general
     partner  (the  "General  Partner"),  among  others.  See  "Claims and Legal
     Proceedings".  Among other equitable and legal  remedies,  the plaintiff is
     seeking  the  removal of the General  Partner  and the  liquidation  of the
     Partnership. The Company is not currently involved in these proceedings and
     does not  presently  possess any  contractual  rights with respect to their
     ultimate  resolution.  If, in connection with these  lawsuits,  the General
     Partner is removed or resigns,  or the  Partnership  is liquidated  under a
     court-appointed receiver, there can be no assurance that the resulting sale

<PAGE>

     and/or distribution of the Partnership's share of Common Stock will be made
     in the same or similar manner as that contemplated by the Plan. The General
     Partner  has denied the  allegations  of the  plaintiff  and is  vigorously
     contesting the lawsuits;  however,  in the event of an adverse ruling,  the
     Company cannot predict the volume or price at which the Common Stock trades
     might be  affected.  In  connection  with the  Plan  the  Company  incurred
     approximately  $1,150 of expenses on the behalf of the  Partnership.  These
     amounts  are  reimbursable  to the Company  and  included in other  current
     assets (Note 6).

     A  former  executive  officer  of  the  Company  and  an  affiliate  of the
     Partnership,  is being retained as a consultant to the Company. Pursuant to
     his consulting  agreement with the Company,  the former  executive  officer
     will receive,  until January 31, 2000, or upon earlier  termination  of his
     consulting  agreement,  $125 per year and various insurance coverages,  and
     will be authorized to exercise all stock options awarded to him, subject to
     applicable vesting provisions.  Under this agreement,  the former executive
     officer is required to provide  the Company  with 20 hours of  consultation
     per month,  has released the Company from any liability  resulting from his
     employment and has also agreed not to compete against the Company.

     The Company  leases  office  space under a five-year  lease with one of the
     Company's  executive  officers.  The term of the lease expires on September
     30,  1998 and the rent is  approximately  $48 per year,  which the  Company
     believes is within prevailing market rates.

     Pursuant to a licensing agreement with the Company, an executive officer of
     the Company,  receives  royalties  related to the manufacture and sale of a
     certain  product for which the  executive  officer owns all of the U.S. and
     foreign  patents.  Under this  agreement,  the Company  paid  royalties  of
     approximately $13 and $12 in fiscal 1997 and 1996,  respectively,  and will
     continue to receive such royalties until 2012 or the earlier termination of
     the licensing agreement.

     During fiscal 1997 and 1996 the Company paid fees of approximately $241 and
     $232, respectively,  to a law firm in which Mr.  Joseph Dana, a director of
     the Company was a member until May 21, 1997.  Effective  May 21, 1997,  Mr.
     Dana became employed as Chief Operating  Officer and General Counsel of the
     Company.


14.  COMMITMENTS AND CONTINGENCIES

     a.   Lease commitments

          On May 15, 1996,  the Company  entered into a five-year  capital lease
          for equipment  which provides for payments over a five-year  period at
          an interest rate of 8.42%. The Company also leases certain factory and
          warehouse  buildings and equipment  under long-term  operating  leases
          expiring periodically through 2009.
<PAGE>




     Future  minimum  lease  payments  under  noncancelable lease obligations at
     September 30, 1997 are as follows:

<TABLE>
<CAPTION>

                                                                              Capital         Operating
                  Year                                                         leases            leases

                  <S>                                                           <C>             <C>    
                  1998........................................................  $  986          $ 2,961
                  1999.......................................................      986            2,399
                  2000.......................................................      986            1,638
                  2001.......................................................    1,993              662
                  2002....................................................           -              307
                  Thereafter.................................................        -              635
                                                                                ------           ------

                  Total minimum lease payments................................  $4,951          $ 8,602
                                                                                                =======

                  Less amount representing interest............................    868
                                                                                   ---

                  Present value of net minimum lease payments..................  4,083

                  Less current maturities of capital
                      lease obligation........................................     614
                                                                               -------

                  Long-term capital lease obligation........................... $3,469
</TABLE>

          Total  rental  expense  for  the  above  operating  leases  and  other
          short-term leases for the fiscal years 1997, 1996 and 1995 was $4,112,
          $4,499 and $3,731, respectively.


     b.   Capital Expenditures

          In fiscal 1998, the Company plans a $41,000  expansion of its existing
          manufacturing  facilities,  primarily to expand  capacity,  subject to
          prevailing  market  conditions,   of  which  $8,128  is  committed  at
          September 30, 1997.


15. LITIGATION

     The Company and its subsidiaries  are parties to litigation  arising out of
     their business  operations.  Most of such  litigation  involves  claims for
     personal injury,  property damage,  breach of contract and claims involving
     employee  relations  and certain  administrative  proceedings.  The Company
     believes such claims are adequately  covered by insurance or do not involve
     a risk of material loss to the Company.

       In connection with the proposed dissolution of the Partnership,  pursuant
     to an Agreement and Plan of Withdrawal and  Dissolution  (the "Plan"),  one
     director and certain of the Company's  officers who are affiliated with the
     General Partner have been named in two putative class action lawsuits filed

<PAGE>

     by certain limited  partners of the  Partnership.  In the first action,  to
     which  the  Company  is not a party,  filed  on  February  11,  1997 in the
     Delaware Court of Chancery and  thereafter  amended,  the  plaintiffs  have
     alleged,  among other things,  breach of the defendants'  fiduciary duty to
     the  limited  partners,  that the  Plan is  unlawfully  coercive,  that the
     General  Partner  has  allegedly  failed  to  satisfy  certain   conditions
     precedent  to the  right  of  limited  partners  to amend  the  partnership
     agreement  and that certain  amendments  necessary  to  implement  the Plan
     violate the terms of the partnership agreement.  The plaintiffs seek, among
     other  equitable  and  legal  remedies,  removal  of the  General  Partner,
     dissolution of the Partnership,  appointment of a liquidating  trustee,  to
     enjoin  the  implementation  of the Plan  and  compensatory  damages  in an
     undetermined amount. On October 23, 1997, the Court preliminarily  enjoined
     the implementation of the Plan, although the Plan was subsequently approved
     by limited  partners on November 7, 1997. On November 7, 1997, the Delaware
     Supreme Court accepted the defendants'  petition for an expedited appeal of
     this  injunction,  and oral argument on the appeal was heard on December 2,
     1997.  The  defendants  have  denied  the  allegations of the plaintiff and
     are vigorously contesting the lawsuit.

       The second  lawsuit was filed in the U.S.  District Court of the Northern
     District  of  California  on May  1,  1997,  and  thereafter  amended.  The
     plaintiff has alleged in his amended complaint  various federal  securities
     and proxy violations allegedly arising out of the joint proxy statement and
     prospectus  which  was  mailed  to  limited partners in connection with the
     solicitation  of  proxies  for  the  vote on the  Plan  and  other  related
     documents.  The  plaintiff  also added the  Company  as a named  defendant,
     alleging that all defendants  acted in concert with, and as agents of, each
     other; however, the plaintiff made no specific indepndent  allegations with
     respect to the Company.  The  plaintiff  seeks,  among other  equitable and
     legal remedies,  to enjoin the  implementation  of the Plan and unspecified
     damages.  On November 6, 1997,  the Court  granted in part the  plaintiff's
     motion for a temporary  restraining  order enjoining the  implementation of
     the Plan.  The  plaintiff's  motion for a preliminary  injunction  has been
     briefed and an oral argument was heard on December 19, 1997. The defendants
     have denied the allegations of the plaintiff and are vigorously  contesting
     the lawsuit.

     The  Partnership  is a  principal  stockholder  of the  Company and certain
     members of the  Company's  management  control  the  General  Partner.  See
     "Certain  Relationships and Related  Transactions."  Based on the Company's
     review of the  allegations  made in the above actions to date,  the Company
     does not believe that the ultimate  resolution of either action will have a
     material adverse effect on the Company's results of operations or financial
     condition.

16.  Subseqent Event

     On December 18, 1997, the Company and its lenders, with BankBoston as agent
     entered into a new five year credit  facility (the "New Credit  Facility").
     The  New  Credit  Facility  consists  of up to a $40  million  asset  based
     securitization  program,  with  amounts  borrowed  through  a newly  formed
     subsidiary,     Synthetic    Industries    Funding    Corporation,     (the
     "Securitization"),  and a $60 million senior secured revolver facility (the
     "New   Revolver").   Securitization   and  New  Revolver   borrowings   are
     collateralized by the Company's accounts  receivables and substantially all
     of the assets of the Company, excluding real property, respectively.

     Interest on the Securitization is based on the applicable  commercial paper
     rate in effect plus a spread.  The New Revolver  permits  borrowings  which
     bear interest, at the Company's option, (i)for domestic borrowings based on
     the lender's base rate or (ii) for Eurodollar borrowings based on a  spread
     over the Interbank Eurodollar  rate at the time of conversion.  Spreads for
     the Securitization and the Eurodollar  borrowings  are  determined  by  the
     operational performance of the Company. At September 30, 1997, the interest
     rates under the  Securitization  and the Eurodollar  borrowings  would have
     been 6.23% and 7.09%, respectively.

     The  New Credit Facility  contains  covenants related to the maintenance of
     certain  operating  ratios  and  limitations  as to the  amount of  capital
     expenditures. The Company's ability to pay dividends on its common stock is
     restricted by both the New Credit  Facility and the Notes. At September 30,
     1997,the  availability  under  the New  Credit  Facility  would  have  been
     approximately $45,000.




                                   SIGNATURES3

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

SYNTHETIC INDUSTRIES L.P.

By: SI MANAGEMENT L.P.
      General Partner

By: SYNTHETIC MANAGEMENT G.P.
      General Partner

By: CHILL INVESTMENTS, INC.
      Managing General Partner

By: /s/ Leornard Chill
      Leonard Chill
      President
      Dated: December 19, 1997