<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 September 30, 2000

             [ ] 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 November 7, 2000, 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..................................................  11

  Item 3. Quantitative and Qualitative Disclosures About Market Risk......  16

Part II. Other Information................................................  19

Signatures................................................................  20

Exhibit Index.............................................................  21
</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>
                                                      September 30, January 1,
                                                          2000         2000
                                                      ------------- ----------
                                                       (Unaudited)
                       ASSETS
                       ------
<S>                                                   <C>           <C>
Current assets:
  Cash and equivalents...............................  $    5,651   $   37,180
  Short-term investments.............................      20,214       19,115
  Accounts receivable, net...........................     131,392      133,249
  Inventories........................................     114,201      113,229
  Other..............................................      47,639       46,212
                                                       ----------   ----------
    Total current assets.............................     319,097      348,985
Property, plant and equipment, net...................     855,729      823,349
Intangibles and loan acquisition costs, net..........     241,855      246,403
Other................................................      52,020       47,509
                                                       ----------   ----------
    Total assets.....................................  $1,468,701   $1,466,246
                                                       ==========   ==========
<CAPTION>
        LIABILITIES AND SHAREHOLDERS' EQUITY
        ------------------------------------
<S>                                                   <C>           <C>
Current liabilities:
  Accounts payable, accrued liabilities and other....  $  106,661   $  136,165
  Short-term borrowings..............................      18,341       19,073
  Current portion of long-term debt..................      11,348        4,842
                                                       ----------   ----------
    Total current liabilities........................     136,350      160,080
                                                       ----------   ----------
Long-term debt, less current portion.................   1,014,404      963,177
Deferred income taxes................................      72,505       83,424
Other non-current liabilities........................      22,938       17,281
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 September 30, 2000; 32,001,800
   shares issued and outstanding at January 1, 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      243,688
  Retained earnings..................................       9,141       13,149
  Accumulated other comprehensive (loss).............     (30,679)     (14,873)
                                                       ----------   ----------
                                                          222,504      242,284
                                                       ----------   ----------
    Total liabilities and shareholders' equity.......  $1,468,701   $1,466,246
                                                       ==========   ==========
</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       Nine Months Ended
                              ------------------------ ------------------------
                              September 30, October 2, September 30, October 2,
                                  2000         1999        2000         1999
                              ------------- ---------- ------------- ----------
<S>                           <C>           <C>        <C>           <C>
Net sales....................   $203,516     $222,486    $659,269     $656,452
Cost of goods sold...........    161,711      161,666     515,077      480,444
                                --------     --------    --------     --------
Gross profit.................     41,805       60,820     144,192      176,008
Selling, general and
 administrative expenses.....     25,549       30,615      82,069       88,528
                                --------     --------    --------     --------
Operating income.............     16,256       30,205      62,123       87,480
Other (income) expense:
  Interest expense, net......     24,306       18,055      65,877       53,845
  Investment income--(gain)
   on marketable securities,
   net.......................        --           --          --        (2,942)
  Foreign currency and other.        636         (568)        599          738
                                --------     --------    --------     --------
                                  24,942       17,487      66,476       51,641
                                --------     --------    --------     --------
Income (loss) before income
 taxes and extraordinary
 item........................     (8,686)      12,718      (4,353)      35,839
Income taxes (benefit).......     (3,040)       4,515      (1,523)      13,159
                                --------     --------    --------     --------
Income (loss) before
 extraordinary item..........     (5,646)       8,203      (2,830)      22,680
Extraordinary item, net of
 taxes of $399...............        --           --          741          --
                                --------     --------    --------     --------
    Net income (loss)........   $ (5,646)    $  8,203    $ (2,089)    $ 22,680
                                ========     ========    ========     ========
Net income (loss) per common
 share:
  Basic:
    Average common shares
     outstanding.............     32,004       32,000      32,004       32,000
    Income (loss) before
     extraordinary item......   $  (0.18)    $   0.26    $  (0.09)    $   0.71
    Extraordinary item, net
     of tax..................        --           --         0.02          --
                                --------     --------    --------     --------
    Net income (loss) per
     common share--basic.....   $  (0.18)    $   0.26    $  (0.07)    $   0.71
                                ========     ========    ========     ========
  Diluted:
    Average common shares
     outstanding.............     32,004       32,030      32,052       32,006
    Income (loss) before
     extraordinary item......   $  (0.18)    $   0.26    $  (0.09)    $   0.71
    Extraordinary item, net
     of tax..................        --           --         0.02          --
                                --------     --------    --------     --------
    Net income (loss) per
     common share--diluted...   $  (0.18)    $   0.26    $  (0.07)    $   0.71
                                ========     ========    ========     ========
  Cash dividends.............   $   0.02     $     --    $   0.06     $    --
                                ========     ========    ========     ========
</TABLE>


                            See accompanying notes.

                                       4
<PAGE>

                              POLYMER GROUP, INC.

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                          Nine Months Ended
                                                       ------------------------
                                                       September 30, October 2,
                                                           2000         1999
                                                       ------------- ----------
<S>                                                    <C>           <C>
Operating activities
  Net income (loss)...................................   $ (2,089)    $ 22,680
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
    Extraordinary item, net of tax....................       (741)         --
    Depreciation and amortization expense.............     54,421       47,496
    Change in marketable securities classified as
     trading, net.....................................        --          (463)
    Foreign currency and other........................        599          738
  Changes in operating assets and liabilities, net of
   effects of business acquisition:
    Accounts receivable...............................      7,091      (19,956)
    Inventories.......................................      1,139       (1,060)
    Accounts payable and accrued expenses.............    (28,867)      14,670
  Other, net..........................................     (7,728)      (2,412)
                                                         --------     --------
      Net cash provided by operating activities.......     23,825       61,693
                                                         --------     --------
Investing activities
  Purchases of property, plant and equipment..........    (76,477)    (142,320)
  Purchases of marketable securities classified as
   available for sale.................................        --       (15,053)
  Other, including business acquisition...............    (18,076)     (21,610)
                                                         --------     --------
      Net cash used in investing activities...........    (94,553)    (178,983)
                                                         --------     --------
Financing activities
  Proceeds from debt..................................    233,028      158,901
  Payment of debt.....................................   (189,268)     (80,845)
  Dividends to shareholders...........................     (1,920)         --
  Exercise of stock options...........................         34          --
  Loan acquisition costs, net.........................     (4,793)      (3,370)
                                                         --------     --------
      Net cash provided by financing activities.......     37,081       74,686
                                                         --------     --------
Effect of exchange rate changes on cash...............      2,118        8,365
                                                         --------     --------
Net decrease in cash and equivalents..................    (31,529)     (34,239)
Cash and equivalents at beginning of period...........     37,180       58,308
                                                         --------     --------
Cash and equivalents at end of period.................   $  5,651     $ 24,069
                                                         ========     ========
</TABLE>


                            See accompanying notes.

                                       5
<PAGE>

                              POLYMER GROUP, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

   The accompanying unaudited consolidated financial statements of Polymer
Group, Inc. (the "Company"), a global manufacturer and marketer of nonwovens
and oriented polyolefin products, have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they 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 September 30, 2000 contains
summarized information; as a result, such data does not include the same
detail provided in the 1999 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 and nine months ended September 30, 2000, are not
necessarily indicative of the results that may be expected for fiscal 2000.

   Reclassifications: Certain amounts previously presented in the consolidated
financial statements for prior periods have been reclassified to conform to
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 Issued 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 is effective
for fiscal years beginning after June 15, 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
Company has elected to defer the adoption of FAS 133 until fiscal year 2001.
Currently, the Company does not anticipate FAS 133 to have a material
financial or operational impact on the Company. However, the Company is in the
process of performing an analysis of areas of risk at this time.

   In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 does not
change existing accounting rules on revenue recognition but 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 adoption of SAB 101 is required no later than the
fourth quarter of 2000. The Company is in the process of reviewing revenue
recognition policies applied throughout the Company and will adopt SAB 101 in
the fourth quarter of 2000. The Company does not anticipate the adoption of
SAB 101 to have a material impact on the results of operations.

                                       6
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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>
                                                       September 30, January 1,
                                                           2000         2000
                                                       ------------- ----------
                                                        (Unaudited)
      <S>                                              <C>           <C>
      Finished goods.................................    $ 60,228     $ 51,588
      Work in process and stores and maintenance
       parts.........................................      17,779       16,753
      Raw materials..................................      36,194       44,888
                                                         --------     --------
        Total........................................    $114,201     $113,229
                                                         ========     ========
</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 applicable to common stock.

Note 4. Debt

   Short-term borrowings amounted to approximately $18.3 million at September
30, 2000 and $19.0 million at January 1, 2000. These amounts are composed of
U.S. loans and local borrowings, principally by international subsidiaries.
Long-term debt as of September 30, 2000 and January 1, 2000, consists of the
following in thousands:
<TABLE>
<CAPTION>
                                                      September 30, January 1,
                                                          2000         2000
                                                      ------------- ----------
                                                       (Unaudited)
      <S>                                             <C>           <C>
      Senior subordinated notes, net of unamortized
       debt discount, due July 2007..................  $  390,064    $394,678
      Senior subordinated notes, due March 2008......     196,500     200,000
      Revolving credit facility, due June 2003.......     142,846     188,085
      Term loans, including current portion, due
       December 2005 and 2006........................     271,780     172,520
      Other..........................................      24,562      12,736
                                                       ----------    --------
                                                       $1,025,752    $968,019
                                                       ==========    ========
</TABLE>

   The senior subordinated notes are unsecured obligations subordinated in
right of payment to all existing and future senior indebtedness of the Company
and have customary provisions regarding redemption and changes of control.
During the second quarter of 2000 the Company purchased $5.0 million principal
amount of its senior subordinated notes due July 2007 and $3.5 million
principal amount of its senior subordinated notes due March 2008. The Company
recognized an extraordinary gain of $0.7 million, net of taxes, on the
retirement of these notes.

                                       7
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The Company's credit facility provides for secured revolving credit
borrowings with aggregate commitments of up to $325.0 million and aggregate
term loans of $275.0 million. Subject to certain terms and conditions, a
portion of the credit facility may be used for letters of credit. Commitment
fees under the credit facility are generally equal to a percentage of the
daily unused amount of such commitment.

   On August 10, 2000, the Company amended its credit facility to modify
certain covenants, including leverage and fixed charge coverage, and to modify
the credit facility in certain other respects.

Note 5. Selected Financial Data of Guarantors

   Payment of the Company's senior subordinated notes is 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 September 30, 2000

<TABLE>
<CAPTION>
                                        Combined
                           Combined       Non-
                          Guarantor    Guarantor      The      Reclassifications
                         Subsidiaries Subsidiaries  Company    and Eliminations  Consolidated
                         ------------ ------------ ----------  ----------------- ------------
<S>                      <C>          <C>          <C>         <C>               <C>
Working capital
 (deficit)..............  $   87,538    $ 95,244   $  (13,022)    $    12,987     $  182,747
Total assets............   2,393,797     585,953    1,129,745      (2,640,794)     1,468,701
Total debt..............       1,805      44,157      998,131             --       1,044,093
Shareholders' equity....   1,289,384     265,095       85,373      (1,417,348)       222,504
</TABLE>

         Condensed Consolidating Selected Balance Sheet Financial Data
                             As of January 1, 2000

<TABLE>
<CAPTION>
                                        Combined
                           Combined       Non-
                          Guarantor    Guarantor      The      Reclassifications
                         Subsidiaries Subsidiaries  Company    and Eliminations  Consolidated
                         ------------ ------------ ----------  ----------------- ------------
<S>                      <C>          <C>          <C>         <C>               <C>
Working capital
 (deficit)..............  $   96,820    $ 99,515   $   (6,778)    $      (652)    $  188,905
Total assets............   2,683,651     604,397    1,127,754      (2,949,556)     1,466,246
Total debt..............       4,667      47,159      935,266             --         987,092
Shareholders' equity....   1,383,090     229,554      118,894      (1,489,254)       242,284
</TABLE>

                                       8
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    Condensed Consolidating Statement of Operations Selected Financial Data
                 For the Nine Months Ended September 30, 2000

<TABLE>
<CAPTION>
                                         Combined
                            Combined       Non-
                           Guarantor    Guarantor     The     Reclassifications
                          Subsidiaries Subsidiaries Company   and Eliminations  Consolidated
                          ------------ ------------ --------  ----------------- ------------
<S>                       <C>          <C>          <C>       <C>               <C>
Net sales...............    $385,221     $292,030   $     --      $(17,982)       $659,269
Operating income (loss).      20,287       42,237       (351)          (50)         62,123
Income (loss) before
 income taxes and
 extraordinary item.....       9,124       20,118    (33,595)          --           (4,353)
Income taxes (benefit)..     (17,749)       4,287     10,418         1,521          (1,523)
Income (loss) before
 extraordinary item.....      26,873       15,831    (44,013)       (1,521)         (2,830)
Extraordinary item, net
 of tax.................         --           --         741           --              741
Equity in earnings of
 subsidiaries...........         --           --      41,183       (41,183)            --
Net income (loss).......      26,873       15,831     (2,089)      (42,704)         (2,089)
</TABLE>

    Condensed Consolidating Statement of Operations Selected Financial Data
                   For the Nine Months Ended October 2, 1999

<TABLE>
<CAPTION>
                                        Combined
                           Combined       Non-
                          Guarantor    Guarantor     The     Reclassifications
                         Subsidiaries Subsidiaries Company   and Eliminations  Consolidated
                         ------------ ------------ --------  ----------------- ------------
<S>                      <C>          <C>          <C>       <C>               <C>
Net sales...............   $418,723     $256,508   $    --       $(18,779)       $656,452
Operating income........     49,503       36,784      1,193           --           87,480
Income (loss) before
 income taxes...........     45,086       26,856    (36,103)          --           35,839
Income taxes (benefit)..      6,770        6,635       (246)          --           13,159
Equity in earnings of
 subsidiaries...........        --           --      58,537       (58,537)            --
Net income..............     38,316       20,221     22,680       (58,537)         22,680
</TABLE>

Note 6. Comprehensive Income (Loss)

   The Company reports comprehensive income 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.
The Company's comprehensive (loss) income, net of taxes, approximated $(11.1)
million and $16.1 million for the three months ended September 30, 2000 and
October 2, 1999, respectively. Year to date comprehensive (loss) income, net
of taxes, approximated $(17.9) million in 2000 and $20.1 million in 1999.

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. Due to a change in the Company's internal reporting
structure, continued product

                                       9
<PAGE>

                              POLYMER GROUP, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
diversification and end market expansion, the Company changed its reportable
segments during the first quarter of fiscal 2000 to Consumer and Industrial
and Specialty and restated prior period segment information to reflect this
change. Sales to The Procter & Gamble Company and Johnson & Johnson, customers
who each account for greater than 10% of the Company's sales, are reported
primarily within the Consumer segment. 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 asset. 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     Nine Months Ended
                                ---------------------- ----------------------
                                              October                October
                                September 30,    2,    September 30,    2,
                                    2000        1999       2000        1999
                                ------------- -------- ------------- --------
   <S>                          <C>           <C>      <C>           <C>
   Net sales to unaffiliated
    customers
     Consumer..................   $114,996    $130,545   $376,687    $373,867
     Industrial and Specialty..     88,520      91,941    282,582     282,585
                                  --------    --------   --------    --------
                                  $203,516    $222,486   $659,269    $656,452
                                  ========    ========   ========    ========
   Operating income
     Consumer..................   $ 10,481    $ 23,063   $ 47,531    $ 68,106
     Industrial and Specialty..      5,775       7,142     14,592      19,374
                                  --------    --------   --------    --------
                                  $ 16,256    $ 30,205   $ 62,123    $ 87,480
                                  ========    ========   ========    ========
</TABLE>


<TABLE>
<CAPTION>
                                                       September 30, January 1,
                                                           2000         2000
                                                       ------------- ----------
      <S>                                              <C>           <C>
      Identifiable assets
        Consumer......................................  $  776,838   $  783,893
        Industrial and Specialty......................     597,984      585,948
        Corporate(1)..................................      93,879       96,405
                                                        ----------   ----------
                                                        $1,468,701   $1,466,246
                                                        ==========   ==========
</TABLE>
--------
(1) Consists primarily of cash and equivalents, short-term investments, loan
    acquisition costs and other corporate related assets.

Note 8. Subsequent Events

   The Board of Directors declared a quarterly dividend of $0.02 per share,
payable on December 1, 2000 to shareholders of record on November 10, 2000.

                                      10
<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 January 1,
2000.

   As a result of a change in the Company's internal reporting structure,
continued product diversification and end market expansion, the Company
changed its reportable segments during the first quarter of fiscal 2000 to
Consumer and Industrial and Specialty and restated prior period segment
information to reflect this change.

Results of Operations

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

<TABLE>
<CAPTION>
                                 Three Months Ended       Nine Months Ended
                              ------------------------ ------------------------
                              September 30, October 2, September 30, October 2,
                                  2000         1999        2000         1999
                              ------------- ---------- ------------- ----------
<S>                           <C>           <C>        <C>           <C>
Net sales by segment
  Consumer...................      56.5%       58.7%        57.0%       57.0%
  Industrial and Specialty...      43.5        41.3         43.0        43.0
                                  -----       -----        -----       -----
                                  100.0       100.0        100.0       100.0
Cost of goods sold
  Material...................      42.0        37.5         40.8        37.9
  Labor......................       8.3         8.8          8.7         8.8
  Overhead...................      29.2        26.4         28.6        26.5
                                  -----       -----        -----       -----
                                   79.5        72.7         78.1        73.2
                                  -----       -----        -----       -----
  Gross profit...............      20.5        27.3         21.9        26.8
Selling, general and
 administrative expenses.....      12.5        13.7         12.5        13.5
                                  -----       -----        -----       -----
Operating income.............       8.0        13.6          9.4        13.3
Other (income) expense
  Interest expense, net......      12.0         8.1         10.0         8.2
  Investment income--(gain)
   on marketable securities..       --          --           --         (0.4)
  Foreign currency and other.       0.3        (0.2)         0.1         0.1
                                  -----       -----        -----       -----
                                   12.3         7.9         10.1         7.9
Income (loss) before income
 taxes and extraordinary
 item........................      (4.3)        5.7         (0.7)        5.4
Income taxes (benefit).......      (1.5)        2.0         (0.2)        2.0
                                  -----       -----        -----       -----
Income (loss) before
 extraordinary item..........      (2.8)        3.7         (0.5)        3.4
Extraordinary item, net of
 taxes.......................       --          --           0.2         --
                                  -----       -----        -----       -----
Net income (loss)............      (2.8)%       3.7%        (0.3)%       3.4%
                                  =====       =====        =====       =====
</TABLE>

                                      11
<PAGE>

Comparison of Three Months Ended September 30, 2000 and October 2, 1999

   The following table sets forth components of the Company's net sales and
operating income by segment for the three months ended September 30, 2000 and
the corresponding decrease over the comparable period in the prior year:

<TABLE>
<CAPTION>
                                        Three Months Ended
                                      ----------------------
                                      September 30, October               %
                                          2000      2, 1999  Decrease  Decrease
                                      ------------- -------- --------  --------
                                        (In Thousands, Except Percent Data)
      <S>                             <C>           <C>      <C>       <C>
      Net sales:
        Consumer.....................   $114,996    $130,545 $(15,549)  (11.9)%
        Industrial and Specialty.....     88,520      91,941   (3,421)   (3.7)
                                        --------    -------- --------   -----
                                        $203,516    $222,486 $(18,970)   (8.5)
                                        ========    ======== ========   =====
      Operating income:
        Consumer.....................   $ 10,481    $ 23,063 $(12,582)  (54.6)%
        Industrial and Specialty.....      5,775       7,142   (1,367)  (19.1)
                                        --------    -------- --------   -----
                                        $ 16,256    $ 30,205 $(13,949)  (46.2)
                                        ========    ======== ========   =====
</TABLE>

Net Sales

   Consolidated net sales were $203.5 million in the third quarter of fiscal
2000, down $19.0 million from $222.5 million for the corresponding period in
1999.

   Consumer segment net sales were $115.0 million and $130.5 million in the
third quarter of 2000 and 1999, respectively. Net sales decreased 11.9% in
this segment due primarily to the continued curtailment in orders of selected
higher margin products from certain customers, industry-wide over-capacity
within the spunmelt technologies and unfavorable foreign currency conversion
rates, predominantly in Europe. The confluence of these negative factors was
offset somewhat by a broader geographic sales base, higher sales of lower
margin products and increased raw material costs passed through to customers
within certain product categories.

   Industrial and Specialty segment net sales were $88.5 million and $91.9
million in the third quarter of 2000 and 1999, respectively. Net sales
decreased 3.7% in this segment due primarily to the continued trend of product
mix issues resulting in lower than anticipated average selling prices within
certain sectors and to unfavorable foreign currency conversion rates,
predominantly in Europe.

Operating Income

   Consolidated operating income was $16.3 million in the third quarter of
fiscal 2000, a decrease of $13.9 million or 46.2% over the third quarter of
1999 operating income of $30.2 million.

   Consumer segment operating income was $10.5 million during the third
quarter of 2000 compared to $23.1 million during the third quarter of 1999, a
decrease of $12.6 million, or 54.6%. This decrease was due primarily to the
continued curtailment in orders of selected higher margin products from
certain customers, continued raw material price increases, pricing pressure
within the spunmelt technologies and unfavorable foreign currency conversion
rates, predominantly in Europe.

   Industrial and Specialty segment operating income was $5.8 million during
the third quarter of 2000 compared to $7.1 million in 1999, a decrease of $1.4
million, or 19.1%. Operating income in the Industrial and Specialty segment
was negatively affected by continued raw material price increases, unfavorable
foreign currency conversion rates, predominantly in Europe, and higher period
expenses associated with the Company's two new Apex(TM) lines, offset in part
by the achievement of initiatives designed to mitigate development and product
qualification costs.

                                      12
<PAGE>

   Offsetting the negative impacts to operating income in both segments was a
reduction of selling, general and administrative expenses as a percentage of
total sales from 13.7% in the third quarter of 1999 to 12.5% in the third
quarter of 2000.

Interest Expense and Other

   Interest expense increased $6.3 million, from $18.1 million in the third
quarter of 1999 to $24.3 million in the third quarter of 2000. The increase is
principally due to a higher average amount of indebtedness outstanding
resulting from increased capital spending and an increase in interest rates.

   Net foreign currency and other losses were approximately $0.6 million
during the third quarter of 2000 compared to gains of $0.6 million during the
third quarter of 1999.

Income Taxes (Benefit)

   The Company provided for income tax benefits of approximately $3.0 million
in the third quarter of 2000, representing an effective tax rate of 35.0%.
During the third quarter of 1999, the Company provided for income taxes of
$4.5 million, representing an effective tax rate of 35.5%. The provision for
income taxes at the Company's effective rate in 1999 differed from the
provision for income taxes at the statutory rate due primarily to higher rates
in foreign jurisdictions. During the third quarter of 1999 the Company
completed the tax-efficient realignment of its European operations which
resulted in a lower effective tax rate for the third quarter of 2000 compared
to the third quarter of 1999.

Net Income (Loss)

   Net income decreased $13.8 million from $8.2 million, or $0.26 per share,
for the third quarter of 1999 to a net loss of $(5.6) million, or $(0.18) per
share, for the third quarter in 2000 as a result of the above mentioned
factors.

Comparison of Nine Months Ended September 30, 2000 and October 2, 1999

   The following table sets forth components of the Company's net sales and
operating income by segment for the nine months ended September 30, 2000 and
the corresponding increase/(decrease) over the comparable period in the prior
year:

<TABLE>
<CAPTION>
                                      Nine Months Ended
                                    ----------------------                %
                                    September 30, October  Increase/  Increase/
                                        2000      2, 1999  (Decrease) (Decrease)
                                    ------------- -------- ---------  ----------
                                        (In Thousands, Except Percent Data)
      <S>                           <C>           <C>      <C>        <C>
      Net sales:
        Consumer...................   $376,687    $373,867 $  2,820       0.8%
        Industrial and Specialty...    282,582     282,585       (3)      --
                                      --------    -------- --------     -----
                                      $659,269    $656,452 $  2,817       0.4
                                      ========    ======== ========     =====
      Operating income:
        Consumer...................   $ 47,531    $ 68,106 $(20,575)    (30.2)%
        Industrial and Specialty...     14,592      19,374   (4,782)    (24.7)
                                      --------    -------- --------     -----
                                      $ 62,123    $ 87,480 $(25,357)    (29.0)
                                      ========    ======== ========     =====
</TABLE>

Net Sales

   Third quarter year to date consolidated net sales were $659.3 million in
2000, an increase of $2.8 million or 0.4% over 1999 consolidated net sales of
$656.5 million.

                                      13
<PAGE>

   Year to date 2000 Consumer segment net sales were $376.7 million compared
to $373.9 million in 1999, an increase of $2.8 million, or 0.8%. This modest
increase resulted from a broader geographic sales base and higher sales of
lower margin products. The effect of these increases was offset by continued
curtailment in orders of selected higher margin products from certain
customers, industry-wide over-capacity within the spunmelt technologies and
unfavorable foreign currency conversion rates, predominantly in Europe.

   Year to date 2000 and 1999 Industrial and Specialty segment net sales were
$282.6 million. Net sales remained level in this segment due primarily to
higher volume shipments offset by the continued trend of product mix issues
resulting in lower than anticipated average selling prices within certain
sectors and to unfavorable foreign currency conversion rates, predominantly in
Europe.

Operating Income

   Third quarter year to date 2000 consolidated operating income was $62.1
million, a decrease of $25.4 million or 29.0% over 1999 operating income of
$87.5 million.

   Year to date 2000 Consumer segment operating income was $47.5 million
compared to $68.1 million during 1999, a decrease of $20.6 million, or 30.2%.
This decrease was due primarily to the continued curtailment in orders of
selected higher margin products from certain customers, continued raw material
price increases, pricing pressure within the spunmelt technologies and
unfavorable foreign currency conversion rates, predominantly in Europe.

   Year to date 2000 Industrial and Specialty segment operating income was
$14.6 million compared to $19.4 million in 1999, a decrease of approximately
$4.8 million, or 24.7%. Operating income in the Industrial and Specialty
segment was negatively affected by continued raw material price increases,
unfavorable foreign currency conversion rates, predominantly in Europe, and
higher period expenses associated with the Company's two new Apex(TM) lines,
offset in part by the achievement of initiatives designed to mitigate
development and product qualification costs.

   Offsetting the negative impacts to operating income in both segments was a
reduction of selling, general and administrative expenses as a percentage of
total sales from 13.5% for the first nine months of 1999 to 12.5% for the same
period in 2000.

Interest Expense and Other

   Interest expense increased $12.0 million, from $53.8 million in the first
nine months of 1999 to $65.9 million in the first nine months of 2000. The
increase in interest expense is principally due to a higher average amount of
indebtedness outstanding resulting from increased capital spending and an
increase in interest rates.

   Net foreign currency and other losses were $0.6 million during the first
nine months of 2000 compared to approximately $0.7 million for the same period
in 1999. In addition, during the first nine months of 1999 the Company
recognized a gain on marketable securities of $2.9 million.

Income Taxes (Benefit)

   The Company recorded income tax benefits of approximately $1.5 million for
the first nine months of 2000, representing an effective tax rate of 35.0%.
During the first nine months of 1999, the Company provided for income taxes of
$13.2 million, representing an effective tax rate of 36.7%. The provision for
income taxes at the Company's effective rate in 1999 differed from the
provision for income taxes at the statutory rate due primarily to higher rates
in foreign jurisdictions. During the third quarter of 1999 the Company
completed the tax-efficient realignment of its European operations which
resulted in a lower effective tax rate for the first nine months of 2000
compared to the same period in 1999.

                                      14
<PAGE>

Income (Loss) Before Extraordinary Item

   Income (loss) before extraordinary item decreased $25.5 million from income
of $22.7 million, or $0.71 per share, for the first nine months of 1999 to a
loss of $(2.8) million, or $(0.09) per share, for the first nine months of
2000.

Extraordinary Item

   During the second quarter of 2000, the Company recorded a one-time gain
from the extinguishment of debt of $0.7 million, net of $0.4 million in taxes.

Net Income (Loss)

   Net income decreased $24.8 million from $22.7 million, or $0.71 per share,
year to date 1999 to a loss of $(2.1) million, or $(0.07) per share, year to
date 2000 as a result of the above mentioned factors.

Liquidity and Capital Resources
<TABLE>
<CAPTION>
                                                      September 30, January 1,
                                                          2000         2000
                                                      ------------- ----------
                                                           (In Thousands)
      <S>                                             <C>           <C>
      Balance sheet data:
        Cash and equivalents and short-term
         investments.................................  $   25,865   $   56,295
        Working capital..............................     182,747      188,905
        Total assets.................................   1,468,701    1,466,246
        Total debt...................................   1,044,093      987,092
        Shareholders' equity.........................     222,504      242,284

<CAPTION>
                                                         Nine Months Ended
                                                      ------------------------
                                                      September 30, October 2,
                                                          2000         1999
                                                      ------------- ----------
                                                           (In Thousands)
      <S>                                             <C>           <C>
      Cash flow data:
        Net cash provided by operating activities....  $   23,825   $   61,693
        Net cash used in investing activities........     (94,553)    (178,983)
        Net cash provided by financing activities....      37,081       74,686
</TABLE>

Operating Activities

   During the first nine months of 2000 the Company's operations generated
$23.8 million in cash compared to $61.7 million for the same period in 1999
due primarily to lower operating earnings. The Company's working capital
decreased during the first nine months of 2000 as a result of lower operating
earnings, higher interest cost associated with its outstanding indebtedness
and capital expenditures during the period.

Investing and Financing Activities

   Capital expenditures for the first nine months of 2000 totaled $76.5
million, relating primarily to margin-enhancing projects. The Company
anticipates capital expenditures in fiscal 2000 to be approximately $85.0
million. However, the Company continues to review additional opportunities and
will make determinations on these projects on a case by case basis.

                                      15
<PAGE>

   On April 18, 2000, the Company amended its credit facility to add an
additional term loan in the amount of $100.0 million. The amendment also
modified certain covenants, including leverage and fixed charge coverage. The
Company borrowed the entire amount of the additional term loan, which was used
to reduce amounts outstanding under the revolving portion of the credit
facility.

   On August 10, 2000, the Company amended its credit facility to modify
certain covenants, including leverage and fixed charge coverage, and to modify
the credit facility in certain other respects.

   The Board of Directors declared a quarterly dividend of $0.02 per share
during each quarter in 2000.

   The Company currently believes that based on current levels of operations
and anticipated growth, its cash from operations, together with other
available sources of liquidity (including but not limited to borrowings under
the amended credit facility) will be adequate over the next several years to
make required debt payments, including interest thereon, to permit anticipated
capital expenditures and to fund the Company's working capital requirements.
As of September 30, 2000, the Company's availability under its credit
facility, including cash and equivalents and short-term investments,
approximated $192.4 million.

Effect of Inflation

   Inflation generally affects the Company by increasing the cost of labor,
equipment and new materials. For a discussion of certain raw material price
increases during the nine months ended September 30, 2000, 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
foreign currency 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 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 nine months
ended September 30, 2000, see "Quantitative and Qualitative Disclosures About
Market Risk--Raw Material and Commodity Risks".

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Long-Term Debt and Interest Rate Market Risk

 Variable Rate Debt

   The amended credit facility permits the Company to borrow up to $600.0
million, a portion of which may be denominated in Dutch guilders and in
Canadian dollars. The variable interest rate applicable to borrowings under
the amended 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 amended 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 amended 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 September 30, 2000, the Company had borrowings under the credit
facility of $414.6 million that were subject to interest rate risk. Each
hypothetical 1.0% increase in interest rates would impact pretax earnings by
$4.1 million. The Company has an interest rate cap agreement that limits the
amount of interest expense on $100 million of this debt to a LIBOR rate of 9%.
The Company does not use these products for trading purposes.

                                      16
<PAGE>

 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 September 30, 2000 was approximately $460.4 million, which
was less than its carrying value by approximately $131.1 million. A 100 basis
points decrease in the prevailing interest rates at September 30, 2000 would
result in an increase in the fair value of fixed rate debt by approximately
$22.6 million. A 100 basis points increase in the prevailing interest rates at
September 30, 2000 would result in a decrease in fair value of total fixed
rate debt by approximately $22.2 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 exchange 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 nine months of 2000, certain
currencies of countries in which the Company conducts foreign currency
denominated business, predominantly in Europe, 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."

   For the nine months ending September 30, 2000, the result of an additional
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 $3.3 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 of its products.

   The Company may enter into financial instruments which are limited in
duration and scope to manage its exposure to fluctuations of foreign currency
exchange rates. These instruments are used for hedging purposes and are used
in connection with an underlying asset, liability, firm commitment or
anticipated transaction. Charges to expense year to date during 2000 and 1999
related to these instruments, which are not used for trading purposes, were
not significant.

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. Historically, the prices of polyethylene and polypropylene resin have
fluctuated, such as in late 1994 and early 1995 when resin prices increased by
approximately 60%. The sharp increase was primarily due to short-term
interruptions in production capacity and increased demand as a result of an
expanding economy. By mid-1995, supply had increased, thereby reducing prices.
In general, prices declined

                                      17
<PAGE>

between 1996 and 1999. During the third quarter of 2000, raw material prices
as a percentage of sales increased significantly from 37.5% in the third
quarter of 1999 to 42.0% in the third quarter of 2000. Year to date raw
material prices as a percentage of sales are up from 37.9% for the first nine
months of 1999 to 40.8% for the same period in 2000. The increase in raw
material costs had a significant negative impact on operating income. As in
the first nine months of 2000, 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

   Except for historical information contained herein, certain matters set
forth within "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of this Form 10-Q are forward looking statements.
Certain risks and uncertainties could cause actual results to differ
materially from those set forth in the forward looking statements. The
following factors could cause actual results to differ materially from
historical results or those anticipated: adverse economic conditions,
competition in the Company's markets, fluctuation in raw material costs, and
other risks detailed in documents filed by the Company with the Securities and
Exchange Commission.

                                      18
<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 required to be filed with this report on Form 10-Q are listed in
the following Exhibit Index.

   On November 3, 2000, the Company filed a Form 8-K under Regulation FD to
clarify a statement made during the Company's quarterly earnings conference
call held on October 26, 2000. The Company inadvertently stated that the
Company's leverage ratio covenant for the end of the fourth quarter 2001 was
set at 6.25 to 1. This number is correct for the end of the second quarter,
however the leverage ratio at the end of the fourth quarter 2001 is 5.0 to 1.

                                      19
<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)

November 14, 2000

                                       20
<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 Exhibit
 Number                           Document Description
 ------- ----------------------------------------------------------------------
 <C>     <S>
  10.1   Amendment No. 5, dated August 10, 2000, 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.

  11     Statement of Computation of Earnings Per Share.

  27     Financial data schedule.
</TABLE>

                                       21