SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K/A #1

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

[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>

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
                                                                                                    
Long-term debt (Note 6)                                                             185,780                67,754
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                29,946
    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:


<PAGE>

<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
  acquisitions:
   Accounts and notes receivable                                (200)       (3,060)        2,196                -       (1,064)
   Inventories                                                     -        (2,007)       (5,389)               -       (7,396)
   Prepaid expenses and other current assets                     (86)          (34)         (128)               -         (248)
   Accounts 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
  acquisitions:
   Accounts and notes receivable                                 200            167        (3,155)              -        (2,788)
   Inventories                                                     -            281        (4,838)              -        (4,557)
   Prepaid expenses and other current assets                      98           (119)          184               -           163
   Accounts 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
  acquisitions:
   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>

                                   SIGNATURES

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

Dated: April 23, 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 amendment has been signed below on April 8, 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


<PAGE>

                               Index to Exhibits


Exhibit No.         Description
-----------         -----------

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

   23.1             Consent of Independent Auditors