<PAGE>

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

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

                                   FORM 10-Q

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

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

                 For the quarterly period ended March 31, 2001

    [ ] 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 1-14330

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

               Delaware                              57-1003983
    (State or other jurisdiction of               (I.R.S. Employer
    incorporation or organization)               Identification No.)

          4838 Jenkins Avenue                           29405
   North Charleston, South Carolina                  (Zip Code)
    (Address of principal executive
               offices)

      Registrant's telephone number, including area code: (843) 566-7293

   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 periods that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes   X   No

   Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

   On April 25, 2001 there were 32,004,200 Common Shares, $.01 par value,
outstanding.

-------------------------------------------------------------------------------
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<PAGE>

                              POLYMER GROUP, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Part I. Financial Information.............................................   3

  Item 1. Financial Statements............................................   3

  Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.............................................  13

  Item 3. Quantitative and Qualitative Disclosures About Market Risk......  18

Part II. Other Information................................................  20

Signatures................................................................  21

Exhibit Index.............................................................  22
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

                          Item I. Financial Statements

                              POLYMER GROUP, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                       (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                        March 31,   December 30,
                                                          2001          2000
                                                       -----------  ------------
                                                       (Unaudited)
<S>                                                    <C>          <C>
                        ASSETS
                        ------
Current assets:
  Cash and equivalents................................ $   31,207    $   12,276
  Short-term investments..............................     19,171        18,312
  Accounts receivable, net............................    137,094       136,746
  Inventories.........................................    127,026       122,751
  Other...............................................     49,778        50,972
                                                       ----------    ----------
    Total current assets..............................    364,276       341,057
Property, plant and equipment, net....................    837,209       858,338
Intangibles and loan acquisition costs, net...........    239,869       246,058
Other.................................................     66,090        62,541
                                                       ----------    ----------
    Total assets...................................... $1,507,444    $1,507,994
                                                       ==========    ==========

         LIABILITIES AND SHAREHOLDERS' EQUITY
         ------------------------------------
Current liabilities:
  Accounts payable.................................... $   61,979    $   61,579
  Accrued liabilities and other.......................     48,599        56,856
  Short-term borrowings...............................     19,487        18,605
  Current portion of long-term debt...................      7,373        13,558
                                                       ----------    ----------
    Total current liabilities.........................    137,438       150,598
                                                       ----------    ----------
Long-term debt, less current portion..................  1,067,214     1,023,986
Deferred income taxes.................................     81,074        82,574
Other non-current liabilities.........................     23,368        24,601
Shareholders' equity:
  Series preferred stock--$.01 par value, 10,000,000
   shares authorized, 0 shares issued and outstanding.        --            --
  Common stock--$.01 par value, 100,000,000 shares
   authorized, 32,004,200 shares issued and
   outstanding at March 31, 2001 and December 30,
   2000...............................................        320           320
  Non-voting common stock--$.01 par value, 3,000,000
   shares authorized, 0 shares issued and outstanding.        --            --
  Additional paid-in capital..........................    243,722       243,722
  Retained earnings (deficit).........................    (12,959)        6,266
  Accumulated other comprehensive (loss)..............    (32,733)      (24,073)
                                                       ----------    ----------
                                                          198,350       226,235
                                                       ----------    ----------
    Total liabilities and shareholders' equity........ $1,507,444    $1,507,994
                                                       ==========    ==========
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>

                              POLYMER GROUP, INC.

               CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                     (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                               Three Months
                                                                   Ended
                                                             ------------------
                                                              March
                                                               31,     April 1,
                                                               2001      2000
                                                             --------  --------
<S>                                                          <C>       <C>
Net sales................................................... $201,256  $231,952
Cost of goods sold..........................................  170,194   180,416
                                                             --------  --------
Gross profit................................................   31,062    51,536
Selling, general and administrative expenses................   30,056    29,277
                                                             --------  --------
Operating income............................................    1,006    22,259
Other (income) expense:
  Interest expense, net.....................................   25,395    19,130
  Foreign currency and other................................    1,422      (158)
                                                             --------  --------
                                                               26,817    18,972
                                                             --------  --------
Income (loss) before income taxes...........................  (25,811)    3,287
Income taxes (benefit)......................................   (7,227)    1,150
                                                             --------  --------
      Net income (loss)..................................... $(18,584) $  2,137
                                                             ========  ========
Net income (loss) per common share:
  Basic:
    Average common shares outstanding.......................   32,004    32,003
    Net income (loss) per common share--basic............... $  (0.58) $   0.07
  Diluted:
    Average common shares outstanding.......................   32,004    32,148
    Net income (loss) per common share--diluted............. $  (0.58) $   0.07

Cash dividends per common share............................. $   0.02  $   0.02
</TABLE>



                            See accompanying notes.

                                       4
<PAGE>

                              POLYMER GROUP, INC.

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                              Three Months
                                                                  Ended
                                                            ------------------
                                                             March
                                                              31,     April 1,
                                                              2001      2000
                                                            --------  --------
<S>                                                         <C>       <C>
Operating activities
  Net income (loss)........................................ $(18,584) $  2,137
  Adjustments to reconcile net income (loss) to net cash
   used in operating activities:
    Depreciation and amortization expense..................   20,103    18,020
    Foreign currency and other.............................    1,422      (158)
  Changes in operating assets and liabilities, net of
   effects of business acquisition:
    Accounts receivable....................................     (348)   (4,831)
    Inventories............................................   (4,275)    1,587
    Accounts payable and accrued expenses..................   (4,940)  (32,944)
  Other, net...............................................   (4,404)   (7,847)
                                                            --------  --------
      Net cash (used in) operating activities..............  (11,026)  (24,036)
                                                            --------  --------
Investing activities
  Purchases of property, plant and equipment...............   (6,615)  (35,573)
  Other, net...............................................      --     (1,294)
                                                            --------  --------
      Net cash (used in) investing activities..............   (6,615)  (36,867)
                                                            --------  --------
Financing activities
  Proceeds from debt.......................................   49,206    49,600
  Payment of debt..........................................  (10,297)  (17,041)
  Dividends to shareholders................................     (640)     (640)
  Exercise of stock options................................      --         34
                                                            --------  --------
      Net cash provided by financing activities............   38,269    31,953
                                                            --------  --------
Effect of exchange rate changes on cash....................   (1,697)    3,297
                                                            --------  --------
Net increase (decrease) in cash and equivalents............   18,931   (25,653)
Cash and equivalents at beginning of period................   12,276    37,180
                                                            --------  --------
Cash and equivalents at end of period...................... $ 31,207  $ 11,527
                                                            ========  ========
</TABLE>


                            See accompanying notes.

                                       5
<PAGE>

                              POLYMER GROUP, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation and Significant Accounting Policies

   The accompanying unaudited consolidated financial statements of Polymer
Group, Inc. (the "Company"), a global manufacturer and marketer of nonwoven
and oriented polyolefin products, have been prepared in accordance with
generally accepted accounting principles in the United States for interim
financial information which contemplates that the Company will continue
operations, realize assets and satisfy liabilities in the ordinary course of
business. The Company incurred a net loss of $18.6 million for the first
quarter of 2001 and expects such losses to continue over the 2001 fiscal year.
As a result of the anticipated operating results for fiscal year 2001 the
Company obtained an amendment to its Credit Facility dated April 11, 2001. See
Note 8, "Subsequent Events" for additional information surrounding the
amendment and financial position of the Company. The Company believes that its
available cash and cash equivalents and short-term investments of $50.4
million at March 31, 2001, cash expected to be generated by operations during
2001 and availability under its Credit Facility, as amended, will be adequate
to fund planned operations through and including December 29, 2001.

   The consolidated financial statements of the Company do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The Condensed Consolidated
Balance Sheet as of March 31, 2001 contains summarized information; as a
result, such data does not include the same detail provided in the 2000 Annual
Report. In the opinion of management, these unaudited consolidated financial
statements contain all adjustments of a normal recurring nature necessary for
a fair presentation. Operating results for the three months ended March 31,
2001 are not necessarily indicative of the results that may be expected for
fiscal 2001.

   Reclassifications: Certain amounts previously presented in the consolidated
financial statements for prior periods have been reclassified to conform to
the current classification.

   Use of estimates: The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

   Recently Adopted Accounting Standards: In 1998, the Financial Accounting
Standards Board issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133") as amended, which the Company
adopted effective December 31, 2000. FAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. FAS 133 contains disclosure requirements based on
the type of hedge and the type of market risk that is being hedged. The
adoption of FAS 133 as of the beginning of fiscal year 2001 had no material
impact on the financial condition and operating results of the Company.

   Revenue Recognition: Revenue from product sales is recognized at the time
ownership of goods transfers to the customer and the earnings process is
complete in accordance with Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). SAB 101 specifies how
existing rules should be applied to transactions in the absence of
authoritative literature. Based on the guidelines of current accounting rules
and SAB 101, revenue should not be recognized until it is realized or
realizable and earned. The application of SAB 101 has had no material impact
on the financial condition and operating results of the Company.


                                       6
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Foreign Currency Translation: The Company accounts for and reports
translation of foreign currency transactions and foreign currency financial
statements in accordance with SFAS No. 52, "Foreign Currency Translation." All
assets and liabilities in the balance sheets of foreign subsidiaries whose
functional currency is other than the U.S. dollar are translated at quarter-
end exchange rates. Translation gains and losses are not included in
determining net income but are accumulated as a separate component of
shareholders' equity. However, subsidiaries considered to be operating in
highly inflationary countries use the U.S. dollar as the functional currency
and translation gains and losses are included in determining net income. In
addition, foreign currency transaction gains and losses are included in
determining net income.

Note 2. Inventories

   Inventories are stated at the lower of cost or market using the first-in,
first-out method of accounting and consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                         March 31,  December 30,
                                                           2001         2000
                                                        ----------- ------------
                                                        (Unaudited)
      <S>                                               <C>         <C>
      Finished goods...................................  $ 60,319     $ 60,931
      Work in process..................................    20,277       19,020
      Raw materials....................................    46,430       42,800
                                                         --------     --------
        Total..........................................  $127,026     $122,751
                                                         ========     ========
</TABLE>

Note 3. Net Income (Loss) Per Share

   The Company discloses earnings per share in accordance with SFAS No. 128,
"Earnings Per Share." Basic earnings per share excludes any dilutive effects
of options, warrants and convertible securities and is computed using the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if stock
options were exercised and is based upon the weighted average number of common
and common equivalent shares outstanding for the period. Common equivalent
shares are represented by shares under option. The numerator for both basic
and diluted earnings per share is net income (loss) applicable to common
stock.

                                       7
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 4. Debt

   Short-term borrowings amounted to approximately $19.5 million and $18.6
million at March 31, 2001 and December 30, 2000, respectively. These amounts
are composed of U.S. loans and local borrowings, principally by international
subsidiaries. Long-term debt as of March 31, 2001 and December 30, 2000,
consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                       March 31,  December 30,
                                                         2001         2000
                                                      ----------- ------------
                                                      (Unaudited)
      <S>                                             <C>         <C>
      Senior subordinated notes, net of unamortized
       debt discount, due July 2007.................. $  390,336   $  390,196
      Senior subordinated notes, due March 2008......    196,500      196,500
      Revolving credit facility, due June 2003.......    199,392      155,042
      Term loans, including current portion, due
       December 2005 and 2006........................    270,540      270,540
      Other..........................................     17,819       25,266
                                                      ----------   ----------
                                                      $1,074,587   $1,037,544
                                                      ==========   ==========
</TABLE>

   On April 11, 2001, the Company entered into Amendment No. 6 dated as of
April 11, 2001 to the Credit Facility ("Amendment No. 6"). See Note 8.
"Subsequent Events" for additional discussion surrounding Amendment No. 6.

                                       8
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 5. Selected Financial Data of Guarantors

   Payment of the Company's senior subordinated notes are guaranteed jointly
and severally on a senior subordinated basis by certain of the Company's
subsidiaries. Management has determined that separate complete financial
statements of the guarantors are not material to users of the financial
statements. The following sets forth selected financial data of the guarantor
and non-guarantor subsidiaries (in thousands):

         Condensed Consolidating Selected Balance Sheet Financial Data
                             As of March 31, 2001

<TABLE>
<CAPTION>
                           Combined     Combined
                          Guarantor   Non-Guarantor    The      Reclassifications
                         Subsidiaries Subsidiaries   Company    and Eliminations  Consolidated
                         ------------ ------------- ----------  ----------------- ------------
<S>                      <C>          <C>           <C>         <C>               <C>
Working capital.........  $  114,160    $110,513    $   (9,750)    $    11,915     $  226,838
Total assets............   2,233,388     699,480     1,170,536      (2,595,960)     1,507,444
Total debt..............       1,707      37,961     1,054,406             --       1,094,074
Shareholders' equity....   1,120,151     326,311        49,628      (1,297,740)       198,350

         Condensed Consolidating Selected Balance Sheet Financial Data
                            As of December 30, 2000

<CAPTION>
                           Combined     Combined
                          Guarantor   Non-Guarantor    The      Reclassifications
                         Subsidiaries Subsidiaries   Company    and Eliminations  Consolidated
                         ------------ ------------- ----------  ----------------- ------------
<S>                      <C>          <C>           <C>         <C>               <C>
Working capital.........  $  111,224    $109,561    $  (30,136)    $      (190)    $  190,459
Total assets............   2,429,778     599,983     1,152,546      (2,674,313)     1,507,994
Total debt..............       1,749      43,975     1,010,425             --       1,056,149
Shareholders' equity....   1,299,170     224,827        65,156      (1,362,918)       226,235
</TABLE>

    Condensed Consolidating Statement of Operations Selected Financial Data
                   For the Three Months Ended March 31, 2001

<TABLE>
<CAPTION>
                            Combined     Combined              Reclassifica-
                           Guarantor   Non-Guarantor   The       tions and
                          Subsidiaries Subsidiaries  Company   Eliminations  Consolidated
                          ------------ ------------- --------  ------------- ------------
<S>                       <C>          <C>           <C>       <C>           <C>
Net sales...............    $111,134      $96,656    $    --      $(6,534)     $201,256
Operating income (loss).      (7,781)       9,110        (286)        (37)        1,006
Interest expense, income
 taxes and other, net...      (9,030)       8,936      18,298       1,386        19,590
Net income (loss).......       1,249          174     (18,584)     (1,423)      (18,584)
</TABLE>

                                       9
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    Condensed Consolidating Statement of Operations Selected Financial Data
                   For the Three Months Ended April 1, 2000

<TABLE>
<CAPTION>
                            Combined     Combined             Reclassifica-
                           Guarantor   Non-Guarantor   The      tions and
                          Subsidiaries Subsidiaries  Company  Eliminations  Consolidated
                          ------------ ------------- -------  ------------- ------------
<S>                       <C>          <C>           <C>      <C>           <C>
Net sales...............    $136,235     $105,812    $  --      $(10,095)     $231,952
Operating income........       7,692       13,570       470          527        22,259
Interest expense, income
 taxes and other, net...      (7,088)       8,289    (1,667)      20,588        20,122
Net income..............      14,780        5,281     2,137      (20,061)        2,137
</TABLE>

Note 6. Comprehensive Income (Loss)

   The Company reports comprehensive income (loss) in accordance with SFAS No.
130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 requires unrealized
gains or losses on the Company's available-for-sale securities and foreign
currency translation adjustments to be included in other comprehensive income
(loss). The Company's comprehensive (loss) approximated $(27.2) million and
$(3.5) million for the three months ended March 31, 2001 and April 1, 2000,
respectively.

                                      10
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 7. Segment Information

   The Company reports segment information in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"). Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker in deciding how to allocate resources
and assessing performance. Sales to The Procter & Gamble Company and Johnson &
Johnson, customers who each account for more than 10% of the Company's sales,
are reported primarily in the Consumer segment. Consequently, the loss of
these sales would have a material adverse effect on this segment. Generally,
the Company's products can be manufactured on more than one type of production
line. Accordingly, certain costs and assets attributed to each segment of the
business were determined on an allocation basis. Production times have a
similar relationship to net sales, thus the Company believes a reasonable
basis for allocating certain costs is the percent of net sales method.
Financial data by segments follows (in thousands):

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                            -------------------
                                                            March 31,  April 1,
                                                              2001       2000
                                                            ---------  --------
   <S>                                                      <C>        <C>
   Net sales to unaffiliated customers:
     Consumer.............................................. $ 112,148  $133,977
     Industrial and Specialty..............................    89,108    97,975
                                                            ---------  --------
                                                            $ 201,256  $231,952
                                                            =========  ========
   Operating income (loss):
     Consumer.............................................. $   4,397  $ 18,621
     Industrial and Specialty..............................    (3,391)    3,638
                                                            ---------  --------
                                                            $   1,006  $ 22,259
                                                            =========  ========
</TABLE>

<TABLE>
<CAPTION>
                                                         March 31,  December 30,
                                                            2001        2000
                                                         ---------- ------------
   <S>                                                   <C>        <C>
   Identifiable assets:
     Consumer........................................... $  780,987  $  767,866
     Industrial and Specialty...........................    620,538     652,197
     Corporate(1).......................................    105,919      87,931
                                                         ----------  ----------
                                                         $1,507,444  $1,507,994
                                                         ==========  ==========
</TABLE>
--------
(1) Consists primarily of cash and equivalents, short-term investments, loan
    acquisition costs and other corporate related assets.

Note 8. Subsequent Events

   On March 13, 2001, the Company announced that first quarter and fiscal year
2001 financial results were expected to be materially below previous
expectations, and as a result, did not expect to be in compliance with its
bank covenants. On April 11, 2001, the Company entered into Amendment No.6
dated as of April 11, 2001 to its Credit Facility which waived the leverage
covenant default that existed as of March 31, 2001. The amendment modified the
existing financial covenants relating to senior leverage ratio, fixed charge
coverage ratio and minimum required levels of EBITDA. The amendment also
increases the interest rate by 75 basis points on the outstanding amounts
under the Credit Facility, limits amounts outstanding under the revolving
portion of the Credit Facility (together

                                      11
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

with outstanding letters of credit) to $260 million, limits capital
expenditures to $35 million for fiscal year 2001, restricts the Company from
making new investments or acquisitions and prevents the Company from paying
dividends on its Common Stock or making other restricted payments. The Company
was required to pay a fee to the lenders equal to 1/2 of 1% of the outstanding
commitments of the lenders. The Company also affirmed its intention in the
amendment to reduce the amount outstanding under the Credit Facility by not
less than $150 million through one or more asset dispositions, including sale-
leaseback transactions, synthetic leases or asset securitizations on or before
August 15, 2001. In the event that the Company does not complete such asset
dispositions and reduce outstanding indebtedness under the Credit Facility by
not less than $150 million on or before August 15, 2001, the rate of interest
on the outstanding loans will increase by 50 basis points and the Company will
be required to pay a fee equal to 1/2 of 1% of the outstanding commitments of
the lenders. The Company is currently in active discussions to undertake such
asset dispositions to improve its financial condition. In addition, the
Company intends to take certain actions designed to alter its capital
structure which may include raising additional equity and/or reducing
outstanding indebtedness. However, there can be no assurance that the Company
will complete any of the potential transactions or that the transactions can
be completed on terms and conditions acceptable to the Company.

   Amendment No. 6 also grants the Company a waiver with respect to the
existing default under the leverage covenant existing on March 31, 2001
through and including December 29, 2001, at which time the waiver expires.
Based upon current operating projections, the Company would be in default
under the Credit Facility upon the expiration of the waiver, unless the
actions described above were completed. A failure by the Company to complete
the actions described above in order to comply with the financial covenants
under the Credit Facility including the leverage ratio and fixed charge
coverage ratio covenants, would result in an event of default under the Credit
Facility, which could have a material adverse effect on the Company.

   The Company will evaluate any potential non-cash write off of loan
acquisition costs as a result of Amendment No. 6 prior to the end of the
second fiscal quarter of 2001. At March 31, 2000, the net book value of loan
acquisition costs related to the Company's Credit Facility was $10.4 million.

                                      12
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and
      Results of Operations

   The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto contained in Part I of this report on Form 10-Q and with the
Company's Annual Report on Form 10-K for the fiscal year ended December 30,
2000.

Results of Operations

   The following table sets forth the percentage relationships to net sales of
certain income statement items.

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                              ------------------
                                                              March 31, April 1,
                                                                2001      2000
                                                              --------- --------
<S>                                                           <C>       <C>
Net sales by product category:
  Consumer...................................................    55.7 %   57.8%
  Industrial and Specialty...................................    44.3     42.2
                                                                -----    -----
                                                                100.0    100.0
Cost of goods sold:
  Material...................................................    44.1     39.5
  Labor......................................................     8.9      9.3
  Overhead...................................................    31.6     29.0
                                                                -----    -----
                                                                 84.6     77.8
                                                                -----    -----
  Gross profit...............................................    15.4     22.2
Selling, general and administrative expenses.................    14.9     12.6
                                                                -----    -----
Operating income.............................................     0.5      9.6
Other (income) expense
  Interest expense, net......................................    12.6      8.2
  Foreign currency and other.................................     0.7      --
                                                                -----    -----
                                                                 13.3      8.2
Income (loss) before income taxes (benefit)..................   (12.8)     1.4
Income taxes (benefit).......................................    (3.6)     0.5
                                                                -----    -----
Net income (loss)............................................    (9.2)%    0.9%
                                                                =====    =====
</TABLE>

                                      13
<PAGE>

Comparison of Three Months Ended March 31, 2001 and April 1, 2000

   The following table sets forth components of the Company's net sales and
operating income (loss) by segment for the three months ended March 31, 2001
and the corresponding decrease over the comparable period in the prior year:

<TABLE>
<CAPTION>
                                        Three Months Ended
                                        -------------------
                                        March 31,  April 1,                %
                                          2001       2000   (Decrease) (Decrease)
                                        ---------  -------- ---------- ----------
                                          (In Thousands, Except Percent Data)
      <S>                               <C>        <C>      <C>        <C>
      Net sales:
        Consumer....................... $112,148   $133,977  $(21,829)    (16.3)%
        Industrial and Specialty.......   89,108     97,975    (8,867)     (9.1)
                                        --------   --------  --------
                                        $201,256   $231,952  $(30,696)    (13.2)
                                        ========   ========  ========
      Operating income (loss):
        Consumer....................... $  4,397   $ 18,621  $(14,224)    (76.4)%
        Industrial and Specialty.......   (3,391)     3,638    (7,029)   (193.2)
                                        --------   --------  --------
                                        $  1,006   $ 22,259  $(21,253)    (95.5)
                                        ========   ========  ========
</TABLE>

Net Sales

   Consolidated net sales were approximately $201.3 million for the first
quarter of fiscal 2001, a decrease of $(30.7) million or (13.2)% over first
quarter 2000 consolidated net sales of $232.0 million. The decrease in net
sales was due primarily to lower sales volume of $24.4 million which is
discussed in more detail below. Foreign currency had a negative impact on net
sales of $5.5 million and pricing pressure and product mix issues resulted in
a decline in sales of $0.8 million.

   Consumer segment net sales were $112.1 million for the first quarter 2001
compared to $134.0 million for the first quarter of 2000, a decrease of
$(21.8) million or (16.3)%. The decrease in sales was a factor of the
following: (1) certain specialized manufacturing assets continued to be
underutilized due to certain high margin consumer products not returning to
anticipated sales levels, (2) competitive pricing pressure within the spunmelt
technology resulted in lower selling prices than anticipated, (3) lower sales
to certain consumer products customers and (4) certain foreign currencies,
predominantly in Europe, Canada and Turkey, were weaker against the U.S.
dollar in the first quarter of 2001 versus the first quarter of 2000.

   Industrial and Specialty segment sales were $89.1 million for the first
quarter of 2001 compared to $98.0 million for the first quarter of 2000, a
decrease of $(8.9) million or (9.1)%. The Company continued to experience
product mix issues resulting in sales of lower margin products and lower
selling prices. In addition, longer than anticipated commercialization periods
for new products developed using the APEX(R) technology have resulted in
delayed sales. Sales also decreased as a result of weaker foreign currencies,
predominantly in Europe, Canada and Turkey, against the U.S. dollar in the
first quarter of 2001 verus the first quarter of 2000.

Operating Income

   Consolidated operating income was $1.0 million for the first quarter of
fiscal 2001, a decrease of $(21.3) million or (95.5)% over first quarter 2000
consolidated operating income of $22.3 million.

   Consumer segment operating income was $4.4 million for the first quarter of
2001 compared to $18.6 million for the first quarter of 2000, a decrease of
$(14.2) million or (76.4)%. The decrease in operating income was a factor of
the following: (1) certain specialized manufacturing assets continued

                                      14
<PAGE>

to be underutilized due to certain high margin consumer products not returning
to anticipated sales levels, (2) competitive pricing pressure within the
spunmelt technology resulted in lower selling prices than anticipated, (3)
lower sales to certain consumer products customers, (4) certain foreign
currencies, predominantly in Europe, Canada and Turkey, were weaker against
the U.S. dollar in the first quarter of 2001 versus the first quarter of 2000,
(5) raw material prices continued to increase, (6) higher energy and
distribution costs and (7) increased new program development costs, excluding
APEX(R).

   Industrial and Specialty segment operating loss was $(3.4) million for the
first quarter of 2001 compared to operating income of $3.6 million for the
first quarter of 2000, a decrease of $(7.0) million or (193.2)%. The decrease
in operating income was a factor of the following: (1) the Company continued
to experience product mix issues resulting in sales of lower margin products
and lower selling prices, (2) longer than anticipated commercialization
periods for new products developed using the APEX(R) technology resulted in
delayed sales and increased start-up and commercialization costs, (3) certain
foreign currencies, predominantly in Europe, Canada and Turkey, were weaker
against the U.S. dollar in the first quarter of 2001 versus the first quarter
of 2000, (4) raw material prices continued to increase, (5) higher energy and
distribution costs and (6) increased new program development costs, excluding
APEX(R).

Interest Expense and Other

   Interest expense increased $6.3 million, from $19.1 million in the first
quarter of 2000 to $25.4 million in the first quarter of 2001. The increase in
interest expense is primarily due to a higher average amount of indebtedness
outstanding resulting from increased capital spending, principally on the
Company's two new APEX(R) lines during fiscal year 2000, and an increase in
interest rates resulting from higher outstanding debt balances.

   Foreign currency losses were approximately $1.4 million during the first
quarter of 2001 compared to gains of approximately $0.2 million during the
first quarter of 2000.

Income Taxes (Benefit)

   The Company recorded an income tax benefit of approximately $7.3 million
for the first quarter of 2001, representing an effective tax benefit rate of
28.0%. During the first quarter of 2000, the Company provided for income taxes
of $1.2 million, representing an effective tax rate of 35.0%.

Net Income (Loss)
   Net income decreased $(20.7) million from $2.1 million, or $.07 per diluted
share, during the first quarter of 2000 to a net loss of $(18.6) million, or
$(.58) per diluted share, during the first quarter of 2001 as a result of the
above mentioned factors.

                                      15
<PAGE>

Liquidity and Capital Resources

<TABLE>
<CAPTION>
                                                       March 31,   December 30,
                                                          2001         2000
                                                       ----------  ------------
                                                           (In Thousands)
      <S>                                              <C>         <C>
      Balance sheet data:
        Cash and equivalents and short-term
         investments.................................. $   50,378   $   30,588
        Working capital...............................    226,838      190,459
        Total assets..................................  1,507,444    1,507,994
        Total debt....................................  1,094,074    1,056,149
        Shareholders' equity..........................    198,350      226,235
<CAPTION>
                                                         Three Months Ended
                                                       ------------------------
                                                       March 31,     April 1,
                                                          2001         2000
                                                       ----------  ------------
                                                           (In Thousands)
      <S>                                              <C>         <C>
      Cash flow data:
        Net cash (used in) operating activities....... $  (11,026)  $  (24,036)
        Net cash (used in) investing activities.......     (6,615)     (36,867)
        Net cash provided by financing activities.....     38,269       31,953
</TABLE>

Operating Activities

   During the first quarter of 2001, the Company's cash used in operating
activities was $11.0 million compared to cash used in operating activities of
$24.0 million during the first quarter of 2000.

   The Company had cash and equivalents and short-term investments of $50.4
million at March 31, 2001 as compared to $30.6 million at December 30, 2000,
an increase of $19.8 million. Cash used in operating activities during the
three months ended March 31, 2001 approximated $11.0 million as a result of
lower operating earnings and higher working capital requirements offset by
borrowings under the Company's Credit Facility.

   Consolidated working capital was $226.8 million at March 31, 2001 as
compared to $190.5 million at December 30, 2000 representing an increase of
$36.3 million. The working capital increase during the quarter ended March 31,
2001 resulted from higher cash and inventory coupled with lower accrued and
other liabilities, including current portion of long-term debt. Accounts
receivable on March 31, 2001 were $137.1 million, up slightly from accounts
receivable at December 30, 2000 of $136.7 million. Accounts receivable
represented 60 days of sales outstanding at March 31, 2001, up slightly from
58 days at December 30, 2000. Inventories on March 31, 2001 were $127.0
million as compared to $122.8 million on December 30, 2000, an increase of
$4.3 million, or approximately 3.5%. The increase in inventories over fiscal
year end resulted primarily from higher work in process and raw material
balances at March 31, 2001. Accrued and other liabilities decreased $8.3
million from $56.9 million at December 30, 2000 to $48.6 million at March 31,
2001 due primarily to the timing of senior subordinated note interest
payments.

Investing and Financing Activities

   Capital expenditures for the three months ended March 31, 2001 totaled $6.6
million, a decrease of $29.0 million from capital spending of $35.6 million
during the same period in 2000. The Company anticipates capital expenditures
in fiscal 2001 to be in the range of $30.0 million to $35.0 million.

   On April 11, 2001, the Company entered into Amendment No. 6 dated as of
April 11, 2001 to its Credit Facility ("Amendment No. 6"). The amendment
modified the existing financial covenants relating to senior leverage ratio,
fixed charge coverage ratio and minimum required levels of EBITDA. The

                                      16
<PAGE>

amendment also increases the interest rate by 75 basis points on the
outstanding amounts under the Credit Facility, limits amounts outstanding
under the revolving portion of the Credit Facility (together with outstanding
letters of credit) to $260 million, limits capital expenditures to $35 million
for fiscal year 2001, restricts the Company from making new investments or
acquisitions and prevents the Company from paying dividends on its Common
Stock or making other restricted payments. The Company was required to pay a
fee to the lenders equal to 1/2 of 1% of the outstanding commitments of the
lenders. The Company also affirmed its intention in the amendment to reduce
the amount outstanding under the Credit Facility by not less than $150 million
through one or more asset dispositions, including sale-leaseback transactions,
synthetic leases or asset securitizations on or before August 15, 2001. In the
event that the Company does not complete such asset dispositions and reduce
outstanding indebtedness under the Credit Facility by not less than $150
million on or before August 15, 2001, the rate of interest on the outstanding
loans will increase by 50 basis points and the Company will be required to pay
a fee equal to 1/2 of 1% of the outstanding commitments of the lenders. The
Company is currently in active discussions to undertake such asset
dispositions to improve its financial condition. In addition, the Company
intends to take certain actions designed to alter its capital structure which
may include raising additional equity and/or reducing outstanding
indebtedness. However, there can be no assurance that the Company will
complete any of the potential transactions or that the transactions can be
completed on terms and conditions acceptable to the Company.

   Amendment No. 6 also grants the Company a waiver with respect to the
existing default under the leverage covenant existing on March 31, 2001
through and including December 29, 2001, at which time the waiver expires.
Based upon current operating projections, the Company would be in default
under the Credit Facility upon the expiration of the waiver, unless the
actions described above were completed. A failure by the Company to complete
the actions described above in order to comply with the financial covenants
under the Credit Facility including the leverage ratio and fixed charge
coverage ratio covenants, would result in an event of default under the Credit
Facility, which could have a material adverse effect on the Company.

   The Company will evaluate any potential non-cash write off of loan
acquisition costs as a result of Amendment No. 6 prior to the end of the
second fiscal quarter of 2001. At March 31, 2000, the net book value of loan
acquisition costs related to the Company's Credit Facility was $10.4 million.

   Net cash provided by financing activities for the three months ended March
31, 2001 totaled $38.3 million as a result of borrowings under the Company's
Credit Facility to support working capital requirements and finance capital
expenditures.

   The Company currently believes that based on current levels of operations,
its cash from operations, together with potential asset sales and other
available sources of liquidity (including but not limited to borrowings under
the Credit Facility) will be adequate through the end of fiscal 2001 to make
required debt payments, including interest thereon, to permit anticipated
capital expenditures and to fund the Company's working capital requirements.
As of March 31, 2001, the Company's availability under its Credit Facility,
including cash and equivalents and short-term investments, approximated $93.5
million.

Effect of Inflation

   Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. For a discussion of certain raw material price
increases during the quarter ended March 31, 2001, see "Quantitative and
Qualitative Disclosures About Market Risk--Raw Material and Commodity Risks."

Foreign Currency

   The Company's substantial foreign operations expose it to the risk of
exchange rate fluctuations. If foreign currency denominated revenues are
greater than costs, the translation of foreign currency denominated costs and
revenues into U.S. dollars will improve profitability when the foreign
currency

                                      17
<PAGE>

strengthens against the U.S. dollar and will reduce profitability when the
foreign currency weakens. For a discussion of certain adverse foreign currency
exchange rate fluctuations during the quarter ended March 31, 2001, see
"Quantitative and Qualitative Disclosures About Market Risk--Foreign Currency
Exchange Rate Risk."

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Long-Term Debt and Interest Rate Market Risk

 Variable Rate Debt

   The Credit Facility permits the Company to borrow up to $600.0 million,
subject in the case of borrowings under the revolving portion to the
satisfaction of certain conditions, a portion of which may be denominated in
Dutch guilders and in Canadian dollars. Amendment No. 6 currently limits
amounts outstanding under the revolving portion of the Credit Facility
(together with outstanding letters of credit) to $260 million. The variable
interest rate applicable to borrowings under the Credit Facility is based on,
in the case of U.S. dollar denominated loans, the base rate referred to
therein or the Eurocurrency rate referred to therein for U.S. dollars, at the
Company's option, plus a specified margin. In the event that a portion of the
Credit Facility is denominated in Dutch guilders, the applicable interest rate
is based on the applicable Eurocurrency base rate referred to therein for
Dutch guilders, plus a specified margin. In the event that a portion of the
Credit Facility is denominated in Canadian dollars, the applicable interest
rate is based on the Canadian base rate referred to therein, plus a specified
margin, of the Bankers' Acceptance discount rate referred to therein, at the
Company's option. At March 31, 2001, the Company had borrowings under the
Credit Facility of $469.9 million that were subject to interest rate risk.
Each hypothetical 1.0% increase in interest rates would impact pretax earnings
by $4.7 million. The Company has an interest rate cap agreement which limits
the amount of interest expense on $100 million of this debt to a rate of 9%.
The Company does not use these products for trading purposes.

 Fixed Rate Debt

   The fair market value of the Company's long-term fixed interest rate debt
is also subject to interest rate risk. Generally, the fair market value of
fixed interest rate debt will increase as interest rates fall and decrease as
interest rates rise. The estimated fair value of the Company's long-term
fixed-rate debt at March 31, 2001 was approximately $287.2 million, which was
less than its carrying value by approximately $303.1 million. A 100 basis
points decrease in the prevailing interest rates at March 31, 2001 would
result in an increase in the fair value of fixed rate debt by approximately
$11.2 million. A 100 basis points increase in the prevailing interest rates at
March 31, 2001 would result in a decrease in fair value of total fixed rate
debt by approximately $10.6 million. Fair market values were determined from
quoted market prices or based on estimates made by investment bankers.

Foreign Currency Exchange Rate Risk

   The Company manufactures, markets and distributes certain of its products
in Europe, Canada, Latin America and the Far East. As a result, the Company's
financial results could be significantly affected by factors such as changes
in foreign currency rates or weak economic conditions in the foreign markets
in which the Company maintains a manufacturing or distribution presence. If
foreign currency denominated revenues are greater than costs, the translation
of foreign currency denominated costs and revenues into U.S. dollars will
improve profitability when the foreign currency strengthens against the U.S.
dollar and will reduce profitability when the foreign currency weakens. For
example, during the first quarter of 2001 certain currencies of countries in
which the Company conducts foreign currency denominated business,
predominantly in Europe, Canada and Turkey, weakened against the U.S. dollar
and had a significant impact on sales and operating income. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

                                      18
<PAGE>

   For the quarter ending March 31, 2001, the result of a uniform 10%
strengthening in the value of the dollar relative to the currencies in which
the Company's sales are denominated would have decreased operating income by
approximately $0.9 million. This calculation assumes that each exchange rate
would change in the same direction relative to the U.S. dollar. In addition to
the direct effects of changes in exchange rates, which are a changed dollar
value of the resulting sales, changes in exchange rates also affect the volume
of sales or the foreign currency sales price as competitors' products become
more or less attractive. The Company's sensitivity analysis of the effects of
changes in foreign currency exchange rates does not factor in a potential
change in sales levels or local currency prices.

Raw Material and Commodity Risks

   The primary raw materials used in the manufacture of most of the Company's
products are polypropylene and polyester fiber, polyethylene and polypropylene
resin, and, to a lesser extent, rayon, tissue paper and cotton. The prices of
polyethylene and polypropylene are a function of, among other things,
manufacturing capacity, demand and the price of crude oil and natural gas
liquids. During 2000 raw material prices as a percentage of sales increased
significantly from 37.9% of sales in 1999 to 41.0% of sales in 2000. This
trend continued in the first quarter of 2001 resulting in material prices
increasing to 44.1% of sales. The increase in raw material cost has had a
significant negative impact on operating income because the increase could not
be passed on to customers. As in fiscal 2000 and the first quarter of 2001, a
significant increase in the prices of polyolefin resins that cannot be passed
on to customers could have a material adverse effect on the Company's results
of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Safe Harbor Statement under the Private Securities Litigation Act of 1995

   This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. In addition, from time to time,
the Company or its representatives have made or may make forward-looking
statements orally or in writing. Such forward-looking statements may be
included in, but not limited to, various filings by the Company with the
Securities and Exchange Commission, press releases or oral statements made
with the approval of an authorized executive officer of the Company. Actual
results could differ materially from those projected or suggested in any
forward-looking statements as a result of a variety of factors and conditions
which include, but are not limited to: adverse economic conditions, demand for
the Company's products, competition in the Company's markets, dependence on
key customers, increases in raw material costs, the amount of capital
expenditures, fluctuations in foreign currency exchange rates, the Company's
substantial leverage position and other risks detailed in documents filed by
the Company with the Securities and Exchange Commission.

                                      19
<PAGE>

                          PART II. OTHER INFORMATION

Item 1. Legal Proceedings

   Not applicable.

Item 2. Changes in Securities

   Not applicable.

Item 3. Defaults upon Senior Securities

   Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

   Not applicable.

Item 5. Other Information

   Not applicable.

Item 6. Exhibits and Reports on Form 8-K

Exhibits

   Exhibits required to be filed with this report on Form 10-Q are listed in
the following Exhibit Index.

Reports on Form 8-K

   On April 16, 2001, the Company issued a press release which was filed on
Form 8-K, announcing that the Company amended its $600 million senior bank
credit facility effective April 11, 2001.

                                      20
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements 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.

                                          Polymer Group, Inc.

                                                     /s/ Jerry Zucker
                                          By: _________________________________
                                                       Jerry Zucker
                                                Chairman, President, Chief
                                              Executive Officer and Director
                                               (Principal Executive Officer)

                                                     /s/ James G. Boyd
                                          By: _________________________________
                                                       James G. Boyd
                                                 Executive Vice President,
                                             Treasurer and Director (Principal
                                              Financial Officer and Principal
                                                    Accounting Officer)

May 14, 2001

                                       21
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 Number                           Document Description
 -------                          --------------------
 <C>     <S>
  10.1   Amendment No. 6, dated April 11, 2001, to the Amended, Restated and
         Consolidated Credit Agreement dated July 3, 1997 by and among Polymer
         Group, Inc., the Guarantors named therein, the lenders named therein
         and the Chase Manhattan Bank, as agent. (1)


  11     Statement of Computation of Per Share Earnings.


  99.1   Press release dated March 13, 2001. (2)


  99.2   Press release dated April 16, 2001. (1)
</TABLE>
--------
(1) Incorporated by reference to the respective exhibit to the Company's Form
    8-K, dated April 16, 2000.
(2) Incorporated by reference to the respective exhibit to the Company's Form
    10-K, dated April 11, 2001, for the fiscal year ended December 30, 2000.

                                      22