<PAGE>   1
                       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 November 2, 1996

[ ]      Transition report pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934 for the transition period from _____ to _____.

                        Commission File Number: 33-27038

                             JPS TEXTILE GROUP, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                              57-0868166
(STATE OF OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)

555 North Pleasantburg Drive, Suite 202, Greenville, SC            29607
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)

       Registrant's telephone number, including area code: (864) 239-3900

        Securities registered pursuant to Section 12(b) of the Act: None.

        Securities registered pursuant to Section 12(g) of the Act: None.

         Indicate by check mark whether the 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: /X/

         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/

         As of January 30, 1997, there were 490,000 shares of the registrant's
Class A Common Stock, $.01 par value per share (the "Class A Common Stock"),
held by non-affiliates of the registrant. There is no established public trading
market for such shares.

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court: /X/

         As of the date hereof, 490,000 shares of Class A Common Stock and
510,000 shares of the registrant's Class B Common Stock, $.01 par value per
share, were issued and outstanding.

<PAGE>   2
                             JPS TEXTILE GROUP, INC.

                                Table of Contents

                                     PART I

<TABLE>
<S>        <C>                                                                <C>
Item 1.    BUSINESS........................................................    2

Item 2.    PROPERTIES......................................................   10

Item 3.    LEGAL PROCEEDINGS...............................................   10

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS..............   10

                                     PART II

Item 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
           RELATED STOCKHOLDER MATTERS.....................................   11

Item 6.    SELECTED HISTORICAL FINANCIAL DATA..............................   12

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS.......................................   14

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................   24

Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE.............................   51

                                    PART III

Item 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............  51

Item 11.   EXECUTIVE COMPENSATION...........................................  53

Item 12.   SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT......  58

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................  60

                                     PART IV

Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K...  60

           SIGNATURES.......................................................  66
</TABLE>
<PAGE>   3
                                     PART I

ITEM 1.  BUSINESS.

HISTORICAL BACKGROUND

JPS Textile Group, Inc. ("JPS" or the "Company") is a Delaware corporation,
incorporated in December 1986, with its principal executive offices located at
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607;
telephone number (864) 239-3900.

On March 14, 1988, the Company executed a merger agreement providing for the
acquisition of J.P. Stevens & Co., Inc. ("J.P. Stevens"). On March 15, 1988, the
Company commenced a tender offer pursuant to such merger agreement for all of
the outstanding stock of J.P. Stevens. Subsequently, the Company terminated its
tender offer and J.P. Stevens agreed to be acquired by another entity.
Simultaneously therewith, J.P. Stevens agreed to sell to the Company the
business and substantially all of the assets of five J.P. Stevens divisions: the
Converter and Yarn division; the Automotive Products division; the Elastomerics
division; the Carpet division; and the Industrial Fabrics division (the
"Predecessor Stevens Divisions"), for approximately $527.0 million (the
"Acquisition").

Subsequent to the Acquisition, due to certain financial concerns, the Company
engaged certain financial advisors in March 1990 to advise the Company
concerning a possible restructuring of its debts and equity capitalization. In
furtherance thereof, the Company, together with its legal and financial
advisors, met with representatives of the Company's senior lenders and with the
respective legal and financial representatives of certain large institutional
holders of the Company's (i) Senior Variable Rate Notes due June 1, 1996, (ii)
Senior Subordinated Discount Notes due June 1, 1999, (iii) 15.25% Senior
Subordinated Notes due June 1, 1999, and (iv) 14.25% Subordinated Debentures due
May 15, 2000 (collectively, the "Old Debt Securities"), to discuss the Company's
general business and financial status, and to explore various financial
restructuring alternatives.

In November 1990, the Company and representatives of the holders of the Old Debt
Securities determined that a transaction involving the exchange of the Old Debt
Securities for a significant percentage of "new" common stock and "new" debt
securities with a fixed lower per annum interest rate, together with the
issuance to the holders of the Company's Series A Exchangeable Adjustable Rate
Preferred Stock and Series B Junior Preferred Stock (together, the "Old
Securities") of a significant percentage of the Company's "new" preferred equity
securities, would improve the Company's financial condition and overall
creditworthiness and simplify its capital structure, and that such transaction
would best be accomplished pursuant to a pre-petition solicitation of votes to
accept or reject a voluntary plan of reorganization (the "Plan of
Reorganization") under chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code").

The Company's solicitation was successfully completed and the chapter 11 case
was commenced in early February 1991 before the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). The Plan of
Reorganization was confirmed by the Bankruptcy Court pursuant to a court order
signed on March 21, 1991 and the Plan of Reorganization became effective on
April 2, 1991. As part of the Plan of Reorganization, the Company, together with
its senior bank lenders, agreed to restructure the then-existing bank debt of
the Company.



                                        2
<PAGE>   4
On June 28, 1994, pursuant to the terms of an Asset Purchase Agreement dated May
25, 1994, as amended, (the "Asset Purchase Agreement"), by and among the
Company, JPS Auto Inc., a wholly-owned subsidiary of the Company ("Auto"), JPS
Converter and Industrial Corp., a wholly-owned subsidiary of the Company
("C&I"), Foamex International Inc. ("Foamex") and JPS Automotive Products Corp.,
an indirect, wholly-owned subsidiary of Foamex ("Purchaser"), the Company
consummated the disposition of its Automotive Assets (as described below) to the
Purchaser.

The "Automotive Assets" consisted of the businesses and assets of Auto and the
synthetic industrial fabrics division of C&I, and the Company's investment in
common stock of the managing general partner of Cramerton Automotive Products,
L.P. (an 80% owned joint venture). Pursuant to the Asset Purchase Agreement, the
Purchaser agreed to assume substantially all of the liabilities and obligations
associated with the Automotive Assets. In addition, the Company and its
affiliates agreed, for a four year period, not to directly or indirectly compete
in North, Central and South America with the businesses that were sold.

The sale price for the Automotive Assets was approximately $283 million,
consisting of $264 million of cash paid at closing, $15 million of assumed debt
as of June 28, 1994, and certain post-closing adjustments which resulted in a
net gain of $4.4 million recognized in 1995. The sale of the Automotive Assets
resulted in an approximate total gain of $137.4 million, net of income taxes of
$2.9 million.

The net cash proceeds from the disposition of the Automotive Assets (after
deductions for fees, other expenses and amounts designated by management to
satisfy possible contingent tax liabilities) were approximately $217 million,
and such proceeds were used by the Company to reduce its outstanding
indebtedness.

On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated
as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"),
a wholly-owned subsidiary of the Company, Gulistan Holdings Inc. and Gulistan
Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
"Gulistan"), the Company and Carpet consummated the sale of substantially all
the assets of Carpet used in the business of designing and manufacturing tufted
carpets for sale to residential, commercial and hospitality markets (the "Carpet
Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume
substantially all of the liabilities and obligations associated with the Carpet
Business. Gulistan was formed and its common stock is owned by certain members
of the former management team at Carpet. The Company and its subsidiaries have
agreed, for a three-year period, not to compete in certain specified geographic
areas directly or indirectly with the business that was sold.

The consideration received for the Carpet Business consisted of approximately
$22.5 million in cash, subject to certain post-closing adjustments based on the
audited amount of working capital transferred which resulted in a reduction to
net cash proceeds of approximately $3.5 million, and other debt and equity
securities of Gulistan as follows: a $10 million Promissory Note due in November
2001, $5 million preferred stock redeemable in November 2005, and warrants to
purchase 25% of the common stock of Gulistan. Based on an independent valuation
at the asset transfer date, the Company determined the fair value of these debt
and equity securities to be approximately $11.3 million.



                                        3
<PAGE>   5
The Carpet Assets were reduced to their net realizable value as of October 28,
1995 and such reduction was reflected as a loss on sale of discontinued
operations of $30.7 million in the 1995 consolidated financial statements. In
May 1996, the Company and Gulistan agreed on the amount of the post-closing
adjustment to the consideration received for the Carpet Business. As a result,
the Company paid a post-closing adjustment of $3.5 million (an estimated
post-closing adjustment of $2.0 million was included in the Fiscal 1995 loss on
sale of discontinued operations) and has recognized in Fiscal 1996 an additional
loss of $1.5 million on the sale of discontinued operations. The final amount of
net cash proceeds applied by the Company to reduce outstanding borrowings under
its senior credit facility was approximately $16.7 million (net of fees,
expenses and the post-closing adjustment resulting from the level of working
capital transferred at the closing date).

Pursuant to an Asset Purchase Agreement dated September 30, 1996 between JPS
Elastomerics Corp. ("Elastomerics"), a wholly-owned subsidiary of the Company,
and Elastomer Technologies Group, Inc. ("Elastomer") and a Receivables Purchase
Agreement dated September 30, 1996 between Elastomerics and the Bank of New York
Commercial Corporation, Elastomerics completed the sale of substantially all the
assets of its rubber products division, a business engaged in the manufacture
and sale of natural and synthetic elastic for use in apparel products, diaper
products and specialty industrial applications (the "Rubber Products Business").
The Rubber Products Business had accounted for sales of $22.6, $20.7 million and
$16.8 million in Fiscal 1994, 1995 and 1996 (eleven months), respectively. Under
the terms of the agreement, Elastomer agreed to assume substantially all the
liabilities and obligations associated with the Rubber Products Business. The
Company and its subsidiaries have agreed not to compete directly or indirectly
with the business that was sold for a period of two years. The consideration for
the Rubber Products Business consisted of approximately $5.1 million in cash,
subject to certain post-closing adjustments based on the audited amount of
working capital transferred on the closing date, and resulted in a loss of
approximately $7.7 million which was charged to operations in Fiscal 1996. The
net proceeds from the sale, after fees and expenses, were approximately $4.8
million and were used to reduce the Company's outstanding indebtedness.

GENERAL

The Company is one of the largest diversified domestic manufacturers of textile
and textile related products, principally for the apparel, industrial and home
fashion markets. JPS conducts its operations from 10 manufacturing plants in
five states and employs approximately 4,000 people. The Company competes in
three industry segments; apparel fabrics and products, industrial fabrics and
products and home fashion textiles. Certain financial information about the
Company's industry segments for each of the last three fiscal years is included
in Note 12 of the Notes to Consolidated Financial Statements included in Item 8
herein.

APPAREL FABRICS AND PRODUCTS

The Company is a leading manufacturer of greige goods (unfinished woven fabrics)
and yarn. The Company's products are used in the manufacture of a broad range of
consumer apparel products including blouses, dresses, sportswear and
undergarments.

Greige Goods. The Company produces fabrics from spun and filament yarns that are
used ultimately in the manufacture of apparel such as blouses, dresses and
sportswear. Greige goods are produced from rayon, acetate, polyester and cotton
yarns, and are primarily sold to other textile manufacturers for use in
producing printed and dyed fabrics.

Yarn.  The Company produces a variety of rayon and polyester spun yarns for its
own use and for sale to manufacturers of knitted apparel.

                                        4
<PAGE>   6
INDUSTRIAL FABRICS AND PRODUCTS

Commercial Roofing Products. The Company is a well-established manufacturer of
single-ply membrane roofs that are made from woven synthetic fabrics and
rubber-based or polypropylene specialty polymer compounds which are sold
principally to roofing distributors for use in both the new and replacement
commercial markets.

Other Building Construction Products. The Company is a producer of fabrics made
from glass and synthetic fibers that are used in a number of applications in the
building construction industry. Products include various scrims used for
wallboard tapes and certain roofing applications, and reinforcement substrates
used for the installation of internal and external tiles and synthetic wall
surfaces. The Company produces and sells membrane products (similar to
commercial roofing products) for use in environmental containment applications
such as reservoir liners and covers.

Other Industrial Products. The Company produces a wide variety of other
industrial textile products that are used in many industries for many different
end uses. Many of these products have characteristics that provide insulation or
filtration properties. These specialty fabrics are used in the manufacture of
such products as flame-retardant clothing, filtration products, tarpaulins,
awnings, athletic tapes, printed circuit boards and advanced composites. In
addition, the Company produces urethane products for use in the manufacture of
various products such as athletic shoes, "bulletproof" glass, disposable
intravenous bags, seamless welded drive belts and tubing.

HOME FASHION TEXTILES

The Company produces a variety of unfinished woven fabrics and yarns for use in
the manufacture of draperies, curtains and lampshades and is a major producer of
solution-dyed drapery fabrics.

OPERATIONS

Each operating unit of the Company has individual administrative, manufacturing
and marketing capabilities for all material aspects of operations, including
product design, customer service, purchasing and credit and collection.
Corporate support services include finance, strategic planning, legal, tax and
regulatory affairs.

Following the Acquisition and through the date hereof, management's business
plans have included many cost-reduction activities aimed at improving return on
assets. These activities included consolidating manufacturing operations,
exiting unprofitable product lines, more aggressive capital spending programs to
improve quality and productivity and reorganizing certain manufacturing
operations. The Company plans to continue its manufacturing modernization
program to improve efficiency and productivity and further reduce its cost
structure.

The Company's corporate headquarters is located in Greenville, South Carolina.
The Company maintains a sales office in New York, New York for certain of its
operations. Five additional regional sales offices are maintained by the
Company, principally for its roofing and building construction products. See
Item 2, "PROPERTIES".



                                        5
<PAGE>   7
MANUFACTURING

The Company's experienced workforce and wide variety of yarn making, fabric
forming and other manufacturing equipment allow the Company to rapidly and
efficiently change its product mix to meet style and seasonal requirements. The
Company's activities generally encompass all phases of manufacturing its
products.

In the manufacture of woven textile products, the Company purchases synthetic
and natural fibers and spins them into yarn or purchases filament yarn for
processing. In addition, the Company purchases certain spun yarns. Yarns are
then coated, sized or directly woven into unfinished fabric. Upon completion of
the weaving process, fabric is generally shipped to customers who dye, finish,
coat and cut those fabrics for resale.

Single-ply membrane roofing is made by processing a Company-manufactured woven
substrate with specialty polymers. Other industrial fabric products are produced
from either woven fiberglass or cotton and synthetic fibers, which fibers are
processed into yarn, woven and finished into fabrics by the Company. Other
specialty industrial products are produced by extrusion of urethane resins.

The Company believes that its manufacturing facilities are sufficient for its
present and reasonably foreseeable future production requirements.

RAW MATERIALS

The Company maintains good relationships with its suppliers and has, where
possible, diversified its supplier base so as to avoid a disruption of supply.
In most cases, the Company's raw materials are staple goods that are readily
available from numerous domestic fiber and chemical manufacturers. For several
products, however, branded goods or other circumstances prevent such a
diversification, and an interruption of the supply of these raw materials could
have a significant negative impact on the Company's ability to produce certain
products. The Company believes that its practice of purchasing such items from
large, stable companies minimizes the risk of such an interruption in supply.

MARKETING AND COMPETITION

The textile industry is highly competitive and includes a number of participants
with aggregate sales and financial resources greater than the Company's. The
Company generally competes on the basis of price, quality, design and customer
service. Many companies compete in limited segments of the textile market. In
recent years, a large and growing percentage of domestic consumer apparel demand
has been met by foreign competitors whose products, both fabrics and garments,
are imported into the United States. The Company is well-positioned due to its
ability to respond quickly to changing styling and fashion trends. This ability
generally provides advantages for domestic textile manufacturers. Although no
single company dominates the industry, most market segments are dominated by a
small number of competitors. The Company believes it has a significant market
share in the market for rayon and acetate apparel fabrics, rayon yarn,
solution-dyed satin fabrics and quartz fabrics.



                                        6
<PAGE>   8
The Company's marketing efforts include the development of new product designs
and styles which meet customer needs. The Company's operating units have been
established suppliers to each of its markets for many years and are taking
advantage of well-established customer relationships to increase product
development with its customers. The "J.P. Stevens" trade name, which the Company
has a non-exclusive, royalty-free license to use (see "--Patents, Licenses and
Trademarks" below), is widely recognized throughout the textile industry. The
Company believes that its relatively broad base of manufacturing operations
provides it with a competitive advantage in developing new textile products. In
addition to its direct marketing capabilities, the Company markets certain of
its products through distributors.

The following is a discussion of marketing and competitive factors as they
relate to each of the Company's segments.

Apparel Fabrics and Products

Greige Goods. The Company markets its spun and filament fabrics to converters
who finish and/or dye these products prior to shipping to finished apparel
manufacturers. The Company has sought to maintain a relatively high proportion
of such sales in product areas where its manufacturing flexibility can provide a
competitive advantage. The Company has entered into a joint venture with a
Mexican company involved in dyeing, printing and finishing fabrics primarily for
use in Mexico. The Company expects its sales of greige goods to Mexico to grow
significantly as a result of this venture.

Yarn. The Company competes with a large number of companies which sell yarn to
woven and knit goods manufacturers. Yarns are generally sold on a direct basis,
and the Company believes that quality and price are the primary competitive
factors.

Industrial Fabrics and Products

Construction Products. The Company markets its single-ply roofing products on a
direct basis to roofing distributors. The Company competes with manufacturers of
this and other types of roofing products. The Company believes that its
product's ease of installation and warranty are important competitive factors.

Other Products. Other industrial fabrics and products are marketed directly to
other manufacturers and distributors. The Company believes that price and its
ability to meet customer technical specifications are important competitive
factors.

Home Fashion Textiles

The Company's home fashion operations compete with a large number of
manufacturers of similar woven fabric products. In general, product markets are
differentiated on the basis of price and quality. The Company believes that
design and style features are important competitive factors.

CUSTOMERS

No customer accounts for more than 10% of the Company's sales. However, the loss
of certain customers could have a material adverse effect on sales.



                                        7
<PAGE>   9
PRODUCT DEVELOPMENT

In general, the textile industry expends its efforts on design innovation and
capital expenditures for process enhancements rather than on basic research,
relying on fiber suppliers or machinery manufacturers for basic research.

The Company's research and development activities are directed toward the
development of new fabrics and styles which meet specific styling requirements
(in the case of apparel and home furnishing fabrics and products) or other
specific properties such as insulation, weight, strength, filtration or laminate
adherence (in the case of industrial fabrics and products). Significant time is
spent by employees in activities such as meeting with stylists, designers,
customers, suppliers and machinery manufacturers, as well as producing samples
and running trials in order to develop new products and markets. These
activities are performed at various levels and at various locations, and their
specifically identifiable incremental costs are not material in relation to the
Company's total operating costs.

BACKLOG

Unfilled open orders, which the Company believes are firm, were $52.6 million at
November 2, 1996 and $50.5 million at October 28, 1995 (1995 amount is adjusted
to exclude the discontinued operations of the Carpet Business sold in November
1995). The Company generally fills its open orders in the following fiscal year
and the Company expects that all of the open orders as of November 2, 1996 will
be filled in the 52-week period ending November 1, 1997 ("Fiscal 1997").
Unfilled open orders, which the Company believes are firm, were $60.8 million at
December 30, 1996 compared to $68.0 million at December 30, 1995. The decrease
in open orders at December 30, 1996 as compared to December 30, 1995 is
primarily due to a decrease in customer demand for apparel fabrics and products
and is representative of a change in the timing of the acceptance of certain
orders by the Company. The Company believes that the amount of backlog provides
some indication of the sales volume that can be expected in coming months,
although changes in economic conditions may result in deferral or acceleration
of orders which may affect sales volume for a period.

No significant portion of the Company's business is subject to renegotiation of
profits, or termination of contracts or subcontracts at the election of the
government.

PATENTS, LICENSES AND TRADEMARKS

Certain of the Company's products are sold under registered trademarks which
have been licensed royalty-free to the Company from J.P. Stevens until May 2013,
including trademarks for certain products using the "J.P. Stevens" name.
Patented processes used in the manufacturing process are not a significant part
of the Company's business. The Company does not license its name or products to
others except for the licenses of certain trade names granted royalty free to
operations that the Company has sold.

EMPLOYEES

The Company currently has approximately 4,000 employees of which approximately
3,500 are hourly and approximately 500 are salaried. The Company's employees are
not represented by unions. The Company believes its relations with its employees
to be good and has not had any work stoppages or strikes.



                                        8
<PAGE>   10
ENVIRONMENTAL AND REGULATORY MATTERS

The Company is subject to various federal, state and local government laws and
regulations concerning, among other things, the discharge, storage, handling and
disposal of a variety of hazardous and nonhazardous substances and wastes. The
Company's plants generate small quantities of hazardous waste that are either
recycled or disposed of off-site by or at licensed disposal or treatment
facilities.

The Company believes that it is in substantial compliance with all existing
environmental laws and regulations to which it is subject. In addition, the
Company is subject to liability under environmental laws relating to the past
release or disposal of hazardous materials. To date, and in management's belief
for the foreseeable future, liability under and compliance with existing
environmental laws has not had and will not have a material adverse effect on
the Company's financial or competitive positions. No representation or assurance
can be made, however, that any change in federal, state or local requirements or
the discovery of unknown problems or conditions will not require substantial
expenditures by the Company.

SEASONALITY

Certain portions of the business of the Company are seasonal (principally
construction products) and sales of these products tend to decline during winter
months in correlation with construction activity. These declines have
historically tended to result in lower sales and operating profits in the first
and second quarters than in the third and fourth quarters of the Company's
fiscal year.

WORKING CAPITAL

Information regarding the Company's working capital position and practices is
set forth in Item 7 of this Form 10-K under the caption "Liquidity and Capital
Resources."

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in this Item 1 "BUSINESS" and Item 7 "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" that
are not historical facts are forward-looking statements subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this Annual Report on Form 10-K that a number of
important factors could cause the Company's actual results in Fiscal 1997 and
beyond to differ materially from those expressed in any such forward-looking
statements. These factors include, without limitation, the general economic and
business conditions affecting the textile industry, the Company's ability to
restructure its debt and meet its debt service obligations, competition from a
variety of large textile mills and foreign textile manufacturers who export to
the U.S., the seasonality of the Company's sales, the volatility of the
Company's raw materials cost, and the Company's dependence on key personnel.



                                        9
<PAGE>   11
ITEM 2.  PROPERTIES.

The following table sets forth certain information relating to the Company's
principal facilities (segment information relates to principal use). All of the
facilities owned or leased by the Company are used for manufacturing, except for
the facility in New York, New York, which is used for sales offices, and a
facility in Greenville, South Carolina, comprising 399,000 square feet, which
was closed effective October 28, 1996. Except as noted, all of the Company's
facilities are owned in fee and substantially all owned facilities are pledged
as collateral for the Company's bank financing arrangement.

<TABLE>
<CAPTION>
                               Square                                   Square
     Location                  Footage          Location                Footage
     --------                  -------          --------                -------

       Apparel Fabrics and Products             Industrial Fabrics and Products
       ----------------------------             -------------------------------
     <S>                       <C>              <C>                     <C>
     Greenville, SC            399,000          Kingsport, TN            625,000
     Laurens, SC               475,000          Slater, SC               433,000
     Greenville, SC            460,000          Westfield, NC            237,000
     Stanley, NC               338,000          Easthampton, MA           50,000
     S. Boston, VA             286,000
     Rocky Mount, VA            81,000                     All Segments
                                                           ------------

                                                New York, NY(1)           10,000
     Home Fashion Textiles
     ---------------------

     Lincolnton, NC            387,000
</TABLE>

(1)  The New York, NY facility is leased by the Company under a lease agreement
     which expires on May 30, 1997.

The Company also leases certain other warehouse facilities, various regional
sales offices, a subsidiary's corporate office and its corporate headquarters.
The Company believes that all of its facilities are suitable and adequate for
the current and anticipated conduct of its operations.

ITEM 3.  LEGAL PROCEEDINGS.

The Company is involved in various legal proceedings which are routine
litigations incidental to the conduct of its business. Management believes that
none of this litigation, if determined unfavorably to the Company, would have a
material adverse effect on the financial condition or results of operations of
the Company. No proceeding was terminated in the fourth quarter of Fiscal 1996
that had a material adverse effect on the financial condition or results of
operations of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

No matters were submitted to a vote of securityholders during the fourth quarter
of Fiscal 1996.



                                       10
<PAGE>   12
                                     PART II

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

There is currently no established public trading market for the Company's Class
A Common Stock, $.01 par value per share (the "Class A Common Stock"), or the
Company's Class B Common Stock, $.01 par value per share (the "Class B Common
Stock" and together with the Class A Common Stock, the "Common Stock").

As of January 17, 1997, there were 12 holders of record of Class A Common Stock
and 2 holders of record of Class B Common Stock.

As a holding company, the Company's ability to pay cash dividends is dependent
on the earnings and cash flows of its subsidiaries and the ability of its
subsidiaries to make funds available to the Company for such purpose. Under the
terms of its outstanding indebtedness, the Company is currently prohibited from
paying cash dividends on the Common Stock.

Given the Company's existing indebtedness and its current financial condition,
it intends to retain earnings to fund working capital and for general corporate
purposes, and, therefore, does not intend to pay cash dividends on shares of the
Common Stock in the foreseeable future.



                                       11
<PAGE>   13
ITEM 6.  SELECTED HISTORICAL FINANCIAL DATA.
         (Dollars in Thousands Except Per Share Data)

The following table presents selected consolidated historical financial data for
the Company as of the dates and for the fiscal years indicated. The presentation
of certain previously reported amounts have been reclassified to conform to the
current presentation and to reflect discontinued operations of the Automotive
Assets (sold in 1994) and the Carpet Business (sold on November 16, 1995) as
discussed in Note 3 to the financial statements at Item 8 in this Form 10-K.

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
                                                   ---------------------------------------------------------
                                                    10/31/92    10/30/93   10/29/94    10/28/95    11/2/96
INCOME STATEMENT DATA:                             (52 Weeks)  (52 Weeks) (52 Weeks)  (52 Weeks)  (53 Weeks)
                                                   ----------  ---------- ----------  ----------  ----------
<S>                                                <C>         <C>        <C>         <C>         <C>
Net sales                                          $ 476,326   $ 457,552  $ 461,871   $ 472,565    $ 448,824
Cost of sales                                        404,547     396,160    397,921     406,070      397,804
                                                   ---------   ---------  ---------   ---------    ---------
Gross profit                                          71,779      61,392     63,950      66,495       51,020
Selling, general and administrative expenses          37,391      39,023     39,805      39,586       40,579
Other expense, net                                     1,372       1,236      2,914       6,248        2,498
Charges for plant closing, loss on sale of
   certain operations and writedown of certain
   long-lived assets                                    -           -          -           -          30,028
                                                   ---------   ---------  ---------   ---------    ---------
Operating profit (loss)                               33,016      21,133     21,231      20,661      (22,085)
Valuation allowance on Gulistan securities              -           -          -           -          (4,242)
Interest income                                            1          48        749       2,821        2,856
Interest expense                                     (58,513)    (60,407)   (55,570)    (39,946)     (40,510)
                                                   ---------   ---------  ---------   ---------    ---------
Loss before reorganization items, income
   taxes, discontinued operations, extraordinary
   items and cumulative effects of accounting
   changes (1)                                       (25,496)    (39,226)   (33,590)    (16,464)     (63,981)
Reorganization items - professional fees and
   expenses                                             -           -          -           -          (2,255)
                                                   ---------   ---------  ---------   ---------    ---------
Loss before income taxes, discontinued
   operations, extraordinary items and
   cumulative effects of accounting changes          (25,496)    (39,226)   (33,590)    (16,464)     (66,236)
Income taxes (benefit)                                 1,446       1,782      2,800       1,200         (300)
                                                   ---------   ---------  ---------   ---------    ---------
Loss before discontinued operations,
   extraordinary items and cumulative effects
   of accounting changes                             (26,942)    (41,008)   (36,390)    (17,664)     (65,936)
Discontinued operations, net of taxes:
   Income (loss) from discontinued operations         16,089      24,165     23,628      (7,079)        -
   Net gain (loss) on sale of discontinued
     operations                                         -           -       132,966     (26,241)      (1,500)
Extraordinary gain (loss), net of taxes                 -           -        (7,410)     20,120         -
Cumulative effects of accounting changes,
   net of taxes                                         -         (4,988)      (708)       -            -
                                                   ---------   ---------  ---------   ---------    ---------
Net income (loss)                                  $ (10,853)  $ (21,831) $ 112,086   $ (30,864)   $ (67,436)
                                                   =========   =========  =========   =========    =========

Income (loss) applicable to common stock           $ (13,312)  $ (24,694) $ 108,753   $ (34,695)   $ (71,941)
                                                   =========   =========  =========   =========    =========
</TABLE>

                                                                     (Continued)

                                       12
<PAGE>   14
INCOME STATEMENT DATA (CONTINUED):

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
                                                   ---------------------------------------------------------
                                                    10/31/92    10/30/93   10/29/94    10/28/95    11/2/96
                                                   (52 Weeks)  (52 Weeks) (52 Weeks)  (52 Weeks)  (53 Weeks)
                                                   ----------  ---------- ----------  ----------  ----------
<S>                                                <C>         <C>        <C>         <C>         <C>
Weighted average number of shares
   outstanding                                     1,000,000   1,000,000  1,000,000   1,000,000   1,000,000
                                                   =========   =========  =========   =========   =========
Earnings (loss) per common share:
   Loss before discontinued operations,
     extraordinary items and effects of
     accounting changes                            $  (29.40)  $  (43.87) $  (39.73)  $  (21.50)  $  (70.44)
Discontinued operations, net of taxes:
   Income (loss) from discontinued
     operations                                        16.09       24.17      23.63       (7.08)       -
   Net gain (loss) on sale of discontinued
     operations                                         -           -        132.97      (26.24)      (1.50)
Extraordinary gain (loss), net of taxes                 -           -         (7.41)      20.12        -
Cumulative effects of accounting changes,
   net of taxes                                         -          (4.99)     (0.71)       -           -
                                                   ---------   ---------  ---------   ---------   ---------
Net income (loss)                                  $  (13.31)  $   24.69) $  108.75   $  (34.70)  $  (71.94)
                                                   =========   =========  =========   =========   =========

BALANCE SHEET DATA:
Working capital, excluding net assets
   held for sale                                   $  61,431   $  63,821  $  65,855   $  72,670   $(257,866)(2)
Total assets                                         511,535     532,608    452,811     412,822     335,927
Total long-term debt, less current portion           488,280     522,947    335,472     327,668       4,226
Senior redeemable preferred stock                     18,144      21,007     24,340      28,171      32,676
Shareholders' deficit                                (86,409)   (111,103)    (2,350)    (37,045)   (108,986)
</TABLE>

(1)  The following non-cash charges have been included in the determination of
     loss before reorganization items, income taxes, discontinued operations,
     extraordinary items and cumulative effects of accounting changes for the
     periods shown above.

(2)  As discussed in Note 6 of the Notes to Consolidated Financial Statements
     included in Item 8 herein, all of the Company's senior credit facility
     revolving line of credit and all of the Company's subordinated notes and
     debentures are classified as current liabilities as of November 2, 1996.

<TABLE>
<CAPTION>
                                                  10/31/92      10/30/93     10/29/94     10/28/95       11/2/96
                                                 (52 Weeks)    (52 Weeks)   (52 Weeks)   (52 Weeks)     (53 Weeks)
                                                 ----------    ----------   ----------   ----------     ----------
<S>                                              <C>           <C>          <C>          <C>            <C>
Certain non-cash charges to income:
   Depreciation                                  $   19,736    $   19,799   $   22,242   $   20,820     $   21,756
   Amortization of goodwill and other                   975           969          964          965            983
   Product liability charge                            -             -            -           5,000           -
   Writedown of certain long-lived assets              -             -            -            -            17,554
   Valuation allowance on Gulistan securities          -             -            -            -             4,242
   Other non-cash charges to income                     888         1,957          131          371           -
   Non-cash interest                                 18,502        11,729       11,161        8,818         10,088
                                                 ----------    ----------   ----------   ----------     ----------
                                                 $   40,101    $   34,454   $   34,498   $   35,974     $   54,623
                                                 ==========    ==========   ==========   ==========     ==========
</TABLE>



                                       13
<PAGE>   15
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto included in Item 8
herein.

<TABLE>
<CAPTION>
                                                                                Fiscal Year Ended
                                                                -----------------------------------------------
                                                                  10/29/94          10/28/95          11/2/96
                                                                -----------       -----------      ------------
                                                                                 (In Thousands)
<S>                                                             <C>               <C>              <C>         
NET SALES
Apparel fabrics and products                                    $   254,810       $   247,846      $    221,799
Industrial fabrics and products                                     169,736           191,985           193,001
Home fashion textiles                                                37,325            32,734            34,024
                                                                -----------       -----------      ------------
                                                                $   461,871       $   472,565      $    448,824
                                                                ===========       ===========      ============
OPERATING PROFIT (LOSS)
Apparel fabrics and products                                    $    18,487       $    16,667      $    (22,422)(1)
Industrial fabrics and products                                       7,618             7,590             5,947 (2)
Home fashion textiles                                                 2,564             1,749               647
Indirect corporate expenses, net                                     (7,438)           (5,345)           (6,257)
                                                                -----------       -----------      ------------

   Operating Profit (Loss)                                           21,231            20,661           (22,085)

Valuation allowance on Gulistan securities                           -                 -                 (4,242)
Interest income                                                         749             2,821             2,856
Interest expense                                                    (55,570)          (39,946)          (40,510)
Restructuring fees and expenses                                      -                 -                 (2,255)
                                                                -----------       -----------      ------------

Loss before income taxes, discontinued operations,
   extraordinary items and cumulative effects of
   accounting changes                                           $   (33,590)      $   (16,464)     $    (66,236)
                                                                ===========       ===========      ============
</TABLE>

(1)  The Fiscal 1996 operating loss for apparel fabrics and products includes
     charges of approximately $14.2 million for plant closing and $6.2 million
     for loss on sale of certain operations.

(2)  The Fiscal 1996 operating profit for industrial fabrics and products
     includes charges of approximately $8.1 million for writedown of certain
     long-lived assets and $1.5 million for loss on sale of certain operations.



                                       14
<PAGE>   16
RESULTS OF OPERATIONS

FISCAL 1996 COMPARED TO FISCAL 1995

Consolidated net sales from continuing operations declined $23.8 million (5.0%)
from $472.6 million in Fiscal 1995 to $448.8 million in Fiscal 1996. Operating
profit (loss) from continuing operations decreased $42.8 million from an
operating profit of $20.7 million in Fiscal 1995 to an operating loss of $22.1
million in Fiscal 1996. Excluding charges for plant closings, loss on sale of
certain operations, and charges for writedown of certain long-lived assets,
operating profit would have been $7.9 million, compared to $25.7 million in
Fiscal 1995 (excluding the product liability charge). Substantially all of the
declines in sales and operating profits are attributable to the apparel fabrics
segment which has been severely impacted by lower unit volumes and margins.

Net sales in Fiscal 1996 in the apparel fabrics and products segment, which
includes unfinished woven apparel fabrics (greige goods) primarily for women's
wear, yarn sales and elastic products for various apparel uses, declined $26.0
million (10.5%) from $247.8 million in Fiscal 1995 to $221.8 million in Fiscal
1996. Fiscal 1996 saw the continuation of the trend of weakened demand for
apparel fabrics which began during the second half of Fiscal 1995.

Apparel fabric sales declined $22.3 million in Fiscal 1996 as a result of lower
unit volume combined with lower average selling prices. Fiscal 1996 has been
marked by generally poor retail women's apparel sales, increased competitive
pressures from abroad (particularly in commodity-type fabrics), and falling
margins. As a result of this weaker demand, the Company curtailed production for
most of its apparel fabrics, and experienced a less favorable product mix with a
higher ratio of commodity-type fabrics than was experienced in Fiscal 1995.
These and other conditions led management to conclude in the third fiscal
quarter of 1996 that one of its facilities in Greenville, South Carolina should
be closed. The plant, which was closed on October 28, 1996, had been operating
on a significantly reduced production schedule and was not cost-effective. The
accompanying consolidated statement of operations for Fiscal 1996 includes a
"charge for plant closing" of approximately $14.2 million related principally to
the loss on impairment of the plant in accordance with SFAS No. 121, employee
severance costs and estimated costs of equipment relocation. The Company expects
that the plant closure will result in improved earnings and cash flow from
operations in the future.

Many participants in the domestic women's apparel industry have suffered from
falling margins in recent years as a result of a number of factors, including
increased imports of both fabric and garments, generally relaxed consumer
attitudes regarding fashion, and price pressures from a troubled retail
industry. Many of the Company's customers for apparel fabric (converters) have
seen their importance to the industry diminish and their volumes decline. The
Company has taken steps to broaden its sales distribution in its apparel fabrics
segment to include export sales to Mexico, Europe and other continents. Exports
have not comprised a significant portion of the Company's sales in the past. In
addition, the Company expects to increase its level of capital investment in
this segment, with such investments focused primarily on cost reduction and
productivity improvements.

Sales of elastic apparel products declined $4.6 million to $12.8 million in
Fiscal 1996 from $17.4 million in Fiscal 1995. As discussed below, the Company
sold its rubber products business, which produced these elastic products, in
September 1996. Discontinuation in Fiscal 1996 of certain unprofitable product
lines, changes in customer requirements to non-rubber elastomers, and less than
a full year's sales in Fiscal 1996 caused the decline in elastic sales from
Fiscal 1995.



                                       15
<PAGE>   17
Operating loss in Fiscal 1996 for the apparel fabrics and products segment
decreased by $39.1 million to a $22.4 million loss from a $16.7 million profit.
Included in the Fiscal 1996 operating loss are charges of approximately $14.2
million for plant closing and $6.2 million for loss on sale of certain
operations. Operating profit (loss) in Fiscal 1996 for the apparel fabrics and
products segment before the charges for plant closing and loss on sale of
certain operations declined by $18.7 million to a $2.0 million loss from a $16.7
million profit in Fiscal 1995. Such decline results from the significantly lower
unit volume and the lower margins associated with the Fiscal 1996 product mix.

Net sales in Fiscal 1996 in the industrial fabrics and products segment, which
includes single-ply roofing and environmental membrane, woven fabrics
constructed of cotton, synthetics and fiberglass for insulation, filtration, and
lamination applications, and extruded urethane products, increased $1.0 million
(0.5%) to $193.0 million from $192.0 million in Fiscal 1995. Sales of fiberglass
fabrics increased $7.7 million from Fiscal 1995 as a result of the continued
growth in demand for fabrics used in the manufacture of electrical circuit
boards. The growing global demand for electronic products has fueled significant
increases in sales of fiberglass fabric for the last several years. The Company
expects this demand to continue in the foreseeable future. The Company has
expanded and enhanced its productive capacity in the fiberglass weaving area in
order to satisfy this demand and improve product quality. Sales of roofing
membrane increased $8.8 million from Fiscal 1995, as a result of the continued
success of the Company's "Hi-Tuff/EP" line of roofing products, which was
introduced in late 1993. This product's competitive price and improved
performance characteristics have driven its sales growth, and the product now
accounts for 75% of the Company's roofing sales. The Company expects roofing
sales to continue to grow as the Company capitalizes on the market acceptance of
its roofing products to gain market share. Sales of extruded urethane products
increased $1.9 million from Fiscal 1995 as a result of the Company's expanded
productive capacity and success in developing and satisfying the
specification-driven customer requirements for urethane products. Sales of
cotton industrial fabrics declined $12.8 million as a result of weak markets and
intense foreign competition, particularly from China. Sales of other industrial
fabrics and products declined $4.6 million primarily as a result of exiting
certain industrial fabric markets during late 1995.

Operating profit in Fiscal 1996 for the industrial fabrics and products segment
decreased by $1.7 million from $7.6 million in 1995 to $5.9 million in 1996.
Included in the Fiscal 1996 operating profit are charges of approximately $8.1
million for writedown of certain long-lived assets and $1.5 million for loss on
sale of certain operations. Operating profit in Fiscal 1996 for the industrial
fabrics and products segment before the charge for the writedown of certain
long-lived assets and loss on sale of certain operations increased $8.0 million
(105%) to $15.6 million from $7.6 million in Fiscal 1995. Fiscal 1995 operating
profit reflects a charge of $5 million related to product liability costs. No
such charge occurred in Fiscal 1996. The aforementioned sales volume increases
in roofing, fiberglass, and extruded urethane products, combined with improved
manufacturing and operating efficiencies, increased operating profits. Partially
offsetting these improvements, however, are the effects of lower sales volumes
of cotton industrial fabrics and other synthetic industrial fabrics. Curtailed
production schedules in the Company's cotton manufacturing facility and the
resulting under-absorption of costs were negative influences on operating
profit. The Company does not expect the demand for its cotton industrial fabric
to rebound from Fiscal 1996 levels and has adjusted its operating schedule
accordingly.

As a result of the Company's assessment of the market conditions for its cotton
industrial fabrics, management concluded that its plant in Kingsport, Tennessee,
which manufactures such fabrics, is impaired under the criteria of Statement of
Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121
requires a writedown to fair value in circumstances in which the expected future
net cash flows from the operation of the plant are less than its carrying value.
The accompanying consolidated statement of operations for Fiscal 1996 includes a
charge, "writedown of certain long-lived assets", of $8.1 million for the excess
of the

                                       16
<PAGE>   18
carrying amount of this plant over its estimated fair value.

Pursuant to the terms of an Asset Purchase Agreement dated September 30, 1996,
between JPS Elastomerics Corp., a wholly-owned subsidiary of the Company, and
Elastomer Technologies Group, Inc. and a Receivables Purchase Agreement dated
September 30, 1996 between JPS Elastomerics Corp. and the Bank of New York
Commercial Corporation, JPS Elastomerics Corp. consummated the sale of
substantially all of the assets of its rubber products division, a business
engaged in the manufacture and sale of natural and synthetic elastics for use in
apparel products, diaper products, and specialty industrial applications (the
"Rubber Products Business"). Pursuant to the Asset Purchase Agreement, Elastomer
Technologies Group, Inc. agreed to assume substantially all of the liabilities
and obligations associated with the Rubber Products Business.

The consideration for the sale of the Rubber Products Business consisted of
approximately $5.1 million in cash, subject to certain post-closing adjustments
based on the amount of working capital transferred. The net cash proceeds of
approximately $4.8 million were used by the Company to reduce outstanding
borrowings under its senior credit facility. Revenues of the Rubber Products
Business for Fiscal 1994, Fiscal 1995 and Fiscal 1996 were $22.6 million, $20.7
million and $16.8 million, respectively.

Net sales in Fiscal 1996 in the home fashion textiles segment, which includes
woven drapery fabrics and yarns for the home furnishings industry increased $1.3
million (3.9%) to $34.0 million from $32.7 million in Fiscal 1995 due primarily
to an increase in yarn sales. Sales of home furnishings fabrics in Fiscal 1996
were approximately flat with Fiscal 1995. Demand for the Company's woven fabrics
used in home decoration has been in decline for several years.

Operating profit in Fiscal 1996 in the home fashion textile segment declined by
$1.1 million (64%) to $0.6 million from $1.7 million in Fiscal 1995 primarily as
a result of lower margins on fabric sales.

Indirect corporate expenses in Fiscal 1996 increased $1.0 million from $5.3
million in Fiscal 1995 to $6.3 million in Fiscal 1996 primarily as a result of
the $1.1 million cost of an early retirement offer extended to certain salaried
employees. Lower corporate employee compensation costs in Fiscal 1996 partially
offset this increase.

Debt restructuring fees and expenses totaled $2.3 million in Fiscal 1996. There
were no comparable charges in Fiscal 1995. Such expenses represent fees and
expenses of the Company's financial advisor, the financial advisor for the
holders of a substantial majority of its outstanding bonds, the Company's legal
counsel and other professionals associated with the Company's financial
restructuring.

During Fiscal 1996, Gulistan reported net losses of approximately $4.5 million
before interest expense on the promissory note held by the Company. Accordingly,
the Company did not record interest income on any of the Gulistan securities
held by the Company. Also, in accordance with relevant accounting literature,
the Company has recorded a valuation allowance against its investment in the
Gulistan securities and a corresponding charge to income of $4.2 million as a
result of the net loss ($4.5 million reduced by the $0.3 million of common
equity held by Gulistan management) incurred by Gulistan during Fiscal 1996.

Interest expense in Fiscal 1996 was $40.5 million, or $0.6 million more than
Fiscal 1995 due primarily to the compounding effect of accretion of debt
discounts and non-cash interest.


                                       17
<PAGE>   19
FISCAL 1995 COMPARED TO FISCAL 1994 (RESTATED FOR EFFECT OF CLASSIFYING CARPET
BUSINESS AS DISCONTINUED OPERATIONS)

Consolidated net sales from continuing operations increased $10.7 million (2.3%)
from $461.9 million in Fiscal 1994 to $472.6 million in Fiscal 1995. Operating
profit from continuing operations decreased $0.5 million (2.4%) from $21.2
million in Fiscal 1994 to $20.7 million in Fiscal 1995. Excluding a $5 million
charge to income in Fiscal 1995 for product liability costs (discussed below),
operating income would have increased $4.5 million in Fiscal 1995 over Fiscal
1994. Substantially all of these increases in consolidated net sales and
operating profits occurred in the first two fiscal quarters of 1995. The last
two fiscal quarters of 1995 saw declines in operating results from comparable
prior year levels.

Net sales in Fiscal 1995 in the apparel fabrics and products segment declined
$7.0 million (2.7%) from $254.8 million in Fiscal 1994 to $247.8 million in
Fiscal 1995. Fiscal 1995 results in the apparel fabrics and products segment
were marked by two distinct halves. During the first two fiscal quarters of
1995, the Company reported results which were stronger than the comparable 1994
quarters primarily as a result of the Company's change in its product offering
to emphasize specialty fabrics with more fashion and styling characteristics.
Although overall apparel market conditions were not strong, these fabrics
commanded higher average selling prices and margins than commodity type fabrics
and allowed the Company to improve its margins in the face of the continued
flood of imported commodity apparel fabrics, primarily from Chinese and Eastern
European sources. The passage of the General Agreement on Tariffs and Trade
(GATT) is expected to foster such foreign competition in the commodity apparel
fabrics market in the future. During the second half of Fiscal 1995, consumer
demand for apparel products weakened significantly which in turn has led to a
much weaker market for the Company's fabrics. As a result of this lower unit
demand for all fabric styles, the impact of the aforementioned change in product
offering was much less apparent in the second half.

Operating profit in the apparel fabrics and products segment declined by $1.8
million (9.8%) from $18.5 million in Fiscal 1994 to $16.7 million in Fiscal
1995. This decrease is primarily the result of lower unit volume and poor
average selling prices for the Company's apparel fabrics and products. In
addition to the weak market conditions, the Company has experienced significant
price increases for many of its most important raw materials, including rayon
and polyester fiber.

Net sales in Fiscal 1995 in the industrial fabrics and products segment
increased $22.3 million (13.1%) to $192.0 million from $169.7 million in Fiscal
1994. Sales of fiberglass fabrics for electrical circuit boards and
construction-related scrims increased $7.0 million. The market for fiberglass
fabrics, particularly those used in the manufacture of electronic circuit boards
has been growing in connection with the rapidly expanding worldwide consumer
demand for electronic products. Sales of cotton industrial fabrics increased
$6.7 million as a result of higher unit volume in the first fiscal quarter and
the pass-through of relatively higher cotton costs in Fiscal 1995. Sales of
roofing membrane increased $4.9 million primarily as a result of the continued
success of the Company's new line of roofing products introduced in late 1993.

Operating profit in Fiscal 1995 for the industrial fabrics and products segment
was level with Fiscal 1994 at $7.6 million. The operating profit in Fiscal 1995
was reduced as a result of a $5 million charge for product liability costs for
which there was no comparable charge to income in Fiscal 1994.



                                       18
<PAGE>   20
During the fourth quarter of Fiscal 1995, management determined that the
estimate of the future costs associated with providing services and materials to
repair or replace certain defective roofing products sold by the Company's
predecessor prior to 1987 required revision. In 1988, the Company estimated the
aggregate future costs to repair or replace those defective roofing products to
be approximately $34.1 million. This estimate was based on a number of factors,
including assumed claim rates and costs to repair or replace. Through October
28, 1995, approximately $29.8 million has been incurred and charged to this
liability. The Company reevaluated the exposure based on recent experience and
claims in process. The liability for future costs associated with these
defective roofing products is subject to management's best estimate, including
factors such as expected future claims experience by geographic region and
roofing compound applied; expected costs to repair or replace such roofing
products; estimated remaining length of time that such claims will be made by
customers; and the estimated costs to litigate and settle certain claims now in
litigation and those that may result in future litigation. Based on warranties
that were issued on the roofs, the Company estimates that the defective roofing
product claims will be substantially settled by 2000. Based on management's
estimate of a range of future costs of approximately $9.3 million to $11.4
million, the Company recorded a $5.0 million addition to the liability for such
defective products increasing such liability to $9.3 million at October 28,
1995.

Operating profit in Fiscal 1995 in the industrial fabrics and products segment,
excluding the aforementioned charge for product liability costs, increased $5.0
million (65.3%) to $12.6 million from $7.6 million in Fiscal 1994. The increase
in operating profit is primarily a result of the higher sales volumes described
above combined with the effects of improved manufacturing and operating
efficiencies.

Net sales in Fiscal 1995 in the home fashion textiles segment declined by $4.6
million (12.3%) to $32.7 million from $37.3 million in Fiscal 1994. The decline
in volume results from weak demand for the Company's woven fabrics used in home
decoration, a continuation of a trend in home fashion textile use for several
years, combined with the weak soft goods market in 1995.

Operating profit in Fiscal 1995 in the home fashion textile segment declined by
$0.8 million (31.8%) to $1.7 million primarily as a result of the lower sales
volume described above and lower average selling prices for the Company's
fabrics.

Indirect corporate expenses in Fiscal 1995 declined $2.1 million from $7.4
million in Fiscal 1994 to $5.3 million in Fiscal 1995, primarily as a result of
lower professional fees and lower depreciation and amortization.

Interest expense in Fiscal 1995 was $15.6 million lower than it was for Fiscal
1994. Giving effect to the reduction of debt associated with the use of the net
proceeds from the sale of the Automotive Assets in Fiscal 1994 on a pro forma
basis would reduce interest expense by $14.1 million in Fiscal 1994. Such pro
forma reduction includes $1.3 million representing interest accretion and debt
issuance cost amortization. After giving pro forma effect to the debt reduction
described above, interest expense decreased approximately $1.5 million in Fiscal
1995 from Fiscal 1994. In Fiscal 1995, a $3.4 million decrease in interest
expense as a result of the lower debt balances caused by the Company's open
market purchases of certain of its previously outstanding notes and debentures
(as discussed below) was offset to the extent of $1.9 million due primarily to
higher average interest rates and the compounding effect of accretion of debt
discounts and non-cash interest.



                                       19
<PAGE>   21
During the first quarter of Fiscal 1995, the Company expended $36.6 million to
make open market purchases of certain of its outstanding notes and debentures
with an aggregate face value of $66.6 million and a carrying value (including
interest due at maturity) of $59.2 million. The Company recognized a gain from
early extinguishment of debt of $20.1 million, net of expenses of $1.9 million
and income taxes of $0.6 million. The Company has made no further open market
purchases and is not currently seeking to make any such purchases.

The terms of the Asset Purchase Agreement dated May 25, 1994, as amended,
regarding the sale of the Automotive Assets on June 28, 1994, provided that the
selling price be adjusted based on the net assets sold. During Fiscal 1995, such
amount was finalized and resulted in additional cash proceeds to the Company of
$4.5 million. Such amount, net of $0.1 million of tax, has been included as gain
on sale of discontinued operations in Fiscal 1995.

On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated
as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"),
a wholly-owned subsidiary of the Company, Gulistan Holdings Inc., and Gulistan
Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
"Gulistan"), the Company and Carpet consummated the sale of substantially all of
the assets of Carpet used in the business of designing and manufacturing tufted
carpets for sale to residential, commercial and hospitality markets (the "Carpet
Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume
substantially all of the liabilities and obligations associated with the Carpet
Business.

The consideration for the sale of the Carpet Business consisted of approximately
$19.0 million in cash, as adjusted, and other debt and equity securities of
Gulistan as follows: a $10 million Promissory Note due in November 2001, $5
million of preferred stock redeemable in November 2005, and warrants to purchase
25% of the common stock of Gulistan. Based on an independent valuation, the
Company has determined the fair value of these debt and equity securities to be
approximately $11.3 million. The net assets of the Carpet Business (adjusted to
net realizable value) have been classified as "net assets held for sale" on the
October 28, 1995 Consolidated Balance Sheet. As of October 28, 1995, the Company
adjusted the net assets of the Carpet Business to their net realizable value,
which resulted in a charge to the 1995 Consolidated Statement of Operations of
$30.7 million, classified as loss on sale of discontinued operations. The cash
consideration was adjusted in Fiscal 1996 pursuant to the terms of the Asset
Transfer Agreement based on the audited amount of working capital transferred,
which adjustment resulted in a reduction of $3.5 million in the cash
consideration and an additional charge to income in Fiscal 1996 of $1.5 million.
The fiscal amount of net cash proceeds (net of fees, expenses and the
post-closing adjustment) of $16.7 million was applied by the Company to reduce
outstanding borrowings under the credit agreement for the senior credit
facility. The loss on the sale is not currently recognizable for tax purposes
and the Company has recorded no net tax benefit as a result of this loss due to
uncertainties regarding the ability to utilize these losses in future years.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under its Revolving Credit Facility
(as defined below). At November 2, 1996, the Company had $18.6 million available
for borrowing under the Revolving Credit Facility. Borrowings under the
Revolving Credit Facility are made or repaid on a daily basis in amounts equal
to the net cash requirements or proceeds for that business day.




                                       20
<PAGE>   22
The Company expects that its planned capital expenditures in Fiscal 1997 of
approximately $23 million will be funded by cash from operations, bank and other
equipment financing sources. Should such capital resources be inadequate or
unavailable, however, management would defer certain of its planned capital
expenditures or take other appropriate actions to preserve liquidity. At
November 2, 1996, the Company had commitments for capital expenditures of
approximately $1.4 million.

The Company and its operating subsidiaries (being hereinafter collectively
referred to as the "Borrowing Subsidiaries") are parties to the Fourth Amended
and Restated Credit Agreement, dated as of June 24, 1994, as amended (the
"Restated Credit Agreement"), by and among the financial institutions party
thereto, Citibank, N.A. ("Citibank"), as administrative agent and co-agent, and
General Electric Capital Corporation ("GECC"), as collateral agent and co-agent.
The Restated Credit Agreement, as amended, provides for a revolving credit loan
facility and letters of credit (the "Revolving Credit Facility") in a maximum
principal amount equal to the lesser of (a) $118 million and (b) a specified
borrowing base, which is based upon eligible receivables and inventory of the
Borrowing Subsidiaries (the "Borrowing Base"), except that (i) no Borrowing
Subsidiary may borrow an amount greater than the Borrowing Base attributable to
it, (ii) letters of credit may not exceed $15 million in the aggregate, and
(iii) $20 million of the Revolving Credit Facility is available, not subject to
the Borrowing Base, to purchase property, plant and equipment or to finance or
refinance such purchases ("Capex Loans"), provided that the aggregate of all
revolving credit loans, including Capex Loans, and letters of credit may not
exceed the lesser of (A) $118 million and (B) the sum of the Borrowing Base plus
$25 million (subject to certain reductions).

The Revolving Credit Facility (or a similar credit facility) is essential for
the Company's continued operations. On September 6, 1996, the Revolving Credit
Facility was amended to, among other things, extend its expiration date and
reduce the interest rate by 0.25%. Under the terms of the Restated Credit
Agreement, the Revolving Credit Facility expires on March 1, 1997 (unless
otherwise extended) if the Company has not commenced a case under chapter 11 of
the Bankruptcy Code. If such a case is commenced on or prior to March 1, 1997,
the Revolving Credit Facility will be extended automatically to the earlier of
November 1, 1997 or the effective date of a reorganization under chapter 11 of
the Bankruptcy Code. At this time, the Company has not made a decision to
commence a case under the Bankruptcy Code. The Company has classified the $85.6
million outstanding under its Revolving Credit Facility revolving line of credit
as a current liability in the accompanying consolidated balance sheet. In
addition, the loan covenants were amended to be based upon the activities of the
consolidated operating subsidiaries (JPS Converter and Industrial Corp. and JPS
Elastomerics Corp.) rather than the consolidated Company (i.e., excludes the
assets and liabilities of the parent company and other non-operating
subsidiaries). The Restated Credit Agreement does not permit additional
borrowings by the Borrowing Subsidiaries for, among other things, loans or
dividends to the Company for the payment of interest on its notes and
debentures. As a result of the aforementioned restriction on the use of proceeds
of revolving loans, the Company did not make scheduled November 15, 1996
interest payments of approximately $1.9 million on its subordinated debentures
and did not make scheduled December 1, 1996 interest payments of approximately
$5.4 million on its senior subordinated discount notes and approximately $3.6
million on its senior subordinated notes. The failure to make these scheduled
interest payments constitutes an event of default under the indentures governing
these debt securities. As a result, the holders of these debt securities are
entitled to accelerate the debt represented thereby, among other things.
Accordingly, these debt obligations are classified as current liabilities in the
accompanying consolidated balance sheet as of November 2, 1996. The Company does
not have the ability to repay such indebtedness if the same were to be
accelerated.

On May 8, 1996, the Company engaged The Blackstone Group, L.P. to act as its
financial advisor in connection with a potential financial restructuring of its
debt obligations. In addition, at the request of the holders of a substantial
majority of its outstanding bonds, the Company engaged Houlihan, Lokey, Howard &
Zukin, Inc., effective April 10, 1996 to act as financial advisors to the
holders of the Company's debt

                                       21
<PAGE>   23
securities in connection with such a financial restructuring. The Company has
provided substantial information to these financial advisors on a confidential
basis regarding the Company's business, strategies, plans and prospects. In
addition, the Company is discussing the terms of a potential financial
restructuring with these advisors and the holders of a substantial majority of
its outstanding bonds. The Company's ability to accomplish a restructuring of
the terms of its debt securities or any refinancing thereof will depend on a
number of factors, including its operating performance, market conditions and
the ability of the Company and its bondholders to come to an agreement as to the
appropriate terms of any such restructuring. Although no agreement, formal or
informal, has been reached between the Company and its bondholders regarding the
terms of a potential financial restructuring, management is optimistic that a
restructuring will be accomplished. Management is unable to predict the impact
of any such restructuring on the accompanying financial statements.

INFLATION AND TAX MATTERS

The Company is subject to the effects of changing prices. It has generally been
able to pass along inflationary increases in its costs by increasing the prices
for its products; however, market conditions sometimes preclude this practice.

The Company recorded a net $0.3 million income tax benefit on continuing
operations in Fiscal 1996. The Company had a $0.5 million deferred state tax
benefit from the charge for plant closing and writedown of certain long-lived
assets. While no tax expense resulted from applying the statutory tax rate to
the loss before income taxes, the Company was not able to fully offset
subsidiary income in all tax jurisdictions with net operating losses of the
Company or other subsidiaries or operating loss carryovers. As a result, a $0.2
million current year provision for state income taxes was required. During
Fiscal 1994, the Company utilized approximately $141 million of net operating
loss carryforwards to offset the gain on sale of the Automotive Assets. Income
tax expense incident to the sale was reduced by approximately $49 million as a
result of such utilization. Federal alternative minimum and state taxes of
approximately $2.8 million were recognized as a result of the sale. The
Company's future ability to utilize its net operating losses may be
significantly limited under the income tax laws should there be changes in the
ownership of the Company's stock which constitute an ownership change for tax
purposes. The effect of such an ownership change would be to significantly limit
the annual utilization of the remaining net operating loss to an amount equal to
the value of the Company immediately prior to the time of the change (subject to
certain adjustments) multiplied by the Federal long-term tax exempt rate. The
Company does not believe that this potential limitation on net operating loss
carryforwards is currently applicable. However, there is no assurance that the
Internal Revenue Service will not take a contrary position or that such
limitation will not become applicable for subsequent taxable periods. The
Company has provided a 100% valuation allowance of $53.6 million for its
remaining deferred tax asset, net of existing taxable "temporary differences,"
except those related to certain deferred state tax liabilities. The gross
deferred tax asset relates primarily to the benefit of the net operating loss
carryforward and losses from discontinued operations not currently recognizable
for tax purposes. In the Company's opinion, the valuation allowance is required
as realization of the tax benefit is not assured based on prior operating
history.

Although the Company believes use of its net operating losses to offset the gain
on the Automotive Assets will more likely than not be sustained under existing
tax laws, uncertainty exists primarily due to the fact that applicable
regulations under Internal Revenue Code Section 382 have not been issued.
Therefore, in accordance with provisions of the Indentures, the Company set
aside, in a special-purpose subsidiary, a portion ($39.5 million) of the net
proceeds from the sale of the Automotive Assets to satisfy, if necessary, these
possible contingent tax liabilities. These funds have been invested in U.S.
Government securities and are classified as other noncurrent assets in the
Company's consolidated balance sheets.


                                       22
<PAGE>   24
In the first quarter of Fiscal 1995, the Company estimated that the open market
purchases of certain of its debt securities would result in additional tax
liabilities of approximately $3.2 million. Such amount was recorded as a
reduction of the extraordinary gain from early extinguishment of debt in the
first fiscal quarter. This amount of tax was based on management's best estimate
at that time of alternative minimum taxable income for Fiscal 1995. During the
fourth fiscal quarter, management's estimate of Fiscal 1995 alternative minimum
taxable income was revised downward. Accordingly, the Company reduced the $3.2
million tax estimate by $2.6 million to $0.6 million during the fourth quarter
of Fiscal 1995.

The loss recorded on the disposition of the Carpet Business is not currently
recognizable for tax purposes. The Company has recorded no net tax benefit in
its financial statements due to uncertainties surrounding the Company's ability
to utilize such losses in future years.

                                       23
<PAGE>   25
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEPENDENT AUDITORS' REPORT

JPS Textile Group, Inc.:

We have audited the accompanying consolidated balance sheets of JPS Textile
Group, Inc. and subsidiaries (the "Company") as of November 2, 1996 and October
28, 1995, and the related consolidated statements of operations, senior
redeemable preferred stock and shareholders' equity (deficit), and cash flows
for each of the three years in the period ended November 2, 1996. Our audits
also included the financial statement schedule listed in the index at page S-1.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule 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 the Company at November 2, 1996 and
October 28, 1995, and the results of its operations and its cash flows for each
of the three years in the period ended November 2, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

The accompanying consolidated financial statements for the years ended November
2, 1996 and October 28, 1995 have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 14 to the consolidated
financial statements, the Company has had recurring net losses from continuing
operations since inception, has a net shareholders' deficiency, is in default on
its senior subordinated discount notes, the senior subordinated notes and the
subordinated debentures and, under certain conditions, the Company's senior
revolving credit facility expires on March 1, 1997. The events of default
entitle the holders of these debt securities to accelerate payment on such debt.
The Company's default on its notes and debentures, its inability to service its
debt without a restructuring thereof, the uncertainty of the Company's ability
to restructure its notes and debentures and to meet the requirements for
extension of its senior revolving credit facility or to obtain alternative
sources of financing as described in Note 14 raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 14. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.



DELOITTE & TOUCHE LLP

Greenville, South Carolina
January 17, 1997



                                       24
<PAGE>   26
JPS TEXTILE GROUP, INC.

CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)

<TABLE>
<CAPTION>
                                                                       October 28,    November 2,
                                                                          1995           1996
                                                                       -----------    -----------
<S>                                                                     <C>            <C>
ASSETS

CURRENT ASSETS:
   Cash                                                                 $  1,352       $  1,460
   Accounts receivable, less allowance of $2,131 in 1995
     and $2,511 in 1996 (Note 6)                                          88,186         75,166
   Inventories (Notes 5 and 6)                                            48,729         48,374
   Prepaid expenses and other                                              2,545          1,967
   Net assets held for sale (Note 3)                                      28,932           -
                                                                        --------       --------
       Total current assets                                              169,744        126,967

PROPERTY, PLANT AND EQUIPMENT, net (Notes 5 and 6)                       161,436        124,004

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS
   ACQUIRED, less accumulated amortization of $6,877 in 1995 and          31,489         30,506
   $7,860 in 1996

OTHER ASSETS (Notes 5, 9, 10 and 13)                                      50,153         54,450




                                                                        --------       --------

           Total                                                        $412,822       $335,927
                                                                        ========       ========
</TABLE>

                                       25
<PAGE>   27
<TABLE>
<CAPTION>
                                                                       October 28,    November 2,
                                                                          1995           1996
                                                                       -----------    -----------
<S>                                                                     <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Accounts payable                                                     $ 29,754       $ 24,708
   Accrued interest                                                        9,895          9,608
   Accrued salaries, benefits and withholdings (Note 9)                   11,503         10,440
   Other accrued expenses (Notes 5, 9 and 11)                             12,699         13,987
   Senior credit facility, revolving line of credit (Note 6)                -            85,639
   Current portion of long-term debt (Note 6)                              2,770        240,451
                                                                        --------       --------
       Total current liabilities                                          66,621        384,833

LONG-TERM DEBT (Note 6)                                                  327,668          4,226

DEFERRED INCOME TAXES (Note 8)                                             4,165          3,665

OTHER LONG-TERM LIABILITIES (Notes 5, 9 and 10)                           23,242         19,513
                                                                        --------       --------

       Total liabilities                                                 421,696        412,237
                                                                        --------       --------

COMMITMENTS AND CONTINGENCIES (Notes 4, 6, 8 and 9)

SENIOR REDEEMABLE PREFERRED STOCK, redemption
   value of $51,324 in 1995 and $54,520 in 1996 (Note 7)                  28,171         32,676
                                                                        --------       --------

SHAREHOLDERS' EQUITY (DEFICIT) (Note 7):
   Junior preferred stock                                                    250            250
   Common stock:
     Class A, 490,000 shares issued and outstanding                            5              5
     Class B, 510,000 shares issued and outstanding                            5              5
   Additional paid-in capital                                             29,613         25,108
   Deficit                                                               (66,918)      (134,354)
                                                                        --------       --------
       Total shareholders' deficit                                       (37,045)      (108,986)
                                                                        --------       --------

           Total                                                        $412,822       $335,927
                                                                        ========       ========
</TABLE>


See notes to consolidated financial statements.


                                       26
<PAGE>   28
JPS TEXTILE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)

<TABLE>
<CAPTION>
                                                                                  Year Ended
                                                                  ------------------------------------------
                                                                  October 29,      October 28,   November 2,
                                                                     1994             1995          1996
                                                                  -----------      -----------   -----------
<S>                                                                <C>              <C>           <C>
Net sales                                                          $ 461,871        $ 472,565     $ 448,824
Cost of sales                                                        397,921          406,070       397,804
                                                                   ---------        ---------     ---------
Gross profit                                                          63,950           66,495        51,020
Selling, general and administrative expenses (Note 11)                39,805           39,586        40,579
Other expense, net (Notes 9 and 10)                                    2,914            6,248         2,498
Charges for plant closing, loss on sale of certain operations
   and writedown of certain long-lived assets (Note 4)                  -                -           30,028
                                                                   ---------        ---------     ---------
Operating profit (loss)                                               21,231           20,661       (22,085)
Valuation allowance on Gulistan securities (Note 3)                                                  (4,242)
Interest income                                                          749            2,821         2,856
Interest expense (Note 6)                                            (55,570)         (39,946)      (40,510)
Debt restructuring fees and expenses (Note 1)                           -                -           (2,255)
                                                                   ---------        ---------     ---------
Loss before income taxes, discontinued operations,
   extraordinary items and cumulative effects
   of accounting changes                                             (33,590)         (16,464)      (66,236)
Provision (benefit) for income taxes (Note 8)                          2,800            1,200          (300)
                                                                   ---------        ---------     ---------
Loss before discontinued operations, extraordinary items
   and cumulative effects of accounting changes                      (36,390)         (17,664)      (65,936)
Discontinued operations:
   Income (loss) from discontinued operations                         23,628           (7,079)         -
   Net gain (loss) on sales of discontinued operations,
     net of taxes of $2,800 in 1994 and $100 in 1995 (Note 3)        132,966          (26,241)       (1,500)
                                                                   ---------        ---------     ---------
Income (loss) before extraordinary items and
     cumulative effects of accounting changes                        120,204          (50,984)      (67,436)
Extraordinary gain (loss) on early extinguishment of debt,
   net of taxes of $600 in 1995 (Note 6)                              (7,410)          20,120          -
Cumulative effects of accounting changes (Note 10)                      (708)            -             -
                                                                   ---------        ---------     ---------
Net income (loss)                                                    112,086          (30,864)      (67,436)
Senior redeemable preferred stock in-kind
   dividends and discount accretion (Note 7)                          (3,333)          (3,831)       (4,505)
                                                                   ---------        ---------     ---------
Income (loss) applicable to common stock                           $ 108,753        $ (34,695)    $ (71,941)
                                                                   =========        =========     =========

Weighted average number of common shares outstanding               1,000,000        1,000,000     1,000,000
                                                                   =========        =========     =========

Earnings (loss) per common share:
   Loss before discontinued operations, extraordinary items
     and cumulative effects of accounting changes                  $  (39.73)       $  (21.50)    $  (70.44)
   Discontinued operations:
     Income (loss) from discontinued operations                        23.63            (7.08)         -
     Net gain (loss) on sales of discontinued operations              132.97           (26.24)        (1.50)
                                                                   ---------        ---------     ---------
   Income (loss) before extraordinary items and cumulative
     effects of accounting changes                                    116.87           (54.82)       (71.94)
   Extraordinary gain (loss) on early extinguishment of debt           (7.41)           20.12          -
   Cumulative effects of accounting changes                            (0.71)            -             -
                                                                   ---------        ---------          -
   Net income (loss)                                               $  108.75        $  (34.70)    $  (71.94)
                                                                   =========        =========     =========
</TABLE>

See notes to consolidated financial statements.


                                       27
<PAGE>   29
JPS TEXTILE GROUP, INC.

CONSOLIDATED STATEMENTS OF SENIOR REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
(In Thousands)

<TABLE>
<CAPTION>
                                                                          Shareholders' Equity (Deficit)
                                                                 ----------------------------------------------    
                                                     Senior                                                        
                                                    Redeemable                 Junior     Additional               
                                                    Preferred      Common     Preferred    Paid-In                 
                                                      Stock        Stock        Stock      Capital     Deficit     
                                                    ----------   ---------    ---------   ----------  ---------    
<S>                                                 <C>          <C>          <C>         <C>         <C>          
Balance - October 30, 1993                          $  21,007    $      10    $     250   $  36,777   $(148,140)   
                                                                                                                   
Net income for 52 weeks                                                                                 112,086 
Preferred stock-in-kind dividends                                                                                  
  and discount accretion                                3,333                                (3,333)                            
                                                    ---------    ---------    ---------   ---------   ---------    
                                                                                                                   
Balance - October 29, 1994                             24,340           10          250      33,444     (36,054)   
                                                                                                                   
Net loss for 52 weeks                                                                                   (30,864)  
Preferred stock-in-kind dividends                                                                                 
  and discount accretion                                3,831                                (3,831)  
                                                    ---------    ---------    ---------   ---------   ---------   
                                                                                                                  
Balance - October 28, 1995                             28,171           10          250      29,613     (66,918)  
                                                                                                                  
Net loss for 53 weeks                                                                                   (67,436)  
Preferred stock-in-kind dividends                                                                                 
   and discount accretion                               4,505                                (4,505)  
                                                    ---------    ---------    ---------   ---------   ---------    
                                                                                                                   
Balance - November 2, 1996                          $  32,676    $      10    $     250   $  25,108   $(134,354)   
                                                    =========    =========    =========   =========   =========       
</TABLE>


See notes to consolidated financial statements.


                                       28
<PAGE>   30
JPS TEXTILE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
                                                                                  Year Ended
                                                                     -------------------------------------
                                                                     October 29,  October 28,  November 2,
                                                                        1994          1995        1996
                                                                     -----------  -----------  -----------
<S>                                                                   <C>          <C>          <C>       
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss)                                                  $ 112,086    $ (30,864)   $ (67,436)
                                                                      ---------    ---------    --------- 
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
       Charges for plant closing, loss on sale of certain
         operations and writedown of certain long-lived assets             --           --         30,028
       Loss (income) from discontinued operations                       (23,628)       7,079         --
       Loss (gain) on sales of discontinued operations                 (132,966)      26,241        1,500
       Extraordinary loss (gain) on early extinguishment of
         debt                                                             7,410      (20,120)        --
       Cumulative effects of accounting changes                             708         --           --
       Depreciation and amortization, except amounts
         included in interest expense                                    23,206       21,785       22,739
       Interest accretion and debt issuance cost amortization            11,161        8,818       10,088
       Product liability charge                                            --          5,000         --
       Deferred income tax provision (benefit)                            1,227         --           (500)
       Financing costs incurred                                          (2,943)         (25)        (614)
       Valuation allowance on Gulistan securities                          --           --          4,242
       Other, net                                                        (2,970)        (498)      (3,163)
       Changes in assets and liabilities:
         Accounts receivable                                                426       (1,086)      10,372
         Inventories                                                       (179)        (685)      (2,635)
         Prepaid expenses and other assets                               (1,248)      (2,505)      (2,348)
         Accounts payable                                                   228         (911)      (3,983)
         Accrued expenses and other liabilities                          (2,951)      (7,202)      (1,688)
                                                                      ---------    ---------    --------- 
              Total adjustments                                        (122,519)      35,891       64,038
                                                                      ---------    ---------    ---------
   Net cash provided by (used in) operating activities                  (10,433)       5,027       (3,398)
                                                                      ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
   Property and equipment additions                                     (18,423)     (18,811)      (9,834)
   Receipts from discontinued operations, net                            17,115        3,453         --
   Proceeds from sale of discontinued operations, net                   259,044        4,415       17,077
   Proceeds from sale of certain operations                                --           --          5,113
   Purchase of long-term investments                                    (39,500)        --           --
                                                                      ---------    ---------    ---------
   Net cash provided by (used in) investing activities                  218,236      (10,943)      12,356
                                                                      ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of long-term debt                                 285        5,000           29
   Revolving credit facility borrowings (repayments), net               (41,666)      41,808       (6,087)
   Purchases and repayment of other long-term debt                     (166,044)     (41,384)      (2,792)
                                                                      ---------    ---------    ---------
   Net cash provided by (used in) financing activities                 (207,425)       5,424       (8,850)
                                                                      ---------    ---------    ---------

NET INCREASE (DECREASE) IN CASH                                             378         (492)         108
Cash at beginning of year                                                 1,466        1,844        1,352
                                                                      ---------    ---------    ---------
Cash at end of year                                                   $   1,844    $   1,352    $   1,460
                                                                      =========    =========    =========
</TABLE>


                                       29
<PAGE>   31
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)

<TABLE>
<CAPTION>
                                                                                   Year Ended
                                                                  -----------------------------------------------
                                                                  October 29,       October 28,       November 2,
                                                                     1994              1995              1996
                                                                  -----------       -----------       -----------
<S>                                                                <C>               <C>               <C>
SUPPLEMENTAL INFORMATION ON CASH FLOWS
   FROM CONTINUING OPERATIONS:
   Interest paid                                                   $  48,219         $  33,681         $  30,709
   Income taxes paid                                                     376             3,314               693
   Non-cash financing activities:
     Senior redeemable preferred stock dividends-in-kind               2,765             2,936             3,114
</TABLE>



See notes to consolidated financial statements.


                                       30
<PAGE>   32
JPS TEXTILE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       BUSINESS AND BASIS OF PRESENTATION

         JPS Textile Group, Inc. (the "Company") purchased from J.P. Stevens &
         Co., Inc. ("J.P. Stevens") substantially all of the property, plant and
         equipment, inventories, certain other assets and the business of five
         former divisions of J.P. Stevens (the "Predecessor Stevens Divisions")
         on May 9, 1988 (the "Acquisition"). The purchase was financed through
         long-term borrowings and the sale of preferred and common stock. The
         Company operates principally as a manufacturer of apparel fabrics and
         products, industrial fabrics and products and home fashion textiles.
         These products are sold primarily to the domestic clothing
         manufacturing and construction industries. As described in Notes 3 and
         4, certain of the acquired businesses and operations have been
         subsequently sold.

         A Plan of Reorganization (the "Plan") which was distributed to the
         Company's bondholders and preferred stockholders (the
         "Securityholders") on December 21, 1990, was approved by the
         securityholders in early February 1991 and in accordance with the Plan,
         the Company filed a voluntary petition for reorganization under Chapter
         11 of the United States Bankruptcy Code. Subsequently, in March 1991,
         the bankruptcy court confirmed the Plan and it became effective April
         2, 1991. The Plan provided for, among other things, the cancellation of
         certain existing debt and preferred stock securities in exchange for
         490,000 shares of new Class A common stock along with new debt
         instruments and new preferred stock with lower interest and dividend
         rates. Since the Company's reorganization did not meet the criteria for
         "fresh-start" accounting, the primary adjustment to historical carrying
         values as a result of the reorganization was to state the new long-term
         debt and senior redeemable preferred stock at present values of amounts
         to be paid determined at appropriate current interest rates as of April
         2, 1991, the effective date of the Plan. The resulting present value
         discount is amortized as interest expense or dividends over the life of
         the related debt or senior redeemable preferred stock instrument using
         the interest method.

2.       SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation - The consolidated financial statements
         include JPS Textile Group, Inc. and its subsidiaries, all of which are
         wholly owned. Significant intercompany transactions and accounts have
         been eliminated.

         The equity method of accounting is used to account for the Company's
         50% interest in a joint venture with a Mexican company (see Note 13).
         Under the equity method, the Company's original investment is recorded
         at cost and is adjusted by the Company's share of undistributed
         earnings or loss of the investee.

         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.
         The Company's most significant financial statement estimates include
         the estimate of the allowance for doubtful accounts, reserve for
         self-insurance liabilities and the reserve for certain defective
         roofing products sold by the Predecessor Stevens Division operations
         (discussed in Note 9). Management determines its estimate of the
         allowance for doubtful accounts considering a number of factors,
         including historical experience, aging of the accounts and the current

                                       31
<PAGE>   33
         creditworthiness of its customers. The Company self-insures, with
         various insured stop-loss limitations, its workers' compensation,
         general liability and health claims. Management determines its estimate
         of the reserve for self-insurance considering a number of factors,
         including historical experience and third party claims administrator
         and actuarial assessment of the liabilities for reported claims and
         claims incurred but not reported. Management believes that its
         estimates provided in the financial statements, including those for the
         above-described items, are reasonable and adequate. However, actual
         results could differ from those estimates.

         Inventories - Inventories are stated at the lower of cost or market.
         Cost, which includes labor, material and factory overhead, is
         determined on the first-in, first-out basis.

         Property, Plant and Equipment - Property, plant and equipment is
         recorded at cost and depreciation is recorded using the straight-line
         method for financial reporting purposes. The estimated useful lives
         used in the computation of depreciation are as follows:
              Land improvements                             10 to 45 years
              Buildings and improvements                    25 to 45 years
              Machinery and equipment                        3 to 15 years
              Furniture, fixtures and other                  5 to 10 years

         Excess of Cost Over Fair Value of Net Assets Acquired - Excess of cost
         over fair value of net assets acquired is being amortized on a
         straight-line basis over a period of forty years. Periodically, the
         Company evaluates the realizability of the excess of cost over fair
         value of net assets acquired based upon expectations of undiscounted
         future cash flows and comparing such future cash flows to the carrying
         amount of the related asset.

         Debt Issuance Costs - Costs incurred in securing and issuing long-term
         debt are deferred and amortized over the terms of the related debt in
         amounts which approximate the interest method of amortization.

         Product Warranties - On certain of its products, the Company provides a
         warranty against defects in materials and workmanship under separately
         priced extended warranty contracts generally for a period of ten years.
         Revenue from such extended warranty contracts is deferred and
         recognized as income on a straight-line basis over the contract period.
         The cost of servicing such product warranties is charged to expense as
         incurred.

         Postretirement Benefits - The Company accounts for postretirement
         benefits other than pensions using the principles of Statement of
         Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting
         for Postretirement Benefits Other Than Pensions". SFAS No. 106 requires
         that the projected future cost of providing postretirement benefits,
         such as health care and life insurance, be recognized as an expense as
         employees render service. See Note 10 for a further description of the
         accounting for postretirement benefits.

         Postemployment Benefits - Effective October 31, 1993, the Company
         adopted SFAS No. 112, "Employers' Accounting for Postemployment
         Benefits". SFAS No. 112 requires that the cost of benefits provided to
         former or inactive employees after employment but before retirement be
         recognized on the accrual basis of accounting instead of when paid, as
         had been the Company's practice. See Note 10 for a further description
         of the accounting for postemployment benefits.

         Revenue Recognition - The Company recognizes revenue from product sales
         when it has shipped the goods or ownership has been transferred to the
         customer for goods to be held for future shipment at the customer's
         request.


                                       32
<PAGE>   34
         Advertising Costs - The Company defers advertising related costs until
         the advertising is first run in magazines or other publications or in
         the case of brochures, until the brochures are printed and available
         for distribution. Advertising costs were approximately $708,000,
         $1,225,000 and $1,856,000 in Fiscal 1994, 1995 and 1996, respectively.

         Income Taxes - The Company accounts for income taxes using the
         principles of SFAS No. 109, "Accounting for Income Taxes". Under SFAS
         No. 109, deferred taxes represent the future income tax effect of
         temporary differences between the book and tax bases of the Company's
         assets and liabilities, assuming they will be realized and settled at
         the amount reported in the Company's financial statements.

         Earnings Per Share - Earnings per share is computed by dividing
         earnings applicable to common stock (net income or loss adjusted by
         senior redeemable preferred stock dividends) by the weighted average
         number of shares of common stock outstanding during the period.

         Cash Flows - For purposes of reporting cash flows, cash includes cash
         on hand and in banks. The Company has no investments that are deemed to
         be cash equivalents.

         Fiscal Year - The Company's operations are based on a fifty-two or
         fifty-three week fiscal year ending on the Saturday closest to October
         31. The 1994 and 1995 fiscal years each consisted of fifty-two weeks
         and Fiscal 1996 had fifty-three weeks.

         Reclassifications - Certain Fiscal 1995 and 1994 amounts have been
         reclassified to conform to the 1996 presentation. In addition, see Note
         3 regarding reclassifications of Fiscal 1994 amounts for discontinued
         operations.

3.       SALE OF DISCONTINUED OPERATIONS

         Carpet Business - On November 16, 1995, pursuant to the terms of an
         Asset Transfer Agreement dated as of November 16, 1995, by and among
         the Company, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of
         the Company, Gulistan Holdings Inc. and Gulistan Carpet Inc., a
         wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
         "Gulistan"), the Company and Carpet consummated the sale of
         substantially all of the assets of Carpet used in the business of
         designing and manufacturing tufted carpets for sale to residential,
         commercial and hospitality markets (the "Carpet Business"). Pursuant to
         the Asset Transfer Agreement, Gulistan agreed to assume substantially
         all of the liabilities and obligations associated with the Carpet
         Business. Gulistan was formed and its common stock is owned by certain
         members of the former management team at Carpet. The Company and its
         subsidiaries have agreed, for a three-year period, not to compete
         directly or indirectly with the business that was sold. The
         Consolidated Statements of Operations and Cash Flows for Fiscal 1994
         have been reclassified to reflect the Carpet Business as discontinued
         operations.

         The consideration for the sale of the Carpet Business consisted of
         approximately $22.5 million in cash, subject to certain post-closing
         adjustments based on the audited amount of working capital transferred
         on November 16, 1995, and other debt and equity securities of Gulistan
         as follows: a $10 million Promissory Note due in November 2001, $5
         million of preferred stock redeemable in November 2005, and warrants to
         purchase 25% of the common stock of Gulistan. Based on an independent
         valuation at the asset transfer date, the Company determined the fair
         value of these debt and equity securities to be approximately $11.3
         million. These debt and equity securities are included in other
         non-current assets on the November 2, 1996 balance sheet. Since the
         disposal of


                                       33
<PAGE>   35
         the Carpet Business occurred subsequent to the end of Fiscal 1995, the
         net assets of the Carpet Business (adjusted to net realizable value)
         were classified as "net assets held for sale" on the October 28, 1995
         Consolidated Balance Sheet. As of October 28, 1995, the Company
         adjusted the net assets of the Carpet Business to their net realizable
         value, which resulted in a charge to the 1995 Consolidated Statement of
         Operations of $30.7 million (net of tax), classified as loss on sale of
         discontinued operations. The loss on the sale is not currently
         recognizable for tax purposes and the Company has recorded no net tax
         benefit as a result of this loss due to uncertainties regarding the
         ability to utilize these losses in future years. Net sales from the
         discontinued operations of the Carpet Business were $141.6 million and
         $120.1 million in Fiscal years 1994 and 1995, respectively.

         In May 1996, the Company and Gulistan agreed on the amount of the
         post-closing adjustment. As a result, the Company paid a post-closing
         adjustment of $3.5 million (an estimated post-closing adjustment of
         $2.0 million was included in the Fiscal 1995 loss on sale of
         discontinued operations) and has recognized in Fiscal 1996 an
         additional loss of $1.5 million on the sale of discontinued operations.
         The final amount of net cash proceeds applied by the Company to reduce
         outstanding borrowings under its senior credit facility was
         approximately $16.7 million (net of fees, expenses, and the
         post-closing adjustment resulting from the level of working capital
         transferred at the closing date).

         In Fiscal 1996, Gulistan reported a net loss of approximately $4.5
         million before interest expense on the promissory note held by the
         Company. Accordingly, the Company did not record interest income on any
         of the Gulistan securities held by the Company. Also, in accordance
         with relevant accounting literature, the Company has recorded a
         valuation allowance against its investment in the Gulistan securities
         and a corresponding charge to income of $4.2 million as a result of the
         net loss ($4.5 million reduced by the $0.3 million of common equity
         held by Gulistan management) incurred by Gulistan during the 1996
         fiscal year. The valuation allowance will be increased or decreased
         (but not below zero) with a corresponding charge or credit to income to
         give effect to future losses or earnings of Gulistan as those losses or
         earnings occur.

         Automotive Businesses - On June 28, 1994, pursuant to the terms of an
         Asset Purchase Agreement dated May 25, 1995 (the "Asset Purchase
         Agreement"), by and among the Company, JPS Auto Inc., a wholly-owned
         subsidiary of the Company ("Auto"), JPS Converter and Industrial Corp.,
         a wholly-owned subsidiary of the Company ("C&I"), Foamex International
         Inc. ("Foamex") and JPS Automotive Products Corp., an indirect,
         wholly-owned subsidiary of Foamex ("Purchaser"), the Company
         consummated the disposition of its Automotive Assets (as described
         below) to the Purchaser.

         The Automotive Assets consisted of the businesses and assets of Auto
         and the synthetic industrial fabrics division of C&I, and the Company's
         investment in common stock of the managing general partner of Cramerton
         Automotive Products, L.P. (an 80% owned joint venture). Net sales from
         the discontinued operations of the Automotive Assets were $224.9
         million for the eight months ended June 28, 1994. Pursuant to the terms
         of the Asset Purchase Agreement, the Purchaser agreed to assume
         substantially all of the liabilities and obligations associated with
         the Automotive Assets. In addition, the Company and its affiliates
         agreed, for a period of four years, not to directly or indirectly
         compete in North, Central and South America with the businesses that
         were sold.

         The sale price for the Automotive Assets was approximately $283
         million, consisting of $264 million of cash paid at closing, $15
         million of assumed debt as of June 28, 1994 and certain post-closing
         adjustments which resulted in a gain of $4.4 million, net of $0.1
         million of taxes, recognized in Fiscal 1995. The sale of the Automotive
         Assets resulted in an approximate total gain of $137.4 million, net of
         income taxes of $2.9 million.



                                       34
<PAGE>   36
         The net cash proceeds from the disposition of the Automotive Assets
         (after deductions for fees, other expenses and amounts designated by
         management to satisfy possible contingent tax liabilities) were
         approximately $217 million and such proceeds were used by the Company
         to reduce its outstanding indebtedness.

         The Company has allocated to the discontinued operations of the
         Automotive Assets and the Carpet Business a pro-rata portion of the
         interest expense of its senior credit facility, which pro-rata portions
         were approximately $3.4 million and $1.6 million in Fiscal 1994 and
         1995, respectively.

4.       SALE OF CERTAIN OPERATIONS, PLANT CLOSING AND WRITEDOWN OF CERTAIN
         LONG-LIVED ASSETS

         Pursuant to an Asset Purchase Agreement dated September 30, 1996
         between JPS Elastomerics Corp. ("Elastomerics"), a wholly-owned
         subsidiary of the Company, and Elastomer Technologies Group, Inc.
         ("Elastomer") and a Receivables Purchase Agreement dated September 30,
         1996 between Elastomerics and the Bank of New York Commercial
         Corporation, Elastomerics sold substantially all the assets of its
         rubber products division, a business engaged in the manufacture and
         sale of natural and synthetic elastic for use in apparel products,
         diaper products and specialty industrial applications (the "Rubber
         Products Business"). The Rubber Products Business had accounted for
         sales of $22.6 million, $20.7 million and $16.8 million in Fiscal 1994,
         1995 and 1996 (eleven months), respectively. Under the terms of the
         agreement, Elastomer agreed to assume substantially all the liabilities
         and obligations associated with the Rubber Products Business. The
         Company and its subsidiaries have agreed not to compete directly or
         indirectly with the business that was sold for a period of two years.
         The consideration for the Rubber Products Business consisted of
         approximately $5.1 million in cash, subject to certain post-closing
         adjustments based on the audited amount of working capital transferred
         on the closing date, and resulted in a loss of approximately $7.7
         million. This loss on sale was charged to operations in Fiscal 1996.
         The net proceeds from the sale, after fees and expenses, was
         approximately $4.8 million and was used to reduce the Company's
         outstanding indebtedness.

         On August 28, 1996, the Company implemented a plan to close its Dunean
         plant in Greenville, South Carolina, as a result of management's
         determination that a permanent decline in the Company's spun apparel
         business had occurred. This plant had been operating on a reduced
         schedule due to poor market conditions and financial projections
         indicated it would continue to do so. As a result of the plant closing,
         the accompanying Consolidated Statement of Operations includes a
         "charge for plant closing" of approximately $14.2 for Fiscal 1996
         related principally to the estimated loss on the impairment of
         long-lived assets in accordance with SFAS No. 121, "Accounting for the
         Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed Of", employee severance costs and estimated costs for
         equipment relocation. As of November 2, 1996, this plant closing was
         substantially complete. Of the approximately $4.8 million in exit costs
         recognized in association with the plant closing, approximately $2.3
         million related to equipment relocation and employee severance was not
         paid at November 2, 1996.

         Also, in connection with the Company's review of present and expected
         conditions in the markets it serves, management determined that its
         plant in Kingsport, Tennessee, which manufactures cotton fabrics, is
         impaired under the criteria of SFAS No. 121 because expected future
         cash flows from the operation of the plant are less than the carrying
         value of the plant assets. The accompanying Consolidated Statement of
         Operations for Fiscal 1996 includes a "writedown of certain long-lived
         assets" of $8.1 million for the excess of the carrying value of the
         plant over its estimated fair value. Estimated fair value was
         determined based on an independent appraisal of the plant's property,
         plant and equipment.


                                       35
<PAGE>   37
5.       BALANCE SHEET COMPONENTS

         The components of certain balance sheets accounts are (in thousands):

<TABLE>
<CAPTION>
                                                                                   October 28,      November 2,
                                                                                      1995              1996
                                                                                   -----------      -----------
         <S>                                                                       <C>              <C>
         Inventories:
           Raw materials and supplies                                              $    13,909      $    13,155
           Work-in-process                                                              18,334           16,912
           Finished goods                                                               16,486           18,307
                                                                                   -----------      -----------
                                                                                   $    48,729      $    48,374
                                                                                   ===========      ===========

         Property, plant and equipment, net:
           Land and improvements                                                   $     7,349      $     5,921
           Buildings and improvements                                                   53,649           42,775
           Machinery and equipment                                                     205,345          183,320
           Furniture, fixtures and other                                                 7,725            8,116
                                                                                   -----------      -----------
                                                                                       274,068          240,132
           Less accumulated depreciation                                              (118,866)        (117,642)
                                                                                   -----------      -----------
                                                                                       155,202          122,490
           Construction in progress                                                      6,234            1,514
                                                                                   -----------      -----------
                                                                                   $   161,436      $   124,004
                                                                                   ===========      ===========

         Other noncurrent assets:
           Unamortized debt issuance costs                                         $     1,092      $       351
           Prepaid pension costs                                                         5,973            1,055
           Investments (Notes 3 and 9)                                                  42,885           52,986
           Other                                                                           203               58
                                                                                           ---               --
                                                                                   $    50,153      $    54,450
                                                                                   ===========      ===========

         Other accrued expenses:
           Roofing product liability costs                                         $     4,000      $     3,000
           Taxes payable other than income taxes                                         1,433            1,250
           Income taxes                                                                  2,753            2,150
           Other                                                                         4,513            7,587
                                                                                   -----------      -----------
                                                                                   $    12,699      $    13,987
                                                                                   ===========      ===========

         Other long-term liabilities:
           Roofing product liability costs and deferred warranty income            $    15,700      $    14,361
           Accrued postretirement benefit plan liability                                 5,249            4,808
           Other                                                                         2,293              344
                                                                                   -----------      -----------
                                                                                   $    23,242      $    19,513
                                                                                   ===========      ===========
</TABLE>


                                       36
<PAGE>   38
6.       LONG-TERM DEBT

         Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
                                                                           October 28,   November 2,
                                                                              1995          1996
                                                                           ----------    -----------
<S>                                                                         <C>          <C>      
Senior credit facility, revolving line of credit                            $  91,726    $  85,639
Senior subordinated discount notes (including interest due
  at maturity of $4,370 and $6,002, respectively)                             113,617      115,249
Senior subordinated notes (including interest due at maturity
  of $4,347 and $5,609, respectively)                                          81,120       82,382
Subordinated debentures                                                        54,071       54,071
Equipment financing                                                             9,780        7,016
                                                                            ---------    ---------
  Total                                                                       350,314      344,357
Less reorganization discount:
  Senior subordinated discount notes                                           (5,171)      (3,308)
  Senior subordinated notes                                                    (4,435)      (2,694)
  Subordinated debentures                                                     (10,270)      (8,039)
                                                                            ---------    ---------
  Total long-term debt                                                        330,438      330,316
Less current portion                                                           (2,770)    (326,090)
                                                                            ---------    ---------
  Long-term portion                                                         $ 327,668    $   4,226
                                                                            =========    =========
</TABLE>


         Senior Credit Facility - On September 6, 1996, the senior credit
         facility was amended to, among other things, extend its expiration date
         and reduce the interest rate by 0.25%. Under the terms of the amended
         credit agreement, the senior credit facility expires on March 1, 1997
         (unless otherwise extended) if the Company has not commenced a case
         under chapter 11 of the Bankruptcy Code. If such a case is commenced on
         or prior to March 1, 1997 (or any extended date), the senior credit
         facility will be extended automatically until the earlier of November
         1, 1997 or the effective date of a reorganization under chapter 11 of
         the Bankruptcy Code. The Company has classified the $85.6 million
         outstanding under its senior credit facility revolving line of credit
         as a current liability in the accompanying Consolidated Balance Sheet.
         In addition, the loan covenants were amended to be based upon the
         activities of the consolidated operating subsidiaries (JPS Converter
         and Industrial Corp. and JPS Elastomerics Corp.) rather than the
         consolidated Company (i.e. excludes the assets and liabilities of the
         parent company and other non-operating subsidiaries). The amended
         credit agreement does not permit additional borrowings by the operating
         subsidiaries for, among other things, loans or dividends to the Company
         for the payment of interest on its notes and debentures. As a result of
         this restriction, the Company did not make interest payments of
         approximately $1.9 million on its subordinated debentures due November
         15, 1996, and did not make interest payments of approximately $5.4
         million and $3.6 million on its senior subordinated discount notes and
         senior subordinated notes, respectively, due December 1, 1996. The
         terms of the indentures governing the Company's subordinated debt
         provide that such a failure to pay interest when due results in an
         event of default on such indebtedness and as a result, the holders of
         these debt securities are entitled to accelerate the debt represented
         thereby. Accordingly, all of the Company's notes and debentures have
         been classified as current liabilities as of November 2, 1996. As
         discussed in Note 14, the Company has engaged financial advisors
         regarding extension, replacement or refinancing of its debt securities.



                                       37
<PAGE>   39
         The senior credit facility provides for a $118 million revolving line
         of credit. The Company pays a fee of 1/2 of 1% per annum of the average
         unused line of credit. All senior borrowings bear interest at a Base
         Rate (as defined) plus 1.0% per annum (9.25% at November 2, 1996) or at
         the Eurodollar Rate (as defined) plus 2.50% per annum (approximately
         7.88% at November 2, 1996). Borrowings under the revolving line of
         credit (other than for loans used to purchase property, plant and
         equipment or to finance or refinance such purchases ("Capex Loans"))
         are limited to specified percentages of eligible accounts receivable
         and inventories, as defined, and such borrowings plus letters of credit
         outstanding and Capex Loans may not exceed the lesser of $118 million
         and the borrowing base plus an additional amount of $25,000,000. As of
         November 2, 1996, unused letters of credit issued and outstanding
         totaled $2,385,000. The outstanding unused letters of credit reduce the
         funds available under the revolving line of credit. At November 2,
         1996, the Company had $18,656,000 available for borrowing under the
         revolving credit agreement.

         The senior credit facility also permits, subject to certain conditions,
         the sale of fixed assets to the extent the net cash proceeds of all
         such sales made from March 1994 forward do not cumulatively exceed $35
         million (excluding the proceeds from the sale or transfer of the
         Automotive Assets and the Carpet Business). As of November 2, 1996,
         such limit has not been exceeded.

         During the first quarter of Fiscal 1995, the Company borrowed
         $36,607,000 under the revolving line of credit and made open market
         purchases of certain of its outstanding notes and debentures with an
         aggregate face value (including interest due at maturity) of
         $68,318,000 and a carrying value of $59,225,000. The Company recognized
         an extraordinary gain from early extinguishment of debt of $20,120,000,
         net of expenses of $1,898,000 and income taxes of $600,000.

         Senior Subordinated Discount Notes - The Company issued the discount
         notes in the 1991 reorganization. The discount notes began accruing
         interest on June 1, 1992 at 10.85% with 9.85% paid semi-annually and 1%
         payable at maturity. Interest payable at maturity compounds
         semi-annually at the annual rate of 10.85%. In connection with the 1991
         reorganization, the carrying value of the discount notes was reduced to
         its estimated net present value using an effective interest rate of
         13%. Under the terms of the indenture, mandatory redemption payments
         equal to $37,777,000, plus accrued interest, are due on each of June 1,
         1997 and June 1, 1998 prior to maturity on June 1, 1999 with optional
         early redemption available. However, due to the event of default
         discussed above, all of the discount notes are classified as current
         liabilities as of November 2, 1996.

         Senior Subordinated Notes - The senior subordinated notes bear interest
         at 10.25% with 9.25% paid semi-annually and 1% payable at maturity and
         were issued in the 1991 reorganization. Interest payable at maturity
         compounds semi-annually at the annual rate of 10.25%. In connection
         with the 1991 reorganization, the notes were adjusted to their
         estimated net present value by recording a discount resulting in an
         effective interest rate of 13%. Under the terms of the indenture,
         mandatory redemption payments equal to $31,250,000, plus accrued
         interest, are due on each of June 1, 1997 and June 1, 1998 with
         optional early redemption available. However, due to the event of
         default discussed above, all of the senior subordinated notes are
         classified as current liabilities as of November 2, 1996.



                                       38
<PAGE>   40
         Subordinated Debentures - The subordinated debentures bear interest at
         7%, payable semi-annually, with a mandatory redemption payment of
         principal of $37,500,000 due May 15, 1999, prior to maturity on May 15,
         2000, with optional early redemption available. In connection with the
         1991 reorganization, the debentures were adjusted to an estimated net
         present value by recording a discount of $24,390,000 resulting in an
         effective interest rate of 13.5%. Due to the event of default discussed
         above, the subordinated debentures are classified as current
         liabilities as of November 2, 1996.

         Equipment Financing - The Company has financed a portion of its
         equipment purchases with loans from a finance company and certain
         equipment vendors at fixed interest rates ranging from 7.6% to 9.7%.
         Monthly principal payments are due in various amounts as determined by
         the terms of the loans which have final maturity dates ranging from
         October 1997 through December 2001.

         Restrictive Covenants - Provisions of the senior credit agreement and
         the Company's other debt indentures place significant restrictions on
         certain corporate acts such as mergers, consolidations, acquisitions,
         repurchases of stock, the making of certain other restricted payments,
         transactions with affiliates and the sale of assets and prohibit the
         payment of cash dividends. The Company must maintain minimum levels of
         "net worth", defined to be total assets (excluding investments
         designated by management to satisfy possible contingent tax
         liabilities) minus total liabilities plus the subordinated notes and
         debentures and other adjustments, which vary quarterly from $100
         million at November 2, 1996 to $105 million in the fourth quarter of
         1997. In addition, the senior credit agreement contains requirements to
         meet certain financial ratios which vary quarterly or annually and
         place limitations on the Company's ability to incur additional debt or
         grant a security interest in its assets. Other customary covenants,
         conditions and default provisions are also present in the agreement and
         indentures. The Company was in compliance with the restrictions and
         financial covenants of its senior credit agreement and its long-term
         debt indentures at November 2, 1996. However, as discussed above,
         subsequent to November 2, 1996, the Company did not make the scheduled
         interest payments on its debt securities which constituted a default
         under the indentures.

         Fair Value - The fair value of the Company's long-term debt based on
         estimated quoted prices, compared to the carrying values (at discounted
         amounts), is as follows (in thousands):


<TABLE>
<CAPTION>
                                                                  October 28, 1995           November 2, 1996
                                                                ---------------------       -------------------
                                                                Carrying        Fair         Carrying      Fair
                                                                  Value        Value          Value       Value
                                                                --------       -----        ---------     -----
           <S>                                                    <C>        <C>            <C>         <C>
           10.85% Senior Subordinated Discount Notes              $108,446   $  96,138      $ 111,941   $ 63,364
           10.25% Senior Subordinated Notes                         76,685      66,025         79,688     44,544
           7% Subordinated Debentures                               43,081      32,443         46,032     10,820
</TABLE>

         Because of the lack of significant trading activity of the Company's
         notes and debentures, estimated quoted prices vary.

         Other - Substantially all of the Company's assets are pledged as
         collateral for the senior credit facility and the equipment financing.

         Interest expense includes $11,161,000 in Fiscal 1994, $8,818,000 in
         Fiscal 1995 and $10,088,000 in Fiscal 1996 representing amortization of
         debt issuance expenses and accretion of interest on the discounted
         notes and accrued product liability costs (see Note 9).



                                      39

<PAGE>   41



         In 1994, the Company recorded a $7,410,000 loss on early extinguishment
         of debt in connection with the retirement of certain debt with a
         portion of the proceeds of the Automotive Assets sale as discussed
         above. The loss represents deferred financing fees and reorganization
         discounts associated with the retired debt along with expenses of the
         transactions.

         Maturities - Aggregate principal maturities of all long-term debt are
         as follows (in thousands):

<TABLE>
<CAPTION>
                                 Fiscal Year Ending
                                 ------------------
                                 <S>                              <C>  
                                 1997                             $   340,132
                                 1998                                   1,580
                                 1999                                     689
                                 2000                                     638
                                 2001                                     638
                                 Thereafter                               680
                                                                  -----------
                                                                  $   344,357
                                                                  ===========
</TABLE>

7.       SENIOR REDEEMABLE PREFERRED STOCK AND EQUITY SECURITIES

         Certain information on senior redeemable preferred stock and equity
         securities at October 28, 1995 and November 2, 1996 is as follows:

<TABLE>
<CAPTION>
                                                                                     Shares Issued and Outstanding
                                                                                     -----------------------------
                                                          Par Value                    October 28,    November 2,
                                                          Per Share   Authorized          1995             1996
                                                          ---------   ----------        ---------      ---------
         <S>                                                 <C>       <C>               <C>             <C>    
         Series A Senior Redeemable Preferred Stock          $.01      700,000(1)        507,031         538,176
         Series B Junior Preferred Stock                      .01      700,000(1)         10,000          10,000
         Class A Common Stock                                 .01      700,000           490,000         490,000
         Class B Common Stock                                 .01      700,000           510,000         510,000
</TABLE>

         (1)  The aggregate number of authorized shares of preferred stock is
              700,000, including both the senior redeemable preferred stock and
              the junior preferred stock.

         The senior redeemable preferred stock must be redeemed on May 15, 2003.
         Its holders vote with the junior preferred stockholders as a single
         class to elect two directors, otherwise, except in the event of
         default, the senior redeemable preferred stock is non-voting. The
         senior redeemable preferred stock is redeemable at the option of the
         Company prior to maturity at 103% of the liquidation preference of $100
         per share. Dividends are cumulative and are calculated based on an
         annual rate of 6% of the liquidation preference and are paid quarterly.
         Under the terms of various credit agreements, dividends must be in the
         form of additional shares until 1998. In connection with the 1991
         reorganization, the senior redeemable preferred stock was discounted to
         its estimated net present value with the net discount of $23,351,000
         reflected as an adjustment of additional paid-in capital. The
         difference between the net carrying value of the senior redeemable
         preferred stock and its mandatory redemption value is being amortized
         using the interest method of amortization over the life of the shares
         by charges to additional paid-in capital or, if available, by charges
         to retained earnings. The effective dividend rate on the senior
         redeemable preferred stock is 15.0%. The unamortized discount was
         approximately $23,153,000 at October 28, 1995 and $21,844,000 at
         November 2, 1996. Because of the lack of recent trading activity and
         disparities in potential valuation methodologies, determination of the
         fair value of the Company's senior redeemable preferred stock is
         impractical.



                                       40

<PAGE>   42



         The junior preferred stock has a liquidation preference of $25 per
         share. Its holders vote with the senior redeemable preferred
         stockholders as a single class to elect two directors, otherwise,
         except in the event of default, the junior preferred stock is
         non-voting. The liquidation preference increases $15 per share for each
         year that the Company attains certain specified earnings levels for
         each of the first five fiscal years ended after April 2, 1991. No
         increase in the liquidation preference occurred because actual earnings
         were less than the specified earnings levels in each of the years.
         Dividends are non-cumulative and are payable at the same rate as is
         paid on the common stock, if any. As of November 2, 1996, no dividends
         had been paid. The Company's senior credit agreement prohibits the
         payment of cash dividends.

         The Class A and Class B common stocks have substantially the same
         voting rights except in the election of directors. The Class A common
         stockholders, voting separately as a class, have the right to elect
         three out of the seven Company directors.

8.       INCOME TAXES

         The Fiscal 1994, 1995 and 1996 provision (benefit) for income taxes on
         continuing operations included in the consolidated statements of
         operations consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                           Fiscal         Fiscal          Fiscal
                                                                           1994           1995            1996
                                                                           ----           ----            ----
                  <S>                                                     <C>            <C>             <C>    
                  Current state                                           $  1,573       $  1,200        $   200
                  Deferred state provision (benefit)                         1,227        -                 (500)
                                                                          --------       --------        -------
                  Provision (benefit) for income taxes                    $  2,800       $  1,200        $  (300)
                                                                          ========       ========        =======
</TABLE>

         There is no provision for Federal income taxes.

         A reconciliation between income taxes at the 35% statutory Federal
         income tax rate and the provision (benefit) for income taxes for the
         fiscal years ended 1994, 1995 and 1996 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           Fiscal         Fiscal           Fiscal
                                                                           1994           1995             1996
                                                                           ----           ----             ----
           <S>                                                         <C>             <C>           <C>        
           Income tax benefit at Federal statutory rate                $  (11,757)     $  (5,762)    $  (23,183)
           Increase (decrease) in income taxes arising
              from effect of:
                State and local income taxes                                2,800          1,200           (300)
                Amortization of goodwill                                      316            316            344
                Other                                                         250            212            109
                Losses not resulting in tax benefits                       11,191          5,234         22,730
                                                                       ----------      ---------     ----------
           Provision (benefit) for income taxes                        $    2,800      $   1,200     $     (300)
                                                                       ==========      =========     ==========
</TABLE>


                                      41

<PAGE>   43



         Presented below are the elements which comprise deferred tax assets and
         liabilities (in thousands):

<TABLE>
<CAPTION>
                                                                           October 28,     November 2,
                                                                               1995          1996
                                                                           ----------     ----------
<S>                                                                        <C>            <C>       
Gross deferred assets:
  Estimated allowance for doubtful accounts                                $      476     $      412
  Excess of tax over financial statement basis of inventory                       634            647
  Accruals deductible for tax purposes when paid                                2,263          2,497
  Deferred compensation deductible for tax purposes when paid                      39            157
  Postretirement benefits deductible for tax purposes when paid                 2,177          2,141
  Miscellaneous                                                                    56             83
  Alternative minimum tax credit carryforward available                         2,300          2,564
  Deferred financial statement income recognized for tax purposes
     when received                                                              5,432          6,489
  Excess of tax over financial statement carrying value of
     investment in discontinued operation                                      11,231         13,474
  Excess of tax basis of intangibles over financial statement basis             8,004          8,817
  Net operating loss carryforward                                              23,519         33,291
  Less valuation allowance                                                    (26,020)       (53,578)
                                                                           ----------     ----------
     Gross deferred assets                                                     30,111         16,994
                                                                           ----------     ----------
Gross deferred liabilities:
  Pension asset recognized for book purposes                                   (2,208)          (411)
  Excess of financial statement over tax basis of property, plant,
     and equipment                                                            (21,550)       (11,898)
  Excess of tax over financial statement basis of debt instruments
     (net of deferred financing fees)                                          (6,353)        (4,685)
  Deferred state taxes resulting from filing separate subsidiary
     returns in some jurisdictions                                             (4,165)        (3,665)
                                                                           ----------         ------
     Gross deferred liabilities                                               (34,276)       (20,659)
                                                                           ----------     ----------
     Net deferred noncurrent tax liability                                 $   (4,165)    $   (3,665)
                                                                           ==========     ========== 
</TABLE>

         At November 2, 1996, the Company had regular federal net operating loss
         carryforwards for tax purposes of approximately $90,000,000. The net
         operating losses expire in years 2005 through 2011. The Company also
         has federal alternative minimum tax net operating losses of
         approximately $45,000,000 which expire in 2007 and 2011. During 1995,
         the Company utilized approximately $6,000,000 of alternative minimum
         tax net operating loss carryovers to offset income from the
         extraordinary gain on early extinguishment of debt. As previously
         noted, alternative minimum taxes can be carried forward indefinitely
         and used as a credit against regular federal taxes.

         The Company's future ability to utilize its net operating losses 
         may be significantly limited under the income tax laws should
         there be changes in the ownership of the Company's stock which
         constitute an ownership change for tax purposes. The effect of such an
         ownership change would be to significantly limit the annual utilization
         of the net operating loss carryforwards to an amount equal to the value
         of the Company immediately prior to the time of the change (subject to
         certain adjustments) multiplied by the Federal long-term tax exempt
         rate. The Company does not believe this potential limitation on
         utilization of the net operating loss carryforwards currently applies.
         However, there is no assurance that the Internal Revenue Service will
         not take a contrary position or that such limitation will not become
         applicable for subsequent taxable periods. Due to the Company's
         operating history, it is uncertain that it will be able to utilize all
         deferred tax assets. Therefore, a valuation allowance has been provided
         equal to the deferred tax assets remaining after deducting all deferred
         tax liabilities, exclusive of those related to certain deferred state
         tax liabilities.

                                       42

<PAGE>   44




9.       COMMITMENTS AND CONTINGENCIES

         The Company leases office facilities, machinery and computer equipment
         under noncancellable operating leases. Rent expense was approximately,
         $2,810,000 in Fiscal 1994, $3,411,000 in Fiscal 1995 and $5,158,000 in
         Fiscal 1996.

         Future minimum payments, by year and in the aggregate, under the
         noncancellable operating leases with terms of one year or more consist
         of the following at November 2, 1996 (in thousands):

<TABLE>
       <S>                       <C>      
       1997                      $   4,235
       1998                          3,816
       1999                          3,239
       2000                          2,581
       2001                            907
                                 ---------
                                 $  14,778
                                 =========
</TABLE>

         The Company has planned expenditures of approximately $23.5 million for
         property, plant and equipment additions in Fiscal 1997.

         The Company has established long-term incentive compensation plans for
         certain of its key executives. One plan provides for payments to
         participants at retirement or termination based on the increase of the
         fair value, as defined, of the common stock of the Company over certain
         established levels, as determined by the Company's Board of Directors.
         No amounts have been earned under the provisions of this plan, except
         for a termination and death benefit of $203,000 which was paid in
         Fiscal 1994. Another plan, effective November 1, 1994, provides for
         payments to covered participants from amounts accumulated in individual
         award banks. Awards are determined based on the achievement of
         specified returns on net assets employed. No awards are expected to be
         paid out under this plan for operating results through November 2,
         1996. The Company's policy is to accrue the cost of the plans as the
         fair value of the common stock increases over the established levels or
         as actual earnings occur if the cumulative earnings for the periods
         included under the plan are expected to reach the specified levels
         necessary for bonuses to be payable.

         As required by the September 6, 1996 amendment to the senior credit
         facility, the Company entered into retention bonus agreements with
         certain of its executives and key employees during Fiscal 1996. The
         retention bonus agreements provide specific individual awards if the
         participants continue active employment with the Company for at least
         six months following the completion of the proposed financial
         restructuring discussed in Note 14. Under the terms of the agreements,
         an aggregate of approximately $675,000 will be paid out on the
         effective date of a restructuring and an aggregate of approximately
         $1,200,000 will be paid out six months after the effective date of a
         restructuring. No amounts are considered earned until the effective
         date of a restructuring. In Fiscal 1996, approximately $363,000 was
         accrued and included in restructuring fees and expenses in the
         accompanying Consolidated Statements of Operations.



                                       43

<PAGE>   45



         The Company has provided for all estimated future costs associated with
         certain defective roofing products sold by the Predecessor Stevens
         Division operations. The liability for future costs associated with
         these defective roofing products is subject to management's best
         estimate, including factors such as expected future claims by
         geographic region and roofing compound applied; expected costs to
         repair or replace such roofing products; estimated remaining length of
         time that such claims will be made by customers; and the estimated
         costs to litigate and settle certain claims now in litigation and those
         that may result in future litigation. Based on warranties that were
         issued on the roofs, the Company estimates that the defective roofing
         product claims will be substantially settled by 2000. Management
         updates its assessment of the adequacy of the remaining reserve for
         defective roofing products quarterly and if it is deemed that an
         adjustment to the reserve is required, it will be charged to operations
         in the period in which such determination is made. Based on
         management's estimate of a range of future costs, the Company recorded
         a $5,000,000 addition to the liability for such defective products,
         charged to other expense in the accompanying Fiscal 1995 Consolidated
         Statement of Operations. No additional amounts were accrued in Fiscal
         1996. The Company charges the costs of settling these defective
         material obligations as a reduction of the recorded liability balance
         and, accordingly, such costs are not charged against the results of
         operations. Payments on the defective product liability claims were
         $3,870,000, $4,040,000 and $3,111,000 in fiscal years 1994, 1995 and
         1996, respectively.

         In connection with the sale of the Automotive Assets in June 1994, the
         Company invested $39.5 million of the sale proceeds in long-term
         securities (principally United States Treasury Securities maturing in
         1997) designated by management to be available to satisfy possible
         contingent tax liabilities. The investments are classified as
         "held-to-maturity" and recorded at amortized cost. As of October 28,
         1995 and November 2, 1996, the aggregate fair value of the United
         States Treasury Securities was approximately $43,400,000 and
         $46,200,000, respectively, with gross unrealized holding gains of
         approximately $500,000 and $400,000 in Fiscal 1995 and 1996,
         respectively.

         The Company is exposed to a number of asserted and unasserted potential
         claims encountered in the normal course of business. In the opinion of
         management, the resolution of these matters will not have a material
         adverse effect on the Company's financial position or future results of
         operations.

10.      RETIREMENT PLANS

         Defined Benefit Pension Plan - Substantially all of the Company's
         employees are covered by a company-sponsored defined benefit pension
         plan. The plan also provides benefits to individuals employed by the
         Automotive Businesses which were sold by the Company on June 28, 1994,
         the Carpet Business sold on November 16, 1995 and the Rubber Products
         Business sold on September 30, 1996. The benefits of these former
         employees were "frozen" at the respective dates of sale of the
         businesses. Accordingly, these former employees will retain benefits
         earned through the respective disposal dates, however, they will not
         accrue additional benefits. In addition, the plan provides benefits to
         individuals employed by the Dunean plant which was closed effective
         October 28, 1996. Benefits for employees who were terminated as a
         result of the plant closing were also "frozen" as of October 28, 1996
         and no additional benefits will accrue subsequent to that date. The
         plan provides pension benefits that are based on the employees'
         compensation during the last ten years of employment. The Company's
         policy is to fund the annual contribution required by applicable
         regulations.



                                       44

<PAGE>   46



         Assets of the pension plan are invested in common and preferred stocks,
         government and corporate bonds, real estate and various short-term
         investments.

         A reconciliation as of the most recent measurement date (November 1,
         1995) of the funded status of the plan with amounts reported in the
         Company's Consolidated Balance Sheets follows (in thousands):

<TABLE>
<CAPTION>
                                                                                       October 28,    November 2,
                                                                                          1995           1996
                                                                                       ---------       --------
         <S>                                                                           <C>             <C>     
         Actuarial present value of benefit obligations:
           Vested                                                                      $  89,236       $ 88,983
           Non-vested                                                                        613            377
         Accumulated benefit obligation                                                   89,849         89,360
         Provision for future pay increases                                                6,232          6,755
                                                                                       ---------       --------
           Total projected benefit obligation                                             96,081         96,115
         Plan assets at fair value                                                        91,996         89,410
                                                                                       ---------       --------
         Projected benefit obligation greater than plan assets                            (4,085)        (6,705)
         Unrecognized net loss                                                             4,460          4,212
         Prior service cost not yet recognized in net periodic pension cost                5,598          3,548
                                                                                       ---------       --------
         Pension asset in accompanying Consolidated Balance Sheets                     $   5,973       $  1,055
                                                                                       =========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                                          Fiscal         Fiscal         Fiscal
         Components of net periodic pension cost:                          1994           1995           1996
                                                                        ----------     ----------     -------
           <S>                                                          <C>            <C>             <C>     
           Service cost-benefits earned during the period               $    2,925     $   2,483       $  2,378
           Interest cost on projected benefit obligation                     6,987         7,131          7,048
           Return on plan assets                                             3,802       (15,628)        (7,674)
           Net amortization and deferral                                   (10,291)        8,478            451
                                                                        ----------     ---------       --------
           Net periodic pension cost                                         3,423         2,464          2,203
           Cost allocated to discontinued operations                         1,051           444         -
                                                                        ----------     ---------       ---
           Net periodic pension cost for continuing operations          $    2,372     $   2,020       $  2,203
                                                                        ==========     =========       ========
</TABLE>

         On February 15, 1996, the Company offered special early retirement
         benefits to approximately fifty salaried employees who met certain
         criteria. Approximately $2.2 million of pension benefits were paid in
         lump-sums by the plan to twenty-eight employees who accepted the offer.
         In Fiscal 1996 a charge of $1,125,000 representing the actuarial cost
         to the plan of the early retirement offer as accepted by the employees
         is included in other expense in the accompanying Consolidated Statement
         of Operations.

         In Fiscal 1996 the Company recognized losses of approximately $632,000
         for pension curtailment and special termination benefits in accordance
         with SFAS No. 88, "Employees' Accounting for Settlements and
         Curtailments of Defined Benefit Pension Plans and for Termination
         Benefits", which related primarily to the sale of the Rubber Products
         Business and the Dunean plant closing and related termination of
         participation in the plan of these employees.

         The weighted-average discount rate used in determining the actuarial
         present value of the projected benefit obligation at October 28, 1995
         and November 2, 1996 was 7.8%. The expected long-term rate of return on
         assets was 9% at October 28, 1995 and November 2, 1996. The assumed
         rate of increase in compensation levels was based on age-related tables
         at October 28, 1995 and November 2, 1996. Effective November 1, 1993,
         the Company amended the benefit formula for salaried employees to
         provide for an additional benefit on compensation in excess of the
         average social security wage base.

                                       45

<PAGE>   47




         401(k) Savings Plan - The Company also has a savings, investment and
         profit-sharing plan available to employees meeting eligibility
         requirements. Effective January 1, 1994, the Company amended the plan
         to include coverage of hourly wage employees (previously the plan
         covered substantially only salaried employees). The plan is a tax
         qualified plan under Section 401(k) of the Internal Revenue Code. The
         Company makes a matching contribution of 25% of each participant's
         contribution with a maximum matching contribution of 1-1/2% of the
         participant's base compensation. Company contributions were
         approximately $536,000 in Fiscal 1994, $589,000 in Fiscal 1995 and
         $587,000 in Fiscal 1996.

         Postretirement Benefits - The Company has several unfunded
         postretirement plans that provide certain health care and life
         insurance benefits to eligible retirees. The plans are contributory,
         with retiree contributions adjusted periodically, and contain
         cost-sharing features such as deductibles and coinsurance. The
         Company's life insurance plan provides benefits to both active
         employees and retirees. Active employee contributions in excess of the
         cost of providing active employee benefits are applied to reduce the
         cost of retirees' life insurance benefits. The following table sets
         forth the status of the Company's postretirement plans as recorded in
         the accompanying Consolidated Balance Sheets (in thousands):

         Accumulated postretirement benefit obligation (APBO):

<TABLE>
<CAPTION>
                                                                                 October 28,         November 2,
                                                                                    1995                1996
                                                                                  --------           ---------
              <S>                                                                 <C>                <C>      
              Retirees                                                            $  2,974           $   1,721
              Fully eligible active plan participants                                1,242               1,075
              Other active plan participants                                           551                 914
              Unrecognized gain                                                        482               1,098
                                                                                  --------           ---------
              Accrued postretirement benefit plan liability                       $  5,249           $   4,808
                                                                                  ========           =========
</TABLE>

         Net periodic postretirement benefit expense included the following
         components (in thousands):

<TABLE>
<CAPTION>
                                                                              Fiscal      Fiscal       Fiscal
                                                                               1994        1995         1996
                                                                              ------      ------       -----
              <S>                                                             <C>         <C>          <C>  
              Service cost for benefits earned                                $    7      $    1       $   5
              Interest cost on APBO                                              352         357         297
                                                                              ------      ------       -----
              Net periodic postretirement cost                                $  359      $  358       $ 302
                                                                              ======      ======       =====
</TABLE>

         In Fiscal 1996, the Company recognized a curtailment gain of
         approximately $347,000 related to the sale of the Rubber Products
         Business and the Dunean plant closing, and related termination of
         participation in the plans of these employees.

         Since the Company has capped its annual liability per person and all
         future cost increases will be passed on to retirees, the annual rate of
         increase in health care costs does not affect the postretirement
         benefit obligation.

         The weighted-average discount rate used in determining the accumulated
         postretirement benefit obligation was 7.8% as of October 28, 1995 and
         November 2, 1996.



                                       46

<PAGE>   48



         Postemployment Benefits - Effective October 31, 1993, the Company
         adopted SFAS No. 112, which requires that the cost of benefits provided
         to former or inactive employees after employment but before retirement
         be recognized on the accrual basis of accounting instead of when paid,
         as had been the Company's practice.

         The cumulative effects as of October 31, 1993 of adopting SFAS No. 112
         were to increase accrued postemployment benefit costs by approximately
         $708,000 and charge income for approximately $708,000. Income taxes
         were not applicable. The effect of adopting SFAS No. 112 on income from
         operations in 1994 was not significant. The liability for
         postemployment benefits at October 28, 1995 and November 2, 1996 is
         included in other long-term liabilities in the accompanying
         Consolidated Balance Sheets.

11.      RELATED PARTIES

         The Company incurred fees of $1,250,000 in Fiscal 1994 and $1,000,000
         in each of Fiscal 1995 and 1996 for management services provided by a
         certain shareholder pursuant to a management services agreement. The
         balance sheets as of October 28, 1995 and November 2, 1996 include
         accrued fees of $1,000,000 each in other accrued expenses. The
         agreement provides for payments of $1,000,000 to the shareholder
         annually through the year 2001. Payment of the Fiscal 1996 accrued
         management fee is limited to $450,000 by the Company's senior credit
         facility, as amended on September 6, 1996, with the balance to be paid
         upon the earlier of the consummation of a financial restructuring as
         discussed in Note 14 or completion of the Company's 1997 second fiscal
         quarter.

12.      BUSINESS SEGMENTS

         The Company competes in three industry segments: Apparel Fabrics and
         Products, Industrial Fabrics and Products and Home Fashion Textiles.
         The apparel fabrics and products segment manufactures a broad range of
         apparel fabrics and apparel related products, including unfinished
         woven apparel fabrics (greige goods) for men's, women's and children's
         wear, and spun yarns for use in apparel. The industrial fabrics and
         products segment manufactures commercial roofing products made from
         woven synthetic fabrics and rubber-based specialty polymer compounds,
         other building construction products made from glass and synthetic
         fibers, various industrial products which generally have insulation or
         filtration characteristics, and other rubber products and various
         extruded polyurethane products. The home fashion textiles segment
         manufactures a variety of unfinished woven fabrics and yarns for use in
         the manufacturing of draperies, curtains and lampshades and is a major
         producer of solution-dyed drapery fabrics.

         Export sales are approximately 4% of net sales and the Company has no
         significant foreign operations. Earnings by business segment represent
         operating profit, excluding net unallocated corporate operating
         expenses. Identifiable segment assets are those assets used in the
         operations of the segment. Corporate assets are cash and other assets.


                                       47

<PAGE>   49



         Industry segment information (in thousands):

<TABLE>
<CAPTION>
                                                                          Fiscal         Fiscal           Fiscal
                                                                           1994           1995             1996
                                                                        ----------     ----------      ---------
<S>                                                                     <C>            <C>             <C>      
         Net sales:
           Apparel fabrics and products                                 $  254,810     $  247,846      $ 221,799
           Industrial fabrics and products                                 169,736        191,985        193,001
           Home fashion textiles                                            37,325         32,734         34,024
                                                                        ----------     ----------      ---------
                                                                        $  461,871     $  472,565      $ 448,824
                                                                        ==========     ==========      =========
         Operating profit (loss):
           Apparel fabrics and products                                 $   18,487     $   16,667      $ (22,422)
           Industrial fabrics and products                                   7,618          7,590          5,947
           Home fashion textiles                                             2,564          1,749            647
           Indirect corporate expenses, net                                 (7,438)        (5,345)        (6,257)
                                                                        ----------     ----------      ---------

           Operating profit (loss)                                          21,231         20,661        (22,085)

         Valuation allowance on Gulistan Securities                         -              -              (4,242)
         Interest income                                                       749          2,821          2,856
         Interest expense                                                  (55,570)       (39,946)       (40,510)
         Restructuring fees and expenses                                    -              -              (2,255)
                                                                        ----------     ----------      ---------

         Loss before income taxes, discontinued operations,
           extraordinary items and cumulative effects on
           accounting changes                                           $  (33,590)    $  (16,464)     $ (66,236)
                                                                        ==========     ==========      =========

         Depreciation and amortization expense:
           Apparel fabrics and products                                 $   13,329     $   12,722      $  12,946
           Industrial fabrics and products                                   6,103          5,690          6,282
           Home fashion textiles                                             2,359          2,394          2,517
                                                                        ----------     ----------      ---------
              Total segments                                                21,791         20,806         21,745
           Corporate and other                                               1,415            979            994
                                                                        ----------     ----------      ---------
                                                                        $   23,206     $   21,785      $  22,739
                                                                        ==========     ==========      =========

         Capital expenditures:
           Apparel fabrics and products                                 $    8,120     $    8,852      $   4,389
           Industrial fabrics and products                                   6,171          9,312          4,545
           Home fashion textiles                                             4,122            643            899
                                                                        ----------     ----------      ---------
              Total segments                                                18,413         18,807          9,833
           Corporate and other                                                  10              4              1
                                                                        ----------     ----------      ---------
                                                                        $   18,423     $   18,811      $   9,834
                                                                        ==========     ==========      =========
</TABLE>


                                                                       Continued

                                       48

<PAGE>   50



         Industry segment information (in thousands):

<TABLE>
<CAPTION>
                                                                     October 29,     October 28,    November 2,
                                                                        1994            1995           1996
                                                                     ---------      -----------    -----------
         <S>                                                         <C>            <C>            <C>        
         Identifiable assets:
           Apparel fabrics and products                              $ 171,164      $   165,622    $   127,909
           Industrial fabrics and products                             106,124          115,710        101,376
           Home fashion textiles                                        24,752           20,731         21,333
                                                                     ---------      -----------    -----------
              Total segments                                           302,040          302,063        250,618
           Corporate and other                                          81,087           81,827         85,309
                                                                     ---------      -----------    -----------
                                                                       383,127          383,890        335,927
           Net assets held for sale                                     69,684           28,932         -
                                                                     ---------      -----------    -----------
                                                                     $ 452,811      $   412,822    $   335,927
                                                                     =========      ===========    ===========
</TABLE>

13.      JOINT VENTURE

         In May 1996, the Company purchased a 50% ownership interest in a
         Mexican corporation engaged in the manufacture and sale of textile
         products for the apparel industry in Mexico. The investment is
         accounted for on the equity method of accounting. As of November 2,
         1996, the carrying value of the investment was approximately $146,000.
         The effect of the joint venture on Fiscal 1996 results of operations
         was not significant.

         In 1996, the Company had sales to the joint venture of approximately
         $2.0 million. As of November 2, 1996, the Company's accounts receivable
         from the joint venture was approximately $1.8 million.

14.      LIQUIDITY AND GOING CONCERN

         The accompanying consolidated financial statements have been prepared
         assuming that the Company will continue as a going concern which
         contemplates the realization of assets and the settlement of
         liabilities and commitments in the normal course of business. The
         Company has had recurring net losses from continuing operations since
         its inception, has a net shareholder's deficiency of approximately
         $108,986,000 at November 2, 1996, is in default on its senior
         subordinated discount notes, senior subordinated notes and subordinated
         debentures, and, under the circumstances discussed below, the Company's
         senior revolving credit facility expires on March 1, 1997. The
         Company's senior revolving credit facility (or a similar credit
         facility) is essential for the Company's continued operations. On
         September 6, 1996, the senior credit agreement was amended to, among
         other things, extend its expiration date and reduce the interest rate
         by 0.25%. Under the terms of the amended credit agreement, the senior
         credit facility expires on March 1, 1997 (unless otherwise extended) if
         the Company has not commenced a case under chapter 11 of the Bankruptcy
         Code. If such a case is commenced on or prior to March 1, 1997, the
         senior credit facility will be extended automatically to the earlier of
         November 1, 1997 or the effective date of a reorganization under
         chapter 11 of the Bankruptcy Code. At this time, the Company has not
         made a decision to commence a case under the Bankruptcy Code. In
         addition, the loan covenants were amended to be based upon the
         activities of the consolidated operating subsidiaries (JPS Converter
         and Industrial Corp. and JPS Elastomerics Corp.) rather than the
         consolidated Company (i.e., excludes the assets and liabilities of the
         parent company and other non-operating subsidiaries). The amended
         credit agreement does not permit additional borrowings by the borrowing
         subsidiaries for, among other things, loans or dividends to the Company
         for the payment of interest on its notes and debentures. As a result of
         the aforementioned restriction on the use of proceeds of revolving
         loans, the Company

                                       49

<PAGE>   51



         did not make scheduled November 15, 1996 interest payments of
         approximately $1.9 million on its subordinated debentures and did not
         make scheduled December 1, 1996 interest payments of approximately $5.4
         million on its senior subordinated discount notes and approximately
         $3.6 million on its senior subordinated notes. The failure to make
         these scheduled interest payments constitutes an event of default under
         the indentures governing these debt securities. As a result, the
         holders of these debt securities are entitled to accelerate the debt
         represented thereby, among other things. The Company does not have the
         ability to repay such indebtedness if the same were to be accelerated.

         On May 8, 1996, the Company engaged The Blackstone Group, L.P. to act
         as its financial advisor in connection with a potential financial
         restructuring of its debt obligations. In addition, at the request of
         the holders of a substantial majority of its outstanding bonds, the
         Company engaged Houlihan, Lokey, Howard & Zukin, Inc., effective April
         10, 1996 to act as financial advisors to the holders of the Company's
         debt securities in connection with such a financial restructuring. The
         Company has provided substantial information to these financial
         advisors on a confidential basis regarding the Company's business,
         strategies, plans and prospects. In addition, the Company is discussing
         the terms of a potential financial restructuring with these advisors
         and the holders of a substantial majority of its outstanding bonds. The
         Company's ability to accomplish a restructuring of the terms of its
         debt securities or any refinancing thereof will depend on a number of
         factors, including its operating performance, market conditions and the
         ability of the Company and its bondholders to come to an agreement as
         to the appropriate terms of any such restructuring. Although no
         agreement, formal or informal, has been reached between the Company and
         its bondholders regarding the terms of a potential financial
         restructuring, management is optimistic that a restructuring will be
         accomplished. Management is unable to predict the impact of any such
         restructuring on the accompanying financial statements. If the Company
         is not successful in this regard, the default on the Company's debt
         securities and its inability to service such debt as required raise
         substantial doubt about the Company's ability to continue as a going
         concern.



                                       50

<PAGE>   52



ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

           None.

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information with respect to the persons
who are members of the Board of Directors or executive officers of the Company.
Each director serves until a successor is elected and qualified. Directors
receive no compensation for their services.

<TABLE>
<CAPTION>
Name                                Age              Position(s) Held
----                                ---              ----------------
<S>                                 <C>              <C>   
Jerry E. Hunter                     59               Director, Chairman of the Board, President and
                                                     Chief Executive Officer

David H. Taylor                     41               Director, Executive Vice President-Finance and Secretary

Steven M. Friedman                  42               Director

Muzzafar Mirza                      38               Director

Alain M. Oberrotman                 45               Director

Marc C. Particelli                  51               Director
</TABLE>

The business experience of each of the directors and executive officers during
the past five years is as follows:

Jerry E. Hunter was appointed Chairman of the Board of the Company on July 30,
1996. Mr. Hunter has been a director of the Company since April 6, 1993 and
Chief Executive Officer since November 29, 1994. Mr. Hunter has served as
President of the Company since September 1988. Prior to that time, from May 1988
to September 1988, he was Executive Vice President - Operations. He also serves
as a Vice President of each of the Company's subsidiaries. From April 1986 to
May 1988 he was Vice President - Technical Services at J.P. Stevens. From March
1983 to March 1986, he was Senior Vice President at Cannon Mills, Inc., a
textile manufacturer. Prior to March 1983, he was employed by Springs
Industries, a textile manufacturer, for twenty-one years.

David H. Taylor was appointed as a director of the Company on April 15, 1993.
Mr. Taylor has served as Executive Vice President - Finance and Secretary of the
Company since June 1991, and prior thereto he was Controller and Assistant
Secretary of the Company since May 1988. Prior to that time, he was a Senior
Manager at Deloitte Haskins & Sells, a public accounting firm by which he was
employed from June 1977 through May 1988. In addition, Mr. Taylor serves as a
Vice President and Assistant Secretary of each of the Company's subsidiaries.



                                       51

<PAGE>   53



Steven M. Friedman has served as a director of the Company since May 1988. He
was Chief Executive Officer of the Company from April 1991 to November 1994. Mr.
Friedman became a general partner of EOS Partners, L.P. ("EOS") (a private
investment firm) on January 1, 1994. Prior thereto, he was a general partner of
Odyssey Partners, a private investment partnership with substantial capital
invested in marketable securities and closely-held businesses, since July 1988.
He is also a director of Forstmann & Company, Inc., a manufacturer of textiles
and textile-related products, Eagle Food Centers, Inc., a chain of grocery
stores, The Leslie Fay Companies, Inc., a women's wear designer and
manufacturer, Rickel Home Centers, Inc., a chain of home center retail stores,
and The Caldor Corporation, a chain of discount retail stores.

Muzzafar Mirza was appointed as a director of the Company on October 25, 1993.
He has been a principal of Odyssey Partners since July 1993. From May 1988 to
June 1993, he was employed by General Electric Capital Corporation, as head of
Merchant Banking for the GE Capital Corporate Finance Group. From 1983 to 1988,
he was a Vice President of Marine Midland Bank, N.A. Mr. Mirza is also a
director of The Scotsman Group, Inc. and its parent, Scotsman Holdings, Inc., a
lessor of mobile office units.

Alain M. Oberrotman was appointed as a director of the Company on January 25,
1994. He has been a principal of Odyssey Partners since October 1992. From
September 1990 to October 1992, he was a principal of Hambro International
Equity Partners, a venture capital firm.

Marc C. Particelli was appointed as a director of the Company on November 29,
1994. He has been a principal of Odyssey Partners since October 1, 1994. Prior
thereto, he was worldwide Practice Leader for the Consumer Products group at
Booz, Allen & Hamilton, an international management consulting firm by which he
was employed from 1974 to 1994.

The Company's directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified.

None of the directors or executive officers listed herein is related to any
other such director or executive officer.



                                       52

<PAGE>   54



ITEM 11.      EXECUTIVE COMPENSATION.

The following summary compensation table sets forth information concerning
compensation for the last three years for services in all capacities awarded to,
earned by or paid to the Company's Chief Executive Officer and the five other
most highly compensated executive officers of the Company during Fiscal 1996.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name and                                                      Annual Compensation            All Other
Principal Position                          Year                 Salary      Bonus        Compensation(2)
------------------                          ----                 ------      -----        ---------------
<S>                                         <C>               <C>            <C>             <C>     
Jerry E. Hunter                             1996              $  332,025     $ -             $  3,371
   Chairman of the Board, President         1995                 306,075      195,902           3,228
   and Chief Executive Officer              1994                 291,500      292,793           5,219

Carl Rosen                                  1996                 251,875       -                3,131
   President, JPS Converter &               1995                 243,750       83,000           3,046
     Industrial Corp.(1)                    1994                 217,708       60,000           4,354

David H. Taylor                             1996                 204,783       -                2,291
   Executive Vice President -               1995                 196,350      118,139           2,238
     Finance and Secretary                  1994                 187,000      162,631           3,271

Monnie L. Broome                            1996                 162,775       -                2,295
   Vice President-Human Resources           1995                 155,925       91,822           2,250
                                            1994                 148,500      122,590           3,029

Bruce R. Wilby                              1996                 161,474       57,761           6,040
   President, JPS Elastomerics Corp. (1)    1995                 140,359       -                5,591
                                            1994                 139,669       75,000           6,173

Heyward D. Maddox                           1996                 124,813       93,249           2,258
   Vice President - Sales and Marketing,    1995                 119,242       -                1,724
   JPS Converter & Industrial Corp.(1)      1994                 114,321       54,000           1,530
</TABLE>


(1)  Such executive officers of the Company's subsidiaries perform certain
     policy-making functions for the Company and are therefore included herein
     pursuant to Item 402(a)(3) of Regulation S-K and Rule 36-7 under the
     Exchange Act.

(2)  Employer-matching 401(k) plan contribution, employer-provided life
     insurance premiums and imputed lease value of company-provided automobiles.



                                       53

<PAGE>   55



The following table sets forth certain information regarding estimated potential
awards to named executive officers of the Company pursuant to Retention Bonus
Agreements dated July 12, 1996:

                    LONG-TERM INCENTIVE PLANS/AWARDS IN 1996

<TABLE>
<CAPTION>
                                   Performance                       Estimated Future Payouts Under
                                 or other Period                       Non-Stock Price-Based Plans
Name                     Until Maturation or Payout (1)           Threshold      Target     Maximum
----                     --------------------------               ---------      ------     -------
<S>                                    <C>                             <C>         <C>      <C>      
Jerry E. Hunter                        NA                              N/A         N/A      $794,000 (2)
David H. Taylor                        NA                              N/A         N/A      $510,000 (3)
Monnie L. Broome                       NA                              N/A         N/A      $359,000 (2)
</TABLE>

(1)      The Retention Bonus Agreements have no specified maturation or payout
         period. Payment of the bonuses are contingent on the successful
         completion of a restructuring of the terms of the Company's debt
         securities and the continuing employment of the named executives with
         the Company. The Retention Bonus Agreements are void if the individuals
         are terminated for cause (as defined in the agreements) or if they
         voluntarily discontinue employment with the Company.

(2)      Pursuant to the Retention Bonus Agreements dated July 12, 1996 (subject
         to the contingencies specified in Note (1) above), each named executive
         will receive a retention bonus, payable in two components, as follows:
         (i) an amount equal to 50% of the sum of annual base salary plus the
         average of annual bonuses with the Company for the years 1989 through
         1995 payable on the effective date of a proposed restructuring and (ii)
         an amount equal to 100% of the sum of annual base salary plus the
         average of annual bonuses with the Company for the years 1989 through
         1995 payable six months after the effective date of a proposed
         restructuring.

(3)      Pursuant to the Retention Bonus Agreement dated July 12, 1996 (subject
         to the contingencies specified in Note (1) above), the named executive
         will receive a retention bonus, payable in two components, as follows:
         (i) an amount equal to 50% of the sum of annual base salary plus the
         average of annual bonuses with the Company for the years 1989 through
         1995 payable on the effective date of a proposed restructuring and (ii)
         an amount equal to 50% of the sum of annual base salary plus the
         average of annual bonuses with the Company for the years 1989 through
         1995 plus an amount equal to $200,000 payable six months after the
         effective date of a proposed restructuring.

LONG-TERM INCENTIVE PLAN

The Company and certain of its subsidiaries (the "Subsidiary Participants") have
adopted a Long-Term Incentive Plan for certain officers and key employees
effective November 1, 1994. The plan provides for annual awards which are
accumulated in individual award banks. Awards may be either positive or negative
in any given year and are added or subtracted each year from each participant's
respective award bank. A percentage of each participant's award bank balance is
paid out annually beginning after Fiscal 1996. Awards are based on the
achievement of certain financial performance targets by the Company and the
Subsidiary Participants. Such financial performance targets are established on a
rolling three-year basis and are subject to change at the discretion of the
Boards of Directors of the Company and the Subsidiary Participants.



                                       54

<PAGE>   56



The following employees named in the Summary Compensation Table are currently
employee participants in the Long-Term Incentive Plan: Jerry E. Hunter, Carl
Rosen, David H. Taylor and Monnie L. Broome. As of January 31, 1997, there have
been no awards granted under this plan.

AGREEMENTS WITH EXECUTIVE OFFICERS

On December 23, 1991, the Company entered into an employment agreement with
Bruce R. Wilby. This agreement, as amended, provides severance benefits in the
event Mr. Wilby is terminated prior to December 23, 1999 for reasons other than
for cause (as defined in the agreement). If such termination occurs, Mr. Wilby
is entitled to receive an amount equal to his annual base salary including
normal fringe benefits payable in the normal course as if employment had not
been terminated. As of January 31, 1997, there have been no payments under this
agreement.

On May 1, 1993, the Company entered into an employment agreement with Carl
Rosen. This agreement, as amended, provides that Mr. Rosen will serve as
President of JPS Converter & Industrial Corp. until April 30, 1998. Base salary
under the agreement is currently $265,000 and may be increased but not reduced
over the term of the agreement. Mr. Rosen is eligible for an annual bonus with a
target level equal to 50% of base salary. If the Company terminates Mr. Rosen's
employment for reasons other than for cause (as defined in the agreement), he is
entitled to severance benefits equal to his annual base salary including fringe
benefits plus a pro rata bonus amount up to the date of termination. In the
event the Company reduces Mr. Rosen's base salary or bonus or materially changes
the requirements of his position, Mr. Rosen may voluntarily terminate his
employment with the Company with such termination being treated, for purposes of
severance benefits, as a termination by the Company.

On October 30, 1995, the Company entered into substantially similar severance
agreements with Jerry E. Hunter, David H. Taylor and Monnie L. Broome. These
agreements provide certain payments if there is a termination of employment for
reasons other than for cause (as defined in the agreements) or as a result of a
change in control or ownership of the Company or in the event of the executive's
death. These payments include an amount equal to the annual base salary
including normal fringe benefits payable for a one-year period and a lump sum
bonus payment equal to the average of all annual bonuses from 1989 through the
date of termination or death. As of January 31, 1997, there have been no
payments under these agreements.

As required by the September 6, 1996 amendment to the senior credit facility,
the Company entered into retention bonus agreements with certain of its key
executives and key employees during Fiscal 1996. The retention bonus agreements
provide specific individual awards if the participants continue active
employment with the Company for at least six months following the completion of
the proposed financial restructuring discussed in Note 14 to the Consolidated
Financial Statements. Under the terms of the agreements, an aggregate of
approximately $675,000 will be paid out on the effective date of a restructuring
and an aggregate of approximately $1,200,000 will be paid out six months after
the effective date of a restructuring. No amounts are considered earned until
the effective date of a restructuring. As of January 31, 1997, there have been
no payments under these agreements.

The accompanying Long Term Incentive Plan Table discloses the estimated future
payout to executive officers who participate in the Retention Bonus Plan.



                                       55

<PAGE>   57



RETIREMENT PENSION PLAN

The Company maintains a Retirement Pension Plan for all employees (the "Pension
Plan"), including its salaried employees. The Pension Plan is a defined benefit
pension plan providing a formula benefit with contributions determined on an
actuarial basis. The Pension Plan generally covers all employees 21 years of age
or older who have completed one year of service with the Company. The Pension
Plan generally takes into account annual compensation earned under certain
predecessor plans of J.P. Stevens.

The following table indicates the approximate amounts of annual retirement
income that would be payable to a salaried employee under the Pension Plan based
on the compensation levels and years of credited service shown. There would be
no social security or other offset deducted from the amounts shown.

                               PENSION PLAN TABLE*

<TABLE>
<CAPTION>
                                                               Years of Service
                                      ---------------------------------------------------------------------
Remuneration                          15 Years         20 Years       25 Years      30 Years       35 Years
------------                          --------         --------       --------      --------       --------
     <S>                              <C>              <C>            <C>           <C>            <C>    
     $125,000                         $20,018          $26,691        $33,364       $40,036        $46,709

      150,000 and above                24,518           32,691         40,864        49,036         57,209
</TABLE>

*        Assumes individual retires at age 65 in 1996 with the indicated years
         of service and compensation. The social security integration level of
         such individuals would be $27,576. The social security integration
         level is adjusted annually.

Credited years of service for benefit accrual under the Pension Plan as of
November 2, 1996 for the following executive officers are:

<TABLE>
                  <S>                                                        <C>
                  Jerry E. Hunter...............................             10 years
                  Carl Rosen....................................              5 years
                  David H. Taylor...............................              8 years
                  Monnie L. Broome..............................              8 years
                  Bruce R. Wilby................................             21 years
                  Heyward D. Maddox.............................             28 years
</TABLE>

Annual retirement benefits for salaried employees are generally computed as the
sum of 0.6% of a participant's average compensation (the annual average of five
consecutive, complete plan years of highest compensation during the last 10 plan
years of service) multiplied by the years of benefit service plus 0.6% of a
participant's compensation which exceeds the Participant's Social Security
Integration Level (equal to $27,576 in 1996) multiplied by the participant's
years of benefit service. The Pension Plan provides that each participant's
benefits fully vest after five years of service or the attainment of age 65.



                                       56

<PAGE>   58



This table may understate the benefits available to certain participants because
salaried employees who were covered by the Pension Plan before July 1, 1989 are
entitled to the greater of the benefit formula noted above or the prior benefit
formula, plus additional accrued benefits under the new formula since July 1,
1989. Under the prior formula, a participant's annual pension payable as of
normal retirement age was equal to 1% of the portion of "final average
compensation" which was equal to the "social security integration level" in
effect for the year of retirement, plus 1.5% of the portion of the participant's
final average compensation in excess of the social security integration level,
the sum of which was multiplied by the number of years of credited service not
exceeding 35. In addition, as noted below, the table assumes that covered
compensation was limited to the current allowable amount for all years while
benefits may have been accrued in years when limitations were higher.

Compensation covered by the Pension Plan consists of all payments made to a
participant for personal services rendered as an employee of the Company which
are subject to federal income tax withholding, excluding imputed income
attributable to certain fringe benefit programs. In accordance with the Revenue
Reconciliation Act of 1993 with respect to salaried employees, plan compensation
covers up to a maximum of $150,000 as adjusted per individual for the plan year
beginning November 1, 1994. Plan compensation was subject to substantially
higher limits in previous years ($235,840 for 1994). The amounts shown are also
subject to possible maximum limitations under Section 415 of the Internal
Revenue Code of 1986, as amended (the "Code"), and are subject to possible
reduction for amounts payable under other JPS qualified plans.

COMPENSATION OF DIRECTORS

Members of the Board of Directors receive no compensation for their services.

MANAGEMENT AGREEMENT

Pursuant to a management agreement (the "Management Agreement"), dated as of
April 2, 1991, between the Company and Odyssey Investors, Inc., a Delaware
corporation and an affiliate of Odyssey Partners ("Odyssey Investors"), the
Company agreed to pay Odyssey Investors a $1.0 million fee for Fiscal 1995 and
for each fiscal year thereafter through April 2, 2001, in exchange for certain
management services provided by Odyssey Investors. Such services include
continual financial advisory and business management services in order to
maximize the efficiency of operations and enhance profitability. Payment of the
Fiscal 1996 accrued management fee is limited to $450,000 by provisions of the
Company's Restated Credit Agreement, as amended on September 6, 1996, with the
balance to be paid upon the earlier of the consummation of a financial
restructuring as discussed in Note 14 to the Consolidated Financial Statements
or completion of the Company's 1997 second fiscal quarter.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company does not have a compensation committee or other board committee
performing equivalent functions thereto. However, Odyssey Investors, as part of
its duties under the Management Agreement, from time to time during the past
fiscal year has participated in certain discussions with Jerry E. Hunter, the
Chairman, Chief Executive Officer and a Director of the Company, David H.
Taylor, Executive Vice President-Finance and Director of the Company and Monnie
L. Broome, Vice President-Human Resources of the Company in determining certain
business and financial objectives and other criteria to enable the Company to
set compensation awards and Long Term Incentive Plan targets for the Company's
executive officers.

                                       57

<PAGE>   59



ITEM 12.  SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT.

The following table sets forth information as of December 19, 1996 with respect
to the beneficial ownership of shares of (i) Senior Preferred Stock; (ii) Junior
Preferred Stock; (iii) Class A Common Stock; and (iv) Class B Common Stock by
(a) each person or group that is known to the Company to be the beneficial owner
of more than 5% of the outstanding shares, (b) each director of the Company, and
(c) all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
                              Senior Preferred Stock  Junior Preferred Stock   Class A Common Stock     Class B Common Stock
                              ----------------------  ----------------------   --------------------     --------------------
                                Number      Percent     Number      Percent     Number      Percent      Number      Percent
Name of 5%                        of           of         of          of          of          of           of          of
Beneficial Owner                Shares       Class      Shares       Class      Shares     Class (1)     Shares     Class (1)
----------------                ------       -----      ------       -----      ------     ---------     ------     ---------
<S>                             <C>          <C>         <C>         <C>         <C>          <C>        <C>          <C>   
Bear Stearns Securities Corp.   169,966      31.58%
(4)
% ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717

Presidential Life                53,813      10.00%
Insurance Company
c/o The Bank of New York
Post Office Box 16203
New York, NY 10249

Romulus Holdings Inc.            42,591       7.91%
20 Rockridge Circle
New Rochelle, NY 10804

Citibank, N.A. (4)               28,436       5.28%
P. O. Box 1530, Grand Central
111 Wall Street
20th FL., Zone 9
New York, NY 10043

Lehman Brothers (6)(7)           27,333       5.08%                              73,847       7.38%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717

BT Securities Corp (4)           26,904       5.00%
130 Liberty Street
New York, NY 10015

Dabney Resnick Imperial LLC                                                      52,504       5.25%
Trading Account (4)
150 S. Rodeo Dr., #100
Beverly Hills, CA 90212

Odyssey Partners, L.P. (2)                               5,000       50.00%                              340,000      34.00%
31 West 52nd Street
New York, NY 10019

DLJ Capital Corp. (3)                                                                                    170,000      17.00%
140 Broadway
New York, NY 10005-1285

Messrs. Grant M. Wilson,                                 5,000       50.00%
William J. DeBrule
and Yehochai Schneider
111 Pond Street
Cohasset, MA 02025
</TABLE>


                                       58


<PAGE>   60




<TABLE>
<CAPTION>
                              Senior Preferred Stock  Junior Preferred Stock   Class A Common Stock     Class B Common Stock
                              ----------------------  ----------------------   --------------------     --------------------
                                Number      Percent     Number      Percent     Number      Percent      Number      Percent
Name of 5%                        of           of         of          of          of          of            of         of
Beneficial Owner                Shares       Class      Shares       Class      Shares     Class (1)     Shares     Class (1)
----------------                ------       -----      ------       -----      ------     ---------     ------     ---------
<S>                               <C>        <C>        <C>          <C>           <C>          <C>        <C>           <C>
Lutheran Brotherhood Research                                                      70,180       7.02%
Corp.
625 Fourth Avenue South
Minneapolis, MN 55415

Everest Capital Fund, L.P.                                                         51,223       5.12%
c/o Morgan Stanley & Co., Inc.
One Pierpont Plaza
Brooklyn, NY 11201

Directors and executive officers                                                                           510,000       51.0%
as a group (5)
(6 persons)
</TABLE>



<TABLE>
<S>      <C>                                      
(1)      Percentages represented hereunder are based on the combined Class A 
         Common Stock and Class B Common Stock issued and outstanding.

(2)      Represents shares of Class B Common Stock and Junior Preferred Stock
         owned by Odyssey Partners. In addition, Odyssey Partners has voting
         control with respect to the 5,000 shares of Junior Preferred Stock held
         by Grant M. Wilson, William J. DeBrule and Yehochai Schneider. The
         Class B Common Stock shares are subject to a Stockholders' Agreement,
         which provides, among other things, for certain restrictions on the
         voting and transfer of such shares. Leon Levy, Jack Nash, Stephen
         Berger, Joshua Nash, the Nash Family Partnership and Brian Wruble, by
         virtue of being general partners of Odyssey Partners, share voting and
         dispositive power with respect to the Class B Common Stock and Junior
         Preferred Stock owned by Odyssey Partners and, accordingly, may each be
         deemed to own beneficially such stock owned by Odyssey Partners. Each
         of such persons has expressly disclaimed any such beneficial ownership
         (within the meaning of Rule 13d-3(a) under the Securities and Exchange
         Act of 1934, as amended (the "Exchange Act")) which exceeds the
         proportionate interest in the Class B Common Stock and Junior Preferred
         Stock which he or it may be deemed to own as a general partner of
         Odyssey Partners. Mr. Friedman has an indirect fractional financial
         interest in the shares of Class B Common Stock owned by Odyssey
         Partners; however, he has no voting or dispositive power over any
         shares owned by Odyssey Partners.

(3)      Such shares are subject to the Stockholders' Agreement, which provides,
         among other things, for certain restrictions on the voting and transfer
         of such shares. In addition, pursuant to the Voting Trust Agreement,
         dated as of April 2, 1991, between DLJ and Lincoln National, DLJ
         conferred the right to vote 120,000 of such shares of Class B Common
         Stock to Lincoln National, as voting trustee. Such shares include
         shares held by DLJ First ESC L.L.C. which is an "employee securities
         corporation" formed to hold securities on behalf of participants in
         certain DLJ incentive compensation plans.

(4)      It is not known if these shares are held beneficially or as nominee for 
         one or more beneficial owners.

(5)      None of Jerry E. Hunter, Carl Rosen, David H. Taylor, Monnie L. Broome, 
         Bruce R. Wilby or Heyward D. Maddox, the executive officers listed above 
         in Item 11, " -- Executive Compensation -- Summary Compensation Table," 
         beneficially own, or may be deemed to own, any shares of capital stock of 
         the Company, and therefore are not listed in this table.

(6)      Disclaims beneficial ownership.

(7)      Per Lehman Brothers preferred stock was sold subsequent to December 19.
</TABLE>



                                       59

<PAGE>   61



ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  None.

                                     PART IV

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

(a)      (1)      The following financial statements are included in Item 8:

         (i)      Independent Auditors' Report.
         (ii)     Consolidated Balance Sheets as of November 2, 1996 and 
                  October 28, 1995.
         (iii)    Consolidated Statements of Operations for the fiscal years 
                  ended November 2, 1996, October 28, 1995 and October 29, 1994.
         (iv)     Consolidated Statements of Senior Redeemable Preferred Stock
                  and Shareholders' Equity (Deficit) for the fiscal years ended
                  November 2, 1996, October 28, 1995 and October 29, 1994.
         (v)      Consolidated Statements of Cash Flows for the fiscal years
                  ended November 2, 1996, October 28, 1995 and October 29, 1994.
         (vi)     Notes to Consolidated Financial Statements.

The registrant is primarily a holding company and all subsidiaries are wholly
owned.

         (2) The financial statement schedule required by Item 8 is listed on
Index to Financial Statement Schedule, starting at page S-1 of this report.

         (3) The exhibits required by Item 601 of Regulation S-K are listed in
the accompanying Index to Exhibits. Registrant will furnish to any
securityholder, upon written request, any exhibit listed in the accompanying
Index to Exhibits upon payment by such securityholder of registrant's reasonable
expenses in furnishing any such exhibit.

(b)               Report on Form 8-K dated December 15, 1996, containing
                  disclosure of the Company's default on the indentures
                  governing its subordinated debentures, senior subordinated
                  discount notes and senior subordinated notes due to the
                  Company's failure to make scheduled interest payments on
                  November 15, 1996 and December 1, 1996.

(c)               Reference is made to Item 14(a)(3) above.

(d)               Reference is made to Item 14(a)(2) above.



                                       60

<PAGE>   62



INDEX TO EXHIBITS

The following is a complete list of Exhibits filed as part of this report, which
are incorporated herein:

<TABLE>
<CAPTION>
Exhibit
Number                               Description
------                               -----------
<S>      <C>                                                             
2.1(i)   Plan of Reorganization of JPS Textile Group, Inc., a Delaware
         corporation (the "Company"), filed pursuant to Chapter 11 of the United
         States Bankruptcy Code, dated February 7, 1991 (the "Plan).(A)

2.1(ii)  Revised Technical and Conforming Amendment to the Company's Plan, dated 
         March 20, 1991.(A)

3.1      Restated Certificate of Incorporation of the Company, filed with the
         Secretary of State of the State of Delaware on April 1, 1991.(A)

3.2      By-laws of the Company.(A)

3.3      Certificate of Designations of the Company's Series A Senior Preferred
         Stock (the "Senior Preferred Stock").(A)

3.4      Certificate of Designations of the Company's Series B Junior Preferred
         Stock.(A)

4.1      Indenture, dated as of April 2, 1991 (the "Discount Note Indenture"),
         between the Company and First Trust National Association ("First
         Trust"), as Trustee, relating to the Company's Senior Subordinated
         Discount Notes due June 1, 1999 (the "Discount Notes").(A)

4.2      Form of Discount Note, incorporated by reference to Exhibit A to the
         Discount Note Indenture.(A)

4.3      Indenture, dated as of April 2, 1991 (the "Subordinated Note
         Indenture"), between the Company and First Trust, as Trustee, relating
         to the Company's 10.25% Senior Subordinated Notes due June 1, 1999 (the
         "Subordinated Notes"). (A)

4.4      Form of Subordinated Note, incorporated by reference to Exhibit A to
         the Subordinated Note Indenture.(A)

4.5      Indenture, dated as of April 2, 1991 (the "Debenture Indenture"),
         between the Company and First Bank National Association, as Trustee,
         relating to the Company's 7% Subordinated Debentures due May 15, 2000
         (the "Debentures").(A)

4.6      Form of Debenture, incorporated by reference to Exhibit A to the
         Debenture Indenture.(A)

4.7      Stockholders' Agreement, dated as of April 2, 1991, among Odyssey Partners, 
         L.P. ("Odyssey Partners"), DLJ Capital Corp. ("DLJ Capital") and Lincoln 
         National Bank and Trust Company of Fort Wayne ("Lincoln National").(A)
</TABLE>



                                       61

<PAGE>   63



<TABLE>
<CAPTION>
Exhibit
Number                                 Description
------                                 -----------

<S>      <C>                                
4.8      Letter Agreement, dated April 2, 1991 regarding certain rights of
         "co-sale" granted by Odyssey partners, DLJ Capital and Lincoln National
         to the holders of the Company's Class A Common Stock.(A)

4.9      Letter Agreement, dated April 2, 1991, among Odyssey Partners, Grant M.
         Wilson, William J. DeBrule and Yehochai Schneider.(A)

9.1      Voting Trust Agreement, dated as of April 2, 1991, between DLJ Capital
         and Lincoln National.(A)

10.1     Management Agreement, dated as of April 2, 1991, between the Company
         and Odyssey Investors, Inc.(A)

10.2     Registration Rights Agreement, dated as of April 2, 1991, by and among
         the Company and the holders of the Company's Senior Notes, Discount
         Notes, Subordinated Notes, Senior Preferred Stock and Class A Common
         Stock (collectively, the "Securities").(A)

10.3     Loan and Security Agreement, dated as of October 30, 1991, (the "CIT
         Loan Agreement"), between JPS Converter and Industrial Corp., a
         Delaware corporation ("JCIC") and The CIT Group/Equipment Financing,
         Inc. ("CIT").(A)

10.4     First Amendment to the CIT Loan Agreement, dated as of June 26, 1992,
         by and between JCIC and CIT.(A)

10.5     Second Amendment to the CIT Loan Agreement, dated as of December 22,
         1992, by and between JCIC and CIT.(A)

10.6     Agreement of Lease, dated as of June 1, 1988, by and between 1185
         Avenue of the Americas Associates ("1185 Associates") and JCIC.(A)

10.7     Lease Modification and Extension Agreement, dated as of April 2, 1991,
         by and between 1185 Associates and JCIC.(A)

10.8     Third Amendment to the CIT Loan Agreement, dated as of August 6, 1993,
         by and between JCIC and CIT.(B)

10.9     Trademark License Agreement, dated as of May 9, 1988, by and between
         J.P. Stevens and JPS Acquisition Corp. (predecessor to the Company.)(B)

10.10    Omnibus Real Estate Closing Agreement, dated as of May 9, 1988, by and
         among J.P. Stevens, JPS Acquisition Corp., JPS Acquisition Automotive
         Products Corp., JPS Acquisition Carpet Corp., JPS Acquisition
         Industrial Fabrics Corp., JPS Acquisition Converter and Yarn Corp. and
         JPS Acquisition Elastomerics Corp.(B)
</TABLE>


                                       62

<PAGE>   64


<TABLE>
<CAPTION>
Exhibit
Number                             Description
------                             -----------
<S>      <C>                   
10.11    Purchase Agreement, dated as of April 24, 1988, by and among JPS
         Holding Corp., the Company, Odyssey Partners, West Point-Pepperell,
         Inc., STN Holdings Inc., Magnolia Partners, L.P. and J.P. Stevens.(B)

10.12    Asset Purchase Agreement, dated as of May 25, 1994, by and among the
         Company, JAPC, JCIC, JPS Auto Inc., a Delaware corporation, and Foamex
         International Inc., a Delaware corporation.(C)

10.13    Fourth Amended and Restated Credit Agreement (the "Existing Credit
         Agreement"), dated as of June 24, 1994, by and among the Company, JCIC,
         JPS Elastomerics Corp., a Delaware corporation ("JEC"), JPS Carpet
         Corp., a Delaware corporation ("JCC"), the financial institutions
         listed on the signature pages thereof, Citibank, N.A. ("Citibank") as
         Agent and Administrative Agent, and General Electric Capital
         Corporation ("GECC") as Co-Agent and Collateral Agent.(D)

10.14    First Amendment to the Existing Credit Agreement, dated as of November
         4, 1994, by and among the Company, JCIC, JEC, JCC, the financial
         institutions listed on the signature pages thereof, Citibank, as Agent
         and Administrative Agent, and GECC, as Co-Agent and Collateral
         Agent.(E)

10.15    Second Amendment to the Existing Credit Agreement, dated as of December
         21, 1994, by and among the Company, JCIC, JEC, JCC, the financial
         institutions listed on the signature pages thereof, Citibank, as Agent
         and Administrative Agent, and GECC as Co-Agent and Collateral Agent.(E)

10.16    Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994,
         by and between JCIC and CIT.(E)

10.17    Lease Modification and Extension Agreement, dated as of April 30, 1993,
         by and between 1185 Associates and JCIC.(E)

10.18    Long-Term Incentive Plan of the Company effective November 1, 1994.(F)

10.19    Third Amendment to Existing Credit Agreement, dated as of May 31, 1995
         by and among the Company, JCIC, JEC, JCC, the financial institutions
         listed on the signature pages thereof, Citibank, as Agent and
         Administrative Agent, and GECC, as Co-Agent and Collateral Agent.(G)

10.20    Fourth Amendment to Existing Credit Agreement, dated as of October 28,
         1995 by and among the Company, JCIC, JEC, JCC, the financial
         institutions listed on the signature pages thereof, Citibank, as Agent
         and Administrative Agent, and GECC, as Co-Agent and Collateral
         Agent.(H)

10.21    Lease Modification and Extension Agreement, dated as of November 17,
         1994, by and between 1185 Associates and JCIC.(H)
</TABLE>


                                       63

<PAGE>   65



<TABLE>
<CAPTION>
Exhibit
Number                              Description
------                              -----------
<S>      <C>                
10.22    Asset Transfer Agreement, dated as of November 16, 1995, by and among
         the Company, JPS Carpet Corp., a Delaware corporation, Gulistan
         Holdings Inc. ("GHI"), a Delaware corporation and Gulistan Carpet Inc.,
         a Delaware Corporation and wholly-owned subsidiary of GHI.(I)

10.23    Fifth Amendment to the Fourth Amended & Restated Credit Agreement,
         dated as of May 6, 1996, by and among the Company, JPS Elastomerics
         Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
         Corp., International Fabrics, Inc., the financial institutions listed
         on the signature pages thereof, Citibank, N.A. as agent and
         Administrative Agent and General Electric Capital Corporation as
         Co-Agent and Collateral Agent.(C)

10.24    Sixth Amendment to the Fourth Amended & Restated Credit Agreement,
         dated as of May 15, 1996, by and among the Company, JPS Elastomerics
         Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
         Corp., International Fabrics, Inc., the financial institutions listed
         on the signature pages thereof, Citibank, N.A. as agent and
         Administrative Agent and General Electric Capital Corporation as
         Co-Agent and Collateral Agent.(C)

10.25    Seventh Amendment to the Fourth Amended and Restated Credit Agreement,
         dated as of July 22, 1996, by and among the Company, JPS Elastomerics
         Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
         Corp., International Fabrics, Inc., the financial institutions listed
         on the signature pages thereof, Citibank, N.A. as agent and
         Administrative Agent and General Electric Capital Corporation as
         Co-Agent and Collateral Agent.(L)

10.26    Eighth Amendment to the Fourth Amended and Restated Credit Agreement,
         dated as of September 6, 1996, by and among the Company, JPS
         Elastomerics Corp., JPS Converter and Industrial Corp., JPS Auto Inc.,
         JPS Carpet Corp., International Fabrics, Inc., the financial
         institutions listed on the signature pages thereof, Citibank, N.A. as
         agent and Administrative Agent and General Electric Capital Corporation
         as Co-Agent and Collateral Agent.(L)

10.27    Retention Bonus Agreement, dated July 12, 1996, between the Company and
         Jerry E. Hunter.(L)

10.28    Retention Bonus Agreement, dated July 12, 1996, between the Company and
         David H. Taylor.(L)

10.29    Retention Bonus Agreement, dated July 12, 1996 between the Company and
         Monnie L. Broome.(L)

10.30    Employment Agreement, dated October 30, 1995, between the Company and
         Jerry E. Hunter.(L)

10.31    Employment Agreement, dated October 30, 1995 between the Company and
         David H. Taylor.(L)

10.32    Employment Agreement, dated October 30, 1995 between the Company and
         Monnie L. Broome.(L)

10.33    Employment Agreement, dated May 1, 1993 and amended September 11, 1995
         between the Company and Carl Rosen.(L)
</TABLE>



                                       64

<PAGE>   66



<TABLE>
<CAPTION>
Exhibit
Number                    Description
------                    -----------
<S>      <C>
10.34    Employment Agreement, dated December 23, 1991 and amended August 20,
         1996 and December 23, 1996 between the Company and Bruce Wilby.(H)

10.35    Asset Purchase Agreement, dated as of September 30, 1996 between
         Elastomer Technologies Group, Inc. a Delaware Corporation, and JPS
         Elastomerics Corp., a Delaware Corporation and wholly- owned subsidiary
         of the Company.(H)

10.36    Receivables Purchase Agreement dated as of September 30, 1996 between
         The Bank of New York Commercial Corporation, a New York Corporation and
         JPS Elastomerics Corp., a Delaware Corporation and wholly-owned
         subsidiary of the Company.(H)

11.1     Statement re: Computation of Per Share Earnings - not required since
         such computation can be clearly determined from the material contained
         herein.

12.1     Computation of Ratio of Earnings to Fixed Charges - not required for
         Form 10-K per Item 503(d) of Regulation S-K.

12.2     Computation of Ratio of Earnings to Combined Fixed Charges and
         Preferred Stock Dividends--not required for Form 10-K per Item 503(d)
         of Regulation S-K.

21.1     List of Subsidiaries of the Company.(E)

27.1     Financial data schedule.(for SEC use only)(H)

    --------

(A)      Previously filed as an exhibit to Registration Statement No. 33-58272
         on Form S-1, declared effective by the SEC on July 26, 1993, and
         incorporated herein by reference.
(B)      Previously filed as an exhibit to the Company's Annual Report on Form
         10-K for the year ended October 30, 1993.
(C)      Previously filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended April 30, 1994.
(D)      Previously filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended July 30, 1994.
(E)      Previously filed as an exhibit to the Company's Annual Report on Form
         10-K for the year ended October 29, 1994.
(F)      Previously filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended January 28, 1995.
(G)      Previously filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended April 29, 1995.
(H)      Filed herewith.
(I)      Previously filed as an exhibit to the Company's Current Report on Form
         8-K dated December 1, 1995.
(J)      Previously filed as an exhibit to the Company's Annual Report on Form
         10-K for the year ended October 28, 1995.
(K)      Previously filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended April 27, 1996.
(L)      Previously filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended July 27, 1996.
</TABLE>



                                       65

<PAGE>   67



                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                   JPS TEXTILE GROUP, INC.


Date: January 31, 1997             By: /s/ Jerry E. Hunter
                                       -------------------
                                       JERRY E. HUNTER
                                       Chairman of the Board, President and
                                       Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
SIGNATURE                                   TITLE                                         DATE
---------                                   -----                                         ----
<S>                                      <C>                                            <C> 
/s/ Jerry E. Hunter                      Director, Chairman of the Board,               January 31, 1997
------------------------------            President and Chief Executive Officer
JERRY E. HUNTER                            


/s/David H. Taylor                       Director, Executive                            January 31, 1997
-----------------------------             Vice President-Finance,        
DAVID H. TAYLOR                           Principal Financial Officer and  
                                          Secretary                        
                                           

/s/ Steven M. Friedman                   Director                                       January 31, 1997
-------------------------
STEVEN M. FRIEDMAN


/s/ Muzzafar Mirza                       Director                                       January 31, 1997
-------------------------
MUZZAFAR MIRZA


/s/ Alain M. Oberrotman                  Director                                       January 31, 1997
-------------------------
ALAIN M. OBERROTMAN


/s/ Marc C. Particelli                   Director                                       January 31, 1997
-------------------------
MARC. C. PARTICELLI


/s/ L. Allen Ollis                       Controller                                     January 31, 1997
-------------------------
L. ALLEN OLLIS
</TABLE>



                                       66

<PAGE>   68



JPS TEXTILE GROUP, INC.
INDEX TO SCHEDULE


INDEX TO FINANCIAL STATEMENT SCHEDULE
For the Fiscal Years Ended October 29, 1994, October 28, 1995 and November 2,
1996




FINANCIAL STATEMENT SCHEDULE

II.      Valuation and Qualifying Accounts and Reserves                    S-2






Note:    All other schedules are omitted because they are not applicable or not
         required, or because the required information is shown either in the
         consolidated financial statements or in the notes thereto.




                                      S-1





<PAGE>   69



JPS TEXTILE GROUP, INC.                                             SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
   (IN THOUSANDS)


<TABLE>
<CAPTION>
        Column A                                     Column B            Column C            Column D    Column E
       -------------                                ----------   ------------------------  -----------  ----------
                                                                              Charged to
                                                    Balance at   Charged to     Other                   Balance at
                                                     Beginning    Costs and     Accounts   Deductions    End of
       Classification                               of Period      Expenses    Describe     Describe     Period
       --------------                               ---------      --------    --------     --------     ------
                                                                                 (a)          (b)
<S>                                                   <C>            <C>         <C>          <C>         <C>   
Allowances Deducted from Asset to Which They Apply:

Fiscal Year Ended October 29, 1994 (52 Weeks)
     Allowance for doubtful accounts                  $  1,938       $  748      $   847      $ 1,606     $  1,927
     Claims, returns and other allowances                  777          (73)         369          423          650
                                                      --------       ------      -------      -------     --------
                                                      $  2,715       $  675      $ 1,216      $ 2,029     $  2,577
                                                      ========       ======      =======      =======     ========

Fiscal Year Ended October 28, 1995 (52 Weeks)
     Allowance for doubtful accounts                  $  1,927        $(114)     $   206      $    69     $  1,950
     Claims, returns and other allowances                  650                       175          644          181
                                                      --------        -----      -------      -------     --------
                                                      $  2,577        $(114)     $   381      $   713     $  2,131
                                                      ========        ======     =======      =======     ========

Fiscal Year Ended November 2, 1996 (53 Weeks)
     Allowance for doubtful accounts                  $  1,950       $   72      $   563      $   237     $  2,348
     Claims, returns and other allowances                  181          -            338          356          163
                                                      --------       ------      -------      -------     --------
                                                      $  2,131       $   72      $   901      $   593     $  2,511
                                                      ========       ======      =======      =======     ========
</TABLE>

(a)  Change in various reserves charged to net sales.

(b)  Uncollected receivables written off, net of recoveries.














                                     S-2