<PAGE>   1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



[X]    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 For the Quarterly Period Ended May 28, 2000.

                                       or

[ ]    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: 333-67975




                                  ALBECCA INC.
             (Exact name of registrant as specified in its charter)



            GEORGIA                                         39-1389732
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                          Identification No.)


             3900 Steve Reynolds Boulevard, Norcross, Georgia 30093
              (Address of principal executive offices) (Zip Code)


                                 (770) 279-5210
              (Registrant's telephone number, including area code)





         Indicate by checkmark 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 [ ]


                                       1
<PAGE>   2
                                  ALBECCA INC.

                               INDEX TO FORM 10-Q


<TABLE>
<CAPTION>
                                                                                                                 Page No.
<S>                                                                                                              <C>
Part I - Financial Information

     Item 1.  Financial Statements

              Consolidated Balance Sheets as of August 29, 1999 (audited)
                 and May 28, 2000 (unaudited) .......................................................................3

              Consolidated Statements of Operations for the three and nine months ended
                 May 30, 1999 (unaudited) and May 28, 2000 (unaudited)  .............................................4

              Consolidated Statements of Cash Flows for the nine months ended
                 May 30, 1999 (unaudited) and May 28, 2000 (unaudited)  .............................................5

              Notes to the Consolidated  Financial  Statements  .....................................................6


     Item 2.  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations .........................................................................18

Part II - Other Information

     Item 6.  Exhibits and Reports on Form 8-K  ....................................................................22

Signatures .........................................................................................................23
</TABLE>


                                       2
<PAGE>   3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


                                  ALBECCA INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                    August 29, 1999     May 28, 2000
                                                                    ---------------     ------------
                                     ASSETS                                             (unaudited)
<S>                                                                 <C>                 <C>

CURRENT ASSETS:
  Cash and cash equivalents                                            $  35,058         $  24,985
  Accounts receivable, less allowances for doubtful accounts of
    $5,190 and $6,329 at August 29, 1999 and May 28, 2000                 47,298            42,678
  Inventories                                                             67,620            52,074
  Other current assets                                                     5,057             5,957
                                                                       ---------         ---------
      Total current assets                                               155,033           125,694
PROPERTY, PLANT AND EQUIPMENT, net                                        53,485            44,659
OTHER LONG-TERM ASSETS                                                    58,040            43,599
                                                                       ---------         ---------
                                                                       $ 266,558         $ 213,952
                                                                       =========         =========

                     LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current maturities of long-term debt                                 $  26,589         $  13,312
  Accounts payable                                                        26,423            22,012
  Accrued liabilities                                                     26,331            29,389
                                                                       ---------         ---------
      Total current liabilities                                           79,343            64,713
                                                                       ---------         ---------
LONG-TERM DEBT, less current maturities                                  213,211           173,774
                                                                       ---------         ---------
OTHER LONG-TERM LIABILITIES                                                7,937             8,975
                                                                       ---------         ---------

SHAREHOLDERS' DEFICIT:
  Preferred stock                                                             --                --
  Class A common stock                                                         4                 4
  Class B common stock                                                       166               166
  Additional paid-in capital                                               7,326             7,326
  Accumulated deficit                                                    (33,098)          (27,426)
  Cumulative foreign currency translation adjustment                      (8,331)          (13,580)
                                                                       ---------         ---------
      Total shareholders' deficit                                        (33,933)          (33,510)
                                                                       ---------         ---------
                                                                       $ 266,558         $ 213,952
                                                                       =========         =========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.



                                       3
<PAGE>   4

                                  ALBECCA INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                               Three Months Ended                  Nine Months Ended
                                                         -----------------------------     --------------------------------
                                                         May 30, 1999     May 28, 2000      May 30, 1999        May 28, 2000
                                                         ------------     ------------     ------------        ------------
<S>                                                      <C>              <C>              <C>                 <C>
Net sales                                                  $ 96,224          $ 87,883          $ 297,523          $ 282,156
Cost of sales                                                55,765            47,647            170,272            157,335
                                                           --------          --------          ---------          ---------
  Gross profit                                               40,459            40,236            127,251            124,821
Operating expenses                                           33,932            24,645            105,770             88,264
Restructuring charges                                         1,245               855              1,491                855
Write-down of goodwill                                           --                --                 --              4,997
                                                           --------          --------          ---------          ---------
  Operating income                                            5,282            14,736             19,990             30,705
Loss on disposition of Mersch entities                           --               472                 --              1,854
Interest income                                                (604)           (1,263)            (1,623)            (3,094)
Interest expense                                              6,245             6,033             19,914             18,402
                                                           --------          --------          ---------          ---------
  Income (loss) before provision for income taxes,
    minority interest and extraordinary gain                   (359)            9,494              1,699             13,543
Provision for income taxes                                      539               358              1,849              1,583
Minority interest                                               107                58                355                262
                                                           --------          --------          ---------          ---------
  Income (loss) before extraordinary gain                    (1,005)            9,078               (505)            11,698
Extraordinary gain on retirement of debt,
  net of tax                                                  1,008                --              1,008              4,524
                                                           --------          --------          ---------          ---------
    Net income                                             $      3          $  9,078          $     503          $  16,222
                                                           ========          ========          =========          =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       4
<PAGE>   5


                                  ALBECCA INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                           Nine Months Ended
                                                                   --------------------------------
                                                                   May 30, 1999        May 28, 2000
                                                                   ------------        ------------
<S>                                                                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                       $      503          $ 16,222
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Minority interest                                                     355               262
    Depreciation and amortization                                       6,619             6,384
    Loss (gain) on disposal of property, plant and equipment              483               (78)
    Write-down of goodwill                                                 --             4,997
    Loss on disposition of Mersch entities                                 --             1,854
    Extraordinary gain on retirement of debt                           (1,008)           (4,524)
    Changes in operating assets and liabilities:
      Accounts receivable                                              (2,704)           (3,686)
      Inventories                                                       1,876             9,760
      Other current assets                                             (1,001)             (905)
      Accounts payable                                                 (1,745)             (885)
      Accrued liabilities                                               8,990             5,430
      Other                                                            (1,632)            1,167
                                                                     --------          --------
        Net cash provided by operating activities                      10,736            35,998
                                                                     --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                           (4,520)           (7,760)
  Acquisitions of businesses, net                                      (3,594)           (2,449)
  Proceeds from sales of property, plant and equipment                  1,624             1,452
  Proceeds from disposition of Mersch entities                             --            16,278
  Changes in other long-term assets                                      (627)            1,205
                                                                     --------          --------
        Net cash (used in) provided by investing activities            (7,117)            8,726
                                                                     --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments for additional debt issue costs                               (195)               --
  Proceeds from revolving credit facilities                            26,679            20,550
  Repayments of revolving credit facilities                           (25,411)          (29,199)
  Proceeds from long-term debt                                         14,486             3,098
  Repayments of long-term debt                                        (27,490)          (40,219)
  Distributions to shareholders                                        (4,308)          (10,550)
                                                                     --------          --------
        Net cash used in financing activities                         (16,239)          (56,320)
                                                                     --------          --------
EFFECT OF EXCHANGE RATE ON CASH                                        (1,790)            1,523
                                                                     --------          --------

NET DECREASE IN CASH                                                  (14,410)          (10,073)
CASH and cash equivalents at beginning of period                       54,884            35,058
                                                                     --------          --------
CASH and cash equivalents at end of period                           $ 40,474          $ 24,985
                                                                     ========          ========

SUPPLEMENTAL INFORMATION:
  Interest paid                                                      $ 14,969          $ 13,245
                                                                     ========          ========
  Income taxes paid                                                  $  2,531          $  2,382
                                                                     ========          ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       5
<PAGE>   6

                                  ALBECCA INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

Note 1.       INTERIM FINANCIAL STATEMENT PRESENTATION

         The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, the unaudited interim consolidated financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of only normal recurring
adjustments) considered necessary for a fair presentation have been included. On
a quarterly basis, the Company's results may vary. The results of operations for
any interim period are not necessarily indicative of the results of operations
to be expected for a full year. For further information, refer to the
consolidated financial statements and accompanying footnotes included in the
Company's Form 10-K for the fiscal year ended August 29, 1999, as filed with the
Securities and Exchange Commission.

Note 2.       USE OF ESTIMATES

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

Note 3.       PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of Albecca
Inc. ("Albecca", the "Company") and its subsidiaries. All significant
intercompany transactions have been eliminated. Minority interest represents
minority shareholders' interest in majority-owned subsidiaries.

Note 4.       INCOME TAXES

         Albecca is an S corporation and several of its subsidiaries are
classified as either partnerships or single member entities. Each is treated as
a pass-through entity under the Internal Revenue Code. They are not subject to
federal and certain state income taxes. As a result, the related taxable income
is included in the tax returns of the shareholders and members of the respective
companies. The Company makes distributions to shareholders to pay their income
tax obligations as a result of the Company's status as an S corporation. The
provision for income taxes included in the accompanying consolidated financial
statements primarily relates to certain state and foreign income taxes.

Note 5.       ACQUISITION

         During March 2000, the Company acquired the outstanding 23% interest in
its Italian subsidiary for approximately $2.4 million in cash.

Note 6.       INFREQUENT ITEMS

WRITE-DOWN OF GOODWILL

         In October 1997, the Company acquired Robert F. deCastro, Inc.
("deCastro") a distributor of products in the pre-framed art and the custom
framing markets. Since the acquisition, the demand in the markets for the
deCastro product line has dramatically decreased or ceased. As a result, in the
second quarter of fiscal 2000, management determined to redirect its effort from
pre-framed art and to focus its energies and resources, both financial and
managerial, on the custom picture framing market. The Company determined that
the estimated future undiscounted cash flows of the deCastro product line were
below the carrying value of the associated long-lived assets, primarily
consisting of goodwill. Accordingly, during the second quarter of fiscal 2000,
the Company adjusted the carrying value of deCastro's unamortized goodwill to
its estimated fair value of approximately $.2 million, resulting in a non-cash
impairment charge of approximately $5.0 million. The estimated fair value of
goodwill was based on anticipated future cash flows discounted at a rate
commensurate with the risk involved.

DISPOSITION OF MERSCH ENTITIES

         In the second quarter of fiscal 2000, Albecca made a decision to sell
its investment in its Mersch entities, a manufacturer and supplier of readymade
frames to large European discount stores, located in Germany and France. This
decision was based on management's continued initiative to focus its energies
and resources, both financial and managerial, on the European custom picture
framing market. In January 2000, Albecca sold its investment in its Mersch
entities for cash of $16.3 million and retained certain long-term assets of $3.0
million, for total gross consideration of $19.3 million. In addition, the
Company retained certain liabilities of $12.5 million (which were primarily paid
at closing).


                                       6
<PAGE>   7
                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)

The loss on the disposition of the Mersch entities, recorded during the second
quarter of fiscal 2000, was approximately $1.4 million.

         During the third quarter of fiscal 2000, the Company determined that
the realizable value of one of the Mersch buildings, a long-term asset retained
in the sale, was less than previously estimated. Therefore, the Company has
recorded an additional loss on the disposition of the Mersch entities of $.5
million, which represents the write-down of this asset to estimated realizable
value from future sale. This increases the total loss on the disposition of the
Mersch entities to $1.9 million.

         The sale agreements required the Mersch entities to maintain a minimum
level of working capital through the closing date as supported by a closing
balance sheet audit, which has not yet been agreed to by the respective parties.
In the opinion of management, the disposition of the Mersch entities will not
have a material impact on the future operations or financial position of the
Company. The Mersch entities' five month sales and operating income for fiscal
2000 were approximately $10.0 million and $.1 million, respectively.

RESTRUCTURING CHARGES

UNITED KINGDOM - NORTHAMPTON

         During the third quarter of fiscal 2000, the Company initiated a
restructuring plan related to the closure of one of its facilities in the United
Kingdom and recorded a charge to operations of approximately $909,000.
Management made the decision to close this operation following a series of
under-performing quarters, at which time management determined that the
Company's resources, both financial and managerial, could be more effectively
invested in operations with a greater potential return. This charge included
severance costs for 37 team members approximating $222,000, a $270,000
write-down of property, plant and equipment to its estimated realizable value,
$233,000 of lease termination costs and $184,000 of other exit costs including
post-closure maintenance and administrative costs. The $233,000 of lease
termination costs represent the Company's estimated future obligations under the
existing lease commitments of the closed facility, net of estimated recoverable
costs through subleasing. Management anticipates the restructuring plan will be
completed prior to the second quarter of fiscal 2001.

PREVIOUSLY REPORTED RESTRUCTURING PLANS

SWEDEN

         As of May 28, 2000, the Company's closure of its duplicate facilities
in Sweden was complete. None of the 25 team members originally identified for
termination remained at the facility. The facility was sold in August 1999 and
physical possession was transferred during the second quarter of fiscal 2000.

NEW ZEALAND

         As of May 28, 2000, the Company, through its Australian operations,
continued to sell existing assets and collect existing accounts receivable
related to its closed New Zealand distribution operations. None of the 9 team
members originally identified for termination remained at the facility at May
28, 2000. The Company estimates that the remaining closure activities will be
materially complete by the end of fiscal 2000.

GREECE

    As of May 28, 2000, one of the original 14 team members related to the
Company's closed distribution operations in Greece remained to sell existing
assets and collect existing accounts receivable. The Company estimates that the
team member will continue to provide services through the second quarter of
fiscal 2001.


                                       7
<PAGE>   8
                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


UNITED STATES

         As of May 28, 2000, the Company's closure of its duplicate facilities
in the United States was complete. None of the 17 team members originally
identified for termination remained at the facility. The unused balance of
$29,000 of the remaining restructuring provision was reversed and reflected as a
component of the current restructuring charges incurred during the third quarter
of fiscal 2000.

UNITED KINGDOM - PLASTIC MOULDING MANUFACTURING OPERATIONS

         As of May 28, 2000, none of the original 59 team members remained with
respect to the closure of the Company's plastic moulding manufacturing
operations in the United Kingdom and all material events associated with the
restructuring plan had been completed. The unused balance of $25,000 of the
remaining restructuring provision was reversed and reflected as a component of
the current restructuring charges incurred during the third quarter of fiscal
2000.

         For more descriptive information of the above mentioned restructuring
plans, please see the Company's Form 10-K for the fiscal year ended August 29,
1999, as filed with the Securities and Exchange Commission.

SUMMARY OF RESTRUCTURING PLANS.

         As of May 28, 2000, as it relates to the Company's fiscal 1998, 1999
and 2000 restructuring plans, approximately $791,000 of restructuring charges
remained in accrued liabilities representing approximately $246,000 of severance
and other termination costs and approximately $545,000 of lease termination and
other related exit costs.

         A summary of the previously reported restructuring plans and activity
and restructuring plans adopted during the third quarter of fiscal 2000 consist
of the following estimated accrued future cash/non-cash requirements:

<TABLE>
<CAPTION>

                                                      Write-down      Severance
                                                     of property      and other
                                                         and         termination      Other exit
CLOSURE OF UNITED KINGDOM - NORTHAMPTON:              equipment        benefits          costs            Total
                                                     -----------     -----------      ----------         --------
<S>                                                  <C>             <C>              <C>                <C>
2000 Provision                                          $270,000        $222,000       $417,000          $909,000
     Non-cash                                            270,000              --             --           270,000
                                                        --------        --------       --------          --------
     Cash                                                     --         222,000        417,000           639,000
Third quarter 2000 cash activity (unaudited)                  --              --             --                --
                                                        --------        --------       --------          --------
Balance as of May 28, 2000 (unaudited)                  $     --        $222,000       $417,000          $639,000
                                                        ========        ========       ========          ========
</TABLE>

<TABLE>
<CAPTION>

                                                     Write-down       Severance
                                                     of property      and other
                                                        and          termination      Other exit
CLOSURE OF SWEDEN DUPLICATE FACILITY:                equipment         benefits          costs           Total
                                                     -----------     -----------      ----------      -----------
<S>                                                 <C>              <C>              <C>             <C>
1999 Provision                                          $700,000       $ 275,000       $ 45,000       $ 1,020,000
     Non-cash                                            700,000              --             --           700,000
                                                        --------       ---------       --------       -----------
     Cash                                                     --         275,000         45,000           320,000
Fiscal 1999 cash activity                                     --        (125,000)       (30,000)         (155,000)
                                                        --------       ---------       --------       -----------
Balance as of August 29, 1999                                 --         150,000         15,000           165,000
First quarter 2000 cash activity (unaudited)                  --        (150,000)       (15,000)         (165,000)
                                                        --------       ---------       --------       -----------
Balance as of November 28, 1999 (unaudited)                   --              --             --                --
Second quarter 2000 cash activity (unaudited)                 --              --             --                --
                                                        --------       ---------       --------       -----------
Balance as of February 27, 2000 (unaudited)                   --              --             --                --
Third quarter 2000 cash activity (unaudited)                  --              --             --                --
                                                        --------       ---------       --------       -----------
Balance as of May 28, 2000 (unaudited)                  $     --       $      --       $     --       $        --
                                                        ========       =========       ========       ===========
</TABLE>

                                       8
<PAGE>   9
                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                     Write-down       Severance
                                                     of property      and other
                                                         and         termination        Other exit
CLOSURE OF OPERATIONS IN NEW ZEALAND:                 equipment        benefits            costs             Total
                                                     -----------     ------------       ----------         ---------
<S>                                                  <C>             <C>                <C>                <C>
1999 Provision                                        $75,000         $ 48,000          $ 102,000          $ 225,000
          Non-cash                                     75,000               --                 --             75,000
                                                      -------         --------          ---------          ---------
          Cash                                             --           48,000            102,000            150,000
Fiscal 1999 cash activity                                  --          (30,000)           (75,000)          (105,000)
                                                      -------         --------          ---------          ---------
Balance as of August 29, 1999                              --           18,000             27,000             45,000
First quarter 2000 cash activity (unaudited)               --           (3,000)            (3,000)            (6,000)
                                                      -------         --------          ---------          ---------
Balance as of November 28, 1999 (unaudited)                --           15,000             24,000             39,000
Second quarter 2000 cash activity (unaudited)              --               --                 --                 --
                                                      -------         --------          ---------          ---------
Balance as of February 27, 2000 (unaudited)                --           15,000             24,000             39,000
Third quarter 2000 cash activity (unaudited)               --               --                 --                 --
                                                      -------         --------          ---------          ---------
Balance as of May 28, 2000 (unaudited)                $    --         $ 15,000          $  24,000          $  39,000
                                                      =======         ========          =========          =========
</TABLE>

<TABLE>
<CAPTION>

                                                                      Severance
                                                                      and other
                                                     Write-off of    termination        Other exit
CLOSURE OF OPERATIONS IN GREECE:                       goodwill        benefits            costs             Total
                                                     ------------    -----------        ----------         ---------
<S>                                                  <C>             <C>                <C>                <C>

1998 Provision                                        $333,000        $ 79,000          $ 104,000          $ 516,000
          Non-cash                                     333,000              --                 --            333,000
                                                       -------        --------          ---------          ---------
          Cash                                              --          79,000            104,000            183,000
Fiscal 1998 cash activity                                   --              --                 --                 --
                                                       -------        --------          ---------          ---------
Balance as of August 30, 1998                               --          79,000            104,000            183,000
1999 provision                                              --              --            129,000            129,000
Fiscal 1999 cash activity                                   --         (70,000)          (129,000)          (199,000)
                                                       -------        --------          ---------          ---------
Balance as of August 29, 1999                               --           9,000            104,000            113,000
First quarter 2000 cash activity (unaudited)                --              --                 --                 --
                                                       -------        --------          ---------          ---------
Balance as of November 28, 1999 (unaudited)                 --           9,000            104,000            113,000
Second quarter 2000 cash activity (unaudited)               --              --                 --                 --
                                                       -------        --------          ---------          ---------
Balance as of February 27, 2000 (unaudited)                 --           9,000            104,000            113,000
Third quarter 2000 cash activity (unaudited)                --              --                 --                 --
                                                       -------        --------          ---------          ---------
Balance as of May 28, 2000 (unaudited)                 $    --        $  9,000          $ 104,000          $ 113,000
                                                       =======        ========          =========          =========
</TABLE>


                                       9
<PAGE>   10
                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (unaudited)

<TABLE>
<CAPTION>

                                                                          Severance
                                                                          and other
                                                                         termination        Other exit
CLOSURE OF U.S. FACILITIES:                                                benefits            costs               Total
                                                                         -----------        -----------          ---------
<S>                                                                      <C>                <C>                  <C>
1998 Provision                                                             $ 234,000          $  42,000          $ 276,000
          Non-cash                                                                --                 --                 --
                                                                           ---------          ---------          ---------
          Cash                                                               234,000             42,000            276,000
Fiscal 1998 cash activity                                                         --            (42,000)           (42,000)
                                                                           ---------          ---------          ---------
Balance as of August 30, 1998                                                234,000                 --            234,000
1999 provision                                                                    --            117,000            117,000
Fiscal 1999 cash activity                                                   (145,000)          (108,000)          (253,000)
                                                                           ---------          ---------          ---------
Balance as of August 29, 1999                                                 89,000              9,000             98,000
First quarter 2000 provision (unaudited)                                     (54,000)            54,000                 --
First quarter 2000 cash activity (unaudited)                                 (15,000)           (54,000)           (69,000)
                                                                           ---------          ---------          ---------
Balance as of November 28, 1999 (unaudited)                                   20,000              9,000             29,000
Second quarter 2000 cash activity (unaudited)                                     --                 --                 --
                                                                           ---------          ---------          ---------
Balance as of February 27, 2000 (unaudited)                                   20,000              9,000             29,000
Third quarter 2000 reversal of provision (unaudited)                         (20,000)            (9,000)           (29,000)
                                                                           ---------          ---------          ---------
Balance as of May 28, 2000 (unaudited)                                     $      --          $      --          $      --
                                                                           =========          =========          =========
</TABLE>

<TABLE>
<CAPTION>

                                                            Write-down       Severance          Lease
                                                           of property       and other       termination
CLOSURE OF UNITED KINGDOM PLASTIC MOULDING                     and          termination       and exit
MANUFACTURING OPERATIONS:                                   equipment         benefits          costs              Total
                                                           -----------      -----------      -----------         ---------
<S>                                                        <C>              <C>              <C>                 <C>
1998 Provision                                             $775,000         $230,000          $ 465,000         $1,470,000
          Non-cash                                          775,000               --                 --            775,000
                                                            -------         --------          ---------         ----------
          Cash                                                   --          230,000            465,000            695,000
Fiscal 1998 cash activity                                        --         (216,000)                --           (216,000)
                                                            -------         --------          ---------         ----------
Balance as of August 30, 1998                                    --           14,000            465,000            479,000
Fiscal 1999 cash activity                                        --          (14,000)          (440,000)          (454,000)
                                                            -------         --------          ---------         ----------
Balance as of August 29, 1999                                    --               --             25,000             25,000
First quarter 2000 cash activity (unaudited)                     --               --                 --                 --
                                                            -------         --------          ---------         ----------
Balance as of November 28, 1999 (unaudited)                      --               --             25,000             25,000
Second quarter 2000 cash activity (unaudited)                    --               --                 --                 --
                                                            -------         --------          ---------         ----------
Balance as of February 27, 2000 (unaudited)                      --               --             25,000             25,000
Third quarter 2000 reversal of provision (unaudited)             --               --            (25,000)           (25,000)
                                                            -------         --------          ---------         ----------
Balance as of May 28, 2000 (unaudited)                      $    --         $     --          $      --         $       --
                                                            =======         ========          =========         ==========
</TABLE>


Note 7.  EXTRAORDINARY GAIN

         In September and November 1999, and February 2000, the Company retired
a portion of its senior subordinated notes with a combined face value of $23.8
million. The debt retirements resulted in extraordinary gains approximating $4.5
million, net of state income taxes of approximately $.2 million.


                                       10
<PAGE>   11


                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


Note 8.       INVENTORIES

    Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                        August 29, 1999         May 28, 2000
                                        ----------------        ------------
               <S>                      <C>                     <C>
               Raw materials                 $12,435               $ 9,103
               Work in process                 2,276                 2,186
               Finished goods                 52,909                40,785
                                             -------               -------
                                             $67,620               $52,074
                                             =======               =======
               </TABLE>


Note 9.       STOCK OPTION PLAN

         In 1998, the Company adopted the Albecca Inc. 1998 Stock Option Plan.
In March 1999, the Company awarded 378,000 non-qualified options to acquire
shares of common stock at $6.46 per share to certain members of management under
the Stock Option Plan. No compensation expense was recognized relating to these
grants, as the exercise price was equal to the fair market value as determined
by management's estimation at the time of grant. The options granted vest on
November 1, 2003.

         In May 2000, the Company elected to reduce the exercise price of the
options issued under the 1998 Stock Option Plan from $6.46 per share to $5.80
per share. Due to the repricing, the Company will record an aggregate
compensation charge of approximately $1.6 million, which will be amortized over
the remaining life of the options, or 41 months. The Company has recorded a
compensation charge during the third quarter of $.05 million related to this
change.

Note 10.      RECLASSIFICATIONS

         Certain prior period amounts have been reclassified to conform to the
current period presentation.

Note 11.      COMPREHENSIVE INCOME

         Comprehensive income for the Company is as follows (in thousands):

<TABLE>
<CAPTION>

                                                          Three Months Ended                  Nine Months Ended
                                                   ---------------------------------   --------------------------------
                                                    May 30, 1999      May 28, 2000      May 30, 1999       May 28, 2000
                                                   ---------------   ---------------   ---------------    -------------
         <S>                                       <C>               <C>               <C>                <C>
         Net income, as reported                       $     3           $ 9,078            $   503          $ 16,222
         Foreign currency translation adjustment        (1,688)           (3,831)            (2,093)           (5,249)
                                                       -------           -------            -------          --------
         Total comprehensive income (loss)             $(1,685)          $ 5,247            $(1,590)         $ 10,973
                                                       =======           =======            =======          ========
</TABLE>

Note 12.      COMMITMENTS AND CONTINGENCIES

CONSTRUCTION OF MANUFACTURING FACILITY

         Albecca has entered into a commitment to build a new manufacturing
facility in Ashland, Wisconsin, consisting of land and a building, for a net
capitalizable cost of approximately $4.3 million. As of May 28, 2000, the
Company had expended approximately $4.1 million for this project. Completion of
construction is expected by the end of fiscal 2000.

LITIGATION

         In the third quarter of fiscal 2000, Albecca either settled or reached
substantive agreement on certain outstanding litigation. As a result of the
settlement of this litigation during the third quarter of fiscal 2000, the
Company reversed $3.9 million of previously provided reserves recorded during
fiscal 1998 and prior periods. These amounts were reflected as a reduction of
operating expenses in the Company's third quarter.

         The Company is involved in certain other litigation arising in the
ordinary course of business. In the opinion of management, the ultimate
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.



                                      11
<PAGE>   12

                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (unaudited)

Note 13.      ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

DEFERRED COMPENSATION

         During May 2000, the Company amended certain bonus arrangements with
its Chief Executive Officer and majority shareholder whereby payment of certain
amounts, earned in fiscal years 1999 and 1998, aggregating $1.8 million would be
deferred and paid after fiscal year 2001. As such, the liability for these
deferred amounts have been classified as long-term liabilities in the
accompanying balance sheets.

         During the third quarter of fiscal 2000, the Company finalized certain
employee bonuses related to fiscal 1999. Accordingly, the Company decreased its
estimate of accrued bonuses to the amount actually paid. As a result, the
Company reversed previously provided reserves recorded during fiscal 1999 of
$.5 million. These amounts were reflected as a reduction of operating expenses
in the Company's third quarter of fiscal 2000.

EMPLOYER BENEFIT PLAN

         In January 2000, the Company replaced its self-funded medical employer
benefit plan with a similar plan that was fully insured by third party
insurers. In May 2000, the Company settled open obligations under the
terminated plan in a favorable manner. As a result, during the third quarter
$.7 million was reversed relating to previously provided reserves recorded in
prior periods. These amounts were reflected as a reduction of operating
expenses in the Company's third quarter of fiscal 2000.

Note 14.      SUBSEQUENT EVENTS

DISPOSITION OF BRIO

         Subsequent to the end of the third quarter of fiscal 2000, the Company
sold it's Brio operations, a manufacturer and supplier of readymade frames and
framing supplies to large "Do-It-Yourself" stores in Europe. This decision was
based on management's decision to focus its energies and resources, both
financial and managerial, on the European custom picture framing market. The
transaction was concluded on May 31, 2000, for cash of $14.0 million. The gain
on the disposition of Brio was approximately $1.8 million. The sales agreement
required Brio to maintain a minimum level of working capital through the closing
date as supported by a closing balance sheet audit, which has not yet been
completed. As such, the preliminary estimated gain is subject to adjustment
pending the final results of the audit. Brio's nine-month sales and operating
income for fiscal 2000 were approximately $16.1 million and $.9 million,
respectively. In the opinion of management, the disposition of Brio will not
have a material impact on the future operations or financial position of the
Company.

INDUSTRIAL REVENUE BOND PLACEMENT

         In June 2000, the Company completed an Industrial Revenue Bond
placement through an economic incentive program by the City of Ashland,
Wisconsin, relating to the development of the Company's new manufacturing plant
and purchase of associated equipment. The placement was for $4.6 million, net of
debt issuance costs of $.09 million, of variable interest rate notes with a
weekly adjusting rate, which at closing was 4.37%. Amortization of the bonds
consists of interest only payments for the first five years and a subsequent
amortization period of fifteen years with varying annual principal payments
ranging from $.2 million to $.4 million. The bonds are secured by a letter of
credit that is collateralized by the new manufacturing plant and a majority of
the related new and existing furniture, machinery and equipment.

RETIREMENT OF SENIOR SUBORDINATED NOTES

         Subsequent to the end of the third quarter of fiscal 2000, the Company
retired a portion of its senior subordinated notes with a combined face value of
$5.0 million. The debt retirement will result in an extraordinary gain of
approximately $.6 million, net of state income taxes of approximately $.02
million.

Note 15.      GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

         These condensed consolidating financial statements reflect Albecca Inc.
and Subsidiary Guarantors, which consist of all of the Company's wholly-owned
restricted subsidiaries other than the foreign subsidiaries, as defined under
the Indenture dated August 11, 1998. These nonguarantor foreign subsidiaries are
herein referred to as "Subsidiary Nonguarantors." The subsidiary guarantee of
each Subsidiary Guarantor will be subordinated to the prior payment in full of
all senior debt of such Subsidiary Guarantor. Separate financial statements of
the Subsidiary Guarantors are not presented because the Subsidiary Guarantees
are joint and several and full and unconditional and the Company believes the
condensed consolidating financial statements presented are more meaningful in
understanding the financial position of the Subsidiary Guarantors and the
separate financial statements are deemed not material to investors.


                                       12
<PAGE>   13
                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                  (unaudited)


                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                      May 28, 2000
                                                                                      (Unaudited)
                                                        ------------------------------------------------------------------------
                                                                                                    Consolidated
                                                                        Subsidiary    Subsidiary     Elimination   Consolidated
                                                        Albecca Inc.    Guarantors  Nonguarantors      Entries         Total
                                                        ------------    ----------  -------------   -------------  -------------
<S>                                                     <C>             <C>         <C>             <C>            <C>
                  ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                              $  18,443      $    846     $   5,696      $      --      $  24,985
  Accounts receivable, net                                      --        19,802        22,876             --         42,678
  Intercompany accounts receivable                              --        60,057           278        (60,335)            --
  Inventories                                                   --        21,602        30,472             --         52,074
  Other current assets                                       1,068           801         4,088             --          5,957
                                                         ---------      --------     ---------      ---------      ---------
    Total current assets                                    19,511       103,108        63,410        (60,335)       125,694
PROPERTY, PLANT AND EQUIPMENT, net                              --        11,017        33,642             --         44,659
OTHER LONG-TERM ASSETS                                       5,412        13,687        24,500             --         43,599
INVESTMENT IN SUBSIDIARIES                                  43,453            --         7,886        (51,339)            --
INTERCOMPANY LOANS RECEIVABLE                               97,935            --            --        (97,935)            --
                                                         ---------      --------     ---------      ---------      ---------
                                                         $ 166,311      $127,812     $ 129,438      $(209,609)     $ 213,952
                                                         =========      ========     =========      =========      =========

                  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Current maturities of long-term debt                   $      --      $    887     $  12,425      $      --      $  13,312
  Accounts payable                                              --         7,860        14,152             --         22,012
  Intercompany accounts payable                             53,787           202         6,346        (60,335)            --
  Accrued liabilities                                        6,359        13,304         9,726             --         29,389
                                                         ---------      --------     ---------      ---------      ---------
    Total current liabilities                               60,146        22,253        42,649        (60,335)        64,713
                                                         ---------      --------     ---------      ---------      ---------
LONG-TERM DEBT, less current maturities                    164,930         1,483         7,361             --        173,774
                                                         ---------      --------     ---------      ---------      ---------
INTERCOMPANY LOANS PAYABLE                                      --            --        97,935        (97,935)            --
                                                         ---------      --------     ---------      ---------      ---------
OTHER LONG-TERM LIABILITIES                                     --         5,785         3,190             --          8,975
                                                         ---------      --------     ---------      ---------      ---------
SHAREHOLDERS' EQUITY (DEFICIT):
  Preferred stock                                               --            --            --             --             --
  Class A common stock                                           4            --            --             --              4
  Class B common stock                                         166            --            --             --            166
  Additional paid-in capital                                 8,912        41,826         7,927        (51,339)         7,326
  Accumulated earnings (deficit)                           (67,847)       56,051       (15,630)            --        (27,426)
  Cumulative foreign currency translation adjustment            --           414       (13,994)            --        (13,580)
                                                         ---------      --------     ---------      ---------      ---------
    Total shareholders' equity (deficit)                   (58,765)       98,291       (21,697)       (51,339)       (33,510)
                                                         ---------      --------     ---------      ---------      ---------
                                                         $ 166,311      $127,812     $ 129,438      $(209,609)     $ 213,952
                                                         =========      ========     =========      =========      =========
</TABLE>


                                       13
<PAGE>   14
                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                  August 29, 1999
                                                       --------------------------------------------------------------------------
                                                                                                    Consolidated
                                                                       Subsidiary    Subsidiary      Elimination     Consolidated
                                                       Albecca Inc.    Guarantors   Nonguarantors      Entries          Total
                                                       ------------    ----------   -------------   ------------     ------------
<S>                                                    <C>             <C>          <C>             <C>              <C>
                 ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                             $  27,424       $  1,747      $   5,887       $      --       $  35,058
  Accounts receivable, net                                     --         17,526         29,772              --          47,298
  Intercompany accounts receivable                             --         29,917            513         (30,430)             --
  Inventories                                                  --         28,212         39,408              --          67,620
  Other current assets                                         49            432          4,576              --           5,057
                                                        ---------       --------      ---------       ---------       ---------
    Total current assets                                   27,473         77,834         80,156         (30,430)        155,033
PROPERTY, PLANT AND EQUIPMENT, net                             --          8,088         45,397              --          53,485
OTHER LONG-TERM ASSETS                                      6,443         18,884         32,713              --          58,040
INVESTMENT IN SUBSIDIARIES                                 43,453             --          7,559         (51,012)             --
INTERCOMPANY LOANS RECEIVABLE                              94,598             --             13         (94,611)             --
                                                        ---------       --------      ---------       ---------       ---------
                                                        $ 171,967       $104,806      $ 165,838       $(176,053)      $ 266,558
                                                        =========       ========      =========       =========       =========

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Current maturities of long-term debt                  $      --       $  2,209      $  24,380       $      --       $  26,589
  Accounts payable                                             --          8,611         17,812              --          26,423
  Intercompany accounts payable                            21,742            155          8,533         (30,430)             --
  Accrued liabilities                                         895         16,336          9,100              --          26,331
                                                        ---------       --------      ---------       ---------       ---------
    Total current liabilities                              22,637         27,311         59,825         (30,430)         79,343
                                                        ---------       --------      ---------       ---------       ---------
LONG-TERM DEBT, less current maturities                   188,750          2,045         22,416              --         213,211
                                                        ---------       --------      ---------       ---------       ---------
INTERCOMPANY LOANS PAYABLE                                     --             13         94,598         (94,611)             --
                                                        ---------       --------      ---------       ---------       ---------
OTHER LONG-TERM LIABILITIES                                    --          3,975          3,962              --           7,937
                                                        ---------       --------      ---------       ---------       ---------
SHAREHOLDERS' EQUITY (DEFICIT):
  Preferred stock                                              --             --             --              --              --
  Class A common stock                                          4             --             --              --               4
  Class B common stock                                        166             --             --              --             166
  Additional paid-in capital                                8,912         41,500          7,926         (51,012)          7,326
  Accumulated earnings (deficit)                          (48,502)        29,811        (14,407)             --         (33,098)
  Cumulative foreign currency translation adjustment           --            151         (8,482)             --          (8,331)
                                                        ---------       --------      ---------       ---------       ---------
    Total stockholders' equity (deficit)                  (39,420)        71,462        (14,963)        (51,012)        (33,933)
                                                        ---------       --------      ---------       ---------       ---------
                                                        $ 171,967       $104,806      $ 165,838       $(176,053)      $ 266,558
                                                        =========       ========      =========       =========       =========
</TABLE>


                                       14
<PAGE>   15




                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                              May 28, 2000 (Unaudited)
                                                       --------------------------------------------------------------------------
                                                                                                    Consolidated
                                                                       Subsidiary    Subsidiary      Elimination     Consolidated
                                                       Albecca Inc.    Guarantors   Nonguarantors      Entries          Total
                                                       ------------    ----------   -------------   ------------     ------------
<S>                                                    <C>             <C>          <C>             <C>              <C>

Net sales                                               $      --       $ 55,531      $  34,806       $  (2,454)      $  87,883
Cost of sales                                                  --         28,669         21,432          (2,454)         47,647
                                                        ---------       --------      ---------       ---------       ---------
  Gross profit                                                 --         26,862         13,374              --          40,236
Operating expenses                                             12         12,098         12,535              --          24,645
Restructuring charges                                          --            (29)           884              --             855
                                                        ---------       --------      ---------       ---------       ---------
  Operating income (loss)                                     (12)        14,793            (45)             --          14,736
Loss on disposition of Mersch entities                         --             --            472              --             472
Interest income                                            (1,263)            --             --              --          (1,263)
Interest expense                                            5,464             64            505              --           6,033
                                                        ---------       --------      ---------       ---------       ---------
  Income (loss) before provision for income
    taxes and minority interest                            (4,213)        14,729         (1,022)             --           9,494
Provision for income taxes                                     --            120            238              --             358
Minority interest                                              --             --             58              --              58
                                                        ---------       --------      ---------       ---------       ---------
      Net income (loss)                                 $  (4,213)      $ 14,609      $  (1,318)      $      --       $   9,078
                                                        =========       ========      =========       =========       =========
</TABLE>


<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                               May 30, 1999 (Unaudited)
                                                       --------------------------------------------------------------------------
                                                                                                    Consolidated
                                                                       Subsidiary    Subsidiary      Elimination     Consolidated
                                                       Albecca Inc.    Guarantors   Nonguarantors      Entries          Total
                                                       ------------    ----------   -------------   ------------     ------------
<S>                                                    <C>             <C>          <C>             <C>              <C>

Net sales                                               $      --       $ 50,985      $  46,350       $  (1,111)      $  96,224
Cost of sales                                                  --         28,221         28,655          (1,111)         55,765
                                                        ---------       --------      ---------       ---------       ---------
  Gross profit                                                 --         22,764         17,695              --          40,459
Operating expenses                                             65         17,342         16,525              --          33,932
Restructuring charges                                          --            225          1,020              --           1,245
                                                        ---------       --------      ---------       ---------       ---------
  Operating income (loss)                                     (65)         5,197            150              --           5,282
Interest income                                              (604)            --             --              --            (604)
Interest expense                                            5,185            166            894              --           6,245
                                                        ---------       --------      ---------       ---------       ---------
  Income (loss) before provision for income taxes,
    minority interest and extraordinary gain               (4,646)         5,031           (744)             --            (359)
Provision for income taxes                                     --            130            409              --             539
Minority interest                                              --             --            107              --             107
                                                        ---------       --------      ---------       ---------       ---------
  Income (loss) before extraordinary gain                  (4,646)         4,901         (1,260)             --          (1,005)
Extraordinary gain on retirement of debt,
   net of tax                                               1,008             --             --              --           1,008
                                                        ---------       --------      ---------       ---------       ---------
      Net income (loss)                                 $  (3,638)      $  4,901      $  (1,260)      $      --       $       3
                                                        =========       ========      =========       =========       =========
</TABLE>



                                       15
<PAGE>   16




                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)

                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                  May 28, 2000 (Unaudited)
                                                          --------------------------------------------------------------------------
                                                                                                       Consolidated
                                                                          Subsidiary    Subsidiary      Elimination    Consolidated
                                                          Albecca Inc.    Guarantors   Nonguarantors      Entries         Total
                                                          ------------    ----------   -------------   ------------    ------------
<S>                                                       <C>             <C>          <C>             <C>             <C>

Net sales                                                  $      --       $167,363      $ 121,415       $  (6,622)     $ 282,156
Cost of sales                                                     --         89,576         74,381          (6,622)       157,335
                                                           ---------       --------      ---------       ---------      ---------
  Gross profit                                                    --         77,787         47,034              --        124,821
Operating expenses                                               109         45,996         42,159              --         88,264
Restructuring charges                                             --            (29)           884              --            855
Write-down of goodwill                                            --          4,997             --              --          4,997
                                                           ---------       --------      ---------       ---------      ---------
  Operating income (loss)                                       (109)        26,823          3,991              --         30,705
Loss on disposition of Mersch entities                            --             --          1,854              --          1,854
Interest income                                               (3,094)            --             --              --         (3,094)
Interest expense                                              16,304            223          1,875              --         18,402
                                                           ---------       --------      ---------       ---------      ---------
  Income (loss) before provision for income taxes,
    minority interest and extraordinary gain                 (13,319)        26,600            262              --         13,543
Provision for income taxes                                        --            360          1,223              --          1,583
Minority interest                                                 --             --            262              --            262
                                                           ---------       --------      ---------       ---------      ---------
  Income (loss) before extraordinary gain                    (13,319)        26,240         (1,223)             --         11,698
Extraordinary gain on retirement of debt,
  net of tax                                                   4,524             --             --              --          4,524
                                                           ---------       --------      ---------       ---------      ---------
      Net income (loss)                                    $  (8,795)      $ 26,240      $  (1,223)      $      --      $  16,222
                                                           =========       ========      =========       =========      =========

                                                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NET CASH PROVIDED BY OPERATING ACTIVITIES                  $  20,144       $  5,442      $  10,412       $      --      $  35,998
                                                           ---------       --------      ---------       ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                      --         (4,892)        (2,868)             --         (7,760)
  Acquisitions of businesses, net                                 --             --         (2,449)             --         (2,449)
  Proceeds from sales of property, plant and equipment            --             63          1,389              --          1,452
  Proceeds from disposition of Mersch entities                    --             --         16,278              --         16,278
  Changes in other long-term assets                              721           (186)           670              --          1,205
                                                           ---------       --------      ---------       ---------      ---------
    Net cash provided by (used in) investing activities          721         (5,015)        13,020              --          8,726
                                                           ---------       --------      ---------       ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from revolving credit facilities                       --             --         20,550              --         20,550
  Repayments of revolving credit facilities                       --             --        (29,199)             --        (29,199)
  Proceeds from long-term debt                                    --            157          2,941              --          3,098
  Repayments of long-term debt                               (19,296)        (2,015)       (18,908)             --        (40,219)
  Distributions to shareholders                              (10,550)            --             --              --        (10,550)
                                                           ---------       --------      ---------       ---------      ---------
    Net cash used in financing activities                    (29,846)        (1,858)       (24,616)             --        (56,320)
                                                           ---------       --------      ---------       ---------      ---------
EFFECT OF EXCHANGE RATE ON CASH                                   --            530            993              --          1,523
                                                           ---------       --------      ---------       ---------      ---------
NET DECREASE IN CASH                                          (8,981)          (901)          (191)             --        (10,073)
Cash and cash equivalents at beginning of period              27,424          1,747          5,887              --         35,058
                                                           ---------       --------      ---------       ---------      ---------
Cash and cash equivalents at end of period                 $  18,443       $    846      $   5,696       $      --      $  24,985
                                                           =========       ========      =========       =========      =========
</TABLE>


                                       16
<PAGE>   17




                                  ALBECCA INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 (in thousands)



<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                              May 30, 1999 (Unaudited)
                                                       --------------------------------------------------------------------------
                                                                                                    Consolidated
                                                                       Subsidiary    Subsidiary      Elimination     Consolidated
                                                       Albecca Inc.    Guarantors   Nonguarantors      Entries          Total
                                                       ------------    ----------   -------------   ------------     ------------
<S>                                                    <C>             <C>          <C>             <C>              <C>

Net sales                                               $      --       $154,317      $ 149,168       $  (5,962)      $ 297,523
Cost of sales                                                  --         85,440         90,794          (5,962)        170,272
                                                        ---------       --------      ---------       ---------       ---------
  Gross profit                                                 --         68,877         58,374              --         127,251
Operating expenses                                            107         53,624         52,039              --         105,770
Restructuring charges                                          --            342          1,149              --           1,491
                                                        ---------       --------      ---------       ---------       ---------
  Operating income (loss)                                    (107)        14,911          5,186              --          19,990
Interest income                                            (1,623)            --             --              --          (1,623)
Interest expense                                           16,675            476          2,763              --          19,914
                                                        ---------       --------      ---------       ---------       ---------
 Income (loss) before provision for income taxes,
    minority interest and extraordinary gain              (15,159)        14,435          2,423              --           1,699
Provision for income taxes                                     --            372          1,477              --           1,849
Minority interest                                              --             --            355              --             355
                                                        ---------       --------      ---------       ---------       ---------
  Income (loss) before extraordinary gain                 (15,159)        14,063            591              --            (505)
Extraordinary gain on retirement of debt,
  net of tax                                                1,008             --             --              --           1,008
                                                        ---------       --------      ---------       ---------       ---------
      Net income (loss)                                 $ (14,151)      $ 14,063      $     591       $      --       $     503
                                                        =========       ========      =========       =========       =========

                                      CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH (USED IN) PROVIDED BY
  OPERATING ACTIVITIES                                  $     (59)      $    947      $   9,848       $      --       $  10,736
                                                        ---------       --------      ---------       ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                   --         (1,088)        (3,432)             --          (4,520)
  Acquisitions of businesses, net                              --             --         (3,594)             --          (3,594)
  Proceeds from sales of property, plant and equipment         --             37          1,587              --           1,624
  Changes in other long-term assets                          (321)           305           (611)             --            (627)
                                                        ---------       --------      ---------       ---------       ---------
    Net cash used in investing activities                    (321)          (746)        (6,050)             --          (7,117)
                                                        ---------       --------      ---------       ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments for additional debt issue costs                   (195)            --             --              --            (195)
  Proceeds from revolving credit facilities                    --            512         26,167              --          26,679
  Repayments of revolving credit facilities                    --            (58)       (25,353)             --         (25,411)
  Proceeds from long-term debt                                 --          2,747         11,739              --          14,486
  Repayments of long-term debt                             (7,863)        (3,273)       (16,354)             --         (27,490)
  Distributions to shareholders                            (4,308)            --             --              --          (4,308)
                                                        ---------       --------      ---------       ---------       ---------
      Net cash used in financing activities               (12,366)           (72)        (3,801)             --         (16,239)
                                                        ---------       --------      ---------       ---------       ---------
EFFECT OF EXCHANGE RATE ON CASH                                --             30         (1,820)             --          (1,790)
                                                        ---------       --------      ---------       ---------       ---------
NET (DECREASE) INCREASE IN CASH                           (12,746)           159         (1,823)             --         (14,410)
Cash and cash equivalents at beginning of period           49,188             18          5,678              --          54,884
                                                        ---------       --------      ---------       ---------       ---------
Cash and cash equivalents at end of period              $  36,442       $    177      $   3,855       $      --       $  40,474
                                                        =========       ========      =========       =========       =========
</TABLE>





                                       17
<PAGE>   18


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with Albecca's unaudited consolidated financial statements and the related notes
thereto. In this "Management's Discussion and Analysis of Financial Condition
and Results of Operations," all references to the Company's international
operations ("International") include all of Albecca's operations outside of the
U.S.

         The following table sets forth certain consolidated statements of
operations data as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                              Three Months Ended               Nine Months Ended
                                                          ---------------------------    ---------------------------

                                                          May 30, 1999   May 28, 2000    May 30, 1999   May 28, 2000
                                                          ------------   ------------    ------------   ------------

<S>                                                       <C>            <C>             <C>            <C>
Net sales                                                     100.0%         100.0%          100.0%         100.0%
Cost of sales                                                  58.0           54.2            57.2           55.8
                                                          ---------      ---------       ---------      ---------
  Gross profit                                                 42.0           45.8            42.8           44.2
Operating expenses                                             35.2           28.0            35.5           31.2
Restructuring charges                                           1.3            1.0             0.5            0.3
Write-down of goodwill                                           --             --              --            1.8
                                                          ---------      ---------       ---------      ---------
  Operating income                                              5.5           16.8             6.8           10.9
Loss on disposition of Mersch entities                           --            0.5              --            0.7
Interest income                                                (0.6)          (1.4)           (0.5)          (1.1)
Interest expense                                                6.4            6.9             6.7            6.5
                                                          ---------      ---------       ---------      ---------
  Income (loss) before provision for income
    taxes, minority interest and extraordinary gain            (0.3)          10.8             0.6            4.8
Provision for income taxes                                      0.6            0.4             0.6            0.6
Minority interest                                               0.1            0.1             0.1            0.1
                                                          ---------      ---------       ---------      ---------
  Income (loss) before extraordinary gain                      (1.0)          10.3            (0.1)           4.1
Extraordinary gain on retirement
  of debt, net of tax                                           1.0             --             0.3            1.6
                                                          ---------      ---------       ---------      ---------
      Net income                                                0.0%          10.3%            0.2%           5.7%
                                                          =========      =========       =========      =========
</TABLE>


NET SALES

         For the third quarter ended May 28, 2000, net sales were $87.9 million
compared to $96.2 million for the third quarter ended May 30, 1999. For the nine
months ended May 28, 2000, net sales were $282.2 million compared to $297.5
million for the nine months ended May 30, 1999. The decrease in net sales for
the three and nine months ended May 28, 2000 were primarily the result of the
sale of the South African operations completed at the end of fiscal 1999 and the
disposition of the Mersch entities completed during January of fiscal 2000,
along with unfavorable changes in foreign currency rates, partially offset by an
increase in sales to independent custom framing retailers. U.S. net sales
increased 10.5% and 9.8% for the three and nine months ended May 28, 2000 from
the comparable periods in 1999, primarily the result of an increase in sales to
independent custom framing retailers. International net sales decreased 28.7%
and 20.1% for the three and nine months ended May 28, 2000 from the comparable
periods in 1999 primarily due to the sale of the South African operations
completed at the end of fiscal 1999 and the disposition of the Mersch entities
completed during January of fiscal 2000 and the unfavorable changes in the
foreign currency exchange rates for the French franc, the Deutsche mark and the
Dutch guilder.

COST OF SALES

         Cost of sales were $47.6 million and $157.3 million for the three and
nine months ended May 28, 2000, compared to $55.8 million and $170.3 million for
the three and nine months ended May 30, 1999. In the U.S., gross profit
increased to 48.4% and 46.5% for the three and nine months ended May 28, 2000,
compared to 44.9% and 45.3% for the comparable periods in 1999. The increase was
primarily the result of an improvement in the product mix sold and steps taken
last year by management to address its non-performing U.S. acquisition-related
inventory. International gross profit margin increased to 41.5% and 41.1% for
the three and nine months ended May 28, 2000, compared to 39.0% and 40.3% for
the comparable periods in 1999. This increase was primarily the result of a
decrease in net sales of lower-margin products associated with the recently sold
South African operations, as well as an increase of value added sales in Japan.


                                       18
<PAGE>   19

OPERATING EXPENSES

         Operating expenses were $24.6 million and $88.3 million for the three
and nine months ended May 28, 2000, compared to $33.9 million and $105.8 million
for the three and nine months ended May 30, 1999. In the U.S., operating
expenses as a percentage of net sales decreased to 21.2% and 26.8% for the three
and nine months ended May 28, 2000, compared to 33.4% and 34.2% for the
comparable periods in 1999. The decrease was primarily attributable to the
reduction of duplicative acquisition-related expenses and gains in efficiencies
at the acquisition locations, along with the reversals of previously provided
reserves as more fully described in Notes 12 and 13 to the consolidated
financial statements. International operating expenses as a percentage of net
sales increased to 38.9% and 37.4% for the three and nine months ended May 28,
2000, compared to 37.2% and 36.9% for the comparable periods in 1999. This
increase was primarily due to the decrease in net sales associated with the
recently sold South African operations and the Mersch entities, along with the
recording of charges associated with the closure of the United Kingdom -
Northampton location. Had the reversals of the previously provided reserves
referred to above and more fully described in Notes 12 and 13 to the
consolidated financial statements not taken place, operating expenses as a
percentage of net sales would have been 30.6% and 29.9% in the U.S. and 33.7%
and 33.0% for the total Company for the three and nine months ended May 28,
2000, respectively.


RESTRUCTURING CHARGES

         During the third quarter and the nine months ended May 28, 2000, the
Company recorded a restructuring charge related to the closure of one of its
United Kingdom operations, explained more fully in Note 6 of the notes to the
accompanying consolidated financial statements. In addition, the Company off-set
the remaining $.03 million unused balance associated with the closure of its
duplicate facilities in the United States and the $.02 million unused balance
associated with the closure of the UK plastic moulding manufacturing operations
with the current restructuring charges incurred in the quarter. The
restructuring charges for the quarter were $.9 million. Restructuring charges of
$1.2 million and $1.5 million were recorded for the three and nine months ended
May 30, 1999.

WRITE-DOWN OF GOODWILL

         In October 1997, the Company acquired Robert F. deCastro, Inc.
("deCastro") a distributor of products in the pre-framed art and the custom
framing markets. Since the acquisition, the demand in the markets for the
deCastro product line has dramatically decreased or ceased. As a result, in the
second quarter of fiscal 2000, management determined to redirect its effort from
pre-framed art and to focus its energies and resources, both financial and
managerial, on the custom picture framing market. The Company determined that
the estimated future undiscounted cash flows of the deCastro product line were
below the carrying value of the associated long-lived assets, primarily
consisting of goodwill. Accordingly, during the second quarter of fiscal 2000,
the Company adjusted the carrying value of deCastro's unamortized goodwill to
its estimated fair value of approximately $.2 million, resulting in a non-cash
impairment charge of approximately $5.0 million. The estimated fair value of
goodwill was based on anticipated future cash flows discounted at a rate
commensurate with the risk involved.

DISPOSITION OF MERSCH ENTITIES

         In the second quarter of fiscal 2000, Albecca made a decision to sell
its investment in its Mersch entities, a manufacturer and supplier of readymade
frames to large European discount stores, located in Germany and France. This
decision was based on management's continued initiative to focus its energies
and resources, both financial and managerial, on the European custom picture
framing market. In January 2000, Albecca sold its investment in its Mersch
entities for cash of $16.3 million and retained certain long-term assets of $3.0
million, for total gross consideration of $19.3 million. In addition, the
Company retained certain liabilities of $12.5 million (which were primarily paid
at closing). The loss on the disposition of the Mersch entities, recorded during
the second quarter of fiscal 2000, was approximately $1.4 million.

         During the third quarter of fiscal 2000, the Company determined that
the realizable value of one of the Mersch buildings, a long-term asset retained
in the sale, was less than previously estimated. Therefore, the Company has
recorded an additional loss on the disposition of the Mersch entities of $.5
million, which represents the write-down of this asset to estimated realizable
value from future sale. This increases the total loss on the disposition of the
Mersch entities to $1.9 million.

         The sale agreements required the Mersch entities to maintain a minimum
level of working capital through the closing date as supported by a closing
balance sheet audit, which has not yet been agreed to by the respective parties.
In the opinion of management, the disposition of the Mersch entities will not
have a material impact on the future operations or financial position of the
Company. The Mersch entities' five month sales and operating income for fiscal
2000 were approximately $10.0 million and $.1 million, respectively.


                                       19
<PAGE>   20



INTEREST INCOME

         Interest income was $1.3 million and $3.1 million for the three and
nine months ended May 28, 2000, compared to $.6 million and $1.6 million for the
three and nine months ended May 30, 1999. The increase resulted primarily from
the interest income associated with the Company's investment in its senior
subordinated notes.

INTEREST EXPENSE

         Interest expense was $6.0 million and $18.4 million for the three and
nine months ended May 28, 2000, compared to $6.2 million and $19.9 million for
the three and nine months ended May 30, 1999. The decrease in interest expense
is primarily due to a decrease in long-term debt associated with the sale of the
South African operations and the Mersch entities and the Company's continued
focus to reduce its debt.

EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT

         Consistent with its stated objective of using a portion of its cash to
lower its debt, including its senior subordinated debt, for the nine months
ended May 28, 2000, the Company retired $23.8 million of its senior subordinated
notes. The debt retirements resulted in extraordinary gains totaling $4.5
million, net of state income taxes of $.2 million.

NET INCOME

         For the reasons set forth above, net income was $9.2 and $16.4 million
for the three and nine months ended May 28, 2000, compared to $.0 million and
$.5 million for the three and nine months ended May 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's principal sources of funds have been, and are expected to
continue to be, cash flow from operations and its on-hand cash and cash
equivalents. The Company's principal need for funds historically has been to
finance its working capital (principally inventory and accounts receivable),
capital expenditures, acquisitions and debt reduction. Consistent with its
stated objective, the Company will continue to use its cash, whether generated
from operations, third-party financing, or otherwise, to lower its debt,
including its senior subordinated debt. As of May 28, 2000, the Company had cash
and cash equivalents of $25.0 million compared to $35.1 million as of August 29,
1999.

         Net cash provided by operating activities was $36.0 million for the
nine months ended May 28, 2000, compared to $10.7 million for the nine months
ended May 30, 1999. The increase is primarily attributable to the increase in
net income for the nine months ended May 28, 2000 and a reduction in the
Company's inventories during the period. Net cash provided by investing
activities increased to $8.7 million for the nine months ended May 28, 2000,
compared to net cash used of $7.1 million for the nine months ended May 30,
1999. The increase was primarily due to the disposition of the Company's Mersch
entities and a reduction in the Company's acquisition activities, partially
offset by an increase in capital expenditures. During the nine months ended May
28, 2000, the Company invested $7.8 million for capital expenditures, primarily
associated with the construction of the Company's new manufacturing plant
located in Ashland, Wisconsin. The land and building cost of the manufacturing
facility is expected to be approximately $4.3 million. As of May 28, 2000,
approximately $4.1 million had been expended on the project. Completion is
expected by the end of fiscal 2000. The Company also purchased the outstanding
23% interest in its Italian subsidiary for approximately $2.4 million. During
the nine months ended May 28, 2000, cash used in financing activities increased
to $56.3 million compared to $16.2 million for the nine months ended May 30,
1999, primarily due to the Company retiring a portion of its senior subordinated
debt with a face value of $23.8 million and debt reduction of $11.9 million
associated with the disposition of the Mersch entities.

         As of May 28, 2000, Albecca had outstanding indebtedness of
approximately $187.1 million, consisting of $164.9 million in principal amount
of the August 1998 senior subordinated debt and $22.2 million of other
indebtedness. As of August 29, 1999, Albecca had outstanding indebtedness of
approximately $239.8 million, consisting of $188.8 million in principal amount
of the notes and $51.0 million of other indebtedness.

         The Company enters into forward exchange contracts to hedge purchases
and payables denominated in foreign currencies for periods consistent with its
identified exposures. Gains and losses related to qualifying hedges of these
exposures are deferred and recognized in operating income when the underlying
hedged transaction occurs.

         Albecca's ability to make scheduled payments of the principal of, or to
pay the interest or liquidated damages, if any, on, or to refinance its
indebtedness, including the August 1998 senior subordinated debt, or to fund
planned capital or other expenditures, will depend on its future financial or
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, many of which are beyond its control.
Based upon the current levels of operations, management believes that cash flow
from operations and available cash and cash equivalents will provide adequate
funds for the Company's foreseeable working capital needs, capital expenditures,
scheduled

                                       20
<PAGE>   21

payments of principal and interest on its indebtedness, including the senior
subordinated debt, and acquisitions. There is no certainty that Albecca's
business will generate sufficient cash flow from operations or that future
borrowings will be available in an amount sufficient to enable Albecca to
service its indebtedness, including the senior subordinated debt, or to make
anticipated capital and other expenditures.

YEAR 2000 UPDATE

         The efficient operation of the Company's business is dependent in part
on its computer software programs and operating systems. These programs and
systems are used in several key areas of the Company's business, including order
entry, purchasing, inventory management, pricing, sales, shipping, and financial
reporting, as well as in various administrative functions.

         Albecca has an ongoing program to assess the impact of Year 2000
compliance on its information technology systems and its non-information
technology systems and has formulated plans to address business disruption
associated with potential date processing problems. Through its assessments,
Albecca has identified potential Year 2000 issues in its IT systems, both
hardware and software, and in its non-IT systems. Albecca continues to address
these deficiencies through upgrades, replacements, specific enhancements and
other corrective measures. In connection with its non-IT systems, which are
building security, heating, ventilation and air conditioning, and other
equipment with date sensitive operating controls, Albecca has completed its
testing.

         Albecca has incurred expenses of $1.1 million in conjunction with the
Year 2000 compliance project. The majority of these expenditures were expensed
during fiscal 1999.

         Albecca believes that the most reasonable likely worst case Year 2000
scenario would be a failure by a significant third party in supplying Albecca
products and services it needs to conduct its day-to-day operations. This risk
is not limited to its vendors but also includes, without limitation, utilities
or other general service providers or government entities. Albecca is focusing
its remedial efforts on those factors which it can reasonably be expected to
have influence upon. The extent of lost revenue as a result of such scenarios
cannot be estimated at this time.

         As of the filing date of this Form 10-Q, the Company has not
experienced any significant Year 2000 issues arising from its systems or those
of its material vendors and suppliers. To the extent that there might be any
ongoing Year 2000 issues that might arise at a later date, the Company has
contingency plans in place to address such issues. The Company continues to
maintain close contact with third parties with whom it has material
relationships, such as vendors, suppliers and financial institutions, with
respect to such third parties' Year 2000 compliance and any ongoing Year 2000
issues that might arise at a later date. In light of the Company's efforts, the
Year 2000 issue has had no material adverse effect to date on the operations or
results of operations of the Company, and is not expected to have a material
impact on the Company's financial statements. However, there can be no assurance
that the Company or any third parties will not have ongoing Year 2000 issues
that may have a material adverse effect on the Company's business, operating
results and financial condition in the future.

FORWARD LOOKING STATEMENTS

         When used in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission and in its press releases, and in other
written or oral statements made by the Company's representatives, the words and
phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimates," "projects," "believes," "plans," "anticipates,"
"intends," "may," or similar expressions, are intended to identify "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements include, without limitation,
the Company's expectations regarding sales, earnings, or other future financial
performance and liquidity, and general statements about future operations and
operating results. Although the Company believes that its expectations are based
on reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not differ
materially from its expectations. Factors that could cause actual results to
differ from expectations include, without limitation, (i) the timing and expense
associated with, and effects of, cost-reduction and integration initiatives
being implemented by the Company; (ii) general competitive factors and the
overall financial condition of the custom framing industry, the retail industry
and the general economy; (iii) change in retailer or consumer acceptance of the
Company's products; (iv) consolidations and restructurings in the retail
industry causing a decrease in the number of stores that sell the Company's
products; (v) social, political, and economic risks to the Company's foreign
operations and customers; (vi) changes in the laws, regulations, and policies,
including changes in accounting standards, that affect, or will affect, the
Company in the United States and internationally; (vii) shipment delays,
depletion of inventory, service problems; (viii) changes in product mix to ones
which are less profitable; and (ix) the ability of the Company and third
parties, including customers or suppliers, to adequately address Year 2000
issues. The Company assumes no responsibility to update forward-looking
statements made herein or elsewhere.


                                       21
<PAGE>   22



PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         a.       Exhibits:

<TABLE>
<CAPTION>
NO.                                     DESCRIPTION
---                                     -----------
<S>      <C>
3.1      -- Amended and Restated Articles of Incorporation of Albecca
         (incorporated by reference to Exhibit 3.1 of Albecca's Registration
         Statement on Form S-4 (No. 333-67975) as declared effective by the SEC
         on February 12, 1999).

3.2      -- Amended and Restated Bylaws of Albecca (incorporated by reference to
         Exhibit 3.2 of Albecca's Registration Statement on Form S-4 (No.
         333-67975) as declared effective by the SEC on February 12, 1999).

27.1     -- Financial Data Schedule
</TABLE>

         b.       Reports on Form 8-K: None















                                       22
<PAGE>   23


                                   SIGNATURES


       Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                        ALBECCA INC.
                                        (registrant)


Date:    July 12, 2000                  /s/ Craig A. Ponzio
         -------------                  ---------------------------------------
                                        Craig A. Ponzio, Chairman of the Board,
                                        President, Chief  Executive Officer
                                        (Principal Executive Officer)



Date:    July 12, 2000                  /s/ R. Bradley Goodson
         -------------                  ---------------------------------------
                                        R. Bradley Goodson,
                                        Vice President Finance,
                                        Chief Financial Officer
                                        (Principal Financial Officer)



                                       23