SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             -----------------------

                                    FORM 10-K

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

[X]       ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)
          OF THE  SECURITIES EXCHANGE ACT OF 1934 For the
          fiscal year ended December 31, 1996

[  ]      TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d)
          OF THE  SECURITIES EXCHANGE ACT OF 1934 For the
          transition period from _______ to _______

Commission file number 1-11438

                                 WORLDTEX, INC.
               (Exact name of registrant as specified in charter)


      DELAWARE                                            56-1789271
(State of Incorporation)                   (I.R.S. Employer Identification No.)


              212-12th Avenue, N.E., Hickory, North Carolina 28601
                    (Address of principal executive offices)

                                  704-328-5381
                               (Telephone Number)

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

                                                  Name of each exchange on
      Title of each class                               which registered
      -------------------                       --------------------------------

Common stock, par value $.01 per share            New York Stock Exchange, Inc.
Preferred stock purchase rights                   New York Stock Exchange, Inc.


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

                                      None

                      (Cover sheet continued on next page)

<PAGE>

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

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

As of March 7, 1997: 14,403,571 shares of Common Stock were outstanding; and the
aggregate market value of shares held by non-affiliates  was $120,639,249.  (For
these purposes,  a reported  closing market price of $8.88 per share on March 7,
1997 has been used and "affiliates"  have been arbitrarily  determined to be all
directors and executive officers, although the Company does not acknowledge that
any such  person is actually  an  "affiliate"  within the meaning of the federal
securities laws.)

Documents incorporated by reference:  definitive proxy statement for 1997 Annual
Meeting of Stockholders (Part III).

<PAGE>

                                     PART I

Item 1.   Business
-------   --------

          Worldtex,  Inc.  ("Worldtex"  or the  "Company") is a holding  company
engaged  through its  subsidiaries  in the  manufacture of covered elastic yarn,
which is used to manufacture hosiery products and other apparel items.  Worldtex
is a Delaware  corporation  organized  in July 1992 to acquire the covered  yarn
manufacturing  operations  of  Willcox  & Gibbs,  Inc.,  a New York  corporation
("W&G").  Prior to November 12, 1992,  Worldtex was a wholly owned subsidiary of
W&G. On that date, W&G declared a dividend of one share of Worldtex Common Stock
for each  share of W&G  Common  Stock  outstanding  on  November  23,  1992 (the
"Distribution").

          Worldtex's  principal  subsidiaries are Regal  Manufacturing  Company,
Inc.  ("Regal"),   based  in  Hickory,  North  Carolina,   Rubyco  (1987),  Inc.
("Rubyco"),  based in Montreal,  Canada, Filix Lastex, S.A. ("Filix"),  based in
Troyes, France and Fibrexa, Ltda.  ("Fibrexa"),  based in Bogota,  Colombia. W&G
acquired Regal in 1983,  acquired Rubyco in 1986 and acquired Filix in 1990, and
transferred  them to Worldtex in August 1992.  Worldtex  acquired  Fibrexa as of
April 1, 1995.  References  herein to  "Worldtex"  or the  "Company" for periods
prior to August 1992 shall mean the combined  operations  of W&G's  subsidiaries
then engaged in the manufacture of covered elastic yarn.

          Worldtex  believes that it is one of the largest  covered elastic yarn
manufacturers  in the  world  (measured  by  1996  sales),  and it has a  strong
position in each of the principal markets in which it operates. It believes that
Regal is one of the three largest  manufacturers  of covered elastic yarn in the
United States,  that Filix is the largest in Europe,  that Rubyco is the largest
in  Canada  and that  Fibrexa  is the  largest  in South  America  (in each case
measured by 1996  sales).  Regal's and Rubyco's  products are sold  primarily in
their respective home countries,  Filix sells principally to European  Community
countries and Fibrexa sells  principally  to South American  countries,  and our
other subsidiaries.  See Note 12 to Worldtex's Consolidated Financial Statements
for information relating to Worldtex's domestic and foreign operations.

          The  covered  elastic  yarn  manufactured  by  Worldtex is produced by
wrapping  material,  principally nylon,  polyester or cotton,  around spandex or
latex  rubber.  The wrapping  process is  performed  by  machinery  and requires
careful treatment of the materials utilized.

          Worldtex's  principal  product is nylon  covered  spandex  used in the
manufacture of a variety of men's, women's and children's apparel. Worldtex also
sells  covered  spandex and covered latex rubber for use in the  manufacture  of
men's,  women's  and  children's  socks.  Cotton-covered  spandex  yarn  sold by
Worldtex is used  primarily in the  manufacture  of ladies' opaque tights and of
fashion and active-wear apparel.

          Worldtex  served over 1,500 customers in 1996, with no single customer
accounting for more than 10% of such sales.

          Worldtex  purchases a significant amount of the nylon and spandex used
in its manufacturing  process from E.I. DuPont de Nemours & Company  ("DuPont").
In recent years, spandex production capacity has been expanded, and Worldtex has
been able to obtain sufficient supplies to meet its customers' requirements.

          Worldtex's  research and  development  activities are directed  toward
improvements  in  existing  products  and  manufacturing  processes  and  toward
development of new uses for its products.  During 1996, Worldtex's  expenditures
for these purposes totaled less than 1% of its sales.

          While Worldtex  believes that it is one of the largest covered elastic
yarn  manufacturers  in the  world,  several  companies  actively  compete  with
Worldtex,  at least one of which has greater assets and financial resources than
Worldtex.  Most  of  Worldtex's  major  customers  do not buy  exclusively  from
Worldtex.  Competition is based primarily on product  quality,  customer service
and price.

          As of December 31, 1996,  Worldtex had a total of approximately  1,177
employees,  of whom  approximately  471 were  employed  by  Regal in the  United
States,  approximately 181 were employed in Canada by Rubyco,  approximately 321
were employed in France by Filix and approximately 204 were employed in Colombia
by Fibrexa.  A substantial  amount of the covered  elastic yarn sold by Filix is
produced by  subcontractors,  whose  employees are not included in the foregoing
totals.  Employees of Regal and Fibrexa are not covered by collective bargaining
agreements,  and  certain  employees  of Filix and  Rubyco  are  covered by such
agreements. Worldtex has experienced no significant labor problems during recent
years and considers its employee relations to be good.

Item 2.   Properties
-------   ----------

          Worldtex  maintains its  headquarters in Hickory,  North Carolina,  on
property owned by Regal and used for its administrative personnel.

          Worldtex  operates  a  total  of  twelve   manufacturing   plants  and
distribution  centers, of which seven are owned and five are leased. In general,
the  Company's  facilities  are adequate and suitable for the purposes for which
they are utilized by the Company. The plants and distribution centers are listed
below:
<PAGE>

<TABLE>
<CAPTION>

    Location          Square Feet      Owned/Leased           Use
    --------          -----------      ------------           ---
<S>                     <C>              <C>            <C>
United States:
--------------

  Hickory, NC            82,000          Owned          Manufacturing Plant and
                                                          Headquarters of Regal

  Hickory, NC           144,000          Owned          Manufacturing Plant

  Hickory, NC            41,000          Owned          Manufacturing Plant

  Hickory, NC            46,000          Leased         Distribution Center

  Hickory, NC            18,000          Leased         Distribution Center

  Hickory, NC            80,000          Leased         Distribution Center

Canada:
-------

  Montreal, Quebec       85,000          Leased         Manufacturing Plant and
                                                          Headquarters of Rubyco

France:
-------

  Troyes                 48,000          Owned          Distribution Center and
                                                          Headquarters of Filix

  Athis                 202,000          Owned          Manufacturing Plant

  Conde                 195,000          Owned          Manufacturing Plant

  Le Grand Serre         94,000          Owned          Manufacturing Plant

Columbia:
---------

  Bogota                130,000          Leased         Manufacturing Plant and
                                                          Headquarters of
                                                          Fibrexa
</TABLE>

Item 3.   Legal Proceedings
-------   -----------------

          There are no material pending legal proceedings as of the date of this
Report to which the  Company or any of its  subsidiaries  is a party or to which
any of their property is subject.

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

          During the last quarter of the  Company's  1996 fiscal year no matters
were submitted to a vote of the Company's security holders.

<PAGE>

Item 4A.  Executive Officers of the Registrant
--------  ------------------------------------

<TABLE>
<CAPTION>

                              Age (as of                 Office & Principal Occupations
Name                           12/31/96)                       During Last Five Years
-------------------------     ----------          --------------------------------------------------------------
<S>                               <C>             <C>
Richard J. Mackey                 65              Chairman of the Board and Chief Financial Officer of Worldtex
                                                  (August 1992 to present); Chief Executive Officer of Worldtex
                                                  (August 1992 to May 1994); President of Rexel (May 1987 to
                                                  November 1992); Director of Rexel (1982 to 1993).

Barry D. Setzer                   54              President and Chief Executive Officer of Worldtex (May 1994 to
                                                  present); President and Chief Operating Officer of Worldtex
                                                  (August 1992 to May 1994); President of Rexel's Covered Yarn
                                                  Division (September 1988 to November 1992); President (to
                                                  September 1988) and Director of Regal; Vice President of Rexel
                                                  (November  1987 to November 1992);  Director  of  Rexel
                                                  (1983 to 1992).

A. Orrin Maldoff                  63              Vice President of Worldtex (August 1992 to present); President
                                                  of Rubyco (October 1990 to present).

Kenneth W. O'Neill                52              Vice President of Worldtex (August 1992 to present); President
                                                  of Regal (August 1988 to present).

Mitchell R. Setzer                47              Treasurer and Secretary of Worldtex (August 1992 to present);
                                                  Vice President - Administration of Regal (January 1990 to
                                                  present); Treasurer of Regal (January 1989 to present).

Donald W. Pruitt                  48              Controller of Worldtex (December 1995 to present).
</TABLE>

          Barry D. Setzer and  Mitchell R.  Setzer are not  related.  Richard J.
Mackey and Barry D. Setzer also serve as directors of the Company.

          The  officers  of the  Company  are  elected  annually by the Board of
Directors.


<PAGE>

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters
-------   ---------------------------------------------------------------------

          The Company's  Common Stock is listed on the New York Stock  Exchange.
The  following  table sets forth the high and low per share sales prices for the
Common Stock on the New York Stock  Exchange for each quarter since December 31,
1994.

<TABLE>
<CAPTION>
                                                     High              Low
                                                     ----              ---
          <S>                                      <C>                 <C>
          1995:
               1st Quarter                         $ 4.38              3.63
               2nd Quarter                           6.13              3.88
               3rd Quarter                           6.63              5.63
               4th Quarter                           6.50              5.25

          1996:
               1st Quarter                           5.75              4.63
               2nd Quarter                           6.38              4.75
               3rd Quarter                           7.63              5.75
               4th Quarter                           8.88              7.50

          1997:
               1st Quarter
               (through March 7)                    10.13              8.88
</TABLE>

          At March 7, 1997 there were  approximately  1,100 holders of record of
Common Stock.

          The  Company  has not paid any  dividends  since its Common  Stock was
distributed in the Distribution. Future payment of cash dividends by the Company
will be  dependent  on such  factors as business  conditions,  earnings  and the
financial condition of the Company.  The Revolving Credit Loan Agreement and the
Note Agreement to which the Company is a party restrict the payment of dividends
by the  Company.  Under the most  restrictive  of these  debt  agreements,  $8.9
million was available for the payment of dividends and other distributions as of
December  31,  1996.  See  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations - Liquidity; Capital Resources."

Item 6.   Selected Financial Data
-------   -----------------------

          Worldtex, Inc. and Subsidiaries
          -------------------------------

          The following table sets forth certain  financial data of Worldtex for
the five fiscal  years ended  December  31,  1996,  which has been  derived from
Worldtex's audited financial statements for such years. This data should be read
in conjunction  with the Consolidated  Financial  Statements of Worldtex and the
Notes  thereto  appearing  elsewhere  herein.  Results for 1996 and 1995 are not
directly  comparable due to the  acquisition of Fibrexa as of April 1, 1995. See

<PAGE>

Management's  Discussion and Analysis, Item 7, for discussion of the acquisition
of Fibrexa,  S.A.  Historical  financial  information  may not be  indicative of
Worldtex's future  performance.  Earnings per share for the years ended December
31,  1996,  1995,  1994,  1993 and 1992 are  calculated  based upon the weighted
average number of common shares  outstanding and common equivalent shares during
such year (or,  in the case of 1992,  for the period from  November  12, 1992 to
December 31, 1992).

<TABLE>
<CAPTION>

                                                   Years Ended December 31,
                                 -----------------------------------------------------
                                     1996       1995       1994       1993       1992
                                     ----       ----       ----       ----       ----
                                     (Dollars in thousands, except per share amounts)
<S>                               <C>         <C>        <C>        <C>        <C>
Net Sales                         $207,829    187,981    164,654    152,709    174,936

Income before income taxes          17,361     10,231      8,868     11,490     11,613

Provision for income taxes           6,415      4,979      3,058      4,206      4,314

Net income                          10,946      5,252      5,810      7,284      7,299

Net income per share                   .75        .36        .40        .50        .50

Total assets                       206,032    196,065    166,405    145,996    154,339

Long-term debt                    $ 67,754     68,947     61,085     55,486     62,343

Cash dividends per common share         -          -          -          -          -
</TABLE>


Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations
          -------------------------------------------------

          The following table sets forth the percentage of Worldtex's  sales and
operating  profit (loss)  accounted for by each of Worldtex's  geographic  areas
during the periods  indicated.  For purposes of  determining  operating  profit,
parent company  expenses have been allocated to each area in accordance with its
percentage of total sales.  See Note 12 of the Notes to  Consolidated  Financial
Statements of Worldtex for additional  financial  information (sales,  operating
profits and identifiable assets) by geographic location.

<PAGE>
<TABLE>
<CAPTION>

                                             Years Ended December 31,
                         -----------------------------------------------------------------
                                1996                   1995                    1994
                         -------------------   ---------------------    ------------------
                                   Operating            Operating                Operating
                         Sales       Profit    Sales   Profit (Loss)    Sales      Profit
                         -----     ---------   -----   -------------    -----    ---------
<S>                       <C>         <C>       <C>        <C>           <C>         <C>
North America             41%         11%       42%        (1%)          54%         10%
Europe                    53%         85%       54%        94%           46%         90%
South America              6%          4%        4%         7%            -           -
</TABLE>


Results of Operations
---------------------

          The following table sets forth the  relationship of percentages  which
certain income and expense items have to net sales:

<TABLE>
<CAPTION>

                                                 Years Ended December 31,
                                                -------------------------
                                                  1996     1995     1994
                                                 -----    -----    -----
          <S>                                    <C>      <C>      <C>

          Net Sales                               100%     100%     100%
                                                 =====    =====    =====

          Gross margin                           18.8%    16.7%    15.8%

          Operating costs and expenses:
          Selling & administrative                8.0      8.3      8.2
                                                 -----    -----    -----

          Operating profit                       10.8      8.4      7.6

          Interest expense                        2.7      3.0      2.4

          Other income - net                      0.3      0.0      0.2
                                                 -----    -----    -----

          Income before income taxes              8.4%     5.4%     5.4%
                                                 =====    =====    =====

</TABLE>

          1996 vs. 1995.  Worldtex's  sales in 1996 increased $19.8 million,  or
10.6%,  when  compared  with 1995.  Sales in the  Company's  European  operation
increased  $9.2  million,  or 9.2%,  compared  with 1995,  primarily  because of
increased  demand for covered yarn used by the weaving  industry in Europe.  The
lower value of the French Franc compared with the U.S. dollar reduced 1996 sales
by $2.6 million.  In the Company's  North American  operations,  sales increased
$5.6 million,  or 6.9%, from 1995 levels,  primarily because of increased demand
in non-pantyhose end uses for covered elastic yarn. Sales in the Company's South
American  operation were $11.8 million  (excluding $6.1 million of inter-company
sales)  compared  with  $6.7  million  in 1995  primarily  due to a full year of
operation in 1996 compared  with the partial year of 1995.  The reduced value of
the Colombian Peso lowered 1996 sales by $1.8 million.

          Worldtex's  gross  margin  increased  in 1996 to  18.8%  of  sales  as
compared to 16.7% for 1995.  This  increase  was  primarily  caused by increased

<PAGE>

sales resulting from the Company's  continuing efforts to develop additional end
uses for its products,  lower  manufacturing  costs of the  Company's  Colombian
operations   and  reduced  costs   associated   with  the  1995   restructuring.
Additionally, the Company's fixed expenses were spread over substantially higher
sales.

          Selling and administrative expense increased in 1996 by $.9 million to
$16.6 million.  The increase was caused  principally  by the increased  business
levels in 1996 and the full year operation of the Colombian  subsidiary acquired
in April 1995.

          The increase in interest  expense of $.1 million was caused  primarily
by weighted average outstanding debt increasing  approximately 8% but was mostly
offset by lower average interest rates.

          1995 vs. 1994.  Worldtex's  sales in 1995 increased $23.3 million,  or
14.2%,  when  compared  with 1994.  Sales in the  Company's  European  operation
increased  $24.2 million,  or 31.6%,  compared with 1994,  primarily  because of
increased demand for covered yarn used by the weaving and knitting industries in
Europe . The  increased  value of the  French  Franc over the U.S.  dollar  also
contributed to this  improvement.  In the Company's  North American  operations,
sales declined $7.5 million,  or 8.5%,  from 1994 levels,  primarily  because of
slower  retail  sales for  pantyhose  that contain  covered  yarn and  continued
competitive  pressures caused by excess industry  capacity.  Fibrexa,  S.A., the
company acquired by the Company as of April 1, 1995,  contributed  sales of $6.6
million.

          The Company recorded  nonrecurring  charges in 1995 of $2.6 million. A
restructuring  charge of $1.7 million  ($1.3  million of which was  reflected as
cost of goods sold and $.4 million as selling and administrative  expenses), was
recorded in the fourth quarter to take account of the closing of two facilities.
In the third quarter a reserve was  increased to  accommodate  higher  corporate
taxes in France which resulted in $.9 million in deferred tax expense.

          Worldtex's  gross  margin  increased  in 1995 to  16.7%  of  sales  as
compared  to  15.8%  for  1994.  Gross  margin  increased  to 17.4%  before  the
restructuring  charge recorded in the fourth quarter which included $1.3 million
recorded as cost of goods sold.  This increase in gross margin was primarily due
to improved  margins of the  Company's  French  operation,  attributable  to the
strong demand in Europe for the specialty yarns produced by the Company's French
subsidiary.   In  addition,  the  Company's  fixed  expenses  were  spread  over
substantially higher sales.

          Selling and  administrative  expense increased in 1995 by $2.2 million
to $15.7 million.  The increase was caused principally by the increased business
levels of European  operations,  the acquisition of the Colombian  subsidiary in
April 1995 and the $.4 million fourth quarter restructure charge.

          The increase in interest  expense of $1.7 million was caused primarily
by higher  effective  interest  rates in 1995 and by  additional  borrowings  to
acquire the Colombian subsidiary.

<PAGE>

Income Taxes
------------

          Income tax provisions for Worldtex have been  calculated in accordance
with Statement of Financial Accounting Standards No. 109 ("SFAS 109").  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to temporary differences between the carrying amounts of assets and
liabilities for tax purposes and financial statement purposes and operating loss
and tax credit  carryforwards.  Deferred tax assets and liabilities are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment  date. The French
parliament enacted a provision that increased the tax rate from 33.33% to 36.67%
in July 1995.  The rate increase  resulted in a $.889 million charge to the 1995
tax  provision to increase the deferred tax  liability as of January 1, 1995, to
the higher enacted income tax rate.

Other Operating Information
---------------------------

          Worldtex  provides  service  to over  1,500  customers,  and no single
customer accounted for more than 10% of consolidated net 1996 sales.  Nearly all
of Worldtex's  sales are  attributable  to the sale of covered elastic yarn. Any
significant  decline in demand for  covered  elastic  yarn would have a material
adverse  effect on the  operations of Worldtex.  The Company  regularly  reviews
expansion  opportunities,  but has no plans to enter any markets  other than the
manufacture of covered elastic yarns at the present time.

          The Company  believes that recent trends in consumer  preferences have
put  downward  pressure  on the sheer  pantyhose  market,  and that  alternative
apparel,  such as trouser  socks,  knee highs and  anklets,  have gained  favor.
Although the effect of these trends on the Company in 1996 cannot be quantified,
the Company believes that it has not been material.  However, the Company cannot
predict the extent to which these trends may continue or their future  effect on
the Company.

          The  Company  has  sought to  broaden  the range of  applications  for
covered yarn beyond pantyhose to a wide variety of apparel.  In 1996, 21% of the
Company's  European sales were for pantyhose,  compared with 30% in 1995 and 28%
in 1994.  In the  Company's  North  American  operations,  52% of sales were for
pantyhose in 1996, down from 63% in 1995 and 68% in 1994.

          Approximately 69% of Worldtex's net sales in 1996 were attributable to
sales outside of the United States.  Currency exchange fluctuations in countries
in which  Worldtex  is doing  business  could  adversely  affect  its  operating
results.

          The Company engages in transactions primarily in the currencies of the
countries of its four major operating  subsidiaries -- the U.S., France,  Canada
and Colombia -- with little  inter-company  exchange.  In 1996,  over 83% of the
Company's  sales were in such  currencies.  The majority of the remaining  sales
were sales into the European Community by the Company's French subsidiary. Hedge
transactions  are  immaterial  and  are  detailed  in  Note  3 of the  Notes  to

<PAGE>

Consolidated Financial Statements. Foreign currency transaction gains and losses
have not been material to the Company.

          Spandex  and  nylon  are  the  principal  raw  materials  used  in the
manufacture  of  covered  elastic  yarn  by  Worldtex.   Worldtex   purchases  a
significant  amount of its nylon and spandex from a single  source,  DuPont.  In
recent years,  DuPont and its competitors have expanded their spandex production
capacity,  and Worldtex has been able to obtain sufficient  supplies to meet its
customers'  requirements.  If the  supply  of  spandex  from  DuPont  should  be
interrupted or cease for any reason,  Worldtex believes it might be difficult to
find adequate alternative suppliers of spandex.

Liquidity; Capital Resources
----------------------------

          The principal  indicators  of the  Company's  liquidity are cash flows
from operating  activities and cash flows from financing  activities,  primarily
borrowings under the Company's credit facilities.

          Worldtex generated $15 million from its operating  activities in 1996,
compared to $12 million in 1995 and $9.6  million in 1994.  The  increase in net
cash provided in 1996 was caused primarily by the increase in net income.

          During 1996, capital expenditures  amounted to $13.8 million.  Capital
expenditures  were $8.4  million in 1995 and $8.1  million  in 1994.  During the
second  quarter of 1995,  a wholly  owned  subsidiary  of the  Company  acquired
substantially all of the assets of Fibrexa, S.A., a manufacturer of covered yarn
based in Bogota,  Colombia.  The  consideration  for the purchase of Fibrexa was
approximately $4.4 million in cash,  assumption of approximately $6.5 million in
debt and contingent payments based on earnings from the Company's South American
operations  over a five year period.  The majority of such capital  expenditures
during  the  years   1994-1996  was  primarily   used  to  purchase   additional
manufacturing  equipment  in order to increase and improve  efficiencies  to the
Company's  production  capacity.  The Company  anticipates that its 1997 capital
expenditures  will  approximate  $14.5  million,  primarily  for the purchase of
equipment.

          The Company is party to a Revolving Credit Loan Agreement, dated as of
November 12,  1992,  as amended (the  "Credit  Agreement"),  which  provides for
borrowings  by  Worldtex  through  May 31,  1999 of up to $35  million,  bearing
interest  at rates  based on LIBOR,  the prime rate and  certificate  of deposit
rates.  The Company is also party to Note  Agreements,  dated July 11, 1994 (the
"Note  Agreement"),  under which the Company  issued $50 million of senior notes
due in 2004.  The proceeds of this issue were used to extinguish  $50 million of
debt under the Credit  Agreement.  These senior notes bear  interest at 7.5% per
annum and are to be repaid in annual  installments of $7.1 million  beginning on
July 1, 1998.  The  Credit  Agreement  and the Note  Agreement  include  various
covenants,  including restrictions on liens and sales of assets and requirements
that certain  financial ratios be satisfied.  In addition,  the Credit Agreement
provides  that  Worldtex  may not pay  dividends on or purchase its stock if the
aggregate  amount of all such  payments  (after  giving  effect to any  proposed
payment)  since  December 31, 1992,  would exceed 35% of the  aggregate net cash
proceeds received by Worldtex during such period from the sale of its stock plus
35% of Consolidated Net Income (as defined) for such period.  The Note Agreement

<PAGE>

also  prohibits  such payments if the  aggregate  amount  thereof  (after giving
effect to any proposed  payment)  since June 30, 1994 would exceed the sum of $5
million,  plus 75% of Consolidated  Net Income (as defined) for such period plus
the  aggregate  net proceeds  received by the Company from the sale of its stock
during such period.

          The payment and level of cash dividends by Worldtex are subject to the
discretion of the Board of Directors of Worldtex.  Dividend  decisions are based
upon a number  of  factors,  including  the  business  condition,  earnings  and
financial  condition of Worldtex,  as well as compliance  with the  restrictions
contained in the Credit Agreement and the Note Agreement.

          The Company has entered into an interest  rate swap  agreement  with a
commercial bank that  effectively  converts the interest rate on one-half of its
$50 million  7.50% senior  notes to a floating  rate for three years ending July
1999.  The  agreement  effectively  changed the interest  rate to  approximately
6.24%,  7.87%,  7.08%, 6.59% and 6.77% for the six month intervals ended January
21, 1995 through January 21, 1997. The effective rate decreased to 6.52% for the
six months  ending July 21,  1997 at which time the rate for the swap  agreement
will reset for an additional  six months based on market rates in effect at that
time. Net amounts due under this agreement  decreased  interest expense for 1996
by $.201  million,  for  1995 by $.02  million  and for  1994 by $.137  million.
Management believes the risk of incurring losses resulting from the inability of
the bank to fulfill its  obligation  under the swap  agreement  to be remote and
that any losses would be immaterial.

          At December 31, 1996,  the Company has  indebtedness  of $12.4 million
and  $22.6  million  was  available  for  future  borrowings  under  the  Credit
Agreement.  In  addition,  at such date  Filix had $17.3  million,  Rubyco  $1.1
million and Fibrexa $2.8 million of U.S. dollar equivalent  credit  availability
under bank lines of credit.  Amounts  outstanding  as of December  31, 1996 were
$1.3  million for Fibrexa,  $.018  million for Rubyco and none  outstanding  for
Filix. The most restrictive  covenant of the Credit Agreement and Note Agreement
limit  short-term  borrowings  by the Company's  subsidiaries  to a total of $14
million.  Worldtex believes that these lines of credit, together with internally
generated funds and access to other financing  sources,  will provide sufficient
liquidity for the Company's expected short-term and long-term cash requirements.

Three-Year Comparisons
----------------------

          Total  long-term  debt was  $67.8  million,  $68.9  million  and $61.1
million, respectively, at December 31, 1996, 1995 and 1994.

          Working  capital was $47.5  million,  $47.3  million and $43  million,
respectively, at December 31, 1996, 1995 and 1994.

          Net  worth  was  $85.2   million,   $78.9  million  and  $69  million,
respectively,  at  December  31,  1996,  1995 and  1994.  (See the  Consolidated
Statements of Stockholders' Equity of Worldtex for additional information.)

          The number of days that sales were represented by accounts  receivable
was 69, 68 and 61,  respectively,  at  December  31,  1996,  1995 and 1994.  Net

<PAGE>

accounts  receivable  increased by approximately $1.2 million,  or 3.2%, in 1996
compared with 1995, and sales increased 10.6%.  Inventories,  as a percentage of
cost of sales,  were 22.1% at December 31, 1996,  21.5% at December 31, 1995 and
21.3% at December 31, 1994.

          Worldtex's  results of operations  and  financial  condition are based
upon historical cost. While it is difficult to accurately  measure the impact of
inflation due to the imprecise nature of estimates  required,  Worldtex believes
the effects on the  results of  operations  and  financial  condition  have been
minor.  Worldtex will continue to monitor the impact of inflation in setting its
pricing and other policies.

Item 8.   Financial Statements and Supplementary Data
-------   -------------------------------------------

          The   following   financial   statements,    supplementary   financial
information and schedules are filed as part of this Report:

WORLDTEX, INC.

Independent Auditors' Report
Financial Statements:

                  Consolidated Statements of Income,
                           Years Ended December 31, 1996, 1995 and 1994

                  Consolidated Balance Sheets,
                           December 31, 1996 and 1995

                  Consolidated Statements of Stockholders' Equity,
                           Years Ended December 31, 1996, 1995 and 1994

                  Consolidated Statements of Cash Flows,
                           Years Ended December 31, 1996, 1995 and 1994

                  Notes to Consolidated Financial Statements

Supplementary Financial Information

Financial Statement Schedule:

                  Schedule II -         Valuation and  Qualifying  Accounts
                                        Years Ended December 31, 1996, 1995
                                        and 1994

          All schedules not mentioned above are omitted for the reason that they
are not required or are not  applicable,  or the  information is included in the
Consolidated Financial Statements or the Notes thereto.




<PAGE>



                          Independent Auditors' Report
--------------------------------------------------------------------------------

The Board of Directors
Worldtex, Inc.:

We have audited the accompanying  consolidated balance sheets of Worldtex,  Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related  consolidated
statements of income,  stockholders' equity and cash flows for each of the years
in the three-year  period ended December 31, 1996. In connection with our audits
of the  consolidated  financial  statements,  we also have audited the financial
statement  schedule  as listed in Item 8 of this Form 10-K.  These  consolidated
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated  financial statements and financial statement schedule based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Worldtex,  Inc. and
subsidiaries  as of  December  31,  1996  and  1995,  and the  results  of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.  Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly,  in all material  respects,  the information set forth
therein.



                                                           KPMG Peat Marwick LLP



Greensboro, North Carolina
March 4, 1997


<PAGE>


                                 WORLDTEX, INC.
                        Consolidated Statements of Income
================================================================================
              For the years ended December 31, 1996, 1995 and 1994
                 (Dollars in thousands except per share amounts)

<TABLE>
<CAPTION>

                                                 1996        1995        1994
                                              ---------     -------     -------
<S>                                           <C>           <C>         <C>
Net sales (Notes 12 and 16)                   $ 207,829     187,981     164,654

Cost of goods sold                              168,754     156,519     138,666
                                              ---------     -------     -------

     Gross profit                                39,075      31,462      25,988

Selling and administrative expense               16,582      15,708      13,502
                                              ---------     -------     -------

     Operating profit                            22,493      15,754      12,486

Interest expense                                 (5,693)     (5,560)     (3,885)

Other income - net                                  561          37         267
                                              ---------     -------     -------

     Income before income taxes                  17,361      10,231       8,868

Provision for income taxes (Note 11)              6,415       4,979       3,058
                                              ---------     -------     -------

     Net income                               $  10,946       5,252       5,810
                                              =========     =======     =======

Net income per share                          $    0.75        0.36        0.40
                                              =========     =======     =======

Weighted average shares outstanding
   (Notes 3 and 7)                               14,669      14,567      14,639
                                              =========     =======     =======
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>


                                 WORLDTEX, INC.
                           Consolidated Balance Sheets
================================================================================
                           December 31, 1996 and 1995
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                     ASSETS
                                                                            1996       1995
                                                                         ---------   --------
<S>  <C>                                                                 <C>         <C>
Current Assets:
     Cash                                                                $   2,117     1,845
     Accounts and notes receivable, less allowance
       for doubtful accounts of $2,589 in 1996 and
       $2,623 in 1995 (Note 4)                                              39,868    38,619
     Inventories (Note 3)                                                   37,265    33,660
     Prepaid expenses and other current assets (Note 11)                     2,975     3,432
                                                                         ---------  --------
          Total current assets                                              82,225    77,556

Property, plant and equipment - net (Note 3)                                90,282    83,991
Other assets (Notes 3 and 15)                                                5,147     4,724
Cost in excess of net assets of acquired businesses, net
  of accumulated amortization of $7,115 in 1996 and
  $6,126 in 1995                                                            28,378    29,794
                                                                         ---------  --------
                                                                         $ 206,032   196,065
                                                                         =========  ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Short-term borrowings (Note 5)                                      $   1,342       939
     Current installments of long-term debt (Note 6)                         1,634     1,240
     Accounts and notes payable-trade and other liabilities
       (Notes 8 and 10)                                                     30,254    24,990
     Income taxes payable (Note 11)                                          1,525     3,045
                                                                         ---------  --------
          Total current liabilities                                         34,755    30,214

Long-term debt (Note 6)                                                     67,754    68,947
Other long-term liabilities                                                  1,316     1,014
Deferred income taxes (Note 11)                                             17,029    16,951
                                                                         ---------  --------
     Total liabilities                                                     120,854   117,126
                                                                         ---------  --------
Stockholders' equity (Notes 6, 7 and 8):
     Preferred stock                                                             0         0
     Common stock                                                              147       147
     Paid-in capital                                                        29,946    29,913
     Retained earnings                                                      56,919    45,973
     Cumulative foreign translation adjustment                                (336)    3,817
     Less - Treasury stock, at cost                                         (1,498)     (911)
                                                                         ---------  --------
          Total stockholders' equity                                        85,178    78,939
                                                                         ---------  --------
Commitments and contingencies (Note 9)                                   $ 206,032   196,065
                                                                         =========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>


                                 WORLDTEX, INC.
                 Consolidated Statements of Stockholders' Equity
================================================================================
              For the years ended December 31, 1996, 1995 and 1994
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                         Cumulative
                                                                                         Foreign
                                                    Common     Paid-in      Retained     Translation    Treasury
                                                    Stock      Capital      Earnings     Adjustment       Stock          Total
                                                    -----      -------      --------     -----------    --------        -------
<S>                                                 <C>        <C>          <C>          <C>            <C>
Balance at
Dec. 31, 1993                                        $147       29,913        34,911          (5,929)          0         59,042

Net income                                              0            0         5,810               0           0          5,810

Foreign currency translation adjustment                 0            0             0           5,092           0          5,092

Purchases of treasury stock                             0            0             0               0        (911)          (911)
                                                    -----      -------      --------     -----------    --------        -------
Balance at
Dec. 31, 1994                                         147       29,913        40,721            (837)       (911)        69,033

Net income                                              0            0         5,252               0           0          5,252

Foreign currency translation adjustment                 0            0             0           4,654           0          4,654
                                                    -----      -------      --------     -----------    --------        -------
Balance at
Dec. 31, 1995                                         147       29,913        45,973           3,817        (911)        78,939

Net income                                              0            0        10,946               0           0         10,946

Foreign currency translation adjustment                 0            0             0          (4,153)          0         (4,153)
Purchases of treasury stock                             0            0             0               0        (587)          (587)
Stock issued                                            0           33             0               0           0             33
                                                    -----      -------      --------     -----------    --------        -------
Balance at
Dec. 31, 1996
(Notes 6, 7 and 8)                                   $147       29,946        56,919            (336)     (1,498)        85,178
                                                    =====      =======      ========     ===========    ========        =======
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>

                                 WORLDTEX, INC.
                      Consolidated Statements of Cash Flows
================================================================================
              For the years ended December 31, 1996, 1995 and 1994
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                          1996         1995         1994
                                                       ---------    ---------    ---------

<S>                                                    <C>              <C>          <C>
Cash flows from operating activities:
Net income                                             $  10,946        5,252        5,810
Adjustments  to  reconcile net
  income  to net cash provided
  by  operating activities:
     Depreciation and amortization                         6,284        6,133        4,889
     Provision for losses on accounts receivable             139        1,332          658
     Deferred income taxes                                   825         (161)         502
      Change in assets and liabilities net of effects
       of acquisition of Fibrexa:
       Accounts and notes receivable                      (2,788)      (2,751)      (7,356)
       Inventories                                        (4,557)      (1,276)      (2,626)
       Prepaid expenses and other current assets             163         (527)         517
       Accounts and notes payable -
         trade and other current liabilities               5,344        3,950        6,994
       Income taxes payable                               (1,324)          94          204
                                                       ---------    ---------    ---------
         Net cash provided by operating activities        15,032       12,046        9,592
                                                       ---------    ---------    ---------
Cash flows from investing activities:
  Capital expenditures                                   (13,785)      (8,356)      (8,077)
  Acquisition of Fibrexa, S.A., net of cash acquired           0       (4,067)           0
  Other investing activities                              (1,149)      (3,011)        (876)
                                                       ---------    ---------    ---------
         Net cash used in investing activities           (14,934)     (15,434)      (8,953)
                                                       ---------    ---------    ---------
Cash flows from financing activities:
  Borrowings under line of credit arrangements            16,724        7,813        7,583
  Payments under line of credit arrangements             (16,321)      (6,874)      (7,699)
  Borrowings under revolving credit facility             104,660       46,038       34,830
  Payments under revolving credit facility              (104,940)     (40,578)     (86,140)
  Borrowings under long-term loans                             0            0       50,000
  Stock (reacquired) or issued, net                         (554)           0         (911)
  Other financing activities                                 830       (4,217)       2,465
                                                       ---------    ---------    ---------
      Net cash provided by financing activities              399        2,182          128
                                                       ---------    ---------    ---------
  Effects of exchange rate changes on cash                  (225)        (100)         175
                                                       ---------    ---------    ---------
      Net increase (decrease) in cash                        272       (1,306)         942
Cash at beginning of year                                  1,845        3,151        2,209
                                                       ---------    ---------    ---------
Cash at end of year                                    $   2,117        1,845        3,151
                                                       =========    =========    =========
Supplemental disclosure of cash flow information:
     Cash paid during the period for:
       Interest                                        $   5,784        5,265        2,278
                                                       =========    =========    =========
       Income taxes                                    $   7,630        3,722        1,464
                                                       =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


Note 1 - Organization and Business

          Worldtex,  Inc. ("Worldtex" or the "Company"),  a Delaware corporation
organized in July 1992, is a holding company engaged through its subsidiaries in
the  manufacture of covered elastic yarn,  which is used to manufacture  hosiery
products and other  apparel  items.  Worldtex's  principal  markets are in North
America, South America and Europe. Worldtex's operations are concentrated in one
segment: the manufacture of covered elastic yarns.

          Worldtex's  principal  subsidiaries are Regal  Manufacturing  Company,
Inc.  ("Regal"),   based  in  Hickory,  North  Carolina,   Rubyco  (1987),  Inc.
("Rubyco"),  based in Montreal,  Canada, Filix Lastex, S.A. ("Filix"),  based in
Troyes,  France,  and Fibrexa,  Ltda.  ("Fibrexa"),  based in Bogota,  Colombia.
Reference to Worldtex  shall include its  subsidiaries  unless the context shall
indicate otherwise.

Note 2 - Basis of Presentation

          The consolidated  financial  statements of Worldtex as of December 31,
1996 and 1995 and for the years ended  December 31, 1996,  1995 and 1994 include
the accounts of Regal,  Rubyco,  Filix and, since April 1, 1995, the accounts of
Fibrexa. All significant  intercompany balances and transactions for all periods
are eliminated in the consolidated financial statements.

Note 3 - Summary of Significant Accounting Policies

          (a) Cash

          At December 31, 1996 and 1995, other assets include restricted cash on
deposit of $2,004 and $2,234, respectively,  as security for loans to Fibrexa in
Colombia, South America.

          (b) Inventories

          Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.

          As of December 31, 1996 and 1995, the major classes of inventory are:

<TABLE>
<CAPTION>
                                        1996        1995
                                      -------     -------

                    <S>               <C>          <C>
                    Raw Materials     $12,614      12,728
                                      -------     -------
                    Work in Process     6,428       5,429
                                                  -------
                    Finished Goods     18,223      15,503
                                      -------     -------
                                      $37,265      33,660
                                      =======     =======
</TABLE>

          (c) Property, Plant and Equipment

          Property,  plant and  equipment  are recorded at cost and  depreciated
primarily using the  straight-line  method over the following  estimated  useful
lives of the related  assets:  machinery  and  equipment  (10 to 20 years,  with

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


approximately 77% being depreciated over 20 years), structures (20 to 40 years),
other equipment (5 to 10 years). Leasehold improvements are amortized over their
respective lease terms or their estimated  useful lives, if shorter.  Repair and
maintenance  costs are charged to expense as incurred.  Renewals and betterments
which  substantially  extend the  useful  life of an asset are  capitalized  and
depreciated.  As of December 31, 1996 and 1995,  property,  plant and  equipment
consists of:

<TABLE>
<CAPTION>

                                                 1996       1995
                                              --------   --------
                    <S>                       <C>           <C>
                    Land                      $  2,471      2,538

                    Buildings and leasehold
                       improvements             31,181     29,729

                    Machinery and equipment     91,008     84,598
                                              --------   --------

                                               124,660    116,865

                    Less accumulated
                       depreciation and
                       amortization             34,378     32,874
                                              --------   --------

                                              $ 90,282     83,991
                                              ========   ========
</TABLE>

          (d) Cost in Excess of Net Assets of Acquired Businesses

          The cost in excess of net assets of acquired  businesses  is amortized
on the straight-line method over the expected periods to be benefited, generally
40 years.  The Company assesses the  recoverability  of this intangible asset by
determining  whether  the  amortization  of the cost in excess of net  assets of
acquired  businesses  over its  remaining  life  can be  recovered  through  the
undiscounted  future  operating  cash  flows  of  the  acquired  business.   The
assessment  of the  recoverability  of goodwill  will be  impacted if  estimated
future cash flows are not achieved.

          (e) Forward Exchange Contracts

          Rubyco  enters into  forward  exchange  contracts  as a hedge  against
accounts payable  denominated in foreign  currency.  These contracts are used by
Rubyco to minimize  exposure and reduce risk from exchange rate  fluctuations in
the  regular  course  of its  foreign  business.  Gains and  losses  on  forward
contracts,  which are not material, are deferred and included in the measurement
of the related foreign currency transactions. The impact of forward contracts on
cash flows is reflected in the change in accounts and notes payable - trade.  As
of December 31, 1996 and 1995,  $500 and $100,  respectively,  in contracts were
outstanding.

          (f) Income Taxes

          Deferred tax assets and  liabilities are recognized for the future tax
consequences  attributable to temporary differences between the carrying amounts
of assets and liabilities for tax purposes and financial  statement purposes and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured  using enacted tax rates expected to apply to taxable income in the

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

          No  provision  is made  for  income  taxes  which  may be  payable  if
undistributed  earnings of foreign  subsidiaries were to be paid as dividends to
Worldtex, since Worldtex intends that such earnings will continue to be invested
in those  countries.  At December 31,  1996,  the  cumulative  amount of foreign
undistributed  earnings amounted to approximately  $40,633.  Foreign tax credits
may be available as a reduction  of United  States  income taxes in the event of
such distributions.

          (g) Foreign Exchange

          Assets and  liabilities  denominated in foreign  currencies  have been
translated into U. S. dollars at the period-end exchange rate. Translation gains
and losses are accounted for in a separate  component of  stockholders'  equity.
The exchange gains and losses arising on  transactions  are charged to income as
incurred.  Revenues and expenses  denominated  in foreign  currencies  have been
translated into U.S. dollars at the weighted average exchange rate.

          (h) Earnings per Share

          Earnings  per share are  calculated  based upon the  weighted  average
number of common  shares  outstanding  and common  equivalent  shares during the
year.

          (i) Revenue Recognition

          Revenue  from  sales is  recognized  when  goods  are  shipped  to the
customer.

          (j) Interest Rate Swap

          The interest rate swap  agreement is accounted for like a hedge of the
underlying  debt  obligation and interest  expense is recorded using the revised
interest rate, with fees and other payments amortized as yield adjustments.

          (k) Stock Options

          Prior to January 1, 1996,  the Company  accounted for its stock option
plan in accordance  with the provisions of Accounting  Principles  Board ("APB")
Opinion  No.  25,  Accounting  for  Stock  Issued  to  Employees,   and  related
interpretations.  As such, compensation expense would be recorded on the date of
grant only if the current  market  price of the  underlying  stock  exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123, Accounting
for  Stock-Based  Compensation,  which allows  entities to continue to apply the
provisions  of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based  method defined in SFAS No. 123 had been
applied.  The Company has  elected to  continue to apply the  provisions  of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

          (l) Estimates

          The  preparation of financial  statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  effect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported  amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

          (m) Reclassifications

          Certain  prior year amounts have been  reclassified  to conform to the
current year presentation.  The reclassifications did not impact net earnings as
previously reported.

Note 4 - Notes Receivables

          Filix has the U.S.  dollar  equivalent  of  approximately  $4,500  and
$5,252 of  non-interest  bearing  notes  receivable  as of December 31, 1996 and
1995, respectively, with maturities within four months of the periods ended.

Note 5 - Short-Term Borrowings

          Short-term  debt consists of notes payable to banks and advances under
bank lines of credit and overdraft facilities.

          Fibrexa has  available  the U.S.  dollar  equivalent  of $2,800  under
various bank lines of credit  providing for unsecured  borrowings  and letter of
credit financing generally due in 90 days. At December 31, 1996 and 1995, $1,324
and $939,  respectively,  were  outstanding  under these  agreements  at average
interest rates of 7.57% and 7.44% respectively.

          Filix has  available  the U.S.  dollar  equivalent  of  $17,341  under
various bank lines of credit and overdraft facilities bearing interest at 4.21%.
At  December  31,  1996 and  1995,  no  amounts  were  outstanding  under  these
facilities.

          Rubyco has available the U.S. dollar equivalent of $1,095 under a bank
line of credit, due on demand,  providing for unsecured borrowings and letter of
credit financing at the bank's prime rate (4.75% at December 31, 1996). The line
of credit is guaranteed by the Company.  At December 31, 1996 and 1995,  $18 and
$0, amounts respectively, were outstanding under this agreement.

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


Note 6 - Long-term Debt

          As of December 31, 1996 and 1995, long-term debt consists of:

<TABLE>
<CAPTION>
                                              1996             1995
                                             -------          ------
<S>                                          <C>              <C>
7.50% Senior Notes due July 1,
   1998 through July 1, 2004                 $50,000          50,000
Revolving credit facilities with
   interest at variable rates
   (6.56% and 6.86% weighted
   average rate as of December
   31, 1996 and 1995) due
   May 31, 1999                               12,390          12,670

Other indebtedness, primarily
   fixed rate debt, due at
   various dates through 2007                  6,998           7,517
                                             -------          ------
                                              69,388          70,187
Less current installments                      1,634           1,240
                                             -------          ------
                                             $67,754          68,947
                                             -------          ------
</TABLE>

The aggregate annual  maturities of long-term debt during each of the five years
subsequent to December 31, 1996 are as follows:

<TABLE>
<CAPTION>

                   Year ending
                   December 31                Amount
                   -----------               --------
                    <S>                      <C>
                      1997                   $  1,634
                      1998                      7,849
                      1999                     20,068
                      2000                      9,089
                      2001                      7,889
                    Thereafter                 22,859
                                             --------
                                              $69,388
                                             ========
</TABLE>

          During 1994,  the Company  entered into Senior Note  Agreements  which
provide a total  $50,000  ten year loan due July 1,  2004 with  interest  at the
annual rate of 7.5%. Annual principal  payments of $7,100 are due beginning July
1, 1998. The agreements  contain various covenants  requiring the maintenance of
certain ratios and amounts pertaining to stockholders'  equity,  working capital
and net income. In addition, the agreements restrict future borrowings,  capital
spending and the payment of  dividends.  At December  31, 1996,  Worldtex was in
compliance with the various covenants.

          The Company has an interest rate swap agreement with a commercial bank
that effectively  converts a portion of its $50,000 Senior Notes from fixed rate
debt to a floating  rate based on LIBOR for a period of three years  ending July
1999. At December 31, 1996, the swap agreement had a notional  principal  amount
of $25,000.  The floating  rate is reset every six months during the term of the

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


interest  rate swap  agreement  with  interest  due  January 21 and July 21. The
agreement  effectively  changed  the  interest  rate  on  $25,000  from  7.5% to
approximately  6.24%,  7.87%, 7.08%, 6.59% and 6.77% for the six month intervals
ended  January 21,  1995  through  January 21, 1997 at which time the  effective
interest  rate for this portion of the debt was  decreased to 6.52% for the next
six months.  The  estimated  amount at which the Company  could  terminate  this
agreement was  approximately at a gain of $398 at December 31, 1996. Net amounts
due under this agreement  decreased  interest expense for 1996 by $201, for 1995
by $20 and for 1994 by $137.  Management  believes the risk of incurring  losses
resulting  from the  inability of the bank to fulfill its  obligation  under the
swap agreement to be remote and that any losses would be immaterial.

          The Company's revolving credit agreement provides a maximum of $35,000
in revolving  credit,  of which $12,390 was outstanding at December 31, 1996 and
$12,670 was outstanding at December 31, 1995. The agreement carries a commitment
fee of .25% of the unused  revolving  credit.  The revolving  credit  facilities
terminate  May 31, 1999 with an option to extend for two years at the  Company's
discretion.  The revolving credit agreement contains various covenants requiring
the  maintenance  of certain  ratios and  amounts  pertaining  to  stockholders'
equity,  working capital,  debt to capitalization and fixed charge coverage.  In
addition, the agreement restricts capital spending and the payment of dividends.
At December 31, 1996, Worldtex was in compliance with the various covenants.

          Under  the  most  restrictive  of these  debt  agreements,  $8,900  of
retained  earnings was  unrestricted  as to the payment of  dividends  and other
distributions as of December 31,1996.

Note 7 - Stockholders' Equity

          Worldtex is authorized  to issue up to forty million  shares of common
stock, $.01 par value and ten million shares of preferred stock, $.01 par value.
As of December 31, 1996 and 1995,  there were issued and outstanding  14,403,271
and 14,475,571 shares of common stock, respectively,  and no shares of preferred
stock.  Worldtex is authorized  to  repurchase  up to one million  shares of its
common  stock.  In 1996,  78,500 shares were  purchased and as a result  266,300
shares are carried at cost as Treasury Stock.

          Preferred stock is issuable in one or more series with dividend rates,
liquidation  preferences and redemption,  conversion and voting rights as may be
determined by Worldtex's Board of Directors.

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


          In connection with Worldtex's formation, each shareholder received, in
addition to one share of Worldtex  common stock,  one share  purchase  right for
each outstanding  share of the former parent's common stock. Each right entitles
the  registered  holder to purchase from Worldtex a unit ("Unit")  consisting of
one  one-hundredth of a share of preferred stock of Worldtex,  at a price of $30
per Unit. The share purchase rights are not  exercisable or  transferable  apart
from  Worldtex  common  stock  until  the  earlier  to occur of 1) the tenth day
following  a public  announcement  that a  person  or  group  of  affiliated  or
associated  persons has acquired,  or obtained the right to acquire,  beneficial
ownership of 20% or more of the outstanding Worldtex common stock (an "Acquiring
Person"),  or 2) the tenth business day following the  commencement  of a tender
offer or exchange offer if, upon consummation thereof, any person or group would
be an Acquiring  Person.  The share purchase  rights will expire at the close of
business on December 31, 2002, unless earlier redeemed or exchanged by Worldtex.

          Under the terms of the Worldtex 1992 Stock  Incentive Plan, as amended
by the  stockholders in May 1994,  options to purchase up to 1,400,000 shares of
common stock may be awarded to officers and employees. Options granted under the
plan may be for such terms and exercised at such times as determined at the time
of grant by the Compensation  Committee of the Board of Directors.  In addition,
the Plan  provides  that each  outside  director  will be  granted  an option to
purchase 10,000 shares of common stock of the Company.  As of December 31, 1996,
78,000  shares were  reserved for future  awards under the plan.  The 1992 Stock
Incentive Plan also includes  provisions for the granting of stock  appreciation
rights,  restricted  stock,  deferred  stock,  employee  loans  and  tax  offset
payments.  At December  31,  1996,  no such grants had been  issued,  except for
limited stock appreciation rights applicable if there is a change of control (as
defined) of the Company.

          The following  table  summarizes  stock option activity during each of
the last three years:

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


<TABLE>
<CAPTION>

                                                                Weighted
                                                                Average
                                               Number of        Exercise
                                                 shares         Price
                                               ---------        --------
<S>                                            <C>              <C>
Balance at
   December 31, 1993                             578,000        $6.49
   Options Granted                               436,000        $4.19
   Options Exercised                                   0         -
   Options Canceled                               18,000        $5.33
                                               ---------
Balance at
   December 31, 1994                             996,000        $5.50
   Options Granted                                86,000        $6.44
   Options Exercised                                   0         -
   Options Canceled                                5,000        $6.44
                                               ---------
Balance at
   December 31, 1995                           1,077,000        $5.57
   Options Granted                               255,000        $4.82
   Options Exercised                               6,200        $5.43
   Options Canceled                               10,000        $4.19
                                               ---------
Balance at
   December 31, 1996                           1,315,800        $5.44
                                               =========
Options Exercisable:
   December 31, 1994                             281,333        $6.39
   December 31, 1995                             507,200        $6.03
   December 31, 1996                             737,400        $5.91
Weighted average fair value of options granted:
   December 31, 1995                              $ 3.01
   December 31, 1996                              $ 2.27
</TABLE>

          Options outstanding at December 31, 1996:

<TABLE>
<CAPTION>

                                        Weighted
                                        Average             Weighted
   Range of                             Remaining           Average
   Exercise          Number of          Contractual         Exercise
    Prices             Shares           Life                Price
-------------        ---------          -----------         --------
<S>                   <C>               <C>                  <C>
$4.19 - $4.75         657,800           8.0 yrs              $ 4.40
$6.44 - $6.75         658,000           6.3 yrs              $ 6.48
</TABLE>

        Options exercisable at December 31, 1996:

<TABLE>
<CAPTION>

                                        Weighted
                                        Average             Weighted
   Range of                             Remaining           Average
   Exercise          Number of          Contractual         Exercise
    Prices             Shares           Life                Price
-------------        ---------          -----------         --------
<S>                   <C>               <C>                  <C>
$4.19 - $4.75         179,700           8.0 yrs              $ 4.40
$6.44 - $6.75         557,700           6.3 yrs              $ 6.48
</TABLE>

          The Company  applies  Accounting  Principles  Board Opinion No. 25 and
accordingly  recognizes  compensation  expense to the  extent the quoted  market
price of the stock  exceeds the amount the employee is required to pay as of the
date of grant of the  option.  200,000  options  were issued at less than quoted
market value and $30 has been  charged to  compensation  cost in 1996,  1995 and

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


1994 respectively.  These 200,000 options, plus 200,000 options issued at quoted
market value, vest ratably over three years while all other options vest ratably
over five years. The options have a ten year term.

          Had  compensation  cost  for the  Company's  stock  option  plan  been
determined  consistent with Financial  Accounting  Standards  Statement No. 123,
"Accounting  for  Stock-Based  Compensation",  the  Company's net income and net
income per share would be as follows:

<TABLE>
<CAPTION>

                                                1996           1995
                                                ----           ----
<S>                                           <C>              <C>
Net income as reported                        $10,946          5,252
   Pro forma                                  $10,872          5,240
Net income per share as reported                 $.75            .36
   Pro forma                                     $.75            .36
</TABLE>


          The fair value of each option grant is  established on the date of the
grant  using  the   Black-Scholes   option-pricing   model  with  the  following
weighted-average assumptions used for grants in 1996 and 1995: dividend yield of
0%;  expected  volatility of 27% and 29%;  risk-free  interest rates of 5.5% and
expected lives of eight years.

Note 8 - Employee Benefit Plans

          Employees of Regal  participate in a  non-contributory  profit-sharing
plan for all  eligible  employees,  including  officers.  The plan  provides for
minimum  employer  contributions of the lesser of five percent of Regal's income
before  taxes  plus a  discretionary  amount  determined  by the Regal  Board of
Directors or the maximum  amount  deductible  for Federal  income tax  purposes.
Provisions  for the years ended  December 31, 1996,  1995 and 1994 were $60, $27
and $23 respectively.

          Regal employees  participate in the Worldtex  Employee Stock Ownership
Plan ("Worldtex  ESOP").  The Worldtex ESOP provides eligible  employees with an
opportunity to purchase  Worldtex common stock through payroll  deductions,  and
subject  to  certain   limitations   was  matched  by  Worldtex.   The  Worldtex
contribution was suspended indefinitely effective June 1, 1996. Contributions to
the  Worldtex  ESOP are  invested by an  independent  trustee in common stock of
Worldtex.  Stock attributable to Worldtex contributions vests at the rate of 20%
for after two years of service, with 20% vesting added for each year, up to five
years of  service,  at which  point an  employee  is 100%  vested  in the  plan.
Contributions  to the Worldtex  ESOP were $50,  $124 and $150 in 1996,  1995 and
1994  respectively.  Effective  June 1, 1996,  the Worldtex ESOP was amended and
renamed The Worldtex,  Inc. Profit Sharing and Retirement  Savings Plan in order
to merge the Regal  profit-sharing,  the Worldtex ESOP,  and the Worldtex,  Inc.
401(k) plans. All vesting schedules for Company  contributions were conformed to
the one described above for the ESOP plan.

          Employees of Rubyco  participate  in a Registered  Retirement  Savings
plan. The plan provides for employee  contributions of 4% of salary to a maximum

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


of $2.6 per employee with corresponding  contributions by Rubyco of 5% of salary
in 1996 and 1995 (and 4% in 1994), to a maximum of $2.6 per employee. Provisions
for the years  ended  December  31,  1996,  1995 and 1994 were $27,  $27 and $25
respectively.

          Filix is legally obligated to contribute to an employee profit-sharing
plan whereby  annual  contributions  are determined on the basis of a prescribed
formula using  capitalization,  salaries and certain revenues.  Amounts are paid
into  a bank  trust  fund  the  year  following  the  contribution  calculation.
Provisions for the years ended December 31, 1996,  1995 and 1994 were $902, $780
and $580 respectively.

          Under the terms of an industry-wide  labor agreement,  Filix employees
are entitled to a lump-sum payment at normal retirement age of up to four months
salary  depending on their number of years of service.  Such amounts are payable
only if the  employee  remains  with  Filix  until  retirement.  The plan is not
funded. The following table sets forth the plan's unfunded status as of December
31, 1996 and 1995:

<TABLE>
<CAPTION>

                                                              1996        1995
                                                              ----        ----
<S>                                                          <C>          <C>
Actuarial present value of benefit obligations:
Vested benefit obligations                                   $  -           -
                                                             ======       =====
Accumulated benefit obligation                               $ (256)       (327)
                                                             ======       =====
Projected benefit obligation                                 $ (299)       (384)
Plan assets at fair value                                       -           -
                                                             ------       -----
Projected benefit obligation in
excess of plan assets                                          (299)       (384)
Unrecognized net loss                                            99         120
                                                             ------       -----
Accrued pension liability                                    $ (200)       (264)
                                                             ======       =====
</TABLE>

          Net periodic  pension cost of the Filix  agreement for the years ended
December 31, 1996, 1995 and 1994 included the following components:

<TABLE>
<CAPTION>

                                          1996        1995        1994
                                          ----        ----        ----
<S>                                       <C>          <C>         <C>
Service cost                              $11           9           7
Interest cost on
projected                                  25          26          19
benefit obligation
Amortization of
(gain)/loss                                11           0           0
Net periodic pension cost                 $47          35          26
</TABLE>

          The  projected  benefit  obligation  at December 31, 1996 and 1995 was
determined  using an  assumed  discount  rate of 7.5% and 7%  respectively.  The
assumed long-term rate of increase in compensation was 3% for 1996 and 1995.

          Worldtex has an unfunded  supplemental  death and retirement  plan for
certain key employees.  The accrued  pension  liability at December 31, 1996 and
1995 was $1,287 and $765  respectively.  Net periodic pension cost was $522, $72
and $68 in 1996, 1995 and 1994 respectively.

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


Note 9 - Commitments and Contingencies

          Future minimum lease payments under  noncancelable  operating  leases,
primarily for real property, as of December 31, 1996 are:

<TABLE>
<CAPTION>
                    <S>            <C>
                    1997           $ 1,130
                    1998             1,138
                    1999             1,154
                    2000             1,246
                    2001                59
                                   -------
                    Total          $ 4,727
                                   =======
</TABLE>

          Rental  expense for  cancelable  and  noncancelable  operating  leases
charged to operations for the years ended  December 31, 1996,  1995 and 1994 was
approximately $974, $647 and $427 respectively.

          In the normal course of business,  Worldtex and its  subsidiaries  may
sometimes be named as a defendant in  litigation.  In the opinion of management,
based upon the advice of counsel,  any uninsured liability which may result from
the  resolution  of any present  litigation  or  asserted  claim will not have a
material effect on Worldtex's operations, financial position or liquidity.

Note 10 - Accounts and Notes Payable - Trade and Other Liabilities

          Accounts and notes  payable - trade and other  liabilities  consist of
the following as of December 31, 1996 and 1995:

<TABLE>
<CAPTION>

                                                           1996        1995
                                                           ----        ----
<S>                                                      <C>          <C>
Accounts and other payables - trade                      $21,229      16,206
Salaries, wages and other compensation                     3,502       2,982
Pensions, profit sharing and employee benefits             1,530       1,445
Taxes, other than income taxes                               831         457
Interest                                                   2,109       2,110
Other                                                      1,053       1,790
                                                         -------      ------
Total                                                    $30,254      24,990
                                                         =======      ======
</TABLE>

Note 11 - Income Taxes

          The provisions for income taxes for the years ended December 31, 1996,
1995 and 1994 are as follows:

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)



<TABLE>
<CAPTION>

                     U.S.                     U.S. State
                    Federal       Foreign       & Local       Total
                    -------       -------     ----------      -----
<S>                 <C>            <C>            <C>         <C>
1996
Current             $   90         5,711           22         5,823
Deferred              (154)          758          (12)          592
                    ------         -----          ---         -----
Total               $  (64)        6,469           10         6,415
                    ======         =====          ===         =====
1995
Current             $    0         5,037            0         5,037
Deferred              (717)          834         (175)          (58)
                    ------         -----          ---         -----
Total               $ (717)        5,871         (175)        4,979
                    ======         =====          ===         =====
1994
Current             $ (424)        3,093         (103)        2,566
                    ------         -----          ---         -----
Deferred               195           245           52           492
                    ------         -----          ---         -----
Total               $ (229)        3,338          (51)        3,058
                    ======         =====          ===         =====
</TABLE>

          Income before income taxes for the years ended December 31, 1996, 1995
and 1994 is comprised as follows:

<TABLE>
<CAPTION>

                         1996              1995               1994
                      ---------         ---------          ---------
<S>                   <C>                 <C>                <C>
U.S.                  $   (365)           (1,959)             (813)
Foreign                 17,726            12,190             9,681
                      --------            ------             -----
                      $ 17,361            10,231             8,868
                      ========            ======             =====
</TABLE>

          A reconciliation  for the years ended December 31, 1996, 1995 and 1994
between  the  amount  computed  using the U.S.  Federal  income tax rate and the
effective rate of tax on book income is as follows:

<TABLE>
<CAPTION>

                                               1996        1995         1994
                                               ----        ----         ----
<S>                                            <C>         <C>          <C>
Statutory U.S. Federal
  income tax rate                              34.0%       34.0%        34.0%
State and local income
  taxes, net of U.S.
  Federal income tax benefit                    -          (1.1)        (0.5)
Effect of increase in French
  tax rate on deferred taxes                    -           8.7          -
Amortization of goodwill                        1.9         3.0          3.2
Other, net                                      1.1         4.1         (2.2)
                                               ----        ----         ----
Effective rate of tax on
  book income                                  37.0%       48.7%        34.5%
                                               ====        ====         ====
</TABLE>

          In July 1995, the French parliament enacted a provision that increased
the tax rate from 33.33% to 36.67%.  The rate increase resulted in a $889 charge
to the 1995 income tax  provision to increase  the deferred tax  liability as of
January 1, 1995, to the higher enacted income tax rate.

          The tax effects of temporary differences that give rise to significant
portions of the  deferred  tax assets and  liabilities  at December 31, 1996 and
1995 are as follows:

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)


<TABLE>
<CAPTION>

                                                1996               1995
                                              --------           -------
<S>                                           <C>                <C>
Deferred tax assets:
     Inventories                              $    196               199
     Employee benefits                             739               551
     Other nondeductible reserves                1,136             1,635
                                              --------           -------
                                                 2,071             2,385
                                              --------           -------
Deferred tax liabilities:
     Property, plant and equipment             (16,813)          (16,792)
     Imputed interest                             (838)             (868)
                                              --------           -------
                                               (17,651)          (17,660)
                                              --------           -------
Net deferred income taxes                     $(15,580)          (15,275)
                                              ========           =======
</TABLE>


          Deferred taxes are classified in the accompanying Consolidated Balance
Sheet captions as follows:

<TABLE>
<CAPTION>

                                                 1996          1995
                                                 ----          ----
<S>                                            <C>           <C>
Prepaid expenses and current assets            $  1,449        1,676
Deferred income taxes                           (17,029)     (16,951)
                                               --------      -------
                                               $(15,580)     (15,275)
                                               ========      =======
</TABLE>

          There  was no  valuation  allowance  for  deferred  tax  assets  as of
December 31, 1996 and there was no change in this valuation allowance during the
years  ended  December  31,  1996 and 1995.  Based upon the level of  historical
taxable  income  and  the  expected   reversal  of  future   taxable   temporary
differences,  management  believes  it is more  likely than not that the Company
will realize the benefits of these deductible differences at December 31, 1996.

Note 12 - Geographic Information

          Financial  information by geographic area for the years ended December
31, 1996, 1995 and 1994 is summarized as follows:

<TABLE>
<CAPTION>

                               North                        South
                              America         Europe       America       Total
                              -------         ------       -------       -----
<S>                          <C>              <C>           <C>         <C>
1996
Net Sales                    $ 86,280         109,785       11,764      207,829
Operating Profit                2,469          19,049          975       22,493
Identifiable  Assets           79,598         101,452       24,982      206,032
1995
Net Sales                      80,721         100,577        6,683      187,981
Operating Profit  (loss)         (311)         14,878        1,187       15,754
Identifiable Assets            80,514          99,439       16,112      196,065
1994
Net Sales                      88,241          76,413            -      164,654
Operating Profit                1,280          11,206            -       12,486
Identifiable Assets          $ 80,480          85,925            -      166,405
</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)



Note 13 - Fair Value of Financial Instruments

          Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments,  requires all entities to disclose the fair
value of  certain  on- and  off-balance  sheet  financial  instruments  in their
financial statements.

          (a) Cash, Accounts and Notes Receivable and Accounts and Notes Payable

          The  carrying  amount  approximates  fair  value  because of the short
maturity of these instruments.

          (b) Long-Term Debt

          The fair values of each of the Company's  long-term  debt  instruments
are based on the amount of future  cash flows  associated  with each  instrument
discounted  using  the  Company's   current  borrowing  rate  for  similar  debt
instruments of comparable  maturity.  The estimated fair values of the Company's
long-term debt instruments are:

<TABLE>
<CAPTION>

                                     December 31, 1996
                                 --------------------------
                                 Carrying        Estimated
                                  Amount         Fair Value
                                 --------        ----------
<S>                               <C>              <C>
7.50% Senior Notes                $50,000          52,509
Revolving credit facilities        12,390          12,365
Other indebtedness                  6,998           7,070
                                  -------          ------
Total                             $69,388          71,944
                                  =======          ======
</TABLE>

          (c) Forward Exchange Contracts

          The forward exchange contracts described in Note 3(e) are relatively
simple,  short-term instruments in which future exchange rates are locked in for
a fee.

          (d) Interest Rate Swap

          The interest rate swap described in Note 3(j) is discussed  further in
Note 6.

          (e) Limitations

          Fair value  estimates are made at a specific  point in time,  based on
relevant  market  information and  information  about the financial  instrument.
These estimates are subjective in nature and involve  uncertainties  and matters
of  significant  judgment and  therefore  cannot be determined  with  precision.
Changes in assumptions could significantly affect the estimates.

Note 14 - Acquisitions

          During the second  quarter of 1995, a wholly owned  subsidiary  of the
Company acquired  substantially all of the assets of Fibrexa,  a manufacturer of
covered yarn based in Bogota,  Colombia.  The consideration for the purchase was
approximately  $4,400 in cash,  assumption of  approximately  $6,500 in debt and
contingent  payments  based  on  earnings  from  the  Company's  South  American
operations  over a five-year  period.  The funds for this purchase were obtained

<PAGE>

                                 WORLDTEX, INC.
                   Notes to Consolidated Financial Statements
================================================================================
               (Dollars in thousands except for per share amounts)



from the Company's  cash on hand and  borrowings  under the Company's  Revolving
Credit Agreement.  The excess of cost over fair value of the net assets acquired
was approximately $800 at acquisition and $1,500 at year end 1995, and $2,000 at
December 1996 due to contingency payments per the purchase agreement and will be
amortized on a straight-line method over 40 years. The acquisition was accounted
for as a purchase and accordingly, the net assets and operations of Fibrexa have
been included in the Company's  consolidated  financial  statements beginning on
the effective acquisition date of April 1, 1995.

Note 15 - Related Party Transactions

          In 1996 and 1995, other assets include a $600 noninterest bearing note
receivable due in the year 2000 from a senior executive.

Note 16 - Concentrations

          The  company  currently  buys a  significant  portion of its Lycra and
spandex yarn, an important  component of its products,  from a single  supplier.
There are a limited number of manufacturers of this raw material and a change in
suppliers  could cause a delay in  manufacturing  and a possible  loss of sales,
which would adversely affect operating results.

          Worldtex  served over 1,500  customers in 1996. In 1995,  one customer
accounted  for 10.5% of  consolidated  net sales.  In 1996 and 1994, no customer
represented  over 10% of consolidated  net sales.  Trade accounts  receivable to
South  American  customers as of December 31, 1996 are  approximately  $4,245 of
which  $2,544  are  collateralized  by letters  of  credit,  insurance  or other
security.  The  majority of  Worldtex's  sales are  attributable  to the sale of
covered elastic yarn. Any significant decline in demand for covered elastic yarn
would have a material adverse effect on the operations of Worldtex.

Note 17 - Restructuring Charge

          In December 1995, the Company recorded a year-end charge of $1,715 (or
eight cents per share, net of taxes) for the closure of a Canadian manufacturing
facility and the Company's  Buenos Aires,  Argentina  distribution  branch.  The
charge  included  accruals  for  severance,   inventory  adjustments,   accounts
receivable  reserves,  and equipment and building  write downs to estimated fair
market  values.  $1,300 was  reflected as cost of goods sold and $400 as selling
and administrative expenses.

          As of  December  31,  1996,  $1,315  is  reserved  primarily  for  the
disposition of a manufacturing facility, inventory valuation, and allowances for
the collectibility of accounts receivables related to the closed operations.

<PAGE>


                                 WORLDTEX, INC.
                       Supplementary Financial Information
--------------------------------------------------------------------------------
                  Years ended December 31, 1996, 1995 and 1994
                 (Dollars in thousands except per share amounts)


<TABLE>
<CAPTION>


Unaudited Quarterly        Net              Gross             Net       Net Earnings Per
  Financial Data          Sales            Profit           Income          Share (A)
-------------------     --------           ------           ------      ----------------
<S>      <C>            <C>                <C>               <C>              <C>
1996 Quarter:
         First          $ 51,899            9,746            2,700            .19
         Second           53,140           10,279            3,226            .22
         Third            50,150            8,965            2,481            .17
         Fourth           52,640           10,085            2,539            .17
                        --------           ------           ------
                        $207,829           39,075           10,946
                        ========           ======           ======
1995 Quarter:
         First          $ 46,395            8,269            2,138            .15
         Second           49,100            8,605            2,360            .16
         Third            47,314            7,818              395            .03
         Fourth           45,172            6,770              359            .02
                        --------           ------           ------
                        $187,981           31,462            5,252
                        ========           ======           ======
1994 Quarter:
         First          $ 36,426            5,386            1,115            .08
         Second           42,887            7,011            1,842            .13
         Third            41,626            6,158            1,387            .10
         Fourth           43,715            7,433            1,466            .10
                        --------           ------           ------
                        $164,654           25,988            5,810
                        ========           ======           ======
</TABLE>

(A)  Earnings per share are calculated based upon the weighted average number of
     common shares outstanding and common equivalent shares during the year.

<PAGE>


                                 WORLDTEX, INC.
                 Schedule II - Valuation and Qualifying Accounts
--------------------------------------------------------------------------------
                  Years ended December 31, 1996, 1995 and 1994
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                   Additions
                                                           -----------------------
                                           Balance at      Charged to                  Deductions     Balance at
                                           Beginning       Cost and                      from         End of
                                           of Period       Expenses         Other      Reserves       Period
                                           ----------      ----------       ------     ----------     ----------
<S>                                         <C>            <C>              <C>        <C>            <C>
1996
----
     Allowance for doubtful accounts        $2,623           139             -         173(A)         2,589

1995
----
     Allowance for doubtful accounts        $1,160           1,332          382(B)     251(A)         2,623

1994
----
     Allowance for doubtful accounts        $  472             995           -         307(A)         1,160

</TABLE>

Notes:

(A) Accounts charged off, recoveries, and other adjustments, net.
(B) Increases to reserves reflecting subsidiary purchase price allocation


<PAGE>

Item 9.   Changes  In and  Disagreements  With  Accountants on  Accounting  and
          Financial Disclosure
          ----------------------------------------------------------------------

          Not applicable.


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
--------  --------------------------------------------------

Item 11.  Executive Compensation
--------  ----------------------

Item 12.  Security Ownership of Certain Beneficial Owners and Management
--------  --------------------------------------------------------------

Item 13.  Certain Relationships and Related Transactions
--------  ----------------------------------------------

          Reference  is  made  to  the  information   responsive  to  the  Items
comprising  this  Part III that is  contained  in  Worldtex's  definitive  proxy
statement for its 1997 Annual  Meeting of  Stockholders  to be filed pursuant to
Regulation 14A under the Securities  Exchange Act of 1934, which is incorporated
herein by reference.


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
--------  ---------------------------------------------------------------

Financial Statements and Schedules
----------------------------------

          The financial statements and financial statement schedules included in
this Report are listed in the introductory portion of Item 8.

Exhibits
--------

          The  following  exhibits  are  filed  as  part  of  this  Report  (for
convenience of reference,  exhibits are listed  according to numbers assigned in
the exhibit tables of Item 601 of Regulation  S-K under the Securities  Exchange
Act of 1934 and management  contracts or compensatory  plans are indicated by an
asterisk):

<TABLE>
<CAPTION>

 Exhibit No.        Description
 -----------        -----------
     <S>            <C>
     2.1            Purchase  Agreement,  dated  as of  March  28,  1995,  among
                    Fibrexa,   S.A.,  the  stockholders  of  Fibrexa,   Worldtex
                    Colombiana,  Ltda. and Worldtex -- filed as Exhibit 2 to the
                    Company's  report  on  Form  8-K  dated  June  5,  1995  and
                    incorporated herein by reference.

     3.1            Certificate of Incorporation of Worldtex -- filed as Exhibit
                    3.1 to Worldtex's  Registration  Statement on Form 10, dated
                    October 1, 1992,  as  amended,  and  incorporated  herein by
                    reference.

     3.2            By-Laws of Worldtex  -- filed as Exhibit  3.2 to  Worldtex's
                    Registration Statement on Form 10, dated October 1, 1992, as
                    amended, and incorporated herein by reference.

     4.1            Share Purchase Rights Agreement, dated as of August 1, 1992,
                    by and between Worldtex and Chemical Bank as Rights Agent --
                    filed as Exhibit 4.1 to the Company's  Annual Report on Form
                    10-K for 1992 and incorporated herein by reference.

     4.2            Note Purchase Agreement,  dated July 11, 1994, providing for
                    the issuance of  $50,000,000  7.50% Senior Notes due 2004 --
                    filed as Exhibit  4.2 to the  Company's  = Annual  Report on
                    Form 10-K for 1994 and incorporated herein by reference.

     4.3            Amendment  No. 1, dated as of January 30, 1995,  to the Note
                    Agreement,  dated July 11,  1994 -- filed as Exhibit  4.3 to
                    the  Company's  Annual  Report  on Form  10-K  for  1994 and
                    incorporated herein by reference.

     10.1           Distribution  Agreement  dated  as  of  November  12,  1992,
                    between  W&G and  Worldtex  -- filed as Exhibit  10.1 to the
                    Company's   Annual   Report   on  Form  10-K  for  1992  and
                    incorporated herein by reference.

     10.2           Tax Sharing Agreement dated as of November 12, 1992, between
                    W&G and Worldtex -- filed as Exhibit  10.2 to the  Company's
                    Annual Report on Form 10-K for 1992 and incorporated  herein
                    by reference.

     10.3           Employment  Agreement,  dated  November  15,  1993,  between
                    Worldtex  and Richard J. Mackey -- filed as Exhibit  10.3 to
                    the  Company's  Annual  Report  on Form  10-K  for  1993 and
                    incorporated herein by reference.*

     10.4           Employment  Agreement,  dated  November  15,  1993,  between
                    Worldtex and Barry D. Setzer -- filed as Exhibit 10.4 to the
                    Company's   Annual   Report   on  Form  10-K  for  1993  and
                    incorporated herein by reference.*

     10.5           1992 Stock  Incentive Plan of Worldtex,  as amended -- filed
                    as Appendix A to Worldtex's proxy statement,  dated April 1,
                    1994,  for the 1994  Annual  Meeting  of  Stockholders,  and
                    incorporated herein by reference*.

     10.7           Amendment No. 1 to the Credit  Agreement -- filed as Exhibit
                    10.7 to the  Company's  Annual  Report on Form 10-K for 1993
                    and incorporated herein by reference.

     10.8           Amendment No. 2 to the Credit  Agreement -- filed as Exhibit
                    10.8 to the  Company's  Annual  Report on Form 10-K for 1993
                    and incorporated herein by reference.

     10.9           Amendment No. 3 to the Credit  Agreement -- filed as Exhibit
                    10.9 to the  Company's  Annual  Report on Form 10-K for 1994
                    and incorporated herein by reference.

     10.10          Amendment No. 4 to the Credit Agreement -- filed herewith.

     10.11          Amendment No. 5 to the Credit Agreement -- filed herewith.

     11.1           Statement  re  computation  of  earnings  per share -- filed
                    herewith.

     21.1           Subsidiaries of Worldtex -- filed herewith.

     23.1           Consent of KPMG Peat Marwick LLP -- filed herewith.

     24.1           Powers  of  Attorney   executed  by  certain  directors  and
                    officers  of  Worldtex  --  filed  as  Exhibit  25.1  to the
                    Company's   Annual   Report   on  Form  10-K  for  1992  and
                    incorporated herein by reference.

     24.2           Powers of  Attorney  executed by Mitchell R. Setzer -- filed
                    as Exhibit 24.2 to the Company's  Annual Report on Form 10-K
                    for 1994 and incorporated herein by reference.

     24.3           Powers of  Attorney  executed by Claude D. Egler -- filed as
                    Exhibit 24.3 to the Company's Annual Report on Form 10-K for
                    1996 and incorporated herein by reference.

     27.1           Financial Data Schedule (filed with EDGAR only)
</TABLE>

8-K Reports
-----------

          During the last quarter of the Company's 1996 fiscal year, the Company
filed no reports on Form 8-K.



<PAGE>



                                   SIGNATURES

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

Dated: March 28, 1997

                                      WORLDTEX, INC.



                                      By  /s/Richard J. Mackey
                                         ---------------------------------------
                                             Richard J. Mackey
                                             Chairman of the Board and
                                             Chief Financial Officer




<PAGE>


          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this report has been signed below on March 28, 1997 by the following  persons on
behalf of the registrant and in the capacities indicated.


/s/Richard J. Mackey
-----------------------------------------------------
Richard J. Mackey, Chairman of the Board,
Chief Financial Officer, Director and
Attorney for the persons indicated by asterisk

BARRY D. SETZER*
Barry D. Setzer, Director, President
and Chief Executive Officer

MITCHELL R. SETZER*
Mitchell R. Setzer, Secretary/Treasurer
and Principal Accounting Officer

SIDNEY B. BECKER*
Sidney B. Becker, Director

CLAUDE D. EGLER*
Claude D. Egler, Director

JOHN B. FRASER*
John B. Fraser, Director


-----------------------------------------------------
Salim M. Ibrahim, Director

AUSTIN LIST*
Austin List, Director

WILLI ROELLI*
Willi Roelli, Director

JOHN K. ZIEGLER*
John K. Ziegler, Director

MICHAEL B. WILSON*
Michael B. Wilson, Director