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, 1998

[ ]  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.)

       915 Tate Boulevard, S.E., Suite 106, Hickory, North Carolina 28602
                    Address of principal executive offices)

                                  828-322-2242
                               (Telephone Number)

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

     Title of each class               Name of each exchange on 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. [ ]

As of March 5, 1999: 14,271,171 shares of Common Stock were outstanding; and the
aggregate market value of shares held by  non-affiliates  was $27,029,836.  (For
these purposes,  a reported  closing market price of $2.00 per share on March 5,
1999 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 1999
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 supply of elastomeric  components to the
textile and apparel  industries  and through one of its  subsidiaries  dates its
operations to 1934. Worldtex is a Delaware corporation organized in July 1992 to
acquire the covered yarn  manufacturing  operations of Willcox & Gibbs,  Inc., a
New York corporation that later changed its name to Rexel, Inc.  ("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; such Worldtex shares
were  distributed and started trading publicly on that date. The Company has two
main product lines, covered elastic yarns and narrow elastic fabrics.

COVERED ELASTIC YARNS

            Worldtex's  principal  subsidiaries engaged in the supply of covered
elastic yarns are (i) Regal  Manufacturing  Company,  Inc.  ("Regal"),  based in
Hickory, North Carolina, (ii) Rubyco (1987), Inc. ("Rubyco"), based in Montreal,
Canada,  (iii) Filix Lastex, S.A. ("Filix"),  based in Troyes,  France, and (iv)
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.

            The Company  believes that it is one of the two largest  independent
suppliers  of  covered  elastic  yarn in the  world  (based on 1998 net sales of
$178.7  million for this product  line).  Covered  elastic yarns are used by the
Company's customers to produce stretch fabrics for apparel that provide enhanced
styling   capabilities,   better  shape  retention,   and  improved  aesthetics,
durability and comfort. The principal products that utilize covered elastic yarn
produced  by the  Company  are sheer and opaque  pantyhose,  men's,  women's and
children's  socks,  sweaters,  swimwear,  active  and  athletic  wear and men's,
women's and children's stretch apparel. During 1998, Worldtex yarns were used in
the products of some of the world's best known brands and  designers,  including
Giorgio Armani, Hugo Boss, Pierre Cardin, Liz Claiborne, Danskin, Dim, Christian
Dior, Fogal,  Fruit of the Loom,  Givenchy,  Jockey,  Calvin Klein, Evan Picone,
Polo, Round the Clock, Nina Ricci,  Ellen Tracy and others.  The Company,  which
was one of the first  independent  producers of covered elastic yarn,  currently
operates 11  manufacturing  and  distribution  facilities  located in the United
States, Canada, France and South America. The Company also has a 38% interest in
a  joint  venture  in  Estonia,   and  is  currently  evaluating  joint  venture
opportunities in China and India.

      PRODUCTS

            The covered  elastic  yarn  manufactured  by Worldtex is produced by
wrapping material,  principally nylon, polyester, cotton or other fibers, around

<PAGE>

spandex  or latex  rubber.  The  core of  spandex  or  rubber  provides  stretch
capability  and  durability,  while the wrapped fiber  provides  dyeability  and
results in more comfort to the touch. Advanced  manufacturing  equipment permits
production of ultrafine covered elastic yarns that result in fabrics  comparable
in appearance to natural fibers, but with superior flexibility,  shape retention
and durability.

            Historically,  covered  elastic yarns were  principally  used in the
manufacture of women's pantyhose and other hosiery products.  However,  advances
in production  techniques and trends in consumer apparel preferences have led to
a substantial expansion of the end uses for covered elastic yarn. Today, covered
elastic yarn is used in a broad range of apparel, including sweaters,  swimwear,
running clothes,  athletic uniforms,  slacks,  skirts and dresses, as well as in
pantyhose and socks.

      SALES AND DISTRIBUTION

            The   Company's   manufacturing   and   distribution   centers   are
strategically  located to serve the Company's  principal markets.  The Company's
operations  in the United  States and Canada serve  customers  throughout  North
America,  its operations in France and joint venture in Estonia serve Europe and
its  operations  in  Bogota,  Colombia  serve  South  America  and also  provide
lower-cost products for the Company's other markets

            As of December 31, 1998,  the Company  maintained a marketing  staff
located in Hickory,  North  Carolina,  Troyes,  France,  Montreal,  Canada,  and
Bogota,  Colombia.  Each sales employee has a designated territory. In addition,
certain sales personnel are specialists in designated  applications  for covered
yarn, such as circular knitting or woven fabrics. The sales staff is compensated
by  salary  and  sales  incentive  bonus.  The  Company  also has a  network  of
independent sales agents compensated on a commission basis.

            The  Company's  sales force is trained to work with the  customer to
develop new uses for  covered  elastic  yarns that may  improve  the  customer's
products. The Company's significant experience in the production and utilization
of covered  elastic yarns has provided the Company with  expertise not generally
available  to more  broadly-based  fabric and  apparel  producers.  The  Company
utilizes this expertise to develop solutions utilizing covered elastic yarns for
the customer's fabric needs.

      CUSTOMERS

            In 1998, the Company  provided  covered  elastic yarns to over 1,800
customers,  and no single covered elastic yarn customer  accounted for more than
10% of 1998 sales of covered  elastic yarns.  The Company's ten largest  covered
elastic yarn customers in 1998 accounted for  approximately 22% of 1998 sales of
covered elastic yarns, which totaled $178.7 million.

            The Company's customers are principally producers of fabric sold for
use in apparel products.  In 1998, the Company's  principal  customers  included
Jockey International,  Ithaca Industries,  Doris Hosiery, Nalpac, and Iril, S.A.

<PAGE>

During  1998,  Worldtex  yarns were used in the  products of some of the world's
best known brands and designers,  including  Giorgio Armani,  Hugo Boss,  Pierre
Cardin, Liz Claiborne,  Danskin,  Dim, Christian Dior, Fogal, Fruit of the Loom,
Givenchy,  Jockey,  Calvin Klein, Evan Picone, Polo, Round the Clock, Nina Ricci
and Ellen Tracy.

      MANUFACTURING

            Covered   elastic   yarns  are  produced  by  wrapping   strands  of
conventional  fabric materials around elastic materials such as spandex or latex
rubber.  In the  manufacturing  process,  a  "cover  component"  such as  nylon,
polyester, cotton, or other fiber is fed through high-speed spindles where it is
wrapped or twisted around a "core component" of spandex or latex rubber. Strands
of elastic may be single or double  covered,  depending  on the desired  end-use
application.  After  wrapping,  the yarn,  which is white in color and otherwise
unfinished,  is then  wound on a "take-up  package"  which is  adaptable  to the
customer's machinery and equipment for further processing.

            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 1998, Worldtex's  expenditures
for these purposes totaled less than 1% of its sales.

      RAW MATERIALS

            In 1998,  approximately  65% of the Company's  production  costs for
covered  elastic yarns were  attributable  to raw  materials.  The principal raw
materials  utilized  by the Company are  spandex,  nylon and rubber.  Spandex is
principally  supplied by DuPont,  Globe and Bayer, and Globe is also a principal
supplier  of rubber.  The major  suppliers  of nylon to the Company in 1998 were
DuPont,   BASF,  Nilit,  Nylstar  and  Radaci.  In  1998  Worldtex  purchased  a
substantial  portion 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.

      COMPETITION

            While Worldtex  believes that it is one of the largest  suppliers of
covered  elastic  yarn in the world,  several  companies  actively  compete with
Worldtex,  at least one of which,  Unifi, Inc., 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.

      EMPLOYEES

            As of December 31, 1998, Worldtex had a total of approximately 1,250
employees   engaged  in  its  covered   elastic  yarn   operations.   Of  these,
approximately 450 were employed in the United States by Regal, approximately 150

<PAGE>

were employed in Canada by Rubyco,  approximately 300 were employed in France by
Filix and approximately 350 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 in its covered
elastic yarn operations and considers its employee relations to be good.

NARROW ELASTIC FABRICS

            Worldtex's  subsidiary  engaged in the manufacture of narrow elastic
fabrics is Elastic  Corporation of America,  Inc. ("ECA").  The Company acquired
ECA, based in Columbiana,  Alabama,  in December 1997. The Company's  subsidiary
Elastex,  Inc.  ("Elastex")  acquired certain narrow elastic fabrics operations,
based in Asheboro, North Carolina, from Texfi Industries,  Inc. in October 1997.
Elastex was merged into ECA effective  December 31, 1998,  and references to ECA
herein shall mean the combined  operations of ECA and Elastex unless the context
indicates  otherwise.  In  addition,  on December  30,  1998,  ECA  acquired the
Lexington, South Carolina, narrow elastic manufacturing facility of Fruit of the
Loom.  ECA has  entered  into a long-term  agreement  to supply  narrow  elastic
fabrics to Fruit of the Loom.

            The Company  believes that it is the largest  manufacturer  of woven
and  knitted  narrow  elastic  fabrics in the world  (based on 1998 net sales of
$79.8 million for this product line).  During 1998, ECA's narrow elastic fabrics
were used in  apparel  produced  by  Bassett  Walker,  Fruit of the Loom,  Tommy
Hilfiger,  Jockey,  Michael  Jordan  Sports,  Donna Karan,  Calvin Klein,  Ralph
Lauren,  Russell  Corporation,  Sara Lee (Hanes products),  Vanity Fair, Warnaco
(Warner,  Olga and  Speedo  brands)  and  others.  ECA  operates  a total of six
manufacturing  facilities,  which are located in Alabama, North Carolina,  South
Carolina and Virginia.

      PRODUCTS

            Narrow elastic fabrics are elasticized fabric bands, typically under
six inches in width,  that are used as components  in the  production of a broad
range of apparel products,  such as waistbands for men's, women's and children's
underwear,  athletic apparel and other garments,  straps, facings and edgings in
women's intimate apparel and elastic bands in women's hosiery. In addition,  ECA
manufactures  gauze and  elastic  wrap  products  for the medical  industry  and
specialized elastic fabric used by the automotive industry.

            ECA  manufactures a full range of narrow  elastic  fabric  products,
from  specialty  designs to commodity  items.  These varied  product  offerings,
together with sophisticated weaving and dyeing capabilities,  enable the Company
to provide bundled and customized products to its customers.

            In  addition  to a  traditional  line of woven  elastic  inserts and
commodity narrow elastic fabrics, ECA has enhanced its product line with several

<PAGE>

narrow  elastic  fabric  product  advancements.  For example,  ECA developed and
patented Quikcord(R) which embeds a drawstring within an elastic waistband. This
product  offers cost  savings to apparel  manufacturers  by avoiding  the costly
operation  of threading  the  drawstring  cord  through the elastic.  ECA's most
advanced narrow fabrics  products are waistbands with brand name logos and other
designs woven into the elastics,  principally  used in designer label underwear.
ECA  believes  that it  currently  has the  largest  number of logo looms in the
United States.

      SALES AND DISTRIBUTION

            ECA sells its  products  to  apparel  manufacturers  throughout  the
United  States  and  to  foreign  manufacturers.  Sales  offices  are  based  in
Greensboro,  North  Carolina,  Miami,  Florida,  San  Francisco and Los Angeles,
California, and New York, New York. There is no product specialization among the
salesforce. The salesforce is compensated by salary and bonus incentive awards.

            ECA's key  marketing  strategy is to sell a  customized  product and
service program that meets specific  customer needs and to create  relationships
with  designers at premier  apparel  manufacturers  such as Calvin Klein,  Ralph
Lauren,  Tommy  Hilfiger,  Donna  Karan and  Jockey.  A  customer's  order often
comprises more than one type of narrow elastic fabric product,  and ECA believes
that it is critical to offer a coordinated  comprehensive supply program for its
customers.

      CUSTOMERS

            In 1998, ECA served over 700 narrow elastic fabric customers.  Three
customers each individually  accounted for more than 10% of 1998 sales of narrow
elastic  fabrics.  The Company's ten largest narrow elastic fabric  customers in
1998 accounted for  approximately  56% of 1998 sales of narrow elastic  fabrics,
which totaled $79.8 million.

            ECA's top customers in 1998 included apparel  manufacturers  such as
Bassett  Walker,  Fruit of the Loom,  Tommy  Hilfiger,  Jockey,  Michael  Jordan
Sports, Donna Karan, Calvin Klein, Ralph Lauren,  Russell Corporation,  Sara Lee
(Hanes  products),  Vanity Fair,  Warnaco  (Warner,  Olga and Speedo brands) and
others.  The principal  customer in 1998 for ECA's medical product was Johnson &
Johnson and for its automotive  products was Crotty  Corporation,  a supplier to
General Motors Corporation.

            In  connection  with the  acquisition  by ECA of Fruit of the Loom's
narrow elastic  manufacturing  facility on December 30, 1998, ECA entered into a
long-term  supply  agreement  with Fruit of the Loom.  The Company  expects that
Fruit of the Loom will be ECA's largest customer in 1999.

      MANUFACTURING

            Knit elastic  fabrics are primarily used in underwear and sportswear
applications.  Most commodity knit elastic  products are not "finished," and the

<PAGE>

elastic yarn in the fabric is often bare. In contrast,  the elastic yarn used in
woven elastic  fabrics is covered by natural or synthetic yarns and the products
are finished or dyed. ECA operates dye houses for such purposes.

            Nylon,  polyester,  spandex  and rubber are the basic raw  materials
used in the manufacture of narrow elastic fabrics. For the manufacturing of knit
elastics,  the natural or synthetic  yarns (such as nylon,  polyester or cotton)
and the elastic  threads  (spandex  or rubber) are knitted  together to form the
knitted elastic narrow fabric products on the knitting machines. In woven narrow
elastic  fabrics,  the  elastic  threads  must be covered.  High-speed  covering
machines wrap the elastic core with natural or synthetic  yarns under tension to
cover the elastic. The covered elastic is collected on take-up packages and then
is typically put onto beams.  ECA's proprietary  covering  technology allows the
covered  elastic to be fed directly  onto the loom,  thereby  eliminating a step
wherein the covered  elastic is wound onto beams and then sent to the looms.  On
ECA's weaving looms,  the covered elastic is woven with the natural or synthetic
yarns (such as nylon, polyester or cotton) to create the narrow elastic fabrics.
If logos are required,  special looms are used and  programmed to weave into the
narrow elastic fabric the name of the designer or brand, such as Calvin Klein or
Jockey.

            All woven narrow fabrics are "finished."  The rough-edged  materials
that result from the weaving process are put through a finishing  process during
which the narrow elastic  fabrics are wetted and  resin-treated  and then dried.
Certain  knitted  narrow  elastics are  finished as well,  depending on customer
requirements.  Due to ECA's focus on the high-end  knitted products for intimate
apparel, many of its fine quality knitted elastics are finished and dyed.

            Narrow fabrics may be dyed according to color formulations developed
in-house to meet specific  customer color  requirements.  ECA's dyeing processes
include  continuous  acid,  pressure beam or batch dyeing methods.  ECA believes
that it has the largest and most  diversified  dye lab,  computer color matching
equipment  and dyeing  equipment in the industry.  ECA uses lab equipment  which
simulates  the dye process,  resulting in high accuracy of dye quality and color
uniformity in actual production.

            ECA also produces silicon-backed fabrics. Such fabrics are typically
found in hosiery products, particularly in thigh-high stockings. To produce this
product,  silicon is applied to knit,  lace and simulated  lace uniformly on one
side of the fabric and then dried to create a non-slip  band. The band grips the
thigh allowing the stocking to stay in place without garters.  Utilizing special
robotic equipment,  the  silicon-backed  fabrics are banded to the specific size
requirements of the customers before inspection and final packaging.

      RAW MATERIALS

            Raw  materials  comprised  approximately  50% of ECA's 1998 costs of
production.  Key raw materials for ECA include synthetic  fibers,  such as nylon
and polyester,  spandex,  rubber, cotton, chemical dyes and silicon. The Company
buys its synthetic  materials and spandex  primarily from DuPont and Bayer.  Its
rubber  supply  originates  in  Malaysia  and is obtained  via various  domestic

<PAGE>

importers.  Chemical dyes and auxiliary dye  ingredients are supplied by various
prominent  chemical  companies,  such as Crompton & Knowles and Ciba-Geigy,  and
silicon is primarily supplied by Dow Corning.

      COMPETITION

            ECA believes that it is the leader in many of the market  categories
in which it  operates.  There are  approximately  ten domestic  competitors  who
manufacture narrow elastic fabrics for the apparel industry.  Principal domestic
competitors in narrow elastic fabrics include Clinton Mills and George C. Moore.

      EMPLOYEES

            As of December 31, 1998, Worldtex had a total of approximately 1,000
employees  engaged  in its  narrow  elastic  fabrics  operations.  None of these
employees  are  covered  by  collective  bargaining  agreements.   Worldtex  has
experienced  no  significant  labor  problems  in  its  narrow  elastic  fabrics
operations and considers its employee relations to be good.

ITEM 2.     PROPERTIES
-------     ----------

            Worldtex maintains its headquarters in Hickory,  North Carolina,  in
leased office space.

      COVERED ELASTIC YARN

            The  Company  operates  a  total  of  eleven  covered  elastic  yarn
manufacturing plants and distribution centers, of which seven are owned and four
are leased.  In addition,  the Company has a 38% interest in a joint  venture in
Estonia  that owns and  operates  a 52,000  square  foot  covered  elastic  yarn
manufacturing and distribution  facility.  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 - Regal
  Hickory, NC         69,000      Owned       Manufacturing Plant - Regal
  Hickory, NC         18,000     Leased       Distribution Center - Regal
  Hickory, NC         80,000     Leased       Distribution Center - Regal

CANADA:
  Montreal, Quebec    85,000     Leased       Manufacturing Plant and
                                              Headquarters of Rubyco
FRANCE:
  Troyes              69,000      Owned       Distribution Center and
                                              Headquarters of Filix
  Athis              139,000      Owned       Manufacturing Plant - Filix
  Conde              202,000      Owned       Manufacturing Plant - Filix
  Le Grand Serre      92,000      Owned       Manufacturing Plant - Filix

COLOMBIA:
  Bogota             239,000     Leased       Manufacturing Plant and
                                              Headquarters of Fibrexa

SUBTOTAL           1,219,000

</TABLE>


      NARROW ELASTIC FABRICS

            ECA operates a total of six manufacturing  plants,  all of which are
owned.  In addition,  a rented sales office is maintained in New York City.  The
manufacturing plants are listed below.

<TABLE>
<CAPTION>

    LOCATION        SQUARE FEET   OWNED/LEASED         USE
----------------- -------------- ------------ -------------------------
<S>               <C>            <C>          <C>    
UNITED STATES:
  Columbiana, AL      235,000       Owned     Manufacturing Plant
  Columbiana, AL      115,000       Owned     Manufacturing Plant
  Asheboro, NC        115,000       Owned     Manufacturing Plant
  Hemingway, SC        65,000       Owned     Manufacturing Plant
  Lexington, SC       114,000       Owned     Manufacturing Plant
  Woolwine, VA         77,000       Owned     Manufacturing Plant

SUBTOTAL              721,000

GRAND TOTAL         1,940,000

</TABLE>

<PAGE>

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 1998 fiscal year no matters
were submitted to a vote of the Company's security holders.

<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,
1996.

<TABLE>
<CAPTION>
                            High         Low
                            ----         ---
<S>                         <C>          <C> 
1997:
    1st Quarter          $  10.75        6.13
    2nd Quarter              8.38        6.50
    3rd Quarter              9.00        6.25
    4th Quarter              8.75        7.13

1998:
    1st Quarter              8.06        6.94
    2nd Quarter              8.13        5.44
    3rd Quarter              6.25        4.25
    4th Quarter              4.81        3.50

1999:
    1st Quarter
    (through March 5)        4.19        1.50

</TABLE>

            At March 5, 1999 there were  approximately  956  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 Company's Revolving Credit Agreement and
the  Indenture  for the  Company's 9 5/8% Senior  Notes  restrict the payment of
dividends by the Company.  Under the most  restrictive of these debt agreements,
no amounts were  available for the payment of dividends and other  distributions
as of December 31, 1998. 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, 1998,  which has been derived from

<PAGE>

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 are not directly  comparable
due to the  acquisition of ECA as of December 1, 1997,  Elastex as of October 3,
1997 and Fibrexa as of April 1, 1995. See Management's  Discussion and Analysis,
Item 7.  Historical  financial  information  may not be indicative of Worldtex's
future  performance.  Diluted  earnings per share are calculated  based upon the
weighted  average  number of  common  shares  outstanding  and  dilutive  common
equivalent shares during such year.

<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,
                                 ------------------------------------------------
                                   1998      1997      1996       1995      1994
                                   ----      ----      ----       ----      ----
                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<S>                              <C>        <C>       <C>       <C>        <C>    
Net Sales                        $258,537   203,256   207,829   187,981    164,654

Income (loss) before income
taxes                              (6,392)   11,869    17,361    10,231      8,868

Provision (benefit) for income
taxes                                (494)    5,377     6,415     4,979      3,058

Income (loss) before               
 extraordinary item                (5,898)    6,492    10,946     5,252      5,810

Diluted income (loss) before 
 extraordinary item per share        (.41)      .44       .75       .36        .40

Total assets                      324,120   312,439   206,032   196,065    166,405

Long-term debt                    198,246   185,780    67,754    68,947     61,085

Cash dividends per common share         -         -         -         -          -

</TABLE>

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

            The  Company  believes  that it is one of the largest  suppliers  of
elastomeric  components to the textile  industry in the world (based on 1998 net
sales). The Company has two main product lines, covered elastic yarns and narrow
elastic  fabrics.   Covered  elastic  yarns  manufactured  by  the  Company  are
principally used in the production of sheer and opaque pantyhose, men's, women's
and children's socks,  sweaters,  swimwear,  active and athletic wear and men's,
women's and children's  stretch apparel.  Narrow elastic fabrics are elasticized
fabric bands,  typically under six inches in width,  that are used as components
in the production of a broad range of apparel  products,  such as waistbands for
men's,  women's and children's  underwear,  athletic apparel and other garments,
straps,  facings and edgings in women's  intimate  apparel and elastic  bands in
women's hosiery.

            The  Company's  covered  elastic yarn business  operates  around the
world through its subsidiaries Regal, based in Hickory, North Carolina,  Rubyco,
based in Montreal, Canada, Filix, based in Troyes, France, and Fibrexa, based in
Bogota,  Colombia.  The Company  also has a 38%  interest in a joint  venture in
Estonia.

<PAGE>

            The Company's narrow elastic fabrics  business is conducted  through
ECA, acquired on December 1, 1997 based in Columbiana, Alabama. In addition, the
Company acquired through Elastex certain narrow elastic fabrics operations based
in  Asheboro,  North  Carolina,  in October  1997.  Elastex  was merged into ECA
effective December 31, 1998. In addition, on December 30, 1998, ECA acquired the
Lexington, South Carolina, narrow elastic manufacturing facility of Fruit of the
Loom.

            Worldtex is a holding company, the principal assets of which are the
stock of its  subsidiaries.  All of the  operations  of Worldtex  are  conducted
through  its  direct  and  indirect  wholly-owned   subsidiaries.   Accordingly,
Worldtex's ability to service its indebtedness and meet its other obligations is
dependent  upon  earnings and cash flow of its  subsidiaries  and the payment of
funds by those  subsidiaries  to  Worldtex  in the form of loans,  dividends  or
otherwise. In addition, the ability of Worldtex's subsidiaries to pay dividends,
repay intercompany  liabilities or make other advances to Worldtex is subject to
restrictions  imposed by  corporate  law and certain  United  States,  state and
foreign tax considerations.

            A substantial  portion of the Company's sales and operating  profits
have historically been derived from  international  operations and export sales,
which are subject in varying degrees to risks inherent in doing business abroad.
Such risks include the  possibility  of unfavorable  circumstances  arising from
host country laws or regulations.  In addition, foreign operations include risks
of partial or total  expropriation;  currency  exchange  rate  fluctuations  and
restrictions  on  currency  repatriation;  significant  taxation  policies;  the
disruption of operations from labor and political disturbances,  insurrection or
war; and the  requirements  of partial local  ownership of operations in certain
countries.  Moreover,  changes  in the value of the  currencies  of the  foreign
countries  in which the  Company  does  business  could have a material  adverse
impact on the Company's business, financial condition and results of operations.

            The textile and retail apparel  industries  are highly  cyclical and
are  characterized  by rapid shifts in fashion and consumer  demand,  as well as
competitive  pressures  and price and  demand  volatility.  The  demand  for the
Company's products is principally  dependent upon the level of demand for retail
apparel.  The  demand  for  retail  apparel  is in turn  dependent  on  consumer
spending,  which may be  adversely  affected by an economic  downturn,  changing
retailer and consumer demands, a decline in consumer confidence or spending, and
other factors  beyond the  Company's  control.  In recent years,  sales of sheer
pantyhose have declined.  Although  pantyhose  manufacturers  have  historically
accounted for a significant  portion of the Company's  sales of covered  elastic
yarn,  the Company's  business  strategy  includes the continued  development of
new-end use applications for covered elastic yarn and the diversification of its
product lines with the recent narrow elastics acquisitions.

            Spandex  and  nylon  are the  principal  raw  materials  used in the
Company's  manufacturing  process.  In 1998  Worldtex  purchased  a  significant
portion 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.

<PAGE>

            The textile and apparel  industries  are highly  competitive.  The
apparel  markets  are  served by a  variety  of  producers,  many of which are
located in rapidly growing,  low-wage  countries and use textiles  produced in
those  regions.  Many of these textile  producers have  substantially  greater
financial  and other  resources  and  lower  cost of funds  than the  Company.
Unifi,  Inc.  and Worldtex  are the two largest  suppliers of covered  elastic
yarns in the United States.  Unifi, Inc. has  substantially  greater financial
resources than the Company and is less leveraged.

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,
                                                    ------------------------
                                                    1998      1997      1996
                                                    ----      ----      ----
<S>                                                 <C>        <C>       <C> 
Net Sales.....................................       100%       100%      100%
Gross profit..................................      16.4%      17.7%     18.8%
Selling and administrative expense............       9.9        7.7       7.5
Goodwill amortization.........................       1.8        0.5       0.5
Operating profit..............................       4.7        9.5      10.8
Interest expense..............................       7.3        3.5       2.8
Other income (expense)--net....................      0.1       (0.2)      0.4
                                                    ------     -----     -----
Income (loss) before income taxes.............      (2.5)%      5.8%      8.4%
                                                    ======     =====     =====

</TABLE>


1998 VS. 1997
-------------

            Sales for the twelve  months  ended  December  31,  1998 were $258.5
million and net loss was $5.9 million, compared with sales of $203.2 million and
income before  extraordinary  item of $6.5 million for the comparable  period in
1997.  Diluted net loss per share was $.41 for 1998 compared with diluted income
per share before  extraordinary  item of $.44 in 1997. Results for 1998 reflects
the Company's acquisitions of ECA and Elastex in the last quarter of 1997.

            Worldtex's  covered  elastic  yarn  sales in 1998 of $178.7  million
decreased $15.7 million, or 8.1%, when compared with 1997,  primarily because of
continuing  softness in the European  general  textile  market,  higher  apparel
imports and overall weak demand by ladies' hosiery  customers.  Of the decrease,
the stronger U.S.  dollar versus foreign  currency  denominated  sales decreased
covered  elastic yarn sales by  approximately  $5.7 million  (assuming  currency
translation of 1998 sales at the rate  applicable to 1997  results).  During the
fourth quarter,  the Company recorded charges of $7.8 million,  which included a
$4.4  million   restructuring   provision   for   discontinuing   the  Company's
conventional  covered yarn production in Montreal,  Quebec, $1.9 million related
primarily to asset provisions for  underutilized  equipment in the United States
and $1.5 million related to the retirement of the Company's  former chairman and

<PAGE>

chief financial  officer.  The Company's  narrow elastic fabric sales in 1998 of
$79.8  million  increased  $70.9  million when  compared  with 1997,  due to the
inclusion of narrow  elastic  fabric sales for the full year  compared with 1997
sales from the dates of the ECA and Elastex  acquisitions in the fourth quarter.
Narrow  elastic  fabric  sales  originate in the U.S.  with no foreign  currency
translation exposure.  Results from the narrow elastic fabric operations did not
meet expectations during 1998 due to customer inventory adjustments and softness
relating to Asian economic issues.

            Worldtex's  gross margin in 1998  decreased to 16.4% of net sales as
compared to 17.7% for 1997.  Gross profit  margins  decreased  primarily  due to
one-time  charges of $3.8  million  related to the North  American  covered yarn
restructuring  that lowered  gross margin from 17.8% of sales to 16.4% of sales.
Selling and  administrative  expenses  increased as a percentage of net sales to
9.9% in 1998 from 7.7% in 1997,  primarily  because the fixed component of these
expenses  increased as a result of the recent  acquisitions and the $1.7 million
administrative  expense  included in the one-time  charges relating to the North
American covered yarn  restructuring  and the retirement of the Company's former
chairman.  Goodwill amortization  increased as a percentage of net sales to 4.7%
in 1998 from 0.5% in 1997 due to the $2.3 million goodwill provision included in
the one-time charges relating to the North American covered yarn restructuring.

            The  increase  in  interest  expense  of $11.7  million  was  caused
primarily  by the  $175.0  million  Senior  Notes  issued  December  1,  1997 in
connection with the  acquisitions of Elastex and ECA and refinancing of existing
indebtedness.

1997 VS. 1996
-------------

            Sales for the twelve  months  ended  December  31,  1997 were $203.3
million and net income before extraordinary item was $6.5 million, compared with
sales of $207.8  million  and net  income of $10.9  million  for the  comparable
period in 1996. Diluted income per share before  extraordinary item was $.44 for
1997 compared with $.75 in 1996.  Worldtex's  covered elastic yarn sales in 1997
of $194.4 million decreased $13.5 million, or 6.5%, when compared with 1996. The
decrease  was  primarily  because of the stronger  U.S.  dollar  versus  foreign
currency  denominated  sales  which  decreased  covered  elastic  yarn  sales by
approximately $14.5 million (assuming currency  translation of 1997 sales at the
rate applicable to 1996 results). The Company's narrow elastic fabric operations
were  acquired in the fourth  quarter of 1997 and had sales of $8.9 million from
the acquisition dates. Narrow elastic fabric sales originate in the U.S. with no
foreign currency translation exposure.

            Worldtex's  gross margin in 1997  decreased to 17.7% of net sales as
compared to 18.8% for 1996. Gross profit margins  decreased  primarily due to an
unfavorable  change in the  Company's  product mix.  Gross  profit  margins also
decreased  because  the  Company's  manufacturing  costs were  spread over lower
sales.  Selling and  administrative  expenses  increased as a percentage  of net
sales to 7.7% in 1997 from 7.5% in 1996 primarily because the fixed component of
these expenses was spread over a lower sales base.

<PAGE>

            The  increase  in  interest  expense  of  $1.2  million  was  caused
primarily  by the  $175.0  million  Senior  Notes  issued  December  1,  1997 in
connection  with the  acquisitions  of Elastex  and ECA and the  refinancing  of
existing indebtedness.

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 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 change.  In 1997,  France
increased  the  corporate  tax rate from 36.67% to 41.67%,  which  resulted in a
charge to increase the reserve for deferred income taxes of  approximately  $1.2
million and an additional charge of $.5 million in the fourth quarter to reflect
the retroactive effect of the tax increase for all of 1997.

LIQUIDITY; CAPITAL RESOURCES
----------------------------

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

            Worldtex  generated  $10.5 million from its operating  activities in
1998,  compared with using $1.5 million in 1997 and generating  $15.0 million in
1996.  The  increase in net cash  provided by operating  activities  in 1998 was
caused  primarily  by the  decrease in net income  being more than offset by the
increase in non-cash expenses for depreciation and amortization,  other non-cash
charges and improved working capital utilization.

            EBITDA  represents   operating  profit  (loss)  plus   depreciation,
amortization  and in the case of 1998,  certain one-time charges and is provided
as additional information relating to the Company's debt service capacity. While
EBITDA should not be considered as an alternative  measure of net income or cash
provided  by  operating  activities,  it  is  presented  to  provide  additional
information relating to the Company's debt service capability. EBITDA should not
be  considered in isolation or as a substitute  for other  measures of financial
performance or liquidity. EBITDA for the years ended December 31, 1998, 1997 and
1996  was  $30.9  million,  $26.1  million  and  $28.8  million,   respectively.
Depreciation  and  amortization  for the years ended December 31, 1998, 1997 and
1996 was $16.6 million, $6.8 million and $6.3 million, respectively. Results for
1998 include  one-time charges for depreciation and amortization of $5.6 million
and approximately $1.5 million of additional depreciation to shorten asset lives
on certain covered elastic yarn  manufacturing  equipment  effective  October 1,
1998. Asset lives for existing equipment have been shortened to approximately 10
to 14  years,  on  average,  as  compared  to 14 to 20  years in the  past.  The
Company's  comprehensive review of the covered elastic yarn business with trends
toward off-shore sourcing,  the availability of new generations of equipment and
the  continuing  process of evaluating  future  production  needs  dictated that

<PAGE>

shortening the lives assigned to the covered elastic yarn  production  equipment
was prudent.

            During  1998,  capital   expenditures   amounted  to  $19.8  million
(excluding  $12.8 million to purchase the narrow elastic  fabrics  operations of
Fruit of the Loom on December 30, 1998).  Capital expenditures were $7.7 million
in 1997 and $13.8  million in 1996.  The majority of such  capital  expenditures
during  the  years   1996-1998  were  primarily  used  to  purchase   additional
manufacturing  equipment in order to increase the Company's  production capacity
and to obtain  productivity  improvements.  The Company  currently  expects that
capital  expenditures  for 1999  will  aggregate  approximately  $15.0  million,
primarily  for  machinery and property  improvements.  In addition,  the Company
anticipates  $5 to $7  million  of  the  total  will  be  spent  for  management
information systems (see "Year 2000 Compliance" below).

            The Company purchased substantially all of the narrow elastic fabric
assets of Fruit of the Loom for approximately  $12.8 million in cash on December
30,  1998.  Goodwill  and  other  intangible  assets  of $4.8  million are being
amortized over periods of 5 to 10 years.

            The Company's  business  strategy  includes the pursuit of strategic
acquisitions of other  businesses.  Any acquisition would be funded through cash
on hand, the issuance of additional securities,  the sale of other assets or the
incurrence of additional indebtedness.  The Company's ability to sell assets and
incur  indebtedness are restricted under the Indenture referred to below and the
Company's revolving credit facilities.

            On December  1, 1997,  the  Company  issued and sold $175.0  million
principal  amount of its 9 5/8%  Senior  Notes due 2007 (the  "Notes")  under an
Indenture,  dated as of December  1, 1997 (the  "Indenture").  The net  proceeds
(before deduction of transaction expenses) of approximately $170.0 million, were
used  to  pay  the  purchase  price  in  the  ECA  acquisition,   repay  certain
indebtedness  and to pay transaction  fees and expenses  relating  thereto.  The
Company  used the  balance  of the net  proceeds  from the sale of the Notes for
general corporate purposes.  During 1998, the Company cancelled an interest rate
swap  agreement  relating  to  debt  refinanced  by the  notes  and  received  a
cancellation fee of $.3 million.

            The Company has a domestic  revolving  credit facility that provides
for revolving credit borrowings in an aggregate  principal amount of up to $25.0
million.  The revolving  credit  facility  terminates  and all amounts  borrowed
thereunder  will be due  December  1, 2002.  Loans  under the  revolving  credit
facility  bear  interest  at rates  based  upon a base rate  (the  higher of the
NationsBank, N.A. prime rate or the Federal Funds rate), certificates of deposit
rates or Eurodollar rates, in each case plus an applicable  margin.  Loans under
the revolving  credit  facility are guaranteed by all U.S.  subsidiaries  of the
Company and are required to be secured by liens on the accounts  receivable  and
inventory  of the Company  and its U.S.  subsidiaries,  100% of the  outstanding
capital  stock of the Company's  U.S.  subsidiaries  and 65% of the  outstanding
capital stock of each of the non-U.S.
subsidiaries.

            At December 31, 1998, the Company has total  indebtedness  of $206.1
million and $13.0 million was available for future borrowings under the domestic
credit facility.  In addition,  at such date the Company's foreign  subsidiaries

<PAGE>

had $24.3 million of U.S. dollar equivalent credit availability under bank lines
of credit.  Amounts  outstanding as of December 31, 1998 were $7.3 million.  The
most  restrictive  covenant  of  the  domestic  revolving  credit  facility  and
Indenture limits short-term  borrowings by the Company's foreign subsidiaries to
a total of $15.0 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.

            The  Company  is highly  leveraged.  The  Company's  ability to make
scheduled  payments  of  principal  of,  or to pay the  interest  or  applicable
liquidated damages, if any, on, or to refinance, its indebtedness (including the
Notes),  or to fund  planned  capital  expenditures  will  depend on its  future
performance,  which,  to a certain  extent,  is  subject  to  general  economic,
financial,  competitive,  legislative,  regulatory  and other  factors  that are
beyond its control.  Based upon the current level of operations and  anticipated
revenue growth, management believes that cash flow from operations and available
cash, together with available  borrowings under the Company's credit facilities,
will be adequate to meet the Company's  future  liquidity needs for at least the
next several years. The Company may, however, need to refinance all or a portion
of the principal of the Notes on or prior to maturity. There can be no assurance
that the Company's business will generate  sufficient cash flow from operations,
that anticipated  revenue growth and operating  improvements will be realized or
that future  borrowings will be available under the Company's credit  facilities
in an amount  sufficient  to enable the  Company to  service  its  indebtedness,
including the Notes,  or to fund its other liquidity  needs. In addition,  there
can be no assurance that the Company will be able to effect any such refinancing
on commercially reasonable terms or at all.

            The  Company's   high  degree  of  leverage   could  have  important
consequences to the Company,  including,  but not limited to: (i) making it more
difficult  for the  Company to satisfy  its  obligations,  (ii)  increasing  the
Company's  vulnerability  to general adverse  economic and industry  conditions,
(iii)  limiting the  Company's  ability to obtain  additional  financing to fund
future  working  capital,  capital  expenditures,  and other  general  corporate
requirements,  (iv)  requiring the  dedication  of a substantial  portion of the
Company's cash flow from operations to the payment of principal of, and interest
on, its  indebtedness,  thereby  reducing the  availability of such cash flow to
fund working capital,  capital  expenditures,  research and development or other
general corporate purposes,  (v) limiting the Company's  flexibility in planning
for, or reacting to, changes in its business and the industry,  and (vi) placing
the Company at a competitive  disadvantage vis-a-vis less leveraged competitors.
In addition, the Indenture and the Company's credit facilities contain financial
and other restrictive  covenants that limit the ability of the Company to, among
other things,  borrow  additional  funds.  Failure by the Company to comply with
such  covenants  could  result  in an event of  default  which,  if not cured or
waived,  could have a material  adverse  effect on the Company.  At December 31,
1998,  Worldtex was not in  compliance  with  financial  covenants in its credit
facility  relating to the  leverage  ratio,  interest  coverage  ratio,  minimum
tangible net worth and limitation on capital expenditures.  The Company obtained
a waiver as of December 31, 1998,  and the credit  facility was amended on March
29, 1999, to reset the financial covenants for 1999.

<PAGE>

YEAR 2000 COMPLIANCE
--------------------

            Many existing computer programs in use around the world use only the
last two digits to define a year rather than four digits and do not take account
of the change in century  that will occur in the year 2000.  If this  problem is
not corrected,  computer  applications  could fail or create mistakes.  Worldtex
established  a Year  2000  project  team in 1998  and  retained  an  independent
consulting  group to  provide  assistance  in  assessing  Year 2000 risks and to
provide  recommendations  for  remediation.  The  project  scope  includes  both
information technology and computer based embedded technology.  The project team
has  focused  its  efforts  on  information   systems   software  and  hardware,
manufacturing equipment and facilities, and third-party relationships.

            The Company  adopted a multi-step  approach in  conducting  the Year
2000 project consisting of: (1) identification, (2) assessment and prioritizing,
(3)  remediation  (including  upgrading and  replacement)  and testing,  and (4)
contingency planning. The identification step was completed in April, 1998. Step
two was completed in August,  1998.  The Company has begun a worldwide  business
system replacement project that uses programs primarily from one vendor. The new
systems are expected to make  approximately 80 percent of the Company's business
computer systems Year 2000 compliant and are scheduled to be complete during the
third quarter of 1999.  Remediation for other  information  systems and computer
based embedded  technology systems is 25 percent complete and is scheduled to be
complete by December 31, 1999. The Company has initiated  formal  communications
with its  significant  suppliers,  customers,  and other  business  partners  to
determine  the extent the Company may be  vulnerable  in the event those parties
fail to properly remediate their own Year 2000 issues. Monitoring and testing of
critical system interfaces will be performed as the Year 2000 approaches.

            The estimated  cost for the Year 2000 project,  including  worldwide
business system  replacement,  is  approximately  $5 to $7 million.  The Company
estimates  that $3 to $5 million  will be  capitalized  as hardware and software
purchases.   The  remaining  cost  will  be  expensed  as  incurred  during  the
remediation period. The Company had incurred approximately $1.1 million in costs
as of December 31, 1998, primarily for the purchase of software.

            The Company believes,  although it cannot assure,  that its internal
systems  and  equipment  will be Year  2000  compliant  in a timely  manner.  In
addition,  the Company cannot predict  whether  systems of third parties will be
Year 2000  compliant  in a timely  manner.  The  implementation  of new business
systems and  completion  of the Year 2000 project as  scheduled  will reduce the
possibility  of  significant  interruptions  of normal  operations.  The Company
believes  its  most  likely  worst  case  scenario  is  the  disruption  of  the
distribution  system (product  delays from suppliers  and/or delayed orders from
customers)  which could result in the  reduction or  suspension of the Company's
operations. The Company has not developed a specific Year 2000 contingency plan.
Contingency  plans will be  addressed  as  additional  information  is available
regarding  the  Company's  remediation  and  testing  steps  and the  status  of
third-party Year 2000 readiness.

<PAGE>

EUROPEAN MONETARY UNION - EURO
------------------------------

            The Company conducts business in multiple currencies,  including the
currencies  of  various  European  countries  in the  European  Union  which are
participating  in the single  European  currency by  adopting  the Euro as their
common  currency  on January 1, 1999,  the date that the Euro trades on currency
exchanges. The legal currencies of the participating countries will remain legal
tender for a  transition  period  between  January 1, 1999 and  January 1, 2002.
During  the  transition  period,  wire  transfers  can be made in the Euro  with
payment  for  goods and  services  in either  the Euro or the  legacy  currency.
Between  January  1, 2002 and July 1, 2002,  the  participating  countries  will
introduce  Euro notes and coins and eventually  withdraw all legacy  currencies.
Currency rates during the transition  period will no longer be computed from one
legacy to another but instead will first be converted into the Euro. The Company
is  addressing  the issues  involved with the  introduction  of the Euro and the
impact on its business,  both strategically and operationally.  Based on current
information,  the Company does not expect the Euro conversion to have a material
adverse  effect on the  financial  position  or  results  of  operations  of the
Company.

FORWARD-LOOKING STATEMENTS
--------------------------

            Certain  statements in this Management's  Discussion and Analysis of
Financial  Condition and Results of Operations  which are other than  historical
facts are  intended  to be  "forward-looking  statements"  within the meaning of
federal  securities  laws. Words such as "expects",  "believes",  "anticipates",
"projects",  "estimates",  "plan",  variations  of such words and other  similar
expressions  are intended to identify  such  forward-looking  statements.  These
statements  are subject to various  risks and  uncertainties,  many of which are
outside the control of the Company. Risks and uncertainties include, but are not
limited  to,  the  financial  strength  of the  apparel  industry,  the level of
consumer spending for apparel,  changing consumer  preferences,  the competitive
pricing  environment  within the hosiery market segment of the apparel industry,
foreign currency translation,  success of new product  introductions,  and other
risk factors.  Therefore, actual outcomes and results may differ materially from
what is  expressed  or  forecasted  in,  or  implied  by,  such  forward-looking
statements,  which reflect management's judgment only as of the date hereof. The
Company  does not intend to update  publicly  this  information  to reflect  new
information, future events or otherwise.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------    ----------------------------------------------------------

            The Company in the normal  course of business is exposed to the risk
of loss from  non-performance  by its  customers  for  amounts  due the  Company
through the  extension  of credit.  The Company  controls  credit risk  exposure
through credit approvals,  credit limits, factoring certain selected receivables
and monitoring procedures.  The Company did not have any significant exposure to
any  individual  customer as of December  31, 1998 that had not been  adequately
provided for through an allowance for bad debts.

            The  Company's  sales  are  predominantly  denominated  in the local
currency of the subsidiary  originating  the sale. A significant  decline in the
value of currencies of the foreign  countries in which the Company does business

<PAGE>

could  have a  material  adverse  impact on the  Company's  business,  financial
condition  and results of  operations.  The Company had entered into  derivative
financial instruments related to foreign currency exchange rates at December 31,
1998 totaling $.4 million.

            The  Company's   primary  source  of  funds  other  than  cash  from
operations is borrowings  under its domestic  revolving credit and foreign lines
of credit  facilities  which incur  interest  at variable  rates at terms not to
exceed six  months,  at which time the  borrowings  are reset to current  market
rates.

            The following table summarizes the Company's market risks associated
with long-term  debt.  The table  presents  principal cash out-flows and related
interest rates by year of maturity. Fair values used below were determined using
quoted  market  rates or  interest  rates that are  currently  available  to the
Company on debt with similar terms and remaining maturities.

<TABLE>
<CAPTION>
                         ANNUAL LONG-TERM DEBT MATURITIES
                              (DOLLARS IN THOUSANDS)
                                                                            FAIR
                   1999   2000   2001    2002    2003   THEREAFTER TOTAL    VALUE
                   ----   ----   ----    ----    ----   ---------- -----    -----

<S>                <C>      <C>   <C>      <C>    <C>   <C>       <C>      <C>    
Fixed Rate         $312     555   640      888    871   175,985   179,251  160,055

Average interest  
rate               7.00%   7.00% 7.00%    7.00%  7.00%     9.20%

Variable Rate      $213   1,307    -    12,000     -      6,000    19,520   19,520

Average interest
rate               6.30%   6.30%   -      7.04%    -       5.00%

</TABLE>

            The results of operations  and  financial  condition of Worldtex 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.

<PAGE>

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' Reports

Financial Statements:

            Consolidated Statements of Operations,
                  Years Ended December 31, 1998, 1997 and 1996

            Consolidated Statements of Comprehensive Income (Loss)
                  Years Ended December 31, 1998, 1997 and 1996

            Consolidated Balance Sheets,
                  December 31, 1998 and 1997

            Consolidated Statements of Stockholders' Equity,
                  Years Ended December 31, 1998, 1997 and 1996

            Consolidated Statements of Cash Flows,
                  Years Ended December 31, 1998, 1997 and 1996

            Notes to Consolidated Financial Statements

Supplementary Financial Information

Financial Statement Schedule:

            Schedule II -     Valuation and Qualifying Accounts
                  Years Ended December 31, 1998, 1997 and 1996

            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 and Stockholders of
Worldtex, Inc.:

We have audited the accompanying  consolidated  balance sheet of Worldtex,  Inc.
and  subsidiaries  (the  "Company")  as of December  31,  1998,  and the related
consolidated   statements   of   operations,    comprehensive   income   (loss),
stockholders'  equity,  and cash flows for the year then  ended.  Our audit also
included the financial  statement  schedule for the year ended December 31, 1998
listed  in the  Index  at Item  8.  These  financial  statements  and  financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule based on our audit. The financial  statements and
financial  statement  schedule  of the  Company  as of and for the  years  ended
December 31, 1997 and 1996 were audited by other  auditors  whose report,  dated
February 27, 1998, expressed an unqualified opinion on those statements.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  such 1998 consolidated  financial statements present fairly, in
all material respects,  the financial position of the Company as of December 31,
1998,  and the  results of its  operations  and its cash flows for the year then
ended in conformity with generally accepted accounting principles.  Also, in our
opinion, such financial statement schedule for the year ended December 31, 1998,
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.


Deloitte & Touche LLP

Hickory, North Carolina
February 25, 1999 (March 29, 1999 as to the credit facility amendment  described
in Note 6)

<PAGE>
                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Worldtex, Inc.:

We have audited the accompanying  consolidated  balance sheet of Worldtex,  Inc.
and subsidiaries as of December 31, 1997 and the related consolidated statements
of operations,  stockholders' equity and cash flows for each of the years in the
two-year  period ended  December 31, 1997. In connection  with our audits of the
consolidated financial statements,  we also have audited the financial statement
schedule as listed in the accompanying  index at 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, 1997 and the results of their  operations  and
their cash flows for each of the years in the two-year period ended December 31,
1997, 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 LLP


Atlanta, Georgia
February 27, 1998


<PAGE>

<TABLE>
<CAPTION>
                                   WORLDTEX, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
                FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                      (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

                                                    1998         1997        1996
                                                    ----         ----        ----

<S>                                              <C>            <C>         <C>    
Net sales (Note 12)                              $ 258,537      203,256     207,829

Cost of goods sold (Notes 3 and 16)                216,267      167,272     168,754
                                                 ---------      -------     -------

    Gross profit                                    42,270       35,984      39,075

Selling and administrative expense (Notes 3
    and 16)                                         25,599       15,802      15,640

Goodwill amortization (Notes 3 and 16)               4,638          968         942
                                                 ---------      -------     -------

    Operating profit                                12,033       19,214      22,493

Interest expense (Note 3)                           18,765        7,043       5,826

Other income (expense) - net                           340         (302)        694
                                                 ---------      -------     -------

    Income (loss) before income taxes               (6,392)      11,869      17,361

Provision for income taxes (Note 11)                  (494)       5,377       6,415
                                                 ---------      -------     -------
    Income (loss) before extraordinary item         (5,898)       6,492      10,946

Extraordinary item, net (Note 6)                         -       (1,344)          -
                                                 ---------      -------     -------

    Net income (loss)                            $  (5,898)       5,148      10,946
                                                 =========      =======     =======

Basic net income (loss) per share (Note 3):
    Income (loss) before extraordinary item      $    (.41)         .45         .76
    Extraordinary item, net                              -         (.09)          -
                                                 ---------      -------     -------
    Net income (loss)                            $    (.41)         .36         .76
                                                 =========      =======     =======
Diluted net income (loss) per share (Note 3):
    Income (loss) before extraordinary item      $    (.41)         .44         .75
    Extraordinary item, net                              -         (.09)          -
                                                 ---------      -------     -------
Net income (loss)                                $    (.41)         .35         .75
                                                 =========      =======     =======
Weighted average shares outstanding (Note 3)
    Basic                                           14,368       14,420      14,463
                                                 =========      =======     =======
    Diluted                                         14,368       14,821      14,669
                                                 =========      =======     =======
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

<TABLE>
<CAPTION>
                                 WORLDTEX, INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (IN THOUSANDS)

                                                    1998         1997        1996
                                                    ----         ----        ----

<S>                                              <C>              <C>        <C>   
Net income (loss)                                $  (5,898)       5,148      10,946
                                                 ---------      -------     -------
Other comprehensive income (loss):

    Foreign currency translation adjustments
    (Note 3)                                         2,704      (12,937)     (4,153)
                                                 ---------      -------     -------

    Comprehensive income (loss)                  $  (3,194)      (7,789)      6,793
                                                 =========      =======     =======

</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

<TABLE>
<CAPTION>
                                 WORLDTEX, INC.
                           CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
                           DECEMBER 31, 1998 AND 1997
                                 (IN THOUSANDS)

                                     ASSETS
                                                             1998         1997
                                                             ----         ----
<S>                                                       <C>             <C>
Current assets:
    Cash and cash equivalents                             $    6,715      14,872
    Accounts and notes receivable, less allowance for
       doubtful accounts of $2,041 in 1998 and $2,085 in
       1997 (Notes 4 and 6)                                   42,885      46,320
    Inventories (Notes 3 and 6)                               58,515      54,200
    Prepaid expenses and other current assets (Note 11)        3,982       3,026
                                                             -------     -------
       Total current assets                                  112,097     118,418

Property, plant and equipment - net (Note 3)                 113,652      99,160
Other assets (Notes 3 and 15)                                 12,850      11,946
Cost in excess of net assets of acquired businesses, net
    of accumulated amortization of $9,146 in 1998 and         
    $7,600 in 1997 (Note 3)                                   85,521      82,915
                                                          ----------     -------
                                                          $  324,120     312,439
                                                          ==========     =======

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Short-term borrowings (Note 5)                        $    7,308       1,819
    Current installments of long-term debt (Note 6)              525         620
    Accounts payable-trade and other liabilities (Notes
    8 and 10)                                                 29,412      28,236
    Income taxes payable (Note 11)                             1,700           -
                                                          ----------     -------
       Total current liabilities                              38,945      30,675

Long-term debt (Note 6)                                      198,246     185,780
Other long-term liabilities                                      569       2,547
Deferred income taxes (Note 11)                               12,878      15,935
                                                          ----------     -------
       Total liabilities                                     250,638     234,937
                                                          ==========     =======
Commitments and contingencies (Notes 8 and 9)

Stockholders' equity (Notes 6, 7 and 8):
    Preferred stock                                                -           -
    Common stock (shares issued of 14,700,971 in 1998
       and 14,694,971 in 1997)                                   147         147
    Paid-in capital                                           30,084      30,059
    Retained earnings                                         56,169      62,067
    Accumulated other comprehensive loss:
       Cumulative foreign translation adjustment             (10,569)    (13,273)
                                                             
    Less - Treasury stock, at cost (429,800 shares in
       1998 and 266,300 shares in 1997)                       (2,349)     (1,498)
                                                          ----------     -------
       Total stockholders' equity                             73,482      77,502
                                                          ----------     -------
                                                          $  324,120     312,439
                                                          ==========     =======
</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<PAGE>

<TABLE>
<CAPTION>

                                 WORLDTEX, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (IN THOUSANDS)

                                                                      CUMULATIVE
                                 COMMON                               FOREIGN    
                                 STOCK   COMMON    PAID-IN  RETAINED  TRANSLATION TREASURY
                                 SHARES  STOCK     CAPITAL  EARNINGS  ADJUSTMENT  STOCK    TOTAL      
                                 ------  -----     -------  --------  ----------  -----    -----      

<S>                              <C>     <C>       <C>      <C>       <C>         <C>      <C>   
Balances at December 31, 1995    14,663  $   147   29,913   45,973    3,817       (911)    78,939

Net income                            -        -        -   10,946        -          -     10,946
Foreign currency translation
  adjustment                          -        -        -        -   (4,153)         -     (4,153)
Purchases of treasury stock           -        -        -        -        -       (587)      (587)
Options exercised                     7        -       33        -        -          -         33
                                 ------  -------   ------  ------   -------     ------     ------

Balances at December 31, 1996    14,670  $   147   29,946   56,919     (336)    (1,498)    85,178

Net income                            -        -        -    5,148        -          -      5,148
Foreign currency translation
  adjustment                          -        -        -        -  (12,937)         -    (12,937)
Options exercised                    25        -      113        -        -          -        113
                                 ------  -------   ------  ------   -------     ------     ------

Balances at December 31, 1997    14,695  $   147   30,059   62,067  (13,273)    (1,498)    77,502

Net loss                              -        -        -  (5,898)        -          -     (5,898)
Foreign currency translation
  adjustment                          -        -        -       -     2,704          -      2,704
Purchases of treasury stock           -        -        -       -         -       (851)      (851)
Options exercised                     6        -       25       -         -          -         25
                                 ------  -------   ------  ------   -------     ------     ------

Balances at December 31, 1998
(Notes 6, 7 and 8)               14,701  $   147   30,084  56,169   (10,569)    (2,349)    73,482
                                 ======  =======   ======  ======   =======     ======     ======

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

<TABLE>
<CAPTION>

                                 WORLDTEX, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (IN THOUSANDS)

                                              1998      1997     1996
                                              ----      ----     ----
<S>                                         <C>         <C>      <C>    
Cash flows from operating activities:
  Net income (loss)                         $(5,898)    5,148    10,946
  Adjustments to reconcile net income
    (loss) to net cash provided by 
    (used in) operating activities:
   Depreciation                              11,934     5,877     5,342
   Amortization                               4,638       968       942
   Provision for losses on accounts
    receivable                                  590       305       139
   Deferred income taxes                     (5,089)      720       825
  Change in assets and liabilities 
  net of effects of acquisitions:             
   Accounts and notes receivable              2,729    (1,064)   (2,788)
   Inventories                               (2,228)   (7,396)   (4,557)
   Prepaid expenses and other current
   assets                                     135      (248)      163        
   Accounts payable -
       trade and other current liabilities    1,809    (4,313)    5,344
   Income taxes payable                       1,850    (1,494)   (1,324)
                                            -------   --------  --------
   Net cash provided by (used in)
   operating activities                      10,470    (1,497)   15,032
                                            -------   --------  -------
Cash flows from investing activities:
   Capital expenditures                     (19,871)   (7,706)  (13,785)
   Acquisitions, net of cash acquired       (12,810)  (85,382)        -
   Other investing activities                (2,830)   (8,190)   (1,149)
                                            -------   --------  --------
     Net cash used in investing activities  (35,511)  (101,278) (14,934)
                                            -------   --------  ------- 
Cash flows from financing activities:
   Borrowings under line of credit
     arrangements                             9,482     3,548    16,724
   Payments under line of credit
     arrangements                            (3,221)   (3,435)  (16,321)
   Borrowings under revolving credit
     facility                                12,000   109,550   104,660
   Payments under revolving credit
     facility                                     -  (121,940) (104,940)
   Borrowings under long-term loans               -   175,000         -
   Payments under long-term loans                 -   (50,000)        -
   Stock issued or (reacquired), net           (825)      113      (554)
   Other financing activities                (1,141)    1,068       830
                                            -------   -------   -------
      Net cash provided by financing
      activities                             16,295   113,904       399
                                            -------   -------   -------
Effects of exchange rate changes on cash        589     1,626      (225)
                                            -------   -------   -------
      Net increase (decrease) in cash and
      cash equivalents                       (8,157)   12,755       272
Cash and cash equivalents at beginning of
 year                                        14,872     2,117     1,845
                                            -------   -------   -------
Cash and cash equivalents at end of year    $ 6,715    14,872     2,117
                                            =======   =======   =======
Supplemental disclosure of cash flow
information:
    Cash paid during the year for:
      Interest                              $19,667     7,374     5,784
                                            =======     =====    ======
      Income taxes                          $ 1,920     7,594     7,630
                                            =======     =====    ======

</TABLE>

         SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                  (DOLLARS IN THOUSANDS EXCEPT 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;  and narrow  elastic  fabrics that are used as
components in the  production  of apparel  products and elastic bands in women's
hosiery.  Worldtex's  principal markets are in North America,  South America and
Europe.

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.  During
1997, Worldtex acquired Elastex,  Inc. ("Elastex"),  based in Asheboro,  North
Carolina,   and  Elastic  Corporation  of  America,  Inc.  ("ECA"),  based  in
Columbiana,  Alabama as  discussed  in Note 14.  Elastex  was merged  into ECA
effective   December  31,   1998.   A  reference  to  Worldtex   includes  its
subsidiaries unless the context indicates otherwise.

NOTE 2 - BASIS OF PRESENTATION

The  consolidated  financial  statements of Worldtex as of December 31, 1998 and
1997 and for the years  ended  December  31,  1998,  1997 and 1996  include  the
accounts of Regal, Rubyco, Filix, Fibrexa, Elastex effective October 3, 1997 and
ECA effective  December 1, 1997.  The Company also has a 38% interest in a joint
venture  in  Estonia  which is  accounted  for  under  the  equity  method.  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 AND CASH EQUIVALENTS

At December  31,  1998 and 1997,  cash  included a demand  deposit of $2,596 and
$9,160,  respectively,  with  a  commercial  bank  earning  daily  money  market
investment yields. At December 31, 1998 and 1997,  restricted cash on deposit of
$2,247 and $2,123,  respectively,  is included in other  assets 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, 1998 and 1997, the major classes of inventory are:

<TABLE>
<CAPTION>

                     1998      1997
                     ----      ----
<S>                <C>         <C>   
Raw Materials      $ 16,032    15,401
Work in Process      14,749    13,976
Finished Goods       27,734    24,823
                   --------    ------
                   $ 58,515    54,200
                   ========    ======

</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 (6 to 14 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.

<PAGE>

<TABLE>
<CAPTION>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

As of December 31, 1998 and 1997, property, plant and equipment consists of:


                        1998     1997
                        ----     ----

<S>                    <C>       <C>  
Land                   $3,255    2,820
Buildings and
   leasehold   
   improvements        39,246   34,172
Machinery and
   equipment           111,417  99,083
                     ---------  -------
                       153,918  136,075
Less accumulated
   depreciation
   and amortization    40,266   36,915
                     ---------  -------
                     $113,652   99,160
                     ========   =======
</TABLE>

Effective October 1, 1998, the Company reduced its estimate of depreciable lives
for certain  manufacturing  equipment from a range of 14 to 20 years to 10 to 14
years,  on  average.  This  change  increased  depreciation  expense  in 1998 by
approximately $1.5 million, increased the net loss by approximately $1.0 million
and increased the net loss per share by $.07.

(D)   COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES

The cost in excess of net assets of acquired  businesses is amortized  using the
straight-line  method over the expected  periods to be  benefited,  generally 40
years. The Company  assesses the  recoverability  of these intangible  assets by
determining  whether  the  amortization  of the cost in excess of net  assets of
acquired  businesses  over their  remaining  lives 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

The Company enters into forward  exchange  contracts as a hedge against accounts
payable  denominated in foreign  currency.  These contracts are used 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, 1998 and 1997, $400 and $0, 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 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 change.

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,  and
the foreign currency translation adjustment shown on the consolidated statements
of comprehensive  income (loss) are not shown net of tax, since Worldtex intends
that such earnings will continue to be invested in those countries.  At December
31, 1998, the cumulative  amount of foreign  undistributed  earnings amounted to
approximately  $51,218.  Foreign tax credits may be  available as a reduction of
United States income taxes in the event of such distributions.

(G)   FOREIGN CURRENCY

Assets and  liabilities  denominated in foreign  currencies have been translated
into U.S.  Dollars  at the  period-end  exchange  rate.  Revenues  and  expenses
denominated in foreign  currencies have been translated into U.S. Dollars at the

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

weighted average 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.

(H)   NET INCOME PER SHARE

Basic earnings per share are calculated  based upon the weighted  average number
of common shares  outstanding  during the year.  Diluted  earnings per share are
based upon the weighted  average  number of common  shares and  dilutive  common
equivalent  shares  outstanding  during the year. The  reconciliation  of income
available to common  stockholders  and weighted  average number of common shares
for basic and dilutive  per share  amounts as required by Statement of Financial
Accounting Standards ("SFAS") No. 128, EARNINGS PER SHARE is as follows:

<TABLE>
<CAPTION>
                    1998    1997    1996
                    ----    ----    ----
<S>               <C>       <C>     <C>    
Diluted net
  income (loss)
  available to
  common          
  stockholders    $(5,898)  5,148   10,946
                  -------  ------   ------
Basic weighted
  average common
  shares     
  outstanding      14,368  14,420   14,463

Effect of
  dilutive   
  options
  outstanding           -     401      206
                  -------  ------   ------
Diluted weighted
  average common
  and common
  equivalent
  shares     
  outstanding      14,368  14,821   14,669
                  -------  ------   ------
Potentially
  dilutive shares
  not included
  because their
  effect was
  antidilutive      1,814      80      458
                  -------  ------   ------
</TABLE>

(I)   REVENUE RECOGNITION

Revenue  from sales is  recognized  when goods are shipped to the  customer,  at
which point the risk of loss has passed to the  customer.  The Company  provides
allowances  for bad  debts and  expected  cash  discounts  based  upon  periodic
evaluations  of  the  aging  of  the  accounts  receivable  and  related  claims
experience.

(J)   INTEREST RATE SWAP AGREEMENT

The Company terminated an interest rate swap agreement in 1998. It was accounted
for like a hedge of the  underlying  debt  obligation  and interest  expense was
recorded using the revised interest rate, with fees and other payments amortized
as yield adjustments.

(K)   STOCK OPTIONS

The Company accounts 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.


<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


(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 income as  previously
reported.

(N)   NEW ACCOUNTING STANDARDS

The Company adopted SFAS No. 130, REPORTING  COMPREHENSIVE INCOME, on January 1,
1998.  Comprehensive  income is defined as "all changes in stockholders'  equity
exclusive of transactions with owners".  The Company's only transactions  deemed
to be items of other comprehensive income relate to foreign currency translation
adjustments   for  its  investments  in   consolidated   foreign   subsidiaries.
Comprehensive  income  (loss)  for  1998,  1997  and  1996 is  presented  in the
accompanying consolidated statements of comprehensive income (loss).

Comprehensive  income will also include  gains and losses on certain  derivative
transactions that qualify as hedges, as computed under SFAS No. 133,  ACCOUNTING
FOR DERIVATIVE  INSTRUMENTS  AND HEDGING  ACTIVITIES.  SFAS No. 133 requires all
derivatives  to be recorded on the balance  sheet at fair value and  establishes
special accounting  standards for derivatives that qualify as fair value hedges,
cash flow hedges and hedges of foreign currency  exposures of net investments in
foreign operations.  Management is evaluating the impact of the adoption of SFAS
No. 133 on the Company's financial position and operations.

(O)   CAPITALIZATION OF INTEREST

The Company capitalizes interest expense associated with construction of certain
assets. In 1998, interest of $379 was capitalized.

NOTE 4 - NOTES RECEIVABLE

Foreign  subsidiaries  have the U.S.  dollar  equivalent of $2,845 and $2,812 of
non-interest  bearing  notes  receivable  as of  December  31,  1998  and  1997,
respectively, with maturities within four months of those dates.

NOTE 5 - SHORT-TERM BORROWINGS

Short-term debt consists of notes payable to banks and advances under bank lines
of credit and overdraft  facilities.  The Company's  foreign  subsidiaries  have
available  the U.S.  dollar  equivalent  of $24,544  under various bank lines of
credit and overdraft facilities providing for unsecured borrowings and letter of
credit financing generally due in 90 to 180 days. At December 31, 1998 and 1997,
$7,308 and $1,819,  respectively,  were  outstanding  under these  agreements at
average interest rates of 5.25% to 7.75% respectively.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

NOTE 6 - LONG-TERM DEBT

<TABLE>
<CAPTION>

As of December 31, 1998 and 1997, long-term debt consists of:

                         1998       1997
                         ----       ----
<S>                    <C>        <C>
9.625% Senior Notes
  due December 15,     
  2007                 $175,000   175,000

Industrial revenue
  bonds due June 1,
  2014 with interest
  at variable rates
  (5.0% average rate
  as of December 31,
  1998)                   6,000     6,000

Revolving credit
  facilities due
  December 1, 2002
  with interest at
  variable rates
  (7.04% weighted       
  average rate as of
  December 31, 1998)     12,000         -

Other indebtedness,
  primarily fixed
  rate debt, due at
  various dates          
  through 2007           5,771      5,400
                       --------   -------
                       198,771    186,400
Less current
installments               525        620
                       --------   -------
                       $198,246   185,780
                       ========   =======
</TABLE>


The aggregate annual  maturities of long-term debt during each of the five years
subsequent to December 31, 1998 are as follows:

<TABLE>
<CAPTION>

 YEAR ENDING
 DECEMBER 31,     AMOUNT
 ------------     ------
 <S>          <C>
    1999      $     525
    2000          1,862
    2001            640
    2002         12,888
    2003            871
 Thereafter     181,985
              ---------
              $ 198,771
              =========

</TABLE>

The Company  entered into an  indenture  dated  December 1, 1997,  under which a
total of  $175,000  of Senior  Notes due  December  15,  2007 were  issued  with
interest at the annual rate of 9.625%. The notes are unconditionally  guaranteed
by each of the U.S.  subsidiaries  of the  Company.  The  Company may redeem the
notes on or after December 15, 2002, at redemption  prices ranging from 104.813%
in 2002 to 100% in 2005.  Up to 35% of the aggregate  principal  amount of notes
originally  issued may be redeemed at a price of 109.625%  with the net proceeds

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

of a public offering of common stock at any time on or before December 15, 2000.
The indenture restricts the ability of the Company and its subsidiaries to incur
additional indebtedness and issue preferred stock, enter into sale and leaseback
transactions,  incur  liens,  pay  dividends or make  certain  other  restricted
payments,  apply net  proceeds  from  certain  asset  sales,  enter into certain
transactions with affiliates,  and assign, transfer,  lease, convey or otherwise
dispose of substantially all of the assets of the Company. At December 31, 1998,
Worldtex was in compliance with the various covenants.  Upon the issuance of the
notes the Company repaid certain existing indebtedness.  An extraordinary charge
of  $1,344,  net of a tax  benefit  of $693,  was  recorded  for the early  debt
extinguishment. In addition, during 1998, the Company cancelled an interest rate
swap agreement relating to indebtedness  repaid by the issuance of the notes and
received a settlement of $286.

Certain property and equipment collateralize the industrial revenue bonds, which
are also secured by an annually renewable letter of credit.

The Company has a domestic  credit  facility that provides for revolving  credit
borrowings  in an  aggregate  principal  amount of up to $25,000.  The  domestic
credit  facility  terminates  and all amounts  borrowed  thereunder  will be due
December 1, 2002.  Loans under the domestic  credit  facility  bear  interest at
variable  rates  based  upon a base  rate (the  higher of the prime  rate or the
Federal Funds  rate),certificate  of deposit rates or Eurodollar  rates, in each
case plus an applicable margin. Loans are guaranteed by all U.S. subsidiaries of
the Company and are required to be secured by liens on the  accounts  receivable
and inventory of the Company and its U.S. subsidiaries,  100% of the outstanding
capital  stock of the Company's  U.S.  subsidiaries  and 65% of the  outstanding
capital stock of each of the foreign subsidiaries.  The domestic credit facility
carries  a  commitment  fee of .375% of the  unused  available  borrowings.  The
domestic credit facility  contains  customary  covenants and restrictions on the
Company's  ability to engage in certain  activities.  In addition,  the domestic
credit facility provides that the Company must meet certain financial covenants,
including a minimum  consolidated  current ratio, a maximum leverage ratio and a
minimum  interest  coverage  ratio.  In addition,  the domestic  credit facility
restricts  the payment of dividends.  At December 31, 1998,  Worldtex was not in
compliance with financial  covenants  relating to the leverage  ratio,  interest
coverage   ratio,   minimum   tangible  net  worth  and  limitation  on  capital
expenditures.  The Company  obtained a waiver of the covenant  violations  as of
December 31,  1998,  and the credit  facility was amended on March 29, 1999,  to
reset the financial covenants for 1999.

Under the most restrictive of these debt  agreements,  no amounts were available
for the payment of dividends and other distributions as of December 31, 1998.

NOTE 7 - STOCKHOLDERS' EQUITY

Worldtex is authorized to issue up to  40,000,000  shares of common stock,  $.01
par value,  and  10,000,000  shares of preferred  stock,  $.01 par value.  As of
December 31, 1998 and 1997,  there were issued  14,700,971  and  14,694,971  and
outstanding 14,271,171 and 14,428,671 shares of common stock, respectively,  and
no shares of preferred stock. Worldtex has a current authorization to repurchase
up to 1,000,000  shares of its common stock although no amount was available for
such repurchases at December 31, 1998, under restrictive covenants in Worldtex's
debt agreements.  Through  December 1998,  429,800 shares had been purchased and
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 PER SHARE AMOUNTS)

In connection with Worldtex's formation in 1992, 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 1998,  options to purchase up to 2,100,000  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 a one-time  option to
purchase 10,000 shares of common stock of the Company.  As of December 31, 1998,
options for 37,600 shares had been  exercised  and 307,900  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, 1998, 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:

<TABLE>
<CAPTION>
                                      WEIGHTED
                                      AVERAGE
                         NUMBER OF    EXERCISE
                          SHARES       PRICE
                         ---------    --------  
<S>                      <C>          <C>
Balances at
  December 31,
  1995                   1,077,000     $5.57
  Options Granted          255,000     $4.82
  Options Exercised          6,200     $5.43
  Options Cancelled         10,000     $4.19
                         ---------
Balances at
  December 31,
  1996                   1,315,800     $5.44
  Options Granted           80,000     $8.26
  Options Exercised         25,400     $4.43
  Options Cancelled          3,000     $6.44
                         ---------
Balances at
  December 31,
  1997                   1,367,400     $5.53
  Options Granted          444,100     $3.38
  Options Exercised          6,000     $4.19
  Options Cancelled          1,000     $6.75
                         ---------
Balances at
  December 31,
  1998                   1,804,500     $5.07
                         =========
Options Exercisable:
  December 31, 1996        737,400     $5.91
  December 31, 1997        891,680     $5.76
  December 31, 1998      1,040,940     $5.65
Weighted average
fair value of options
granted:
  December 31, 1996          $2.27
  December 31, 1997          $3.79
  December 31, 1998          $1.98

</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Options outstanding at December 31, 1998:
<TABLE>
<CAPTION>

                            WEIGHTED
                            AVERAGE       WEIGHTED
  RANGE OF                 REMAINING      AVERAGE
  EXERCISE       NUMBER   CONTRACTUAL     EXERCISE
   PRICES      OF SHARES     LIFE         PRICE
  --------     ---------  -----------     --------
<S>            <C>        <C>             <C>
$3.38 - $4.75  1,072,900     7.7 yrs      $ 3.98
$6.44 - $6.75    651,600     4.3 yrs      $ 6.48
$7.97 - $9.44     80,000     8.7 yrs      $ 8.26

</TABLE>

Options exercisable at December 31, 1998:

<TABLE>
<CAPTION>
                            WEIGHTED
                            AVERAGE       WEIGHTED
  RANGE OF                 REMAINING      AVERAGE
  EXERCISE       NUMBER   CONTRACTUAL     EXERCISE
   PRICES      OF SHARES     LIFE         PRICE
  --------     ---------  -----------     --------
<S>            <C>        <C>             <C>
$3.38 - $4.75  410,540       7.7 yrs      $ 3.98
$6.44 - $6.75  614,400       4.3 yrs      $ 6.48
$7.97 - $9.44   16,000       8.7 yrs      $ 8.26

</TABLE>

The Company  continues to apply  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.  Options generally vest ratably over five years and
have a term of ten years.

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 (loss) and net income
(loss) per share would be as follows:

<TABLE>
<CAPTION>
                 1998    1997    1996
                 ----    ----    ----
<S>              <C>     <C>     <C>    
Net income
  (loss) as
  reported      $(5,898) 5,148  10,946
Pro forma net
  income (loss)  (6,019) 5,046  10,872       

Diluted net
  income (loss)
  per share as     
  reported         (.41)   .35     .75
Pro forma net
  income (loss)    
  per share        (.42)    .35     .75

</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 1998,  1997 and  1996:  dividend  yield of 0%;
expected  volatility of 36%, 33% and 27%;  risk-free  interest rates of 5.5% and
expected lives of eight years.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

NOTE 8 - EMPLOYEE BENEFIT PLANS

Effective June 1, 1996, the Company amended and merged the Regal profit-sharing,
the Worldtex ESOP, and the Worldtex,  Inc. 401(k) plans and renamed the combined
plans The  Worldtex,  Inc.  Profit  Sharing  and  Retirement  Savings  Plan (the
"Plan").  The purpose of the Plan is to provide for discretionary profit sharing
contributions,  elective deferrals pursuant to Internal Revenue Code Section 401
(k), and discretionary  matching  contributions for employees of the Company and
its participating  subsidiaries.  All Company  contributions vest at the rate of
20% after two years,  40% after three years, 60% after four years and 100% after
five years.

Worldtex's  United  States  employees  participate  in the  Plan  that  provides
eligible  employees  with an opportunity to purchase  various  investment  funds
including   Company   stock   through   payroll   deductions.   These   employee
contributions,  subject to certain  limitations,  are matched by  Worldtex.  The
Worldtex  contribution  was  suspended  indefinitely  effective  June  1,  1996.
Effective  January 11, 1998,  Worldtex  reinstituted its matching program at the
rate  of  one-third  of  the  employee  contribution  up to a  maximum  employee
contribution  of 6% of  salary.  Contributions  to the Plan are  invested  by an
independent  trustee.  Contributions  to the Plan were $187, $0 and $50 in 1998,
1997 and 1996 respectively.

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.  Contributions for the years
ended December 31, 1998, 1997 and 1996 were $0, $89 and $60 respectively.

Employees of Rubyco  participate  in a Registered  Retirement  Savings plan. The
plan  provides for employee  contributions  of 4% of salary to a maximum of $2.3
per employee  with  corresponding  contributions  by Rubyco of 5% of salary to a
maximum of $2.3 per  employee.  Contributions  for the years ended  December 31,
1998, 1997 and 1996 were $20, $23 and $27 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.  Contributions
for the years ended  December 31, 1998,  1997 and 1996 were $590,  $720 and $902
respectively.

Under the terms of an industry-wide labor agreement, Filix employees participate
in an unfunded plan which provides for 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 Company's accumulated benefit obligation for this plan was $212
and $185 at December 31, 1998 and 1997,  respectively,  with a projected benefit
obligation of $228 and $199.  The projected  obligation at December 31, 1998 and
1997 was  determined  using an  assumed  discount  rate of 7.25% and an  assumed
long-term  rate of increase in  compensation  of 3%. The  Company's net periodic
pension  cost  for  this  plan  was  $22,  $21 and $47 in  1998,  1997  and 1996
respectively.

Worldtex has an unfunded  supplemental plan for a senior executive.  The accrued
liability  at  December  31,  1998 and 1997 was $2,365 and  $1,487.  The Company
accrued $878,  $200 and $522 in 1998,  1997 and 1996  respectively  for benefits
under this plan.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Future minimum lease payments under non-cancelable  operating leases,  primarily
for real property, as of December 31, 1998 are:

<TABLE>
<CAPTION>

     <S>      <C>    
      1999     $   2,296
      2000         2,192
      2001         2,073
      2002         1,684
      2003           128
               ---------
      Total    $   8,373
               =========
</TABLE>

Rental expense for cancelable and  non-cancelable  operating leases charged to
operations  for the years ended  December 31, 1998,  1997 and 1996 was $2,100,
$1,134 and $974 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 PAYABLE -TRADE AND OTHER LIABILITIES

Accounts  payable - trade and other  liabilities  consist of the following as of
December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                        1998     1997
                        ----     ----
<S>                   <C>      <C>
Accounts and other
  payables - trade    $17,781  19,187
Salaries, wages and
  other compensation    4,306   3,612
Pensions, profit
  sharing and      
  employee benefits     3,423   1,668
Taxes, other than
  income taxes          1,162   1,083
Interest                1,145   1,619
Other                   1,595   1,067
                      -------  ------
Total                 $29,412  28,236
                      =======  ======
</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

NOTE 11 - INCOME TAXES

The provisions for income taxes for the years ended December 31, 1998,  1997 and
1996 are as follows:

<TABLE>
<CAPTION>
             U.S.                U.S. STATE
           FEDERAL    FOREIGN     & LOCAL     TOTAL
           -----------------------------------------
<S>        <C>        <C>        <C>          <C>    
1998
----
Current    $     0       3,892       (55)     3,837
Deferred    (3,954)       (266)     (111)    (4,331)
           -----------------------------------------
Total      $(3,954)      3,626      (166)      (494)
           =========================================
1997
----
Current    $  (310)      4,335       (55)     3,970
Deferred      (275)      1,794      (112)     1,407
           -----------------------------------------
Total      $  (585)      6,129      (167)     5,377
           =========================================
1996
----
Current    $    90       5,711        22      5,823
Deferred      (154)        758       (12)       592
           -----------------------------------------
Total      $   (64)      6,469        10      6,415
           =========================================

</TABLE>

Income (loss) before  income taxes for the years ended  December 31, 1998,  1997
and 1996 is comprised as follows:

<TABLE>
<CAPTION>
              1998     1997     1996
              ----     ----     ----
<S>         <C>       <C>      <C>  
U.S.        $(12,760) (2,244)    (365)
Foreign        6,368  14,113   17,726
            $ (6,392) 11,869   17,361

</TABLE>

<PAGE>
                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

A  reconciliation  for the years ended December 31, 1998,  1997 and 1996 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>
                      1998   1997  1996
                      ----   ----  ----
<S>                  <C>      <C>   <C>  
Statutory U.S.       (34.0)%  34.0% 34.0%
 Federal income tax
 rate
Effect of increase
 in French tax rate
 on deferred taxes       -     9.7     -
Effect of higher  
 foreign tax rates
 on current taxes     12.8     7.1     -
Effect of foreign
 inflation       
 adjustments          (5.2)   (7.8)    -
Amortization of       
 goodwill             16.1     2.2   1.9
Other, net             2.6      .1   1.1
                     -------  ----- -----
Effective rate of
 tax on book income   
 (loss)               (7.7)%  45.3% 37.0%
                     =======  ===== =====
</TABLE>

In October 1997,  France increased the tax rate from 36.67% to 41.67%.  The rate
increase  resulted  in a $1,156  charge in 1997 to the income tax  provision  to
increase the deferred tax liability as of January 1, 1997 to the higher  enacted
income tax rate.

<PAGE>

                                WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and  liabilities at December 31, 1998 and 1997 are as
follows:

<TABLE>
<CAPTION>
                        1998       1997
                      -------------------
<S>                   <C>         <C>    
Deferred tax assets:
  Inventories         $    936      259
  Employee benefits      1,294      843
  Allowance for    
  doubtful accounts        467      346
  Net operating loss
  carryforwards          7,153    2,561
                      -------------------
                         9,850    4,009
                      -------------------
Deferred tax
  liabilities:
  Property, plant and
  equipment            (17,932) (17,609)
  Goodwill    
  amortization          (1,323)     (82)
  Imputed interest        (775)    (806)
  Other                   (280)    (362)
                      -------------------
                       (20,310) (18,859)
                      -------------------
Net deferred income   
  taxes               $(10,460) (14,850)
                      ===================
</TABLE>


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

<TABLE>
<CAPTION>
                        1998       1997
                      --------- ----------
<S>                   <C>       <C>    
Prepaid expenses and
  current assets      $  2,418      1,085
Deferred income taxes  (12,878)  (15,935)
                      --------- ----------
                      $(10,460)  (14,850)
                      ========= ==========
</TABLE>


There was a $91  valuation  allowance  established  in 1997 for  deferred  tax
assets  attributable  to items which when realized will result in  adjustments
to goodwill.  There was no valuation  allowance  for years ended  December 31,

<PAGE>
                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1998 and 1996. At December 31, 1998, the Company had U.S.  Federal and state net
operating loss carryforwards aggregating $20,000 and $5,800, respectively, which
expire at various dates through 2018.

NOTE 12 - OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

The  Company's   operations  are  conducted   within  two  product  lines,   the
manufacturing  and sale of covered elastic yarns and of woven and knitted narrow
elastic  fabrics.  As allowed by SFAS No. 131,  DISCLOSURE  ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED  INFORMATION,  the Company has  aggregated  these product
lines for  reporting  purposes due to their  similar  economic  characteristics,
production processes, customers and distribution methods.
External sales by product line are as follows:

<TABLE>
<CAPTION>
                   1998     1997     1996
                   ----     ----     ----
<S>              <C>       <C>      <C>    
Covered elastic
  yarn           $178,768  194,386  207,829
Narrow elastic
  fabric           79,769    8,870        -
                 --------  -------  -------
                 $258,537  203,256  207,829
                 ========  =======  =======
</TABLE>

External sales and net long-lived assets by geographic area are as follows:

<TABLE>
<CAPTION>
                 1998       1997      1996
                 ----       ----      ----
<S>            <C>        <C>       <C>    
United States
-------------
Net sales      $146,684    73,843   64,131
Net long-lived  
  assets        138,791   122,803   43,660
Canada
------
Net sales        20,968    24,295   22,149
Net long-lived  
  assets          1,570     6,025    7,819
France
------
Net sales        79,472    92,417  109,785
Net long-lived  
  assets         53,096    49,673    6,400
Colombia
--------
Net sales        11,413    12,701   11,764
Net long-lived  
  assets         18,566    15,520   15,928

</TABLE>

In 1998, 1997 and 1996, no customer  represented  over 10% of consolidated net
sales.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT 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
quoted  market  rates or 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, 1998
                       -----------------
                     CARRYING   ESTIMATED
                      AMOUNT   FAIR VALUE
                      ------   ----------
<S>                  <C>         <C> 

9.625% Senior Notes  $175,000    155,750
Revolving credit       
facilities             12,000     12,000
Other indebtedness     11,771      11,825
                     --------    -------
Total                $198,771    179,575
                     ========    =======

                       DECEMBER 31, 1997
                       -----------------
                     CARRYING   ESTIMATED
                      AMOUNT   FAIR VALUE
                      ------   ----------
9.625% Senior Notes  $175,000    178,937
Revolving credit
facilities                  -          -
Other indebtedness     11,400     11,510
                     --------    -------
Total                $186,400    190,447
                     ========    =======

</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.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Due to the  short-term  nature of the  foreign  exchange  contracts,  management
believes that the fair value, if any, is not significant.

(D)   INTEREST RATE SWAP AGREEMENT

Although fair value at December 31, 1997 was not determined,  the swap agreement
was cancelled in March 1998 at a gain of $286.

(E)   LIMITATIONS OF ESTIMATES

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

On December 1, 1997, the Company  purchased  substantially  all of the assets of
ECA for approximately  $76,300 in cash and the assumption of $6,000 in long term
debt. On October 3, 1997, the Company purchased  substantially all of the assets
of Elastex for  approximately  $8,400 in cash. The net proceeds from the sale of
the $175,000 senior notes were used to fund the acquisition of ECA and to reduce
outstanding  indebtedness  incurred to finance the  acquisition of Elastex.  The
excess of cost over fair value of net assets acquired was approximately  $53,161
for ECA and  approximately  $4,193 for Elastex and is being  amortized using the
straight-line method over 40 years. ECA acquired substantially all of the narrow
elastic  fabric  assets  of  Fruit  of  the  Loom  on  December  30,  1998,  for
approximately  $12,800.  Goodwill and other intangibles of approximately  $4,800
are being  amortized  using the  straight-line  method  over  periods of 5 to 10
years.  Pro  forma  data  for  this  transaction  is  not  presented  due to the
immateriality of the transaction to the Company. The acquisitions were accounted
for as purchases and, accordingly,  the results of operations have been included
in the Company's consolidated financial statements from the date of acquisition.

NOTE 15 - RELATED PARTY TRANSACTIONS

In 1998, 1997 and 1996,  other assets include a $600  non-interest  bearing note
receivable due in the year 2000 from a senior executive

NOTE 16 - SIGNIFICANT FOURTH QUARTER CHARGES

During the 1998 fourth quarter,  the Company recorded charges of $7,843 (or $.40
per share,  net of taxes) which  included a $4,376  restructuring  provision for
discontinuing  the Company's  conventional  covered yarn production in Montreal,
Quebec, $1,940 related primarily to asset provisions for underutilized equipment
in the United  States and $1,527  related  to the  retirement  of the  Company's
former  chairman  and chief  financial  officer.  The  charges  included  $3,814
recorded in cost of goods sold,  $1,707  recorded as selling and  administrative
expenses and $2,322 recorded as goodwill amortization. The Company will transfer
its production of conventional  covered  elastic yarn currently  manufactured in
Montreal, Quebec to existing operations in the United States and Colombia, South
America.  In  addition,  approximately  $400 of other  expenses  related  to the
restructuring will be charged to operations during 1999. The Company anticipates
that it will complete the restructuring by the fourth quarter of 1999.

NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION

The $175,000 Senior Notes are guaranteed by each of the U.S. subsidiaries of the
Company. The guarantor subsidiaries are wholly owned subsidiaries of the Company
and the guarantees are full,  unconditional and joint and several.  There are no
restrictions on the ability of the guarantor  subsidiaries to make distributions
to the Company,  except those generally  applicable  under relevant  corporation
laws. Separate financial  statements of each guarantor  subsidiary have not been
presented  because  management  has  determined  that they are not  material  to
investors.  The  following  pages  include  summarized  consolidating  financial
information for the Company,  segregating the parent, the guarantor subsidiaries
and the nonguarantor subsidiaries.

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

Consolidating Statements of Operations
Year Ended December 31, 1998

                                                 GUARANTOR     NON-GUARANTOR
                                                  DOMESTIC       FOREIGN
                               WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                               --------------   ------------   ------------   ------------   ------------
<S>                            <C>                <C>            <C>            <C>            <C>    
Net sales                      $      -           152,059        123,888        (17,410)       258,537

Cost of goods sold                    -           131,818        101,859        (17,410)       216,267
                               --------          --------       --------       --------       --------
  Gross profit                        -            20,241         22,029              -         42,270

Selling and administrative
expense                           5,627            12,574         12,036              -         30,237
                               --------           --------      --------       --------       --------
  Operating profit (loss)        (5,627)            7,667          9,993              -         12,033
                               --------           --------      --------       --------       --------
Interest expense                 17,120               586          1,059              -         18,765

Intercompany interest
expense (income)                 (9,467)            8,183          1,284              -              -

Intercompany administrative
charges                          (2,896)            1,894          1,002              -              -

Other income (expense) - net        557                63           (280)             -            340
                               --------           --------      --------       --------       --------
  Income (loss) before
  income taxes                   (9,827)           (2,933)         6,368              -         (6,392)

Provision for income taxes       (3,307)             (813)         3,626              -           (494)

Undistributed earnings of
subsidiaries                        622                 -              -           (622)             -
                               --------           --------      --------       --------       --------
  Net income (loss)            $ (5,898)           (2,120)         2,742           (622)        (5,898)
                               ========           ========      ========       ========       ========

</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)


Consolidating Statements of Operations
Year Ended December 31, 1997

<TABLE>
<CAPTION>
                                                 GUARANTOR     NON-GUARANTOR
                                                  DOMESTIC       FOREIGN
                               WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                               --------------   ------------   ------------   ------------   ------------
<S>                            <C>                <C>            <C>            <C>            <C>    
Net sales                      $       -          77,893         138,892        (13,529)       203,256

Cost of goods sold                     -          69,413         111,388        (13,529)       167,272
                               ---------        --------        --------       --------       --------
  Gross profit                         -           8,480          27,504              -         35,984

Selling and administrative
expense                            2,572           4,270           9,928              -         16,770
                               ---------        --------        --------       --------       --------
  Operating profit (loss)         (2,572)          4,210          17,576              -         19,214
                               ---------        --------        --------       --------       --------
Interest expense                   5,962             247             834              -          7,043

Intercompany interest
expense (income)                  (2,535)            844           1,691              -              -

Intercompany administrative
charges                           (2,435)          1,948             487              -              -

Other income (expense) - net          87              61            (450)             -           (302)
                               ---------        --------        --------       --------       --------
  Income (loss) before
  income taxes                    (3,477)          1,232          14,114              -         11,869

Provision for income taxes        (1,083)            331           6,129              -          5,377

Undistributed earnings of
subsidiaries                       8,886               -               -         (8,886)             -
                               ---------        --------        --------       --------       --------
  Net income before                
  extraordinary Item               6,492             901           7,985         (8,886)         6,492

Extraordinary item                 1,344               -               -              -          1,344
                               ---------        --------        --------       --------       --------
  Net income                   $   5,148             901           7,985         (8,886)         5,148
                               =========        ========        ========       ========       ========

</TABLE>

<PAGE>



                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)
 

Consolidating Statements of Operations
Year Ended December 31, 1996

<TABLE>
<CAPTION>

                                                 GUARANTOR     NON-GUARANTOR
                                                  DOMESTIC       FOREIGN
                               WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                               --------------   ------------   ------------   ------------   ------------
<S>                            <C>                <C>            <C>            <C>            <C>    
 Net sales                     $       -          66,574         150,332         (9,077)       207,829
 Cost of goods sold                    -          59,893         117,938         (9,077)       168,754
                               ---------        --------        --------       --------       --------
   Gross profit                        -           6,681          32,394              -         39,075

 Selling and administrative
 expense                           2,659           3,166          10,757              -         16,582
                               ---------        --------        --------       --------       --------
   Operating profit (loss)        (2,659)          3,515          21,637              -         22,493

 Interest expense                  4,844             194             788              -          5,826

 Intercompany interest            (2,929)            885           2,044              -              -
 expense (income)

 Intercompany administrative      (3,348)          1,851           1,497              -              -
 charges

 Other income (expense) - net        132             144             418              -            694
                               ---------        --------        --------       --------       --------
   Income (loss) before
   income taxes                   (1,094)            729          17,726              -         17,361

 Provision  for income taxes        (350)            296           6,469              -          6,415

 Undistributed earnings of
 subsidiaries                     11,690               -               -        (11,690)             -
                               ---------        --------        --------       --------       --------
   Net income                   $ 10,946             433          11,257        (11,690)        10,946
                               =========        ========        ========       ========       ========   

</TABLE>

<PAGE>



                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)

Consolidating Balance Sheets
December 31, 1998

<TABLE>
<CAPTION>
                                                 GUARANTOR     NON-GUARANTOR
                                                  DOMESTIC       FOREIGN
                               WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                               --------------   ------------   ------------   ------------   ------------
<S>                            <C>              <C>            <C>            <C>            <C>    
Assets
Current Assets
  Cash and cash equivalents         $  2,596            14           4,105              -           6,715
  Accounts and notes
  receivable, net                          -        19,486          23,399              -          42,885
  Inventories                              -        33,815          24,700              -          58,515
  Prepaid expenses and other
  current assets                       2,594           183           1,205              -           3,982
                               -------------    ----------     -----------    ------------   ------------
   Total current assets                5,190        53,498          53,409              -         112,097

Property, plant and equipment,
net                                      337        58,710          54,605              -         113,652
Other assets                           9,240         2,456           1,154              -          12,850
Cost in excess of net assets 
  of acquired businesses, net              -        68,048          17,473              -          85,521
Intercompany investments             105,572             -               -       (105,572)              -
Intercompany advances                155,820        14,798               -       (170,618)              -
                               -------------    ----------     -----------    ------------   ------------
                                    $276,159       197,510         126,641       (276,190)        324,120
                               =============    ==========     ===========    ============   ============

Liabilities and Stockholders'
equity
Current Liabilities
  Short-term borrowings             $      -             -           7,308              -           7,308
  Current Installments of
  long-term debt                           -             -             525              -             525
  Accounts payable-trade and
   other liabilities                   5,216         9,440          14,756              -          29,412
  Income taxes payable                 1,091        (1,641)          2,250              -           1,700
                               --------------   ----------     -----------    -----------    ------------
   Total current liabilities           6,307         7,799          24,839              -          38,945
                               --------------   ----------     -----------    -----------    ------------

Long-term debt                       187,000         6,000           5,246              -         198,246
Other long-term liabilities                -             -             569              -             569
Deferred income taxes                 (5,428)        6,870          11,436              -          12,878
Intercompany payables                 14,798       144,260          11,560       (170,618)              -
                               --------------   ----------     -----------    ------------   ------------
   Total liabilities                 202,677       164,929          53,650       (170,618)        250,638
                               --------------   ----------     -----------    ------------   ------------

Stockholders' equity
  Common stock                           147            49          31,778        (31,827)            147
  Paid-in capital                     30,084        15,822         (15,822)             -          30,084
  Retained earnings                   56,169        16,710          51,782        (68,492)         56,169
  Accumulated other 
  comprehensive loss                 (10,569)            -         (10,569)        10,569         (10,569)
  Less-Treasury stock, at cost        (2,349)            -               -              -          (2,349)
                               --------------   ----------     -----------    ------------   ------------
   Total stockholders' equity         73,482        32,581          72,991       (105,572)         73,482
                               --------------   ----------     -----------    ------------   ------------
                                    $276,159       197,510         126,641       (276,190)        324,120
                               ==============   ==========     ===========    ============   ============

</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------
                             (DOLLARS IN THOUSANDS)


Consolidating Balance Sheets
December 31, 1997
<TABLE>
<CAPTION>
                                                 GUARANTOR     NON-GUARANTOR
                                                  DOMESTIC       FOREIGN
                               WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                               --------------   ------------   ------------   ------------   ------------
<S>                            <C>              <C>            <C>            <C>            <C>    
Assets
Current Assets
  Cash and cash equivalents        $  10,058           321           4,493              -          14,872
  Accounts and notes                       -        20,870          25,450              -          46,320
  receivable, net
  Inventories                              -        28,251          25,949              -          54,200
  Prepaid expenses and other
    current assets                     1,402           511           1,113              -           3,026
                                 -----------     ---------     -----------   ------------    ------------
   Total current assets               11,460        49,953          57,005              -         118,418

Property, plant and equipment,
  net                                    230        46,977          51,953              -          99,160
Other assets                           9,480         1,495             971              -          11,946
Cost in excess of net assets
  of acquired businesses, net              -        64,619          18,296              -          82,915
Intercompany investments             102,246             -              -        (102,246)              -
Intercompany advances                146,164        14,798              -        (160,962)              -
                               --------------    ----------     ------------   ------------   ------------
                                   $ 269,580       177,842        128,225        (263,208)        312,439
                               ==============    ==========     ============   ============   ============
Liabilities and Stockholders'
equity
Current Liabilities
  Short-term borrowings           $       -              -          1,819               -           1,819
  Current Installments of
    long-term debt                        -              -            620               -             620
  Accounts payable-trade and
    other liabilities                 3,600          8,529         16,107               -          28,236
  Income taxes payable                  567         (1,785)         1,218               -               -
                               ------------     ----------     ----------     -----------    ------------
    Total current liabilities         4,167          6,744         19,764               -          30,675
                               ------------     ----------     ----------     -----------    ------------
Long-term debt                      175,000          6,000          4,780               -         185,780
Other long-term liabilities               -              -          2,547               -           2,547
Deferred income taxes                (1,887)         6,820         11,002               -          15,935
Intercompany payables                14,798        123,577         22,587        (160,962)              -
                               ------------      ---------      ---------      ----------      ----------
    Total liabilities               192,078        143,141         60,680        (160,962)        234,937
                               ------------      ---------      ---------      ----------     ----------
Stockholders' equity
  Common stock                          147             49         31,778         (31,827)            147
  Paid-in capital                    30,059         15,822              -         (15,822)         30,059
  Retained earnings                  62,067         18,830         49,040         (67,870)         62,067
  Accumulated other   
    comprehensive loss              (13,273)             -        (13,273)         13,273         (13,273)
  Less-Treasury stock, at cost       (1,498)             -              -               -          (1,498)
                               ------------      ---------      ---------      ----------      ----------
    Total stockholders' equity       77,502         34,701         67,545        (102,246)         77,502
                               ------------      ---------      ---------      ----------      ----------
                                  $ 269,580        177,842        128,225        (263,208)        312,439
                               ============      ==========     =========      ==========      ==========

</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------
                             (DOLLARS IN THOUSANDS)

CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                           GUARANTOR     NON-GUARANTOR
                                                            DOMESTIC       FOREIGN
                                         WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                         --------------   ------------   ------------   ------------   ------------
<S>                                      <C>              <C>            <C>            <C>            <C>    
Cash flows from operating activities:
  Net income (loss)                         $  (5,898)        (2,120)          2,742           (622)        (5,898)
  Adjustments to reconcile net
  income (loss)to net cash
  provided (used in) by
  operating activities:
    Undistributed earnings of
     subsidiaries                                (622)             -               -            622              -
    Depreciation and amortization                  30          7,414           9,128              -         16,572
    Provision for losses on
     accounts receivable                            -            311             279              -            590
    Deferred income taxes                      (4,871)            49            (267)             -         (5,089)
  Change in assets and
     liabilities net of effects
     of acquisitions:
    Accounts and notes receivable                   -          1,072           1,657              -          2,729
    Inventories                                     -         (5,564)          1,732          1,604         (2,228)
    Prepaid expenses and other
     current assets                              (135)           329             (59)             -            135
    Accounts payable-trade and
     other current liabilities                  1,615            911            (717)             -          1,809
    Income taxes payable                          799            145             906              -          1,850
                                        -------------    -----------     -----------    ------------   ------------
    Net cash provided by (used
     in) operating activities                  (9,082)         2,547          15,401          1,604         10,470
                                        -------------    -----------     -----------   ------------   ------------
Cash flows from investing activities:
  Capital expenditures                           (138)       (17,314)         (8,859)         6,440        (19,871)
  Acquisitions, net of cash
  acquired                                     (2,740)             -               -        (10,070)       (12,810)
  Other investing activities                      400         (6,221)         (1,777)         4,768         (2,830)
                                        -------------    -----------     -----------   ------------   ------------
  Net cash used in investing
  activities                                   (2,478)       (23,535)        (10,636)         1,138        (35,511)
                                        --------------   ------------    ------------   ------------   ------------


Cash flows from financing activities:
  Borrowings under line of
    credit arrangements                             -              -           9,482              -          9,482
  Payments under line of credit
    arrangements                                    -              -          (3,221)             -         (3,221)
  Borrowings under revolving
    credit facility                            12,000              -               -              -         12,000
  Payments under revolving
    credit facility                                 -              -               -              -              -
  Borrowings under long-term
    loans                                           -              -               -              -              -
  Payments under long-term loans                    -              -               -              -              -
  Stock issued or (reacquired),
    net                                          (825)             -               -              -           (825)
  Advances - affiliated companies              (9,657)        20,683         (10,960)           (66)             -
  Other financing activities                     (124)             -            (580)          (437)        (1,141)
                                        -------------    -----------     -----------    ------------   ------------
  Net cash provided by (used in)
    financing activities                        1,394         20,683          (5,279)          (503)        16,295
                                        -------------    -----------     -----------    ------------   ------------
Effects of exchange rate changes
on cash                                         2,704             (2)            126         (2,239)           589
                                        -------------    -----------     -----------    ------------   ------------
  Net increase (decrease) in
   cash and cash equivalents                  (7,462)          (307)           (388)             -         (8,157)
                                     
Cash and cash equivalents at
  beginning of year                            10,058            321           4,493              -         14,872
                                        -------------    -----------     -----------    ------------   ------------
Cash and cash equivalents at end
  of year                                   $   2,596             14           4,105              -          6,715
                                        =============    ===========     ===========    ============   ============
</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 17 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------
                             (DOLLARS IN THOUSANDS)
CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                           GUARANTOR     NON-GUARANTOR
                                                            DOMESTIC       FOREIGN
                                         WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                         --------------   ------------   ------------   ------------   ------------
<S>                                      <C>              <C>            <C>            <C>            <C>    
Cash flows from operating activities:
  Net income (loss)                         $   5,148            901           7,985          (8,886)        5,148
  Adjustments to reconcile net
  income to net cash provided by
  (used in) operating activities:
    Undistributed earnings of
     subsidiaries                              (8,886)             -               -           8,886             -
    Depreciation and amortization                  37          2,630           4,178               -         6,845
    Provision for losses on
     accounts receivable                            -             71             234               -           305
    Deferred income taxes                      (1,099)           341           1,792            (314)          720
  Change in assets and
     liabilities net of effects
     of acquisitions:
    Accounts and notes receivable                (200)        (3,060)          2,196               -        (1,064)
    Inventories                                     -         (2,007)        (5,389)               -        (7,396)
    Prepaid expenses and other
     current assets                               (86)           (34)          (128)               -          (248)
    Accounts payable-trade and
     other current liabilities                    406         (2,171)        (1,902)            (646)       (4,313)
    Income taxes payable                         (459)          (597)          (984)             546        (1,494)
                                        -------------    -----------    -----------      -----------   ----------- 
    Net cash provided by (used
     in) operating activities                  (5,139)        (3,926)         7,982             (414)       (1,497)
                                        -------------    -----------    -----------      -----------   ----------- 
Cash flows from investing activities:
  Capital expenditures                             (3)        (2,823)        (5,426)             546        (7,706)
  Acquisitions, net of cash 
  acquired                                     (7,502)             -              -          (77,880)      (85,382)
  Other investing activities                   (7,017)           835         (1,875)            (133)       (8,190)
                                        -------------    -----------    -----------      -----------   ----------- 
  Net cash used in investing
  activities                                  (14,522)        (1,988)        (7,301)         (77,467)     (101,278)
                                       --------------    -----------    -----------      -----------   ----------- 

Cash flows from financing activities:
  Borrowings under line of
    credit arrangements                             -              -          3,548                -         3,548
  Payments under line of credit
    arrangements                                    -              -         (3,435)               -        (3,435)
  Borrowings under revolving
    credit facility                           109,550              -              -                -       109,550
  Payments under revolving
    credit facility                          (121,940)             -              -                -      (121,940)
  Borrowings under long-term
    loans                                     175,000              -              -                -       175,000
  Payments under long-term loans              (50,000)             -              -                -       (50,000)
  Stock issued or (reacquired),
    net                                           113              -              -                -           113
  Advances - affiliated companies             (70,376)         6,068          1,036           63,272             -
  Other financing activities                     (119)             -          1,546             (359)        1,068
  Net cash provided by (used in)
    financing activities                -------------    -----------    -----------      -----------   ----------- 
                                               42,228          6,068          2,695           62,913       113,904

Effects of exchange rate changes
on cash                                       (12,937)            (7)          (398)          14,968         1,626
                                        -------------    -----------    -----------      -----------   ----------- 
  Net increase (decrease) in
   cash and cash equivalents                    9,630            147          2,978                -        12,755
                                      
Cash and cash equivalents at
  beginning of year                               428            174          1,515                -         2,117
                                        -------------    -----------    -----------     -------------  ------------
Cash and cash equivalents at end
  of year                                   $  10,058            321          4,493                -        14,872
                                        =============    ===========    ===========     =============  ============

</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             (DOLLARS IN THOUSANDS)

CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
                                                           GUARANTOR     NON-GUARANTOR
                                                            DOMESTIC       FOREIGN
                                         WORLDTEX, INC.   SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                         --------------   ------------   ------------   ------------   ------------
<S>                                      <C>              <C>            <C>            <C>            <C>    
Cash flows from operating activities:
  Net income                                $  10,946            433         11,257          (11,690)       10,946
  Adjustments to reconcile net
    income to net cash provided by
    (used in) operating activities:
      Undistributed earnings of subsidiaries  (11,690)             -              -           11,690             -
      Depreciation and amortization                37          2,310          3,937                -         6,284
      Provision for losses on
       accounts receivable                        (83)           222              -              139
      Deferred income taxes                      (219)            52            992                -           825
  Change in assets and liabilities
    net of effects of acquisitions:
      Accounts and notes receivable               200            167         (3,155)               -        (2,788)
      Inventories                                   -            281         (4,838)               -        (4,557)
      Prepaid expenses and other
       current assets                              98           (119)           184                -           163
      Accounts payable-trade and
       other current liabilities                  266            720          4,358                -         5,344
      Income taxes payable                        (58)            14         (1,280)               -        (1,324)
                                             --------       --------     ----------         --------   -----------
      Net cash provided by (used in)
       operating activities                      (420)         3,775         11,677                -        15,032 
                                             --------        -------      ---------          --------   -----------
Cash flows from investing activities:
  Capital expenditures                                        (1,525)       (12,260)               -       (13,785)
  Acquisitions, net of cash
    acquired                                    3,174                             -           (3,174)            -
  Other investing activities                      133           (413)          (869)               -        (1,149)
                                             --------        -------      ---------          --------   -----------
  Net cash used in investing
    activities                                  3,307         (1,938)       (13,129)          (3,174)      (14,934)
                                             --------        -------      ---------          --------   -----------
Cash flows from financing activities:
  Borrowings under line of credit
    arrangements                                    -              -         16,724                -        16,724
  Payments under line of credit
    arrangements                                    -              -        (16,321)               -       (16,321)
  Borrowings under revolving
    credit facility                           104,660              -              -                -       104,660
  Payments under revolving credit
    facility                                 (104,940)             -              -                -      (104,940)
  Borrowings under long-term loans                  -              -              -                -             -
  Payments under long-term loans                    -              -              -                -             -
  Stock issued or (reacquired),
    net                                          (554)             -              -                -          (554)
  Advances - affiliated companies               2,298         (1,825)          (615)             142             -
  Other financing activities                      230             (7)         1,573             (966)          830
                                             --------        -------      ---------          --------   -----------
  Net cash provided by (used in)
    financing  activities                       1,694         (1,832)         1,361             (824)          399
                                             --------        -------      ---------          --------   -----------
Effects of exchange rate changes
  on cash                                      (4,153)             1            (71)           3,998          (225)
                                             --------        -------      ---------          --------   -----------
Net increase (decrease) in cash
  and cash equivalents                            428              6           (162)               -           272
Cash and cash equivalents at
  beginning of year                                 -            168          1,677                -         1,845
                                             --------        -------      ---------          --------   -----------
Cash and cash equivalents at end            $     428            174          1,515                -         2,117
  of year                                    ========        =======      =========          ========   ===========
</TABLE>

<PAGE>
                                   WORLDTEX, INC.
                        SUPPLEMENTARY FINANCIAL INFORMATION
                    YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                          NET       DILUTED NET
         UNAUDITED              NET         GROSS        INCOME    INCOME (LOSS)
 QUARTERLY FINANCIAL DATA      SALES        PROFIT       (LOSS)    PER SHARE (A)
 ------------------------      -----        ------       ------    -------------
<S>                            <C>          <C>          <C>       <C>
1998 Quarter:
      First                 $  69,229       14,052        2,151          .15
      Second                   66,054       12,818          748          .05
      Third                    59,801        9,040       (1,061)        (.07)
      Fourth (C)               63,453        6,360       (7,736)        (.54)
                            ---------    ---------    ---------              
                            $ 258,537       42,270       (5,898)
                            =========    =========    ========= 

1997 Quarter:
      First                 $  50,918        9,242        2,666          .18
      Second                   51,880        8,944        2,029          .14
      Third                    45,552        8,124        2,048          .14
      Fourth (B)               54,906        9,673         (251)        (.02)
                            ---------    ---------    ---------              
                            $ 203,256       35,983        6,492
                            =========    =========    ========= 

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
                            =========    =========    ========= 
</TABLE>

NOTES:
------

(A)   Diluted net income (loss) per share amounts are calculated  based upon the
      weighted  average number of common shares  outstanding and common dilutive
      equivalent shares during the year.

(B)   1997 fourth  quarter  net loss after  extraordinary  item - ($1,595)  1997
      total net income after extraordinary item - $5,148

(C)   See footnote 16 for 1998 significant fourth quarter charges.

<PAGE>
                                   WORLDTEX, INC.
                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                 YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                               ---------- ADDITIONS ----------
                                  BALANCE AT   CHARGED TO           DEDUCTIONS   BALANCE AT
                                  BEGINNING    COSTS AND               FROM         END
                                  OF PERIOD    EXPENSES     OTHER    RESERVES    OF PERIOD
                                  ---------    --------     -----    --------    ---------
<S>                               <C>          <C>          <C>      <C>         <C>  
1998
----
Allowance for doubtful accounts   $  2,085        590          -       634(A)     2,041

1997
----
Allowance for doubtful accounts   $  2,589        305      470(B)    1,279(A)     2,085

1996
----
Allowance for doubtful accounts   $  2,623        139          -      173 (A)     2,589

</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 1999 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):

<PAGE>

<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.

    2.2     Asset  Purchase  Agreement,  dated as of  October  29,  1997,  among
            Elastic Corporation of America,  Inc. (a wholly-owned  subsidiary of
            Worldtex,  Inc.), Worldtex,  Inc., and NFA Corp. -- filed as Exhibit
            2.1 to the Worldtex,  Inc. Current Report on Form 8-K dated December
            1, 1997 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     Indenture,  dated as of  December  1, 1997,  by and among  Worldtex,
            Inc., Willcox & Gibbs Filix of Delaware,  Inc., Regal  Manufacturing
            Company,  Inc., Elastic Corporation of America, Inc., Elastex, Inc.,
            Regal  Yarns of  Argentina,  Inc.,  WTX  Colombia  I,  Inc.  and WTX
            Colombia  II,  Inc.  (together,   other  than  Worldtex,  Inc.,  the
            "Guarantors"),  and IBJ Schroder Bank & Trust  Company,  as Trustee,
            with respect to the 9 5/8% Senior Notes due 2007 -- filed as Exhibit
            4.1 to  the  Company's  Registration  Statement  on  Form  S-4  (No.
            333-45331) and incorporated herein by reference.

    4.3     Registration Rights Agreement,  dated as of December 1, 1997, by and
            among  Worldtex,  Inc., the Guarantors and the Initial  Purchasers -
            filed as Exhibit 4.3 to the Company's Registration Statement on Form
            S-4 (No. 333-45331) and incorporated herein by reference.

    4.4     Form of 9 5/8% Note - included in Exhibit 4.2.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

  Exhibit
    No.     Description
  -------   -----------
  <S>       <C>
    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    Severance  Agreement,  dated February 10, 1999, between Worldtex and
            Richard J. Mackey -- filed herewith.*

    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    Employment Agreement,  dated December 22, 1998, between Worldtex and
            Marty R. Kittrell -- filed herewith.*

    10.6    1992 Stock Incentive Plan of Worldtex, as amended -- filed
            herewith.*

    10.7    Credit Agreement,  dated as of December 1, 1997, among Worldtex, the
            Guarantors,  the Lenders  named  therein and  NationsBank,  N.A., as
            Agent - filed as Exhibit 10.6 to the Company's Annual Report on Form
            10-K for 1998 and incorporated herein by reference.

    21.1    Subsidiaries of Worldtex -- filed herewith.

    23.1    Consent of KPMG LLP -- filed herewith.

    23.2    Consent of Deloitte & Touche 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.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

  Exhibit
    No.     Description
  -------   -----------
  <S>       <C>
    24.4    Power of Attorney executed by Marty R. Kittrell - filed herewith.

    27.1    Financial Data Schedule (filed with EDGAR only).

</TABLE>


8-K REPORTS

            A Current Report on Form 8-K, dated October 22, 1998, was filed with
the SEC on  October  22,  1998,  reporting  under Item 4. An  amendment  to such
Current Report was filed with the SEC on October 30, 1998,  reporting under Item
7.

<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 29, 1999
                                       WORLDTEX, INC.



                                       By: /S/ BARRY D. SETZER                
                                           -------------------------------------
                                           Barry D. Setzer
                                           Chairman of the Board,
                                           President and Chief
                                           Executive Officer



            Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 29, 1999 by the following  persons on
behalf of the registrant and in the capacities indicated.



/S/ BARRY D. SETZER                                    
-------------------------------------------------------
Barry D. Setzer, Chairman of the Board, President,
Chief Executive Officer and Director
and Attorney for the persons indicated by asterisk



/S/ MARTY R. KITTRELL                           
-------------------------------------------------------
Marty R. Kittrell, Chief Financial and Accounting
Officer

<PAGE>


CLAUDE D. EGLER*
Claude D. Egler, Director

JOHN B. FRASER*
John B. Fraser, Director




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

WILLI ROELLI*
Willi Roelli, Director

MICHAEL B. WILSON*
Michael B. Wilson, Director

JOHN K. ZIEGLER*
John K. Ziegler, Director