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, 1997

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

Commission file number 1-11438

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

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


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


                                  704-328-5381
                               (Telephone Number)

           Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>

        Title of each class            Name of each exchange on which registered
-------------------------------------- -----------------------------------------
<S>                                           <C>
Common stock, par value $.01 per share        New York Stock Exchange, Inc.
Preferred stock purchase rights               New York Stock Exchange, Inc.
</TABLE>

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

                                      None

                      (Cover sheet continued on next page)

<PAGE>

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

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

As of March 6, 1998: 14,428,671 shares of Common Stock were outstanding; and the
aggregate market value of shares held by non-affiliates  was $105,676,007.  (For
these purposes,  a reported  closing market price of $7.72 per share on March 6,
1998 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 1998 Annual
Meeting of Stockholders (Part III).

<PAGE>

                                     PART I

ITEM 1.   BUSINESS
-------   --------

          Worldtex,  Inc.  ("Worldtex"  or the  "Company") is a holding  company
engaged through its  subsidiaries in the manufacture of covered elastic yarn and
narrow  elastic  fabrics,  which are used in the  production of a broad range of
apparel products.  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 (the "Distribution").

          Worldtex's principal subsidiaries 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, (iv) Fibrexa, Ltda. ("Fibrexa"),  based in Bogota,  Colombia,
(v) Elastex, Inc. ("Elastex"),  based in Asheboro,  North Carolina, and (vi) the
Elastic Corporation of America, Inc. ("ECA"), based in Columbiana,  Alabama. 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,  Elastex on October 3, 1997 and ECA on December  1, 1997.  Regal,
Rubyco, Filix and Fibrexa are engaged in the production of covered elastic yarn,
and Elastex and ECA are engaged in the production of narrow elastic fabrics.

          The  Company  believes  that  it is  one of  the  largest  independent
suppliers  of  covered  elastic  yarn in the world  (based  on 1997 net  sales).
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  1997,  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 when it began  operations in 1934,  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  production  facility in  Estonia,  and  currently  plans joint
venture production facilities in China and India.

          The Company also believes that it is the largest manufacturer of woven
and  knitted  narrow  elastic  fabrics in the world  (based on 1997 net  sales).
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,  facing and edgings in

<PAGE>

women's  intimate  apparel and elastic  bands in women's  hosiery.  During 1997,
ECA's and  Elastex'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 and Elastex together own a total of five  manufacturing  facilities,
which are located in Alabama, North Carolina, South Carolina and Virginia.

COVERED ELASTIC YARN BUSINESS

          Worldtex  believes  that Regal is one of the two largest  suppliers of
covered elastic yarn in the United States,  that Filix is the largest in Europe,
that  Rubyco is the  largest in Canada and that  Fibrexa is the largest in South
America (in each case measured by 1997 net sales). Regal's and Rubyco's products
are sold primarily in their respective home countries,  Filix sells  principally
to European Community  countries and Fibrexa sells principally in South American
countries, as well as to other Worldtex subsidiaries.  See Note 12 to Worldtex's
Consolidated   Financial  Statements  for  information  relating  to  Worldtex's
domestic and foreign operations.

     PRODUCTS

          The  covered  elastic  yarn  manufactured  by  Worldtex is produced by
wrapping material,  principally nylon, polyester, cotton or other fibers, around
spandex  or latex  rubber.  The  core of  spandex  or  rubber  provides  stretch
capability  and  durability,  while the wrapped fiber 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.  In addition,  the Company has entered
into a joint venture for the establishment of manufacturing facilities in China,
and it is  currently  in  negotiations  for a similar  venture  in  India.  Upon
implementation  of the  Chinese  and  Indian  ventures,  the  Company  will have
strategically   located   manufacturing   facilities  able  to  promptly  supply
customers' needs in major fabric producing markets around the world.

<PAGE>

          As of December 31,  1997,  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 1997,  the  Company  served  over  1,500  customers,  and no single
customer  accounted  for more than 10% of 1997 sales.  The Company's ten largest
customers in 1997 accounted for 28% of 1997 sales.

          The Company's  customers are principally  producers of fabric sold for
use in apparel products. In 1997, the Company's principal customers included, in
the United States, Jockey International,  Ithaca Industries,  U.S. Textile Corp.
and Danskin;  in Europe,  Iril,  S.A.,  Vanwijnsberghe  and  Gaillard,  S.A.; in
Canada, Doris Hosiery,  Hafner Elastics and Nalpac; and in South America, Richi,
CMR and  Valenciana.  During 1997,  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 1997, Worldtex's  expenditures
for these purposes totaled less than 1% of its sales.

<PAGE>

     RAW MATERIALS

          In 1997,  approximately 60% of the Company's  operating  expenses were
attributable to raw material costs. 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 1997 were  DuPont,  BASF,  Nilit,
Nylstar  and  Radaci.  In 1997  Worldtex  purchased  over  half of its nylon and
spandex  from  a  single  source,  DuPont.  In  recent  years,  DuPont  and  its
competitors have expanded their spandex  production  capacity,  and Worldtex has
been able to obtain sufficient supplies to meet its customers' requirements.  If
the supply of spandex from DuPont should be interrupted or cease for any reason,
Worldtex believes it might be difficult to find adequate  alternative  suppliers
of spandex.

     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 has greater assets and financial resources than
Worldtex.  In the United  States,  Unifi,  Spanco and  Worldtex  are the leading
suppliers  of covered  elastic  yarn,  and in 1997 Unifi  acquired  Spanco.  The
Company  cannot  predict  the  effect  that  such  acquisition  will have on its
business.  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, 1997,  Worldtex had a total of approximately  1,227
employees   engaged  in  its  covered   elastic  yarn   operations.   Of  these,
approximately 422 were employed in the United States by Regal, approximately 160
were employed in Canada by Rubyco,  approximately 333 were employed in France by
Filix and approximately 312 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 BUSINESSES ACQUIRED IN 1997

          The  Company  believes  that ECA and  Elastex  together  comprise  the
leading  supplier of woven and  knitted  narrow  elastic  fabrics to the apparel
industry in the world (based on 1997 net sales).

     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

<PAGE>

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.

          ECA and  Elastex  manufacture  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
narrow elastic fabric product advancements.  For example, in 1983, ECA developed
and patented  QuikCord,  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.   Cordon
Cristal(TM),  a banded  silicon-backed  narrOw  elastic  fabric  used in women's
thigh-high  hosiery,  is another  trademarked  ECA product.  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 operating logo looms in the
United States.

          Elastex produces generic narrow elastic fabric for use in apparel.  In
addition,  Elastex  manufactures gauze and elastic wrap products for the medical
industry and specialized elastic fabric used by the automotive industry.

     SALES AND DISTRIBUTION

          ECA  and  Elastex  sell  their   products  to  apparel   manufacturers
throughout the United States,  and have begun selling to foreign  manufacturers.
ECA has a sales  staff with an average  of over ten years of  experience  in the
narrow elastics industry. 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,  and  each
salesperson  calls on an average of 25 accounts  regularly.  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 1997,  ECA and  Elastex  served  over 700  customer  accounts.  Two
customers were responsible for 32% of 1997 sales, and the ten largest  customers
accounted for 53% of 1997 sales.

<PAGE>

          ECA's  and  Elastex's   top   customers  in  1997   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 1997 for Elastex's medical
product  was  Johnson &  Johnson  and for its  automotive  products  was  Crotty
Corporation, a supplier to General Motors Corporation.

     MANUFACTURING

          Knit elastic  fabrics are primarily  used in underwear and  sportswear
applications.  Most commodity knit elastic  products are not "finished," and the
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 and Elastex each operate a dye house for such purpose.

          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  licensed  the  process  for making  silicon-backed  fabrics  from
Cheynet,  a major French  narrow  elastic  fabric  manufacturer,  in 1989.  This
process  is  typically  used for  narrow  elastics  found in  hosiery  products,
particularly  in  thigh-high  stockings.  Silicon is  applied to knit,  lace and
simulated  lace  uniformly  on one side of the fabric and then dried to create a

<PAGE>

non-slip  band.  The band grips the thigh allowing the stocking to stay in place
without  garters.  The  silicon-backed  fabrics  are banded  (requiring  special
robotic  equipment) to the specific size  requirements  of the customers  before
inspection and final packaging.

     RAW MATERIALS

          Raw materials costs comprised approximately 42% of ECA's 1997 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 US importers.
Chemical dyes and auxiliary dye  ingredients  are supplied by various  prominent
chemical  companies,  such as Crompton & Knowles and Ciba-Geigy,  and silicon is
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  competitors  who  manufacture
narrow elastic fabrics for the apparel industry.  Principal  competitors in logo
elastics  include  CMI--United  Elastics  and George C.  Moore.  Over the years,
competitors  have created  their own  drawstring  systems which compete with the
QuikCord design,  and principal  competitors with regard to this product include
Southern Webbing and Asheboro Elastics.

     EMPLOYEES

          As of December 31, 1997,  Worldtex  had a total of  approximately  845
employees  engaged  in  its  narrow  elastic  fabrics   operations.   Of  these,
approximately 639 were employed by ECA and 206 were employed by Elastex. None of
these employees are unionized.

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

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

     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:

<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

<PAGE>

    LOCATION          SQUARE FEET     OWNED/LEASED      USE
-------------------   ------------    ------------     ------------------------------------
<S>                   <C>             <C>              <C>
   Hickory, NC        54,000          Owned            Manufacturing Plant
   Hickory, NC        18,000          Leased           Distribution Center
   Hickory, NC        80,000          Leased           Distribution Center

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

FRANCE:
   Troyes             48,000          Owned            Distribution Center and Headquarters of Filix
   Athis             202,000          Owned            Manufacturing Plant
   Conde             195,000          Owned            Manufacturing Plant
   Le Grand Serre     94,000          Owned            Manufacturing Plant

COLOMBIA:
   Bogota            130,000          Leased           Manufacturing Plant and Headquarters of Fibrexa

</TABLE>

     NARROW ELASTIC FABRICS

          ECA and Elastex operate a total of five  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>
   Columbiana, AL    165,000          Owned            Manufacturing Plant
   Columbiana, AL    115,000          Owned            Manufacturing Plant
   Asheboro, NC      115,000          Owned            Manufacturing Plant
   Hemingway, SC     62,000           Owned            Manufacturing Plant
   Woolwine, VA      77,000           Owned            Manufacturing Plant
</TABLE>

ITEM 3.   LEGAL PROCEEDINGS
-------   -----------------

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

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------   ---------------------------------------------------

          During the last quarter of the  Company's  1997 fiscal year no matters
were submitted to a vote of the Company's security holders.

<PAGE>

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT
--------  ------------------------------------

<TABLE>
<CAPTION>
                      Age (as of           Office & Principal Occupations
Name                  12/31/97)                During Last Five Years
-----------------     ----------   ---------------------------------------------
<S>                      <C>       <C>
Richard J. Mackey        66        Chairman  of the Board  and  Chief  Financial
                                   Officer of Worldtex (August 1992 to present);
                                   Chief Executive  Officer of Worldtex  (August
                                   1992 to May 1994); President of W&G (May 1987
                                   to November  1992);  Director of W&G (1982 to
                                   1993).

Barry D. Setzer          55        President  and  Chief  Executive  Officer  of
                                   Worldtex (May 1994 to present); President and
                                   Chief Operating  Officer of Worldtex  (August
                                   1992 to May 1994); President of W&G's Covered
                                   Yarn  Division  (September  1988 to  November
                                   1992);  President  (to  September  1988)  and
                                   Director  of  Regal;  Vice  President  of W&G
                                   (November 1987 to November 1992); Director of
                                   W&G (1983 to 1992).

A. Orrin Maldoff         64        Vice  President  of Worldtex  (August 1992 to
                                   present);  President of Rubyco  (October 1990
                                   to present).

Kenneth W. O'Neill       53        Vice  President  of Worldtex  (August 1992 to
                                   present);  President of Regal (August 1988 to
                                   present).

Mitchell R. Setzer       48        Treasurer and  Secretary of Worldtex  (August
                                   1992   to   present);    Vice   President   -
                                   Administration  of  Regal  (January  1990  to
                                   present); Treasurer of Regal (January 1989 to
                                   present).

Donald W. Pruitt         49        Controller  of  Worldtex  (December  1995  to
                                   present).
</TABLE>

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

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

<PAGE>

                                     PART II

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

          The Company's  Common Stock is listed on the New York Stock  Exchange.
The  following  table sets forth the high and low per share sales prices for the
Common Stock on the New York Stock  Exchange for each quarter since December 31,
1995.

<TABLE>
<CAPTION>
                                                High                 Low
                                                ----                 ---
                    <S>                        <C>                   <C>
                    1996:
                       1st Quarter             $ 5.75                4.63
                       2nd Quarter               6.38                4.75
                       3rd Quarter               7.63                5.75
                       4th Quarter               8.88                7.50

                    1997:
                       1st Quarter              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
                       (through March 6)         8.00                6.94
</TABLE>

          At March 6, 1998 there were  approximately  1,102 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,
$0.4 million was available for the payment of dividends and other  distributions
as of December 31, 1997. 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,  1997,  which has been  derived from
Worldtex's audited financial statements for such years. This data should be read
in conjunction  with the Consolidated  Financial  Statements of Worldtex and the
Notes thereto appearing  elsewhere herein.  Results 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,

<PAGE>

Item 7.  Historical  financial  information  may not be indicative of Worldtex's
future  performance.  Earnings per share are calculated  based upon the weighted
average number of common shares  outstanding and common equivalent shares during
such year.

<TABLE>
<CAPTION>

                                                  YEARS ENDED DECEMBER 31,
                                  ---------------------------------------------------------
                                    1997         1996         1995        1994        1993
                                  --------     --------     -------     -------     -------
                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<S>                               <C>          <C>          <C>         <C>         <C>
Net Sales                         $203,256     207,829      187,981     164,654     152,709

Income before income taxes          11,869      17,361       10,231       8,868      11,490

Provision for income taxes           5,377       6,415        4,979       3,058       4,206

Net income                           6,492      10,946        5,252       5,810       7,284

Diluted net income per share           .44         .75          .36         .40         .50

Total assets                        312,439    206,032      196,065     166,405     145,996

Long-term debt                      185,780     67,754       68,947      61,085      55,486

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
covered  elastic  yarn in the world and the  largest  manufacturer  of woven and
knitted narrow elastic  fabrics in the world (based on 1997 net sales).  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 manufacturing joint
venture  in  Estonia,  has  entered  into a  joint  venture  agreement  for  the

<PAGE>

establishment  of  manufacturing   operations  in  China  and  is  currently  in
negotiations for a similar venture in India.

          The Company's  narrow elastic  fabrics  business is conducted  through
Elastex,  acquired  October  3,  1997  (the  "Elastex  Acquisition"),  based  in
Asheboro, North Carolina and through ECA, acquired on December 1, 1997 (the "ECA
Acquisition")  based in Columbiana,  Alabama.  ECA and Elastex together own five
manufacturing  facilities,  in Columbiana,  Alabama,  Asheboro,  North Carolina,
Hemingway, South Carolina and Woolwine, Virginia.

          Worldtex is a holding company,  the only 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,  any change in the value of the  currencies of the foreign
countries in which the Company does business  against the U.S. dollar 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 United  States
demand for retail apparel. The demand for retail apparel is in turn dependent on
United States 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 in the United  States 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.

          Spandex  and  nylon  are  the  principal  raw  materials  used  in the
manufacture of covered elastic yarn by Worldtex. In 1997 Worldtex purchased over
half of its nylon and spandex from a single  source,  DuPont.  In recent  years,

<PAGE>

DuPont and its competitors have expanded their spandex production capacity,  and
Worldtex  has been able to obtain  sufficient  supplies  to meet its  customers'
requirements.  If the supply of spandex  from DuPont  should be  interrupted  or
cease for any reason,  Worldtex  believes it might be difficult to find adequate
alternative suppliers of spandex.

          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,  Spanco and Worldtex
are the three largest  suppliers of covered  elastic yarns in the United States.
Unifi, which is also a leading producer of other yarns, acquired Spanco in 1997.
The Company  cannot  predict the effect that such  acquisition  will have on the
Company,  although Unifi has substantially  greater financial resources than the
Company and is less leveraged.

          The Company is in the process of assessing the Year 2000 issue and the
estimated costs necessary for the Company's  remediation  plan. The Company does
not  expect  the Year 2000  issue to have a  material  effect  on the  Company's
business,  operations or financial condition. The Company plans to remediate all
Year 2000 issues during 1998 and 1999 and does not expect  remediation  costs to
have  a  material  impact  on  results  of  operations,  liquidity  and  capital
resources.

          The following table sets forth the percentage of Worldtex's historical
sales and operating profit (loss) accounted for by each of Worldtex's geographic
areas during the periods  indicated,  which in the case of 1997 reflects the ECA
Acquisition  (effective  from  December  1,  1997) and the  Elastex  Acquisition
(effective from October 3, 1997). For purposes of determining  operating profit,
parent company  expenses have been allocated to each area in accordance with its
percentage of total sales.  See Note 12 of the Notes to  Consolidated  Financial
Statements  of  Worldtex  for  additional  financial   information  (net  sales,
operating profits and identifiable assets) by geographic location.

<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                    -----------------------------------------------------------------------------
                           1997                       1996                         1995
                    --------------------      --------------------       ------------------------
                     NET       OPERATING       NET       OPERATING        NET       OPERTING
                    SALES       PROFIT        SALES       PROFIT         SALES      PROFIT (LOSS)
                    -----      ---------      -----      ---------       -----      -------------
<S>                  <C>          <C>          <C>          <C>           <C>          <C>
North America        48%          19%          41%          11%           42%          (1%)
Europe               45%          67%          53%          85%           54%          94%
South America         7%          14%           6%           4%            4%           7%
</TABLE>

RESULTS OF OPERATIONS
---------------------

          The following table sets forth the  relationship of percentages  which
certain income and expense items have to net sales:
<TABLE>
<CAPTION>
                                                     YEARS ENDED DECEMBER 31,
                                                  ------------------------------
                                                   1997        1996        1995
                                                  ------      ------      ------
<S>                                               <C>         <C>         <C>
Net Sales......................................    100%       100.0%      100.0%
                                                  ====        =====       =====
Gross margin...................................   17.7%        18.8%       16.7%
Selling, general & administrative expenses.....    8.2          8.0         8.3
Operating profit...............................    9.5         10.8         8.4
Interest expense...............................    3.5          2.8         3.1
Other income (expense)--net....................   (0.2)         0.4         0.1
                                                  ----        -----       -----
Income before income taxes.....................    5.8%         8.4%        5.4%
                                                  ====        =====       =====
</TABLE>

<PAGE>

     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  net income per share was $.44 for 1997  compared  with
$.75 in 1996.  Worldtex's  sales in 1997 decreased $4.6 million,  or 2.2%,  when
compared with 1996. Sales in the Company's European  operations  decreased $17.4
million,  or 15.8%,  compared with 1996,  primarily because of the stronger U.S.
dollar versus the French franc,  which reduced the French  subsidiary's sales by
approximately $12.7 million (assuming currency  translation of 1997 sales at the
rate applicable to 1996 results).  In the Company's  North American  operations,
sales increased $11.9 million, or 13.7%, from 1996 levels,  primarily because of
the inclusion of the narrow fabrics operations  acquired in October and December
which added $8.8  million in sales.  The reduced  value of the  Canadian  dollar
lowered  North  American  sales  by  approximately   $0.4  million  in  currency
translations (assuming currency translation of 1997 sales at the rate applicable
to 1996  results).  Sales in the  Company's  South  American  operation,  net of
intercompany  sales  of $9.5  million  and  $6.1  million  for  1997  and  1996,
respectively,  increased 7.6% compared with the prior year. The reduced value of
the  Colombian  peso  lowered  1997  sales by $2.4  million  (assuming  currency
translation of 1997 sales at the rate applicable to 1996 results).

          The volume  increase  for 1997 in North  America was due  primarily to
increased  market share and  expanding  diversification  into markets that offer
higher margins.  Sales from the French operations,  net of currency translations
for reporting purposes,  decreased approximately 4.3% in 1997 compared with 1996
primarily due to soft economic  conditions  in Europe.  The volume  increases in
South America reflect the Company's  continuing  efforts to expand production in
its lower cost operations.

          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 French subsidiary'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 8.2% in 1997 from 8% in 1996 primarily  because the fixed  component of
these expenses was spread over a lower sales base.

          The increase in interest  expense of $1.2 million was caused primarily
by the $175 million Senior Notes issued  December 1, 1997 in connection with the
acquisitions of Elastex and ECA.

     1996 VS. 1995
     -------------

          Worldtex's  sales in 1996  increased  $19.8  million,  or 10.6%,  when
compared with 1995. Sales in the Company's  European  operations  increased $9.2
million, or 9.2%, compared with 1995,  primarily because of increased demand for
covered  yarn used by the  weaving  industry  in Europe.  The lower value of the
French franc  compared with the U.S.  dollar  reduced 1996 sales by $2.6 million
(assuming  currency  translation  of 1996 sales at the rate  applicable  to 1995
results).  In the Company's  North  American  operations,  sales  increased $5.6
million,  or 6.9%, from 1995 levels,  primarily  because of increased  demand in

<PAGE>

non-pantyhose  end uses for covered  elastic yarn.  Sales in the Company's South
American  operation were $11.8 million  (excluding $6.1 million of inter-company
sales)  compared  with  $6.7  million  in 1995  primarily  due to a full year of
operation in 1996 compared  with the partial year of 1995.  The reduced value of
the  Colombian  peso  lowered  1996  sales by $1.8  million  (assuming  currency
translation of 1996 sales at the rate applicable to 1995 results).

          Worldtex's  gross  margin  increased  in 1996 to  18.8%  of  sales  as
compared to 16.7% for 1995.  This  increase  was  primarily  caused by increased
sales  resulting  from the Company's  continuing  efforts to develop  additional
applications  and end uses for its products,  lower  manufacturing  costs of the
Company's  Colombian  operations  and  reduced  costs  associated  with the 1995
restructuring.  Additionally,  the  Company's  fixed  expenses  were spread over
substantially higher sales.

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

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

INCOME TAXES
------------

          Income tax provisions for Worldtex have been  calculated in accordance
with Statement of Financial Accounting Standards No. 109 ("SFAS 109").  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to temporary differences between the carrying amounts of assets and
liabilities for tax purposes and financial statement purposes and operating loss
and tax credit  carryforwards.  Deferred tax assets and liabilities are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment  date. The French
parliament enacted a provision that increased the corporate tax rate from 33.33%
to 36.67% in July 1995.  The rate increase  resulted in a $0.9 million charge to
the 1995 tax  provision to increase the deferred tax  liability as of January 1,
1995 to the  higher  enacted  income tax rate.  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,  primarily
borrowings under the Company's credit facilities.

<PAGE>

          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")  for net  proceeds
(before deduction of transaction  expenses) of approximately $170.0 million (the
"Offering"),  which was used to pay the purchase  price in the ECA  Acquisition,
repay certain  indebtedness  and to pay transaction  fees and expenses  relating
thereto.  The Company  expects to use the balance of the net  proceeds  from the
sale of the Notes for general corporate purposes.

          Worldtex  used $1.5 million  from its  operating  activities  in 1997,
compared to generating $15 million in 1996 and $12 million in 1995. The decrease
in net cash provided in 1997 was caused  primarily by the decrease in net income
and the increase in working capital investments.

          EBITDA  represents  income before income taxes plus interest  expense,
depreciation and amortization and is provided as additional information relating
to the Company's debt service capacity.  EBITDA for the years ended December 31,
1997,  1996 and  1995 was  $25.8  million,  $29.5  million  and  $22.1  million,
respectively.  Depreciation  and  amortization  for the years ended December 31,
1997,  1996  and  1995  was  $6.8  million,   $6.3  million  and  $6.1  million,
respectively.

          During 1997, capital  expenditures  amounted to $7.7 million.  Capital
expenditures  were $13.8 million in 1996 and $8.4 million in 1995.  The majority
of such capital  expenditures  during the years  1995-1997 was primarily used to
purchase  additional  manufacturing  equipment  in order to increase and improve
efficiencies to the Company's production capacity. The Company currently expects
that capital  expenditures for 1998 will aggregate  approximately $12.0 million,
primarily for machinery and property improvements.

          During the second  quarter of 1995, a wholly owned  subsidiary  of the
Company  acquired   substantially  all  of  the  assets  of  Fibrexa,   S.A.,  a
manufacturer of covered yarn based in Bogota,  Colombia.  The  consideration for
the purchase of Fibrexa was  approximately  $4.4 million in cash,  assumption of
approximately  $6.5 million in debt and  contingent  payments  based on earnings
from the Company's South American operations over a five year period.

          On October 3, 1997, the Company  purchased  Elastex for  approximately
$7.7  million  and paid $0.6  million  to cancel an  equipment  operating  lease
assumed from the seller,  which funds were borrowed  under the Company's  Credit
Facility,  dated as of November  12,  1992,  as amended  (the  "Existing  Credit
Facility").  On  December  1, 1997,  a  wholly-owned  subsidiary  of the Company
purchased  substantially  all of the assets of ECA for a cash purchase  price of
approximately $76.3 million, which was funded with a portion of the net proceeds
from the Offering.  In connection with the ECA  Acquisition,  such subsidiary of
the Company assumed an industrial revenue bond obligation relating to ECA in the
aggregate  principal  amount of $6.0 million,  operating leases (as to which the
present  value of  remaining  lease  payment  obligations  will not exceed  $2.3
million) and certain current liabilities.

          The  Company's  business  strategy  includes  the pursuit of strategic
acquisitions of other  businesses.  Any acquisition would be funded through cash

<PAGE>

on hand  (including  the balance of the net proceeds  from the Offering and cash
generated by the Company's  operations),  the issuance of additional securities,
the sale of other assets or the incurrence of additional indebtedness (including
borrowings  under the New Credit  Facility (as defined  below)).  The  Company's
ability to sell assets and incur indebtedness are restricted under the Indenture
and the New Credit Facility.

          In 1994, the Company entered into an interest rate swap agreement with
a commercial  bank that  effectively  converted the interest rate on one-half of
its $50 million  7.50%  senior  notes to a floating  rate for three years ending
July 1999. The agreement  effectively changed the interest rate to approximately
6.24%,  7.87%,  7.08%, 6.59%, 6.77%, 6.52% and 6.77% for the six month intervals
ended January 21, 1995 through  January 21, 1998.  The effective  rate was 6.49%
for the six months  ending July 21, 1998.  Net amounts due under this  agreement
decreased  interest expense for 1997 by $.257 million,  for 1996 by $.20 million
and for 1995 by $.02 million.  The 7.50% senior notes were repaid with a portion
of the  proceeds  of  the  Offering.  Such  interest  rate  swap  agreement  was
terminated  effective  March  26,  1998,  and such  termination  will not have a
material  effect on the  financial  condition  or results of  operations  of the
Company.  The Company may enter into interest rate swap  agreements  relating to
the Notes in the future.

          In connection with the ECA Acquisition, the Company entered into a new
Credit  Agreement  (the "New Credit  Facility")  and repaid and  terminated  the
Existing Credit Facility.  The New Credit Facility provides for revolving credit
borrowings  in an aggregate  principal  amount of up to $25.0  million.  The New
Credit  Facility  terminates  and all amounts  borrowed  thereunder  will be due
December 1, 2002.  Loans under the New 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 New  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 (the "Foreign Subsidiaries").

          At December 31, 1997, the Company has  indebtedness  of $188.2 million
and $25.0  million  was  available  for future  borrowings  under the New Credit
Facility. In addition, at such date Filix had $15.0 million, Rubyco $1.0 million
and Fibrexa $4.8 million of U.S. dollar  equivalent  credit  availability  under
bank lines of credit.  Amounts  outstanding  as of  December  31, 1997 were $1.5
million for Fibrexa, $0.3 million for Rubyco and none outstanding for Filix. The
most  restrictive  covenant  of the New Credit  Facility  and  Indenture  limits
short-term borrowings by the Company's 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.

          As a result of the ECA  Acquisition  and the Offering,  the Company is
highly leveraged.  The Company's ability to make scheduled payments of principal

<PAGE>

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
New Credit  Facility,  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 New Credit  Facility 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 New Credit  Facility  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.

THREE-YEAR COMPARISONS
----------------------

          Total  long-term  debt was $185.8  million,  $67.8  million  and $68.9
million, respectively, at December 31, 1997, 1996 and 1995.

          Working  capital was $87.7  million,  $47.5 million and $47.3 million,
respectively, at December 31, 1997, 1996 and 1995.

          Net  worth  was  $77.5  million,  $85.2  million  and  $78.9  million,
respectively,  at  December  31,  1997,  1996 and  1995.  (See the  Consolidated
Statements of Stockholders' Equity of Worldtex for additional information.)

          The number of days that sales were represented by accounts  receivable
was 68 (net of $10.3  million  net  receivables  acquired on December 1, 1997 in
connection with the ECA Acquisition),  69 and 68, respectively,  at December 31,
1997, 1996 and 1995. Net accounts  receivable  increased by  approximately  $6.5

<PAGE>

million  (including the acquired ECA  receivables),  or 16.2%,  in 1997 compared
with 1996, and sales  increased  2.2%.  Inventories,  as a percentage of cost of
sales, were 32.4% (including $11.6 million of inventory or 6.9% of cost of sales
assumed in connection  with the ECA Acquisition on December 1, 1997) at December
31, 1997, 22.1% at December 31, 1996 and 21.5% at December 31, 1995.

          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.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------   -------------------------------------------

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

WORLDTEX, INC.

Independent Auditors' Report

Financial Statements:

          Consolidated Statements of Income,
               Years Ended December 31, 1997, 1996 and 1995

          Consolidated Balance Sheets,
               December 31, 1997 and 1996

          Consolidated Statements of Stockholders' Equity,
               Years Ended December 31, 1997, 1996 and 1995

          Consolidated Statements of Cash Flows,
               Years Ended December 31, 1997, 1996 and 1995

          Notes to Consolidated Financial Statements

Supplementary Financial Information

Financial Statement Schedule:

          Schedule II -  Valuation and Qualifying  Accounts Years Ended December
                         31, 1997, 1996 and 1995

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

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors
Worldtex, Inc.:

We have audited the accompanying  consolidated balance sheets of Worldtex,  Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related  consolidated
statements of income,  stockholders' equity and cash flows for each of the years
in the three-year  period ended December 31, 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 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  1996,  and the  results  of their
operations and their cash flows for each of the years in the  three-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 Peat Marwick LLP



Atlanta, Georgia
February 27, 1998

<PAGE>

                                 WORLDTEX, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

--------------------------------------------------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                           1997                1996                1995
                                                        ----------          ----------          ----------
<S>                                                     <C>                 <C>                 <C>
Net sales (Notes 12 and 16)                             $ 203,256             207,829             187,981

Cost of goods sold                                        167,272             168,754             156,519
                                                        ---------           ---------           ---------
      Gross profit                                         35,984              39,075              31,462

Selling and administrative expense                         16,770              16,582              15,708
                                                        ---------           ---------           ---------
      Operating profit                                     19,214              22,493              15,754

Interest expense                                            7,043               5,826               5,693

Other income (expense) - net                                 (302)                694                 170
                                                        ---------           ---------           ---------
      Income before income taxes                           11,869              17,361              10,231

Provision for income taxes (Note 11)                        5,377               6,415               4,979
                                                        ---------           ---------           ---------
      Net income before extraordinary item                  6,492              10,946               5,252

Extraordinary item, net (Note 6)                            1,344                   -                   -
                                                        ---------           ---------           ---------
      Net income                                        $   5,148              10,946               5,252
                                                        =========           =========           =========
Basic net income per share (Note 3):
      Net income before extraordinary item, net               .45                 .76                 .36
      Extraordinary item, net                                 .09                   -                   -
                                                        ---------           ---------           ---------
      Net income                                        $     .36                 .76                 .36
                                                        =========           =========           =========
Diluted net income per share (Note 3):
      Net income before extraordinary item, net               .44                 .75                 .36
      Extraordinary item, net                                 .09                   -                   -
                                                        ---------           ---------           ---------
       Net income                                       $     .35                 .75                 .36
                                                        =========           =========           =========

Weighted average shares outstanding (Note 3)
      Basic                                                14,420              14,463              14,476
                                                        =========           =========           =========
      Diluted                                              14,821              14,669              14,567
                                                        =========           =========           =========
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

                                 WORLDTEX, INC.
                           CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
                           DECEMBER 31, 1997 AND 1996
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                     ASSETS
                                                                                     1997                  1996
                                                                                   --------              --------
<S>                                                                                <C>                   <C>
Current Assets:
    Cash and cash equivalents                                                      $ 14,872                 2,117
    Accounts and notes receivable, less allowance for doubtful accounts
       of $2,085 in 1997 and $2,589 in 1996 (Notes 4, 6 and 16)                      46,320                39,868
    Inventories (Notes 3 and 6)                                                      54,200                37,265
    Prepaid expenses and other current assets (Note 11)                               3,026                 2,975
                                                                                   --------              --------
       Total current assets                                                         118,418                82,225

Property, plant and equipment - net (Note 3)                                         99,160                90,282
Other assets (Notes 3 and 15)                                                        11,946                 5,147
Cost in excess of net assets of acquired businesses, net of accumulated
       amortization of $7,600 in 1997 and $7,115 in 1996                             82,915                28,378
                                                                                   --------              --------
                                                                                   $312,439               206,032
                                                                                   ========              ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Short-term borrowings (Note 5)                                                 $  1,819                 1,342
    Current installments of long-term debt (Note 6)                                     620                 1,634
    Accounts and notes payable-trade and other liabilities (Notes 8 and 10)          28,236                30,254
    Income taxes payable (Note 11)                                                        -                 1,525
                                                                                   --------              --------
       Total current liabilities                                                     30,675                34,755
                                                                                    185,780                67,754
Long-term debt (Note 6)
Other long-term liabilities                                                           2,547                 1,316
Deferred income taxes (Note 11)                                                      15,935                17,029
                                                                                   --------              --------
       Total liabilities                                                            234,937               120,854
                                                                                   --------              --------
Stockholders' equity (Notes 6, 7 and 8):
    Preferred stock                                                                       -                     -
    Common stock                                                                        147                   147
    Paid-in capital                                                                  30,059                 9,946
    Retained earnings                                                                62,067                56,919
    Cumulative foreign translation adjustment                                       (13,273)                 (336)
    Less - Treasury stock, at cost                                                   (1,498)               (1,498)
                                                                                   --------              --------
       Total stockholders' equity                                                    77,502                85,178

Commitments and contingencies (Notes 8 and 9)                                             -                     -
                                                                                   --------              --------
                                                                                   $312,439               206,032
                                                                                   ========              ========
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

                                 WORLDTEX, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

--------------------------------------------------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                CUMULATIVE
                                                                                  FOREIGN
                                  COMMON           PAID-IN        RETAINED      TRANSLATION     TREASURY
                                   STOCK           CAPITAL        EARNINGS      ADJUSTMENT        STOCK        TOTAL
                                  -------          -------        --------      -----------     --------      -------
<S>                               <C>              <C>             <C>          <C>             <C>           <C>
Balances at
 Dec. 31, 1994                    $   147          29,913          40,721          (837)          (911)        69,033

Net income                              -               -           5,252             -              -          5,252
Foreign currency
    translation
    adjustment                          -               -               -         4,654              -          4,654
                                  -------          ------          ------       -------         ------        -------
Balances at
    Dec. 31, 1995                     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)
Stock issued                            -              33               -             -              -             33
                                  -------          ------          ------       -------         ------        -------
Balances at
    Dec. 31, 1996                     147          29,946          56,919          (336)        (1,498)        85,178

Net income                              -               -           5,148             -              -          5,148
Foreign currency
    translation
    adjustment                          -               -               -       (12,937)             -        (12,937)
Stock issued                            -             113               -             -              -            113
                                  -------          ------          ------       -------         ------        -------
Balances at
    December 31, 1997
    (Notes 6, 7 and 8)            $   147          30,059          62,067       (13,273)        (1,498)        77,502
                                  =======          ======          ======       =======         ======        =======
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

                                 WORLDTEX, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

--------------------------------------------------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                  1997            1996           1995
                                                               ---------       ---------      ---------
<S>                                                            <C>             <C>            <C>
Cash flows from operating activities:
Net income                                                     $   5,148         10,946          5,252
Adjustments  to  reconcile   net  income  to  net
  cash  provided  by  operating activities:
    Depreciation and amortization                                  6,845          6,284          6,133
    Provision for losses on accounts receivable                      305            139          1,332
    Deferred income taxes                                            720            825           (161)
    Change in assets and liabilities
      net of effects of acquisitions:
      Accounts and notes receivable                               (1,064)        (2,788)        (2,751)
      Inventories                                                 (7,396)        (4,557)        (1,276)
      Prepaid expenses and other current assets                     (248)           163           (527)
      Accounts and notes payable -
        trade and other current liabilities                       (4,313)         5,344          3,950
      Income taxes payable                                        (1,494)        (1,324)            94
                                                               ---------      ---------      ---------
      Net cash (used in) provided by operating activities         (1,497)        15,032         12,046
                                                               ---------      ---------      ---------
Cash flows from investing activities:
  Capital expenditures                                            (7,706)       (13,785)        (8,356)
  Acquisitions, net of cash acquired                             (85,382)             -         (4,067)
  Other investing activities                                      (8,190)        (1,149)        (3,011)
                                                               ---------      ---------      ---------
    Net cash used in investing activities                       (101,278)       (14,934)       (15,434)
                                                               ---------      ---------      ---------

Cash flows from financing activities:
  Borrowings under line of credit arrangements                     3,548         16,724          7,813
  Payments under line of credit arrangements                      (3,435)       (16,321)        (6,874)
  Borrowings under revolving credit facility                     109,550        104,660         46,038
  Payments under revolving credit facility                      (121,940)      (104,940)       (40,578)
  Borrowings under long term loans                               175,000              -              -
  Payments under long term loans                                 (50,000)             -              -
  Stock issued or (reacquired), net                                  113           (554)             -
  Other financing activities                                       1,068            830         (4,217)
                                                               ---------      ---------      ---------
    Net cash provided by financing activities                    113,904            399          2,182
                                                               ---------      ---------      ---------
Effects of exchange rate changes in cash                           1,626           (225)          (100)
                                                               ---------      ---------      ---------
    Net increase (decrease) in cash                               12,755            272         (1,306)
Cash at beginning of year                                          2,117          1,845          3,151
                                                               ---------      ---------      ---------
Cash at end of year                                            $  14,872          2,117          1,845
                                                               =========      =========      =========

Supplemental  disclosure of cash flow  information:
  Cash paid during the period for:
    Interest                                                   $   7,374          5,784          5,265
                                                               =========      =========      =========
    Income taxes                                               $   7,594          7,630          3,722
                                                               =========      =========      =========
</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.  Reference to Worldtex  shall include its  subsidiaries
unless the context shall indicate otherwise.

NOTE 2 - BASIS OF PRESENTATION

The  consolidated  financial  statements of Worldtex as of December 31, 1997 and
1996 and for the years  ended  December  31,  1997,  1996 and 1995  include  the
accounts of Regal,  Rubyco,  Filix,  Fibrexa  effective  April 1, 1995,  Elastex
effective  October 3, 1997 and ECA effective  December 1, 1997. All  significant
intercompany  balances and  transactions  for all periods are  eliminated in the
consolidated financial statements.



<PAGE>

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A)  CASH AND CASH EQUIVALENTS

At December 31, 1997,  cash includes a $9,160  demand  deposit with a commercial
bank earning  daily money  market  investment  yields.  At December 31, 1997 and
1996,  restricted  cash on  deposit  of $2,123  and  $2,004,  respectively,  are
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, 1997 and 1996, the major classes of inventory are:

<TABLE>
<CAPTION>
                                 1997               1996
                                 ----               ----

<S>                            <C>                   <C>
Raw Materials                  $ 15,401              12,614
Work in Process                  13,976               6,428
Finished Goods                   24,823              18,223
                               --------            --------
                               $ 54,200              37,265
                               ========            ========
</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 20 years, with  approximately 60%
being depreciated over 20 years),  structures (20 to 40 years),  other equipment
(5 to 10 years).  Leasehold  improvements  are amortized  over their  respective
lease terms or their estimated useful lives, if shorter.  Repair and maintenance
costs are  charged  to expense  as  incurred.  Renewals  and  betterments  which
substantially   extend  the  useful  life  of  an  asset  are   capitalized  and
depreciated.  As of December 31, 1997 and 1996,  property,  plant and  equipment
consists of:

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                      1997           1996
                                      ----           ----

<S>                                  <C>             <C>
Land                                 $2,820          2,471
Buildings and leasehold
    improvements                     34,172         31,181
Machinery and equipment
                                     99,083         91,008
                                    -------        -------
                                    136,075        124,660
Less accumulated depreciation
    and amortization
                                     36,915         34,378
                                    -------        -------
                                    $99,160         90,282
                                    =======         ======
</TABLE>

(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

Rubyco  enters into  forward  exchange  contracts  as a hedge  against  accounts
payable  denominated in foreign currency.  These contracts are used by Rubyco to
minimize exposure and reduce risk from exchange rate fluctuations in the regular
course of its foreign business. Gains and losses on forward contracts, which are
not  material,  are  deferred  and  included in the  measurement  of the related
foreign currency transactions.  The impact of forward contracts on cash flows is
reflected  in the change in accounts and notes  payable - trade.  As of December
31, 1997 and 1996, $0 and $500, respectively, in contracts were outstanding.


<PAGE>

(F)  INCOME TAXES

Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences  attributable to temporary differences between the carrying amounts
of assets and liabilities for tax purposes and financial  statement purposes and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured  using enacted tax rates expected to apply to taxable income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

No  provision  is made for income  taxes  which may be payable if  undistributed
earnings of foreign subsidiaries were to be paid as dividends to Worldtex, since
Worldtex  intends  that such  earnings  will  continue  to be  invested in those
countries.  At December 31, 1997, the cumulative amount of foreign undistributed
earnings amounted to approximately $48,509. 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
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

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

for basic and dilutive per share  amounts as required by SFAS No. 128,  EARNINGS
PER SHARE is as follows:

<TABLE>
<CAPTION>
                                  1997        1996         1995
                               ----------  ----------   ----------
<S>                            <C>         <C>          <C>
Net income before
   extraordinary item          $    6,492      10,946        5,252
Preferred dividends and
   other adjustments
                                        -           -            -
                               ----------  ----------   ----------
Basic net income available
   to common stockholders
                               $    6,492      10,946        5,252
Securities effects                      -           -            -
                               ----------  ----------   ----------
Diluted net income available
   to common stockholders
                               $    6,492      10,946        5,252
                               ==========      ======   ==========
Basic weighted average
   common shares outstanding
                                   14,420      14,463       14,476
Effect of dilutive options
   outstanding                        401         206           91
                               ----------  ----------   ----------
Diluted weighted average
   common and common
   equivalent shares
   outstanding
                                   14,821      14,669       14,567
                               ==========  ==========   ==========
Potentially dilutive shares
   not included because
   their effect was
   antidilutive                        80         458          651
                               ==========  ==========   ==========

</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 expected  cash  discounts  based upon  historical  bad debts and
related  claims  experience  and upon periodic  evaluations  of the aging of the
accounts receivable.


<PAGE>

(J)  INTEREST RATE SWAP

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

(K)  STOCK OPTIONS

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

(L)  ESTIMATES

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

(M)  RECLASSIFICATIONS

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

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

NOTE 4 - NOTES RECEIVABLE

Filix has the U.S.  dollar  equivalent  of  approximately  $2,812  and $4,500 of
non-interest  bearing  notes  receivable  as of  December  31,  1997  and  1996,
respectively, with maturities within four months of the periods ended.

NOTE 5 - SHORT-TERM BORROWINGS

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

Fibrexa has  available the U.S.  dollar  equivalent of $4,170 under various bank
lines of  credit  providing  for  unsecured  borrowings  and  letter  of  credit
financing  generally due in 90 days.  At December 31, 1997 and 1996,  $1,560 and
$1,324,  respectively,  were  outstanding  under  these  agreements  at  average
interest rates of 7.75% and 7.57% respectively.

Filix  has  available  the U.S.  dollar  equivalent  of  $15,049  under  various
unsecured  bank lines of credit and  overdraft  facilities  bearing  interest at
4.28%.  At December 31, 1997 and 1996, no amounts were  outstanding  under these
facilities.

Rubyco has available the U.S.  dollar  equivalent of $1,049 under a bank line of
credit, due on demand,  providing for unsecured  borrowings and letter of credit
financing  at the bank's  prime rate (5.5% at December  31,  1997).  The line of
credit is guaranteed by the Company. At December 31, 1997 and 1996, $259 and $18
amounts, respectively, were outstanding under this agreement.


<PAGE>

NOTE 6 - LONG-TERM DEBT

As of December 31, 1997 and 1996, long-term debt consists of:

<TABLE>
<CAPTION>
                                        1997            1996
                                        ----            ----
<S>                                     <C>             <C>
9.625% Senior Notes due
  December 15, 2007                   $175,000             -
7.50% Senior Notes due
  July 1,1998 through July 1, 2004           -        50,000
Industrial revenue bonds
  due June 1, 2014 with
  interest at variable rates
  (5.9% average rate as of
  December 31,1997)                      6,000             -

Revolving credit facilities
  due December 1, 2002
  with interest at variable
  rates (6.56% weighted
  average rate as of
  December 31,1996)                          -        12,390
Other indebtedness, primarily
  fixed rate debt, due at
  various dates through 2007             5,400         6,998
                                      --------      --------
                                       186,400        69,388
Less current installments                  620         1,634
                                      --------      --------
                                      $185,780        67,754
                                      ========     =========

</TABLE>

The aggregate annual  maturities of long-term debt during each of the five years
subsequent to December 31, 1997 are as follows:

<TABLE>
<CAPTION>
       YEAR ENDING
       DECEMBER 31,       AMOUNT
     ---------------    ------------
     <S>                <C>
           1998         $      620
           1999                485
           2000              1,826
           2001                601
           2002                852
        Thereafter         182,016
                        ----------
                        $  186,400
                        ==========
</TABLE>

The Company  entered into an  indenture  dated  December 1, 1997,  under which a
total of $175,000  Senior Notes due December 15, 2007 were issued with  interest

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

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 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, 1997,
Worldtex was in compliance with the various covenants.

On December 1, 1997,  the Company  repaid the $50,000 Senior Notes due July 2004
with part of the proceeds  from the sale of the $175,000  Senior Notes due 2007.
An  extraordinary  charge of $1,344,  net of a tax benefit of $693, was recorded
for the early debt extinguishment.

In 1994,  the  Company  entered  into an  interest  rate swap  agreement  with a
commercial bank that effectively converted a portion of its $50,000 Senior Notes
from  fixed  rate debt to a  floating  rate based on LIBOR for a period of three
years ending July 1999. At December 31, 1997,  the swap agreement had a notional
principal amount of $25,000.  The floating rate is reset every six months during
the term of the interest  rate swap  agreement  with interest due January 21 and
July 21. The  agreement  effectively  changed the interest  rate on $25,000 from
7.5% to approximately 6.24%, 7.87%, 7.08%, 6.59%,6.77%,  6.52% and 6.77% for the
six month  intervals  ended  January 21, 1995 through  January 21, 1998 at which
time the  effective  interest rate for this portion of the debt was decreased to
6.49% for the next six months.  The estimated  amount at which the Company could
terminate  this  agreement  was  approximately  $354 at December 31,  1997.  Net
amounts due under this agreement  decreased  interest  expense for 1997 by $257,
for 1996 by $201 and for 1995 by $20.  The $50,000  Senior  Notes were repaid on

<PAGE>

December 1, 1997. The Company terminated the swap agreement  effective March 26,
1998. The termination did not have a material effect on the financial  condition
or results of operations of the Company.

In connection  with the ECA  acquisition,  the Company entered into a new credit
facility  and  repaid and  terminated  the  existing  credit  facility.  The new
facility  provides for revolving  credit  borrowings  in an aggregate  principal
amount of up to  $25,000.  The new credit  facility  terminates  and all amounts
borrowed  thereunder  will be due  December 1, 2002.  Loans under the new credit
facility  bear  interest at variable  rates.  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. No loans were
outstanding at December 31, 1997. The new credit  facility  carries a commitment
fee of  .375%  of the  unused  available  borrowings.  The new  credit  facility
contains customary covenants and restrictions on the Company's ability to engage
in certain  activities.  In addition,  the new 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 new credit  facility  restricts the payment of  dividends.  At
December 31, 1997, Worldtex was in compliance with the various covenants.

Under the most  restrictive  of these debt  agreements,  $.4 million of retained
earnings was unrestricted as to the payment of dividends and other distributions
as of December 31, 1997.

NOTE 7 - STOCKHOLDERS' EQUITY

Worldtex is authorized to issue up to forty million shares of common stock, $.01
par value,  and ten million  shares of preferred  stock,  $.01 par value.  As of
December 31, 1997 and 1996,  there were issued and  outstanding  14,428,671  and
14,403,271  shares of common  stock,  respectively,  and no shares of  preferred

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

stock.  Worldtex is authorized  to  repurchase  up to one million  shares of its
common stock.  Through December 1997,  266,300 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.

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

Under the terms of the Worldtex  1992 Stock  Incentive  Plan,  as amended by the
stockholders in May 1994,  options to purchase up to 1,400,000  shares of common
stock may be awarded to officers and employees.  Options  granted under the plan
may be for such terms and  exercised at such times as  determined at the time of
grant by the Compensation Committee of the Board of Directors.  In addition, the
Plan provides  that each outside  director will be granted an option to purchase
10,000  shares of common  stock of the Company.  As of December 31, 1997,  1,000
shares  were  reserved  for  future  awards  under the  plan.  In  addition,  in
connection  with the Company's  acquisition  of Elastic  Corporation  of America
("ECA") in December  1997, the Company  granted to a senior  executive of ECA an

<PAGE>

option  outside of the 1992 Stock  Incentive  Plan to purchase  50,000 shares of
common  stock of the  Company.  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, 1997, 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>
                                  NUMBER OF      WEIGHTED AVERAGE
                                   SHARES         EXERCISE PRICE
<S>                               <C>             <C>
Balances at
   December 31, 1994                996,000           $5.50
   Options Granted                   86,000           $6.44
   Options Exercised                      -               -
   Options Cancelled                  5,000           $6.44
                                -----------
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 Exercisable:
   December 31, 1995                507,200           $6.03
   December 31, 1996                737,400           $5.91
   December 31, 1997                891,680           $5.76
Weighted average fair
value of options
granted:
   December 31, 1995                  $3.01
   December 31, 1996                  $2.27
   December 31, 1997                  $3.79

</TABLE>

<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Options outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                       WEIGHTED
                                       AVERAGE         WEIGHTED
RANGE OF EXERCISE     NUMBER OF       REMAINING         AVERAGE
      PRICES           SHARES      CONTRACTUAL LIFE    EXERCISE
                                                         PRICE
<C>     <C>           <C>              <C>                <C>
$4.19 - $4.75         634,800          7.0 yrs            $ 4.40
$6.44 - $6.75         652,600          5.3 yrs            $ 6.48
$7.97 - $9.44          80,000          9.7 yrs            $ 8.26
</TABLE>

Options exercisable at December 31, 1997:

<TABLE>
<CAPTION>
                                       WEIGHTED
                                       AVERAGE         WEIGHTED
RANGE OF EXERCISE     NUMBER OF       REMAINING         AVERAGE
      PRICES           SHARES      CONTRACTUAL LIFE    EXERCISE
                                                         PRICE
<C>     <C>           <C>              <C>               <C>
$4.19 - $4.75         293,880          7.0 yrs           $ 4.40
$6.44 - $6.75         597,800          5.3 yrs           $ 6.48
$7.97 - $9.44               0          9.7 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.  200,000  options  were issued at less than quoted
market value and $30 has been  charged to  compensation  cost in 1997,  1996 and
1995 respectively.  These 200,000 options, plus 200,000 options issued at quoted
market value, vest ratably over three years while all other options vest ratably
over five years. The options have a ten year term.

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

<PAGE>

<TABLE>
<CAPTION>
                                 1997        1996       1995
                                 ----        ----       ----
<S>                             <C>        <C>          <C>
Net income as reported
                                $5,148     10,946       5,252
Pro forma                        5,046     10,872       5,240
Diluted net income
   per share
   as reported                     .35        .75         .36
Pro forma                          .35        .75         .36

</TABLE>

The fair  value of each  option  grant is  established  on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions  used for  grants  in 1997,  1996 and  1995:  dividend  yield of 0%;
expected  volatility of 33%, 27% and 29%;  risk-free  interest rates of 5.5% and
expected lives of eight years.

NOTE 8 - EMPLOYEE BENEFIT PLANS

Employees of Regal participate in a non-contributory profit-sharing plan for all
eligible employees,  including officers.  The plan provides for minimum employer
contribution of the lesser of five percent of Regal's income before taxes plus a
discretionary  amount  determined by the Regal Board of Directors or the maximum
amount  deductible  for Federal  income tax purposes.  Provisions  for the years
ended December 31, 1997, 1996 and 1995 were $89, $60 and $27 respectively.

Regal  employees  participate  in the Worldtex  Employee  Stock  Ownership  Plan
("Worldtex  ESOP").  The  Worldtex  ESOP  provides  eligible  employees  with an
opportunity to purchase  Worldtex common stock through payroll  deductions,  and
subject  to  certain   limitations   was  matched  by  Worldtex.   The  Worldtex
contribution  was  suspended  indefinitely  effective  June 1,  1996.  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 Worldtex ESOP are invested by an independent
trustee  in  common  stock  of   Worldtex.   Stock   attributable   to  Worldtex
contributions vests at the rate of 20% for after two years of service,  with 20%
vesting  added for each year,  up to five years of  service,  at which  point an
employee is 100% vested in the plan. Contributions to the Worldtex ESOP were $0,

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

$50 and $124 in 1997,  1996 and 1995  respectively.  Effective June 1, 1996, the
Company  amended and  renamed the plan The  Worldtex,  Inc.  Profit  Sharing and
Retirement Savings Plan in order to merge the Regal profit-sharing, the Worldtex
ESOP, and the Worldtex,  Inc.  401(k) plans.  All vesting  schedules for Company
contributions were conformed to the one described above for the ESOP plan.

Employees of Rubyco  participate  in a Registered  Retirement  Savings plan. The
plan  provides for employee  contributions  of 4% of salary to a maximum of $3.5
with corresponding contributions by Rubyco of 5% of salary to a maximum of $3.5.
Provisions  for the years ended  December 31, 1997,  1996 and 1995 were $32, $27
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.  Provisions for
the years  ended  December  31,  1997,  1996 and 1995 were  $720,  $902 and $780
respectively.

Under  the  terms of an  industry-wide  labor  agreement,  Filix  employees  are
entitled  to a lump-sum  payment at normal  retirement  age of up to four months
salary  depending on their number of years of service.  Such amounts are payable
only if the  employee  remains  with  Filix  until  retirement.  The plan is not
funded. The following table sets forth the plan's unfunded status as of December
31, 1997 and 1996:

<TABLE>
<CAPTION>
                                             1997         1996
                                             ----         ----
<S>                                         <C>           <C>
Actuarial present value of benefit
   obligations:
Vested benefit obligations                  $    -            -
                                            ======       ======
Accumulated benefit
   obligation                               $ (185)        (256)
                                            ======       ======
Projected benefit obligation                $ (199)        (299)
Plan assets at fair value                        -            -
                                            ------       ------
Projected benefit obligation in               (199)        (299)
   excess of plan assets
Unrecognized net loss                           14           99
                                            ------       ------
Accrued pension liability                   $ (185)        (200)
                                            ======       ======


<PAGE>

Net periodic  pension cost of the Filix  agreement for the years ended  December
31, 1997, 1996 and 1995 included the following components:
</TABLE>


<TABLE>
<CAPTION>
                                       1997      1996       1995
                                       ----      ----       ----
<S>                                  <C>         <C>        <C>
Service cost                         $    8        11          9
Interest cost on projected benefit
   obligation                            13        25         26
Amortization of (gain)/loss               -        11          -
                                     ------    ------     ------
Net periodic pension cost            $   21        47         35
                                     ======    ======     ======
</TABLE>

The projected  benefit  obligation at December 31, 1997 and 1996 was  determined
using an  assumed  discount  rate of 7.25% and 7.5%  respectively.  The  assumed
long-term rate of increase in compensation was 3% for 1997 and 1996.

Worldtex has a unfunded  supplemental  death and retirement plan for certain key
employees.  The accrued  pension  liability  at  December  31, 1997 and 1996 was
$1,487 and $1,287.  Net periodic  pension  cost was $200,  $522 and $72 in 1997,
1996 and 1995 respectively.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Future minimum lease payments under  noncancelable  operating leases,  primarily
for real property, as of December 31, 1997 are:

      1998            $   2,174
      1999                1,936
      2000                1,904
      2001                1,924
      2002                  404
                      ---------
      Total           $   8,342
                      =========

Rental  expense for  cancelable and  noncancelable  operating  leases charged to
operations  for  the  years  ended   December  31,  1997,   1996  and  1995  was
approximately $1,134, $974 and $647 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

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

of any present  litigation or asserted claim will not have a material  effect on
Worldtex's operations, financial position or liquidity.

NOTE 10 - ACCOUNTS AND NOTES PAYABLE - TRADE AND OTHER LIABILITIES

Accounts  and  notes  payable  - trade  and  other  liabilities  consist  of the
following as of December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                        1997            1996
                                        ----            ----
<S>                                 <C>               <C>
Accounts and other                  $  19,187         21,229
    payables - trade
Salaries, wages and other               3,612          3,502
    compensation
Pensions, profit sharing and            1,668          1,530
    employee benefits
Taxes, other than income taxes          1,083            831
Interest                                1,619          2,109
Other                                   1,067          1,053
                                    ---------      ---------
Total                               $  28,236         30,254
                                    =========      =========
</TABLE>

NOTE 11 - INCOME TAXES

The provisions for income taxes for the years ended December 31, 1997,  1996 and
1995 are as follows:

<TABLE>
<CAPTION>
                 U. S.                 U.S. STATE
                FEDERAL     FOREIGN     & LOCAL       TOTAL
<S>            <C>              <C>           <C>       <C>
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
               ==========   =========   =========   =========
1995
Current        $       -        5,037           -       5,037
Deferred            (717)         834        (175)        (58)
               ----------   ---------   ----------  ----------
Total          $    (717)       5,871        (175)      4,979
               ==========   =========   ==========  =========
</TABLE>


<PAGE>

Income before income taxes for the years ended December 31, 1997,  1996 and 1995
is comprised as follows:

<TABLE>
<CAPTION>
                          1997          1996           1995
                          ----          ----           ----
<S>                    <C>               <C>          <C>
U.S.                   $ (2,244)         (365)        (1,959)
Foreign                  14,113        17,726         12,190
                       --------      --------      ---------
                       $ 11,869        17,361         10,231
                       ========      ========       ========
</TABLE>

A  reconciliation  for the years ended December 31, 1997,  1996 and 1995 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>
                                      1997       1996      1995
                                      ----       ----      ----
<S>                                   <C>        <C>       <C>
Statutory U.S. Federal income
   tax rate                           34.0%      34.0%     34.0%
State and local income taxes,
   net of U.S. Federal income
   tax benefit                           -          -      (1.1)
Effect of increase in French
   tax rate on deferred taxes          9.7          -       8.7
Effect of increase in French
   tax rate on current taxes           7.1          -         -
Effect of foreign inflation
   adjustments                        (7.8)         -         -
Amortization of goodwill               2.2        1.9       3.0
Other, net                              .1        1.1       4.1
                                      -----      -----     -----
Effective rate of tax on book
   income                              45.3%      37.0%     48.7%
                                      ======      =====    ======
</TABLE>

In October 1997,  the French  parliament  enacted a provision that increased the
tax rate from  36.67% to 41.67%.  The 36.67% rate was  increased  from 33.33% in
July 1995.  The rate  increases  resulted in a $1,156  charge in 1997 and a $889
charge in 1995 to income tax provision to increase the deferred tax liability as
of January 1 of each year to the higher enacted income tax rate.

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and  liabilities at December 31, 1997 and 1996 are as
follows:

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                          1997        1996
                                          ----        ----
<S>                                       <C>         <C>
Deferred tax assets:
   Inventories                          $     259         196
   Employee benefits                          843         739
   Allowance for doubtful accounts            346         671
   Net operating loss carryforwards         2,561         623
                                        ---------   ---------
                                            4,009       2,229
                                        ---------   ---------
Deferred tax liabilities:
   Property, plant and equipment          (17,609)    (16,813)
   Goodwill amortization                      (82)          -
   Imputed interest                          (806)       (838)
   Other nondeductible items                 (362)       (158)
                                        ----------  ----------
                                          (18,859)    (17,809)
                                        ----------  ----------
Net deferred income taxes                $(14,850)    (15,580)
                                        ==========  ==========

</TABLE>


<PAGE>

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

<TABLE>
<CAPTION>
                                    1997          1996
                                    ----          ----
<S>                                <C>              <C>
Prepaid expenses and
   current assets                  $  1,085         1,449
Deferred income taxes               (15,935)      (17,029)
                                   --------      --------
                                   $(14,850)      (15,580)
                                   ========      ========
</TABLE>

There was a $91 valuation allowance  established in 1997 for deferred tax assets
attributable to items when realized will result in adjustments to goodwill as of
December 31, 1997. There was no valuation allowance for years ended December 31,
1996 and  1995.  Based  upon the  level of  historical  taxable  income  and the
expected reversal of future taxable temporary  differences,  management believes
it is more likely than not that the Company  will  realize the benefits of these
deductible differences at December 31, 1997.

NOTE 12 - GEOGRAPHIC INFORMATION

Financial  information by geographic area for the years ended December 31, 1997,
1996 and 1995 is summarized as follows:

<TABLE>
<CAPTION>
                      NORTH                SOUTH
                      -----                -----
                     AMERICA    EUROPE    AMERICA    TOTAL
                     -------    ------    -------    -----
<S>                  <C>        <C>       <C>        <C>
1997
----
Net Sales             $98,138    92,417     12,701   203,256
Operating Profit        3,637    12,830      2,747    19,214
Identifiable Assets   196,795    89,919     25,725   312,439
1996
----
Net Sales              86,280   109,785     11,764   207,829
Operating Profit        2,469    19,049        975    22,493
Identifiable Assets    79,598   101,452     24,982   206,032
1995
----
Net Sales              80,721   100,577      6,683   187,981
Operating Profit
   (loss)                (311)   14,878      1,187    15,754
Identifiable Assets    80,514    99,439     16,112   196,065

</TABLE>

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards  No. 107,  DISCLOSURES  ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, requires all entities to disclose the fair value
of certain on- and off-balance  sheet  financial  instruments in their financial
statements.

(A)  CASH, ACCOUNTS AND NOTES RECEIVABLE AND ACCOUNTS AND NOTES PAYABLE

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

(B)  LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                         DECEMBER 31, 1997
                                         -----------------
                                      CARRYING        ESTIMATED
                                       AMOUNT        FAIR VALUE
                                       ------        ----------

<C>                                  <C>             <C>
9.625% Senior Notes                  $   175,000         179,831
Revolving credit facilities                    -               -
Other indebtedness                        11,400          11,510
                                     -----------     -----------
Total                                $   186,400         191,341
                                     ===========     ===========
</TABLE>

<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

(C)     FORWARD EXCHANGE CONTRACTS

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

(D)     INTEREST RATE SWAP

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

(E)     LIMITATIONS

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

NOTE 14 - ACQUISITIONS

On December 1, 1997, the Company  completed the acquisition of substantially all
of the assets of the  Elastic  Corporation  of America  division  ("ECA") of NFA
Corp.  for  approximately  $76,300 in cash and the  assumption of $6,000 in long
term debt. ECA is a supplier of woven and knitted narrow elastic  fabrics to the
apparel industry. On October 3, 1997, the Company purchased substantially all of
the assets of the Narrow Fabrics division ("Elastex") of Texfi Industries,  Inc.
for  approximately  $8,400 in cash.  Elastex  is a supplier  of  knitted  narrow
elastic fabrics to the apparel  industry.  The net proceeds from the sale of the
$175,000  senior notes were used to fund the  acquisition on December 1, 1997 of
ECA and to reduce outstanding  indebtedness  incurred to finance the acquisition
on October 3, 1997, of Elastex. The excess of cost over fair value of net assets
acquired was approximately  $52,887 for ECA and approximately $3,837 for Elastex
as of December 31, 1997, which will be amortized using the straight-line  method
over  40  years.  The  acquisitions  were  accounted  for  as  a  purchase  and,
accordingly, the net assets and operations of ECA and Elastex have been included
in the Company's  consolidated financial statements beginning on the acquisition
effective dates.


<PAGE>

The  following  unaudited  pro forma  data  presents  1997 and 1996  results  of
operations  of the  Company,  Elastex  and ECA as though  the  acquisitions  had
occurred  at  the  beginning  of  each  period   presented,   giving  effect  to
depreciation  and  amortization of assets on the accounting  basis recognized in
recording the purchase and the interest on funds used to effect the purchase.


<TABLE>
<CAPTION>
                                        1997             1996
                                        ----             ----
<S>                                  <C>                <C>
Net sales                            $ 283,726          279,383
Net income                               5,576            7,240
Diluted net income per share               .38              .49
</TABLE>


During the second  quarter of 1995,  a wholly  owned  subsidiary  of the Company
acquired  substantially  all of the  assets  of  Fibrexa,  S.A.  ("Fibrexa"),  a
manufacturer of covered yarn based in Bogota,  Colombia.  The  consideration for
the purchase  was  approximately  $4,400 in cash,  assumption  of  approximately
$6,500 in debt and  contingent  payments  based on earnings  from the  Company's
South American  operations over a five-year period.  The funds for this purchase
were obtained from the Company's cash on hand and borrowings under the Company's
Revolving Credit Agreement. The excess of cost over fair value of the net assets
acquired  was  approximately  $800 at  acquisition  and $1,500 at year end 1995,
$2,000 at December 1996, and $2,800 at December 1997 due to contingency payments
per the  purchase  agreement,  which will be amortized  using the  straight-line
method over 40 years.  The  acquisition  was  accounted  for as a purchase  and,
accordingly,  the net assets and operations of Fibrexa have been included in the
Company's   consolidated   financial   statements  beginning  on  the  effective
acquisition date of April 1, 1995.

NOTE 15 - RELATED PARTY TRANSACTIONS

In 1997,  1996 and 1995,  other assets include a $600  noninterest  bearing note
receivable due in the year 2000 from a senior executive.


<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


NOTE 16 - CONCENTRATIONS

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

In 1995, one customer accounted for 10.5% of Worldtex's  consolidated net sales.
In 1997 and 1996, no customer  represented  over 10% of consolidated  net sales.
The majority of Worldtex's  sales during 1997 were  attributable  to the sale of
covered  elastic  yarn. In 1997,  Worldtex  acquired two narrow  elastic  fabric
businesses. Any significant decline in demand for covered elastic yarn or narrow
elastic  fabrics  would  have a material  adverse  effect on the  operations  of
Worldtex.

NOTE 17 - RESTRUCTURING CHARGE

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

As of December 31, 1997, $507 is reserved primarily for inventory  valuation and
allowances for the collectibility of accounts  receivables related to the closed
operations.

NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION

The $175,000 Senior Notes are guaranteed by each of the U.S. subsidiaries of the
Company, which consist of Regal, Willcox & Gibbs Filix of Delaware,  Inc., Regal
Yarns of Argentina,  Inc.,  WTX Colombia I, Inc. and WTX Colombia II, Inc.,  ECA
and Elastex.  The guarantor  subsidiaries  are wholly owned  subsidiaries of the

<PAGE>

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 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
Consolidating Statements of Income
December 31, 1997
                                                                 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 (benefit) 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 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
Consolidating Statements of Income
December 31, 1996
                                                               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 expense (income)          (2,929)               885             2,044                 -                 -
Intercompany administrative charges             (3,348)             1,851             1,497                 -                 -
Other income (expense) - net                       132                144               418                 -               694
                                            ----------         ----------        ----------        ----------        ----------

  Income (loss) before income taxes             (1,094)               729            17,726                 -            17,361

Provision (benefit) 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 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
Consolidating Statements of Income
December 31, 1995
                                                               GUARANTOR        NON-GUARANTOR
                                                               DOMESTIC            FOREIGN
                                          WORLDTEX, INC.      SUBSIDIARIES       SUBSIDIARIES      ELIMINATIONS      CONSOLIDATED
                                          --------------      ------------       ------------      ------------      ------------

<S>                                        <C>                     <C>              <C>                <C>               <C>
Net sales                                  $        -              63,621           127,110            (2,750)           187,981

Cost of goods sold                                  -              58,626           100,584            (2,691)           156,519
                                           ----------          ----------        ----------        ----------         ----------

  Gross profit                                      -               4,995            26,526               (59)            31,462

Selling and administrative expense              2,136               4,279             9,293                 -             15,708
                                           ----------          ----------        ----------        ----------         ----------

  Operating profit (loss)                      (2,136)                716            17,233               (59)            15,754

Interest expense                                4,788                 183               722                 -              5,693
Intercompany interest expense (income)         (3,167)                753             2,414                 -                  -
Intercompany administrative charges            (3,077)              2,147               930                 -                  -
Other income (expense) - net                       62                 551              (443)                -                170
                                           ----------          ----------        ----------        ----------         ----------

  Income (loss) before income taxes              (618)             (1,816)           12,724               (59)            10,231

Provision (benefit) for income taxes                2                (894)            5,871                 -              4,979

Undistributed earnings of subsidiaries          5,872                   -                 -            (5,872)                 -
                                           ----------          ----------        ----------        ----------         ----------

  Net income (loss)                        $    5,252                (922)            6,853            (5,931)             5,252
                                           ==========          ===========       ==========        ===========        ==========
</TABLE>


<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
Consolidating Balance Sheets
December 31, 1997

                                                                     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 receivable, net                        -          20,870           25,450                -           46,320
  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 and notes 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
  Preferred stock                                           -               -                -                -                -
  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
  Cumulative foreign translation adjustment           (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 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------

                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
Consolidating Balance Sheets
December 31, 1996

                                                                     GUARANTOR       NON-GUARANTOR
                                                                     DOMESTIC          FOREIGN
                                                WORLDTEX, INC.     SUBSIDIARIES      SUBSIDIARIES   ELIMINATIONS     CONSOLIDATED
                                                --------------     ------------      ------------   ------------     ------------

<S>                                                <C>                    <C>            <C>            <C>               <C>
Assets
Current Assets
  Cash                                             $      428             174            1,515                -            2,117
  Accounts and notes receivable, net                     (200)          7,558           32,510                -           39,868
  Inventories                                               -          12,926           24,339                -           37,265
  Prepaid expenses and other current assets             1,405             415            1,155                -            2,975
                                                   ----------      ----------       ----------       ----------       ----------
    Total current assets                                1,633          21,073           59,519                -           82,225

Property, plant and equipment, net                        263          30,725           59,294                -           90,282
Other assets                                            2,343           2,117              687                -            5,147
Cost in excess of net assets of acquired
   businesses, net                                          -           8,212           20,166                -           28,378
Intercompany investments                               85,858               -                -          (85,858)               -
Intercompany advances                                  75,788          14,798                -          (90,586)               -
                                                   ----------      ----------       ----------       ----------       ----------
                                                     $165,885          76,925          139,666         (176,444)         206,032
                                                   ==========      ==========       ==========       ===========      ==========
Liabilities and Stockholders' equity
Current Liabilities
  Short-term borrowings                           $         -               -            1,342                -            1,342
  Current Installments of long-term debt                    -               -            1,634                -            1,634
  Accounts and notes payable trade and other
      liabilities                                       3,193           5,937           21,124                -           30,254
  Income taxes payable                                    750          (1,734)           2,509                -            1,525
                                                   ----------      ----------       ----------       ----------       ----------
    Total current liabilities                           3,943           4,203           26,609                -           34,755
                                                   ----------      ----------       ----------       ----------       ----------

Long-term debt                                         62,390               -            5,364                -           67,754
Other long-term liabilities                                 -               -            1,316                -            1,316
Deferred income taxes                                    (424)          6,795           10,658                -           17,029
Intercompany payables                                  14,798          47,950           27,838          (90,586)               -
                                                   ----------      ----------       ----------       ----------       ----------
    Total liabilities                                  80,707          58,948           71,785          (90,586)         120,854
                                                   ----------      ----------       ----------       ----------       ----------

Stockholders' equity
  Preferred stock                                           -               -                -                -                -
  Common stock                                            147              49           27,160          (27,209)             147
  Paid-in capital                                      29,946               -                -                -           29,946
  Retained earnings                                    56,919          17,928           41,057          (58,985)          56,919
  Cumulative foreign translation adjustment              (336)              -             (336)             336             (336)
  Less-Treasury stock, at cost                         (1,498)              -                -                -           (1,498)
                                                   ----------      ----------       ----------       ----------       ----------
    Total stockholders' equity                         85,178          17,977           67,881          (85,858)          85,178
                                                   ----------      ----------       ----------       ----------       ----------
                                                   $  165,885          76,925          139,666         (176,444)         206,032
                                                   ==========      ==========       ==========       ===========      ==========
</TABLE>


<PAGE>

                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
December 31, 1997
                                                                            GUARANTOR   NON-GUARANTOR
                                                                            DOMESTIC       FOREIGN
                                                          WORLDTEX, INC.   SUBSIDIARIES  SUBSIDIARIES   ELIMINATIONS  CONSOLIDATED
                                                          --------------   ------------  ------------   ------------  ------------
<S>                                                       <C>                  <C>         <C>             <C>           <C>
Cash flows from operating activities:
Net income                                                $    5,148           901         7,985           (8,886)       5,148
Adjustments to reconcile net income to net cash
  provided by 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
  acquisition of Fibrexa:
   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 and notes payable-trade and other                    406        (2,171)       (1,902)            (646)      (4,313)
      current liabilities
   Income taxes payable                                         (459)         (597)         (984)             546       (1,494)
                                                          ----------    ----------    ----------       ----------   ----------
   Net cash provided by (used in) operating                   (5,139)       (3,926)        7,982             (414)      (1,497)
                                                          -----------   -----------   ----------       -----------  -----------
   activities

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 in cash                   (12,937)           (5)         (398)          14,968        1,626
                                                          -----------   -----------   -----------      ----------   ----------
      Net increase (decrease) in cash                          9,630           147         2,978                -       12,755
  Cash at beginning of year                                      428           174         1,515                -        2,117
                                                          ----------    ----------    ----------       ----------   ----------
  Cash at end of year                                     $   10,058           321         4,493                -       14,872
                                                          ==========    ==========    ==========       ==========   ==========
</TABLE>



<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
December 31, 1996
                                                                            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 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
  acquisition of Fibrexa:
   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 and notes 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                     (420)         3,775        11,677               -        15,032
                                                          -----------    ----------    ----------      ----------    ----------
   activities

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 in cash                      (4,153)             1           (71)          3,998          (225)
                                                          -----------    ----------    -----------     ----------    -----------
      Net increase (decrease) in cash                            428              6          (162)              -           272
Cash at beginning of year                                          -            168         1,677               -         1,845
                                                          ----------     ----------    ----------      ----------    ----------
Cash at end of year                                       $      428            174         1,515               -         2,117
                                                          ==========     ==========    ==========      ==========    ==========

</TABLE>


<PAGE>


                                 WORLDTEX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           NOTE 18 - SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION
--------------------------------------------------------------------------------
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
December 31, 1995
                                                                        GUARANTOR       NON-GUARANTOR
                                                                         DOMESTIC         FOREIGN
                                                       WORLDTEX, INC.  SUBSIDIARIES     SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                                       --------------  ------------     ------------    ------------    ------------
<S>                                                   <C>                  <C>             <C>             <C>               <C>
Cash flows from operating activities:
Net income                                            $    5,252           (922)           6,853           (5,931)           5,252
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Undistributed earnings of subsidiaries                 (5,873)             -                -            5,873                -
   Depreciation and amortization                               -          2,330            3,803                -            6,133
   Provision for losses on accounts receivable                 -          1,175              157                -            1,332
   Deferred income taxes                                    (925)           (70)             834                -             (161)
Change in assets and liabilities net of effects of
  acquisition of Fibrexa:
   Accounts and notes receivable                            (300)         1,978           (4,625)             196           (2,751)
   Inventories                                                 -             82           (1,358)               -           (1,276)
   Prepaid expenses and other current assets                  35           (230)            (332)               -             (527)
   Accounts and notes payable-trade and other                547           (436)           3,839                -            3,950
      current liabilities
   Income taxes payable                                      394           (209)             (91)               -               94
                                                      ----------     ----------       ----------       ----------       ----------
   Net cash provided (used in) by operating
   activities                                               (870)         3,698            9,080              138           12,046
                                                      ----------     ----------       ----------       ----------       ----------

Cash flows from investing activities:
   Capital expenditures                                      (32)          (513)          (7,811)               -           (8,356)
   Acquisitions, net of cash acquired                    (13,255)             -              325            8,863           (4,067)
   Other investing activities                                133            128             (691)          (2,581)          (3,011)
                                                      ----------     ----------       ----------       ----------       ----------
   Net cash used in investing activities                 (13,154)          (385)          (8,177)           6,282          (15,434)
                                                      ----------     ----------       ----------       ----------       ----------

Cash flows from financing activities:
   Borrowings under line of credit arrangements                -              -            7,813                -            7,813
   Payments under line of credit arrangements                  -              -           (6,874)               -           (6,874)
   Borrowings under revolving credit facility             46,038              -                -                -           46,038
   Payments under revolving credit facility              (40,578)             -                -                -          (40,578)
   Borrowings under long term loans                            -              -                -                -                -
   Payments under long term loans                              -              -                -                -                -
   Stock issued or (reacquired), net                           -              -                -                -                -
   Advances - affiliated companies                         6,143         (1,323)          (4,907)              87                -
   Other financing activities                             (2,234)          (593)             375           (1,765)          (4,217)
                                                      ----------     ----------       ----------       ----------       ----------
   Net cash provided by (used in) financing
      activities                                           9,369         (1,916)          (3,593)          (1,678)           2,182
                                                      ----------     ----------       ----------       ----------       ----------

Effects of exchange rate changes in cash                   4,655             (1)             (12)          (4,742)            (100)
                                                      ----------     ----------       ----------       ----------       ----------
      Net increase (decrease) in cash                          -          1,396           (2,702)               -           (1,306)
Cash at beginning of year                                      -         (1,228)           4,379                -            3,151
                                                      ----------     -----------      ----------       ----------            -----
Cash at end of year                                   $        -            168            1,677                -            1,845
                                                      ==========     ==========       ==========       ==========       ==========
</TABLE>


<PAGE>


                                 WORLDTEX, INC.
                       SUPPLEMENTARY FINANCIAL INFORMATION

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

                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                     DILUTED NET
        UNAUDITED             NET         GROSS          NET         INCOME PER
 QUARTERLY FINANCIAL DATA    SALES        PROFIT        INCOME         SHARE (A
-------------------------- --------      --------       -------      -----------
<S>                        <C>              <C>           <C>             <C>
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
                           ========      ========       =======
1995 Quarter:
      First                $ 46,395         8,269         2,138           .15
      Second                 49,100         8,605         2,360           .16
      Third                  47,314         7,818           395           .03
      Fourth                 45,172         6,770           359           .02
                           --------      --------       -------
                           $187,981        31,462         5,252
                           ========      ========       =======

NOTES:
------
<FN>
(A)  Income per share are calculated  based upon the weighted  average number of
     common shares outstanding and common equivalent shares during the year.

(B)  1997 fourth  quarter net income after  extraordinary  item - ($1,595)
     1997 year net income after extraordinary item - $5,148
</FN>
</TABLE>



<PAGE>

                                 WORLDTEX, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

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

                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                       ADDITIONS
                                    --------------------------------------------------------------------------

                                    BALANCE AT     CHARGED TO                      DEDUCTIONS       BALANCE AT
                                    BEGINNING      COST AND                          FROM              END
                                    OF PERIOD      EXPENSES           OTHER        RESERVES         OF PERIOD
                                    ---------      --------           -----        --------         -----=----

<S>                                   <C>               <C>           <C>           <C>               <C>
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

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


NOTES:
------

<FN>
(A) Accounts charged off, recoveries, and other adjustments, net.

(B) Increases to reserves reflecting subsidiary purchase price allocation.
</FN>
</TABLE>



<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 1998 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):

   Exhibit
     NO.       DESCRIPTION
   -------     -----------

    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.

<PAGE>

    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.

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

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

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

<PAGE>

   Exhibit
     NO.       DESCRIPTION
   -------     -----------

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

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

   10.6        Credit  Agreement,  dated as of December 1, 1997, among Worldtex,
               the Guarantors, the Lenders named therein and NationsBank,  N.A.,
               as Agent -- filed herewith.

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

   21.1        Subsidiaries of Worldtex -- filed herewith.

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

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

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

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

   27.1        Financial Data Schedule (filed with EDGAR only).

8-K REPORTS
-----------

          A Current  Report on Form 8-K,  dated December 1, 1997, was filed with
the SEC,  reporting  under Items 2 and 7 and including  the following  financial
statements:

ELASTIC CORPORATION OF AMERICA (A DIVISION OF NFA CORP.)
Audited Financial Statements:
     Independent Auditors' Report
     Statements of assets,  liabilities and divisional equity as of December 28,
          1996, December 30, 1995 and December 31, 1994
     Statements of income  and  divisional  equity for the  fiscal  years  ended
          December 28, 1996, December 30, 1995 and December 31, 1994

<PAGE>

     Statements of cash flows for the fiscal  years  ended  December  28,  1996,
          December 30, 1995 and December 31, 1994
     Notes to Financial Statements

Unaudited  Financial  Statements:
     Statement of assets,  liabilities and divisional equity as of September 27,
          1997
     Statements of income and divisional  equity for the thirty-nine weeks ended
          September 27, 1997 and September 28, 1996
     Statements of cash flows for the thirty-nine weeks ended September 27, 1997
          and September 28, 1996
     Notes to Unaudited Financial Statements


<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 31, 1998

                                      WORLDTEX, INC.



                                      By  /S/ RICHARD J. MACKEY
                                          --------------------------------------
                                          Richard J. Mackey
                                          Chairman of the Board and
                                          Chief Financial Officer

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this report has been signed below on March 31, 1998 by the following  persons on
behalf of the registrant and in the capacities indicated.


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

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

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