<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 February 25, 2001.

                                       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>                                                                            <C>
Part I - Financial Information

    Item 1.  Financial Statements

              Consolidated Balance Sheets as of August 27, 2000 (audited) and
                 February 25, 2001 (unaudited) .......................................           3

              Consolidated Statements of Operations for the three and six months ended
                 February 27, 2000 (unaudited) and February 25, 2001 (unaudited) .....           4

              Consolidated Statements of Cash Flows for the six months ended
                 February 27, 2000 (unaudited) and February 25, 2001 (unaudited) .....           5

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

    Item 2.  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations ...........................................          15

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk ..............          17

Part II - Other Information

    Item 6.  Exhibits and Reports on Form 8-K ........................................          18

Signatures ...........................................................................          19
</TABLE>


                                       2
<PAGE>   3


PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


                                  ALBECCA INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                        August 27,          February 25,
                                                                           2000                 2001
                                                                        -----------         -----------
                                     ASSETS                                                 (unaudited)
<S>                                                                     <C>                 <C>
CURRENT ASSETS:
  Cash and cash equivalents                                              $  23,321           $  24,555
  Accounts receivable, less allowances for doubtful accounts of
    $5,283 and $5,380 at August 27, 2000 and February 25, 2001              36,384              36,097
  Inventories                                                               48,413              49,381
  Other current assets                                                       4,754               5,301
                                                                         ---------           ---------
      Total current assets                                                 112,872             115,334
PROPERTY, PLANT AND EQUIPMENT, net                                          36,692              35,484
OTHER LONG-TERM ASSETS                                                      41,531              40,603
                                                                         ---------           ---------
                                                                         $ 191,095           $ 191,421
                                                                         =========           =========

                     LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Current maturities of long-term debt                                   $   7,686           $   5,796
  Accounts payable                                                          17,247              18,443
  Accrued liabilities                                                       24,664              20,322
                                                                         ---------           ---------
      Total current liabilities                                             49,597              44,561
                                                                         ---------           ---------
LONG-TERM DEBT, less current maturities                                    162,496             154,239
                                                                         ---------           ---------
OTHER LONG-TERM LIABILITIES                                                  8,879               9,726
                                                                         ---------           ---------

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                                                      (23,578)            (10,357)
  Accumulated other comprehensive loss                                     (13,795)            (14,244)
                                                                         ---------           ---------
      Total shareholders' deficit                                          (29,877)            (17,105)
                                                                         ---------           ---------
                                                                         $ 191,095           $ 191,421
                                                                         =========           =========
</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                  Six months ended
                                                                 -----------------------------     -------------------------------
                                                                 February 27,     February 25,     February 27,       February 25,
                                                                     2000             2001              2000              2001
                                                                 ------------     ------------     ------------       ------------

<S>                                                              <C>              <C>              <C>                <C>
Net sales                                                          $ 94,153         $ 81,561         $ 194,273         $ 164,934
Cost of sales                                                        52,389           42,444           109,688            86,918
                                                                   --------         --------         ---------         ---------
  Gross profit                                                       41,764           39,117            84,585            78,016
Operating expenses                                                   31,522           25,609            63,619            51,054
Impairment of goodwill                                                4,997               --             4,997                --
                                                                   --------         --------         ---------         ---------
  Operating income                                                    5,245           13,508            15,969            26,962
Loss on disposition of businesses                                     1,382               --             1,382                --
Interest  income                                                     (1,011)          (1,905)           (1,831)           (3,481)
Interest expense                                                      5,956            5,778            12,369            11,668
Other income                                                             --             (430)               --               (69)
                                                                   --------         --------         ---------         ---------
  (Loss) income before provision for income taxes, minority
    interest and extraordinary gain                                  (1,082)          10,065             4,049            18,844
Provision for income taxes                                              363              388             1,225             1,267
Minority interest                                                        90               23               204                54
                                                                   --------         --------         ---------         ---------
  (Loss) income before extraordinary gain                            (1,535)           9,654             2,620            17,523
Extraordinary gain on repurchase of debt, net of tax                  1,544              251             4,524               498
                                                                   --------         --------         ---------         ---------
      Net income                                                   $      9         $  9,905         $   7,144         $  18,021
                                                                   ========         ========         =========         =========
</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>
                                                                        Six months ended
                                                                 -----------------------------
                                                                  February 27,    February 25,
                                                                      2000             2001
                                                                 -------------    ------------
<S>                                                              <C>              <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income                                                       $  7,144         $ 18,021
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Minority interest                                                   204               54
    Depreciation and amortization                                     3,933            2,727
    Loss on disposal of property, plant and equipment                     5              114
    Impairment of goodwill                                            4,997               --
    Loss on disposition of businesses                                 1,382               --
    Extraordinary gain on repurchase of debt                         (4,524)            (498)
    Changes in operating assets and liabilities:
      Accounts receivable                                            (5,908)            (279)
      Inventories                                                     7,910           (1,551)
      Other current assets                                              268             (523)
      Accounts payable                                                1,600            1,579
      Accrued liabilities                                             5,535           (4,282)
      Other                                                            (236)             854
                                                                   --------         --------
        Net cash provided by operating activities                    22,310           16,216
                                                                   --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property, plant and equipment                       (6,316)          (1,447)
    Proceeds from sales of property, plant and equipment              1,411              668
    Proceeds from disposition of businesses                          16,278               --
    Changes in other long-term assets                                   687              (57)
                                                                   --------         --------
        Net cash provided by (used in) investing activities          12,060             (836)
                                                                   --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from revolving credit facilities                        14,424           11,009
    Repayments of revolving credit facilities                       (20,242)         (10,941)
    Proceeds from long-term debt                                      2,752              703
    Repayments of long-term debt                                    (35,871)         (10,323)
    Distributions to shareholders                                    (3,000)          (4,800)
                                                                   --------         --------
        Net cash used in financing activities                       (41,937)         (14,352)
                                                                   --------         --------
EFFECT OF EXCHANGE RATE ON CASH                                         337              206
                                                                   --------         --------

NET (DECREASE) INCREASE IN CASH                                      (7,230)           1,234
CASH and cash equivalents, beginning of period                       35,058           23,321
                                                                   --------         --------
CASH and cash equivalents, end of period                           $ 27,828         $ 24,555
                                                                   ========         ========

SUPPLEMENTAL INFORMATION:
    Interest paid                                                  $ 12,491         $ 11,782
                                                                   ========         ========
    Income taxes paid                                              $  1,351         $  2,258
                                                                   ========         ========
</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 27, 2000, 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.  RESTRUCTURING PLANS

         Restructuring plans address the status of the Company's ongoing
restructuring activities which were initiated in prior fiscal years. As of
February 25, 2001, the following restructuring plans had remaining financial
and/or legal obligations:

UNITED KINGDOM - NORTHAMPTON

         As of February 25, 2001, with respect to the Company's closure of its
United Kingdom - Northampton operation, none of the original 37 team members
remained at the facility. The Company continues to sell existing assets and
collect existing accounts receivable through its United Kingdom - Arqadia Ltd.
operations. Management estimates that the restructuring plan will be completed
prior to the end of fiscal 2001.

NEW ZEALAND

         As of February 25, 2001, with respect to the closure of the Company's
distribution operations in New Zealand, none of the 9 original team members
remained at the facility. The Company, through its Australian operations, is
finalizing the legal requirements of the liquidation, and estimates the
restructuring plan will be completed prior to the end of fiscal 2001.

GREECE

         As of February 25, 2001, with respect to the closure of the Company's
distribution operations in Greece, none of the original 14 team members remained
at the facility. The Company, through its local counsel, will continue to
collect existing accounts receivable and finalize the legal liquidation of its
Greek entities. The Company estimates that the restructuring plan will be
completed prior to the end of fiscal 2001.

         For more descriptive information on the above mentioned restructuring
plans, please see the Company's Form 10-K for the fiscal year ended August 27,
2000, as filed with the Securities and Exchange Commission.


SUMMARY OF PREVIOUSLY REPORTED RESTRUCTURING PLANS

         At February 25, 2001, as it relates to the Company's fiscal 1998, 1999
and 2000 restructuring plans, $489,000 of restructuring charges remained in
accrued liabilities representing $85,000 of severance and other termination
costs and $404,000 of lease termination and other exit costs. During the second
quarter of fiscal 2001, $128,000 was paid relating to lease termination costs on
a building not yet subleased, relating to the closure of the Company's United
Kingdom - Northampton operation.


                                       6
<PAGE>   7

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


         A summary of the previously reported restructuring plans and activity
consist of the following estimated accrued future cash/non-cash requirements:


<TABLE>
<CAPTION>
                                                                       Severance and
                                                    Write-down of          other              Lease
                                                     property and       termination       termination and
CLOSURE OF UNITED KINGDOM - NORTHAMPTON:              equipment           benefits        other exit costs          Total
                                                    -------------      -------------      ----------------       -----------
<S>                                                 <C>                <C>                <C>                    <C>
2000 Provision                                         $499,000          $ 298,000           $ 618,000           $ 1,415,000
     Non-cash                                           499,000                 --                  --               499,000
                                                       --------          ---------           ---------           -----------
     Cash                                                    --            298,000             618,000               916,000
Fiscal 2000 cash activity                                    --           (116,000)            (84,000)             (200,000)
                                                       --------          ---------           ---------           -----------
Balance as of August 27, 2000                                --            182,000             534,000               716,000
First quarter 2001 cash activity (unaudited)                 --           (121,000)           (126,000)             (247,000)
                                                       --------          ---------           ---------           -----------
Balance as of November 26, 2000 (unaudited)                  --             61,000             408,000               469,000
Second quarter 2001 cash activity (unaudited)                --                 --            (128,000)             (128,000)
                                                       --------          ---------           ---------           -----------
Balance as of February 25, 2001 (unaudited)            $     --          $  61,000           $ 280,000           $   341,000
                                                       ========          =========           =========           ===========
</TABLE>



<TABLE>
<CAPTION>
                                                                       Severance and
                                                    Write-down of          other
                                                     property 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
Fiscal 2000 cash activity                                    --             (3,000)             (3,000)               (6,000)
                                                       --------          ---------           ---------           -----------
Balance as of August 27, 2000                                --             15,000              24,000                39,000
First quarter 2001 cash activity (unaudited)                 --                 --                  --                    --
                                                       --------          ---------           ---------           -----------
Balance as of November 26, 2000 (unaudited)                  --             15,000              24,000                39,000
Second quarter 2001 cash activity (unaudited)                --                 --                  --                    --
                                                       --------          ---------           ---------           -----------
Balance as of February 25, 2001 (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
Fiscal 2000 cash activity                                    --                 --              (4,000)               (4,000)
                                                       --------          ---------           ---------           -----------
Balance as of August 27, 2000                                --              9,000             100,000               109,000
First quarter 2001 cash activity (unaudited)                 --                 --                  --                    --
                                                       --------          ---------           ---------           -----------
Balance as of November 26, 2000 (unaudited)                  --              9,000             100,000               109,000
Second quarter 2001 cash activity (unaudited)                --                 --                  --                    --
                                                       --------          ---------           ---------           -----------
Balance as of February 25, 2001 (unaudited)            $     --          $   9,000           $ 100,000           $   109,000
                                                       ========          =========           =========           ===========
</TABLE>


                                       7
<PAGE>   8



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

Note 6.  OTHER INCOME

         Other income primarily represents realized and unrealized foreign
currency exchange gains and losses on intercompany account balances and certain
other foreign-denominated assets, as well as gains and losses on derivative
instruments as discussed in Note 10.

Note 7.  EXTRAORDINARY GAIN

         In September and December 2000 and February 2001, the Company
repurchased a portion of its senior subordinated notes with a face value of
$8,000,000. The debt repurchases resulted in extraordinary gains of $498,000,
net of state income taxes of $12,000. In September and November 1999 and
February 2000, the Company repurchased a portion of its senior subordinated
notes with a face value of $23,820,000. The debt repurchases resulted in
extraordinary gains of $4,524,000, net of state income taxes of $189,000.

Note 8.  INVENTORIES

         Inventories consist of the following (in thousands):


<TABLE>
<CAPTION>
                                 August 27,      February 25,
                                    2000             2001
                                 ----------      ------------
         <S>                     <C>             <C>
         Raw materials            $ 6,290          $ 6,425
         Work in process            2,127            2,495
         Finished goods            39,996           40,461
                                  -------          -------
                                  $48,413          $49,381
                                  =======          =======
</TABLE>



Note 9.  COMPREHENSIVE INCOME

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


<TABLE>
<CAPTION>
                                                               Three months ended                   Six months ended
                                                         -----------------------------      ------------------------------
                                                         February 27,     February 25,      February 27,      February 25,
                                                            2000              2001             2000               2001
                                                         ------------     ------------      ------------      ------------
         <S>                                             <C>              <C>               <C>               <C>
         Net income, as reported                           $     9           $ 9,905          $ 7,144           $ 18,021
         Foreign currency translation adjustments           (1,123)            2,459           (1,418)              (449)
                                                           -------           -------          -------           --------
         Total comprehensive (loss) income                 $(1,114)          $12,364          $ 5,726           $ 17,572
                                                           =======           =======          =======           ========
</TABLE>

         Accumulated other comprehensive loss represents foreign currency
translation adjustments of $13,795,000 and $14,244,000 at August 27, 2000 and
February 25, 2001, respectively.

Note 10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

         Effective August 28, 2000, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), as amended by SFAS No. 137, which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. This
statement became effective for all fiscal years beginning after June 15,
2000.

         The statement requires the Company to recognize all derivatives on the
balance sheet at fair value. If the derivative is a hedge, changes in the fair
value of derivatives are either offset against the change in fair value of
assets, liabilities, or firm commitments through earnings or recognized in
comprehensive income (equity) until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value is recognized in
earnings. In transition, the statement required all hedging relationships to be
evaluated and designated anew, resulting in cumulative transition adjustments to
earnings and other comprehensive income (equity). In accordance with the
transition provisions of SFAS 133, the Company recorded a cumulative adjustment,
net of tax, of $188,000 to recognize the fair value of the derivatives during
the first quarter of fiscal 2001, to other income on the Company's Consolidated
Statement of Operations.

         The Company has historically entered into forward exchange contracts to
reduce the foreign currency exchange risks associated with its committed and
anticipated foreign currency denominated purchases. Its U.S. operations purchase
primarily the Italian Lira, Spanish Peseta, and French Franc, and its United
Kingdom subsidiary primarily enters into U.S. dollar forward exchange contracts.

         The carrying amount of derivatives at fair value as of February 25,
2001 was $130,000. During the three months ended February 25, 2001, a loss of
$133,000 was recorded, net of tax, representing the change in fair value of the
derivatives. As of February 25, 2001 the maximum period of time the Company was
hedging its exposure to the variability in future cash flows for forecasted
transactions was approximately six months.


                                       8
<PAGE>   9

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

Note 11. COMMITMENTS AND CONTINGENCIES

LITIGATION

         The Company is involved in certain 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.

Note 12. SUBSEQUENT EVENTS

REPURCHASE OF SENIOR SUBORDINATED NOTES

         Subsequent to the end of the second quarter of fiscal 2001, the Company
repurchased $2,000,000 of its senior subordinated notes. The Company estimates
that an extraordinary loss of approximately $35,000 will be recorded.

Note 13. RECLASSIFICATIONS

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

Note 14. 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.


                                       9
<PAGE>   10



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


                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                               February 25, 2001 (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                           $ 15,720        $  1,193        $   7,642         $      --       $  24,555
  Accounts receivable, net                                  --          20,137           15,960                --          36,097
  Intercompany accounts receivable                          --          93,331              516           (93,847)             --
  Inventories                                               --          25,887           23,494                --          49,381
  Other current assets                                     183           1,348            3,770                --           5,301
                                                      --------        --------        ---------         ---------       ---------
    Total current assets                                15,903         141,896           51,382           (93,847)        115,334
PROPERTY, PLANT AND  EQUIPMENT, net                         --          10,335           25,149                --          35,484
OTHER LONG-TERM ASSETS                                   4,506          13,712           22,385                --          40,603
INVESTMENT IN SUBSIDIARIES                             130,515              --            7,885          (138,400)             --
INTERCOMPANY LOANS RECEIVABLE                           91,274              --              176           (91,450)             --
                                                      --------        --------        ---------         ---------       ---------
                                                      $242,198        $165,943        $ 106,977         $(323,697)      $ 191,421
                                                      ========        ========        =========         =========       =========

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Current maturities of long-term debt                $     --        $    721        $   5,075         $      --       $   5,796
  Accounts payable                                          --           9,445            8,998                --          18,443
  Intercompany accounts payable                         88,033             578            5,236           (93,847)             --
  Accrued liabilities                                      645           9,416           10,261                --          20,322
                                                      --------        --------        ---------         ---------       ---------
    Total current liabilities                           88,678          20,160           29,570           (93,847)         44,561
                                                      --------        --------        ---------         ---------       ---------
LONG-TERM DEBT, less current maturities                140,930           6,601            6,708                --         154,239
                                                      --------        --------        ---------         ---------       ---------
INTERCOMPANY LOANS PAYABLE                                  --             176           91,274           (91,450)             --
                                                      --------        --------        ---------         ---------       ---------
OTHER LONG-TERM LIABILITIES                                931           5,634            3,161                --           9,726
                                                      --------        --------        ---------         ---------       ---------
SHAREHOLDERS'  EQUITY (DEFICIT):
  Preferred stock                                           --              --               --                --              --
  Class A common stock                                       4              --               --                --               4
  Class B common stock                                     166              --               --                --             166
  Additional paid-in capital                             7,326          41,826            7,926           (49,752)          7,326
  Accumulated earnings (deficit)                         4,163          91,183          (17,055)          (88,648)        (10,357)
  Accumulated other comprehensive gain (loss)               --             363          (14,607)               --         (14,244)
                                                      --------        --------        ---------         ---------       ---------
    Total shareholders' equity (deficit)                11,659         133,372          (23,736)         (138,400)        (17,105)
                                                      --------        --------        ---------         ---------       ---------
                                                      $242,198        $165,943        $ 106,977         $(323,697)      $ 191,421
                                                      ========        ========        =========         =========       =========
</TABLE>


                                       10
<PAGE>   11



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


                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                    August 27, 2000
                                                   ------------------------------------------------------------------------------
                                                                                                    Consolidated
                                                                    Subsidiary      Subsidiary       Elimination     Consolidated
                                                   Albecca Inc.     Guarantors     Nonguarantors        Entries          Total
                                                   ------------     ----------     -------------    -------------    ------------
                                     ASSETS
<S>                                                <C>              <C>            <C>              <C>              <C>

CURRENT ASSETS:
  Cash and cash equivalents                          $  13,745        $  1,855       $   7,721        $      --        $  23,321
  Accounts receivable, net                                  --          20,291          16,093               --           36,384
  Intercompany accounts receivable                          --          73,310           1,336          (74,646)              --
  Inventories                                               --          23,617          24,796               --           48,413
  Other current assets                                     180             987           3,587               --            4,754
                                                     ---------        --------       ---------        ---------        ---------
      Total current assets                              13,925         120,060          53,533          (74,646)         112,872
PROPERTY, PLANT AND EQUIPMENT, net                          --          11,095          25,597               --           36,692
OTHER LONG-TERM ASSETS                                   4,894          13,745          22,892               --           41,531
INVESTMENT IN SUBSIDIARIES                             105,452              --           7,884         (113,336)              --
INTERCOMPANY LOANS RECEIVABLE                           91,985              --             532          (92,517)              --
                                                     ---------        --------       ---------        ---------        ---------
                                                     $ 216,256        $144,900       $ 110,438        $(280,499)       $ 191,095
                                                     =========        ========       =========        =========        =========

                 LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term debt               $      --        $    563       $   7,123        $      --        $   7,686
  Accounts payable                                          --           9,484           7,763               --           17,247
  Intercompany accounts payable                         67,854             114           6,678          (74,646)              --
  Accrued liabilities                                      814          11,856          11,994               --           24,664
                                                     ---------        --------       ---------        ---------        ---------
      Total current liabilities                         68,668          22,017          33,558          (74,646)          49,597
                                                     ---------        --------       ---------        ---------        ---------
LONG-TERM DEBT, less current maturities                148,930           6,085           7,481               --          162,496
                                                     ---------        --------       ---------        ---------        ---------
INTERCOMPANY LOANS PAYABLE                                  --             388          92,129          (92,517)              --
                                                     ---------        --------       ---------        ---------        ---------
OTHER LONG-TERM LIABILITIES                                220           5,961           2,698               --            8,879
                                                     ---------        --------       ---------        ---------        ---------
SHAREHOLDERS' (DEFICIT) EQUITY:
  Preferred stock                                           --              --              --               --               --
  Class A common stock                                       4              --              --               --                4
  Class B common stock                                     166              --              --               --              166
  Additional paid-in capital                             7,326          41,825           7,926          (49,751)           7,326
  Accumulated (deficit) earnings                        (9,058)         68,199         (19,134)         (63,585)         (23,578)
  Accumulated other comprehensive gain (loss)               --             425         (14,220)              --          (13,795)
                                                     ---------        --------       ---------        ---------        ---------
      Total shareholders' (deficit) equity              (1,562)        110,449         (25,428)        (113,336)         (29,877)
                                                     ---------        --------       ---------        ---------        ---------
                                                     $ 216,256        $144,900       $ 110,438        $(280,499)       $ 191,095
                                                     =========        ========       =========        =========        =========
</TABLE>


                                       11
<PAGE>   12


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


                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                           February 25, 2001 (Unaudited)
                                                     --------------------------------------------------------------------------
                                                                                                   Consolidated
                                                                      Subsidiary    Subsidiary      Elimination    Consolidated
                                                     Albecca Inc.     Guarantors   Nonguarantors      Entries          Total
                                                     ------------     ----------   -------------   ------------    ------------
<S>                                                  <C>              <C>          <C>             <C>             <C>

Net sales                                              $     --        $55,672       $ 28,552        $ (2,663)       $ 81,561
Cost of sales                                                --         27,386         17,721          (2,663)         42,444
                                                       --------        -------       --------        --------        --------
  Gross profit                                               --         28,286         10,831              --          39,117
Operating expenses                                          172         15,923          9,514              --          25,609
                                                       --------        -------       --------        --------        --------
  Operating (loss) income                                  (172)        12,363          1,317              --          13,508
Interest income                                          (1,905)            --             --              --          (1,905)
Interest expense                                          5,372            182            224              --           5,778
Other income                                                 --             --           (430)             --            (430)
                                                       --------        -------       --------        --------        --------
  (Loss) income before provision for income taxes,
    minority interest, and extraordinary gain            (3,639)        12,181          1,523              --          10,065
Provision for income taxes                                   --            125            263              --             388
Minority interest                                            --             --             23              --              23
                                                       --------        -------       --------        --------        --------
  (Loss) income before extraordinary gain                (3,639)        12,056          1,237              --           9,654
Extraordinary gain on repurchase of debt, net of tax        251             --             --              --             251
Equity in earnings of subsidiaries                       13,293             --             --         (13,293)             --
                                                       --------        -------       --------        --------        --------
      Net income (loss)                                $  9,905        $12,056       $  1,237        $(13,293)       $  9,905
                                                       ========        =======       ========        ========        ========
</TABLE>



<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                           February 27, 2000 (Unaudited)
                                                     --------------------------------------------------------------------------
                                                                                                   Consolidated
                                                                      Subsidiary    Subsidiary      Elimination    Consolidated
                                                     Albecca Inc.     Guarantors   Nonguarantors      Entries          Total
                                                     ------------     ----------   -------------   ------------    ------------
<S>                                                  <C>              <C>          <C>             <C>             <C>

Net sales                                              $     --        $56,243       $ 39,767        $ (1,857)       $ 94,153
Cost of sales                                                --         30,067         24,179          (1,857)         52,389
                                                       --------        -------       --------        --------        --------
  Gross profit                                               --         26,176         15,588              --          41,764
Operating expenses                                           13         17,075         14,434              --          31,522
Impairment of goodwill                                       --          4,997             --              --           4,997
                                                       --------        -------       --------        --------        --------
  Operating (loss) income                                   (13)         4,104          1,154              --           5,245
Loss on disposition of businesses                            --             --          1,382              --           1,382
Interest income                                          (1,011)            --             --              --          (1,011)
Interest expense                                          5,315             58            583              --           5,956
                                                       --------        -------       --------        --------        --------
  (Loss) income before provision for income taxes,
    minority interest and extraordinary gain             (4,317)         4,046           (811)             --          (1,082)
Provision for income taxes                                   --            120            243              --             363
Minority interest                                            --             --             90              --              90
                                                       --------        -------       --------        --------        --------
  (Loss) income before extraordinary gain                (4,317)         3,926         (1,144)             --          (1,535)
Extraordinary gain on retirement of debt, net of tax      1,544             --             --              --           1,544
Equity in earnings of subsidiaries                        2,782             --             --          (2,782)             --
                                                       --------        -------       --------        --------        --------
      Net income (loss)                                $      9        $ 3,926       $ (1,144)       $ (2,782)       $      9
                                                       ========        =======       ========        ========        ========
</TABLE>


                                       12
<PAGE>   13


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


                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                     Six months ended
                                                                              February 25, 2001 (Unaudited)
                                                        ---------------------------------------------------------------------------
                                                                                                       Consolidated
                                                                         Subsidiary    Subsidiary       Elimination    Consolidated
                                                        Albecca Inc.     Guarantors   Nonguarantors       Entries          Total
                                                        ------------     ----------   -------------    ------------    ------------
<S>                                                     <C>              <C>          <C>              <C>             <C>

Net sales                                                  $     --       $112,806       $ 57,028        $ (4,900)       $164,934
Cost of sales                                                    --         57,084         34,734          (4,900)         86,918
                                                           --------        -------       --------        --------        --------
  Gross profit                                                   --         55,722         22,294              --          78,016
Operating expenses                                              190         32,062         18,802              --          51,054
                                                           --------        -------       --------        --------        --------
  Operating (loss) income                                      (190)        23,660          3,492              --          26,962
Interest income                                              (3,481)            --             --              --          (3,481)
Interest expense                                             10,831            416            421              --          11,668
Other income                                                     --             --            (69)             --             (69)
                                                           --------        -------       --------        --------        --------
  (Loss) income before provision for income taxes,
    minority interest and extraordinary gain                 (7,540)        23,244          3,140              --          18,844
Provision for income taxes                                       --            260          1,007              --           1,267
Minority interest                                                --             --             54              --              54
                                                           --------        -------       --------        --------        --------
  (Loss) income before extraordinary gain                    (7,540)        22,984          2,079              --          17,523
Extraordinary gain on repurchase of debt, net of tax            498             --             --              --             498
Equity in earnings of subsidiaries                           25,063             --             --         (25,063)             --
                                                           --------        -------       --------        --------        --------
      Net income (loss)                                    $ 18,021        $22,984       $  2,079        $(25,063)       $ 18,021
                                                           ========        =======       ========        ========        ========


                                            CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES                                     $ 14,088        $(1,000)      $  3,128        $     --        $ 16,216
                                                           --------        -------       --------        --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                     --           (388)        (1,059)             --          (1,447)
  Proceeds from sales of property, plant
    and equipment                                                --            432            236              --             668
  Changes in other long-term assets                             190           (372)           125              --             (57)
                                                           --------        -------       --------        --------        --------
  Net cash provided by (used in) investing activities           190           (328)          (698)             --            (836)
                                                           --------        -------       --------        --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from revolving credit facilities                      --            102         10,907              --          11,009
  Repayments of revolving credit facilities                      --             (2)       (10,939)             --         (10,941)
  Proceeds from long-term debt                                   --            600            103              --             703
  Repayments of long-term debt                               (7,503)           (23)        (2,797)             --         (10,323)
  Distributions to shareholders                              (4,800)            --             --              --          (4,800)
                                                           --------        -------       --------        --------        --------
  Net cash (used in) provided by financing activities       (12,303)           677         (2,726)             --         (14,352)
                                                           --------        -------       --------        --------        --------
EFFECT OF EXCHANGE RATE ON CASH                                  --            (11)           217              --             206
                                                           --------        -------       --------        --------        --------
NET INCREASE (DECREASE) IN CASH                               1,975           (662)           (79)             --           1,234
Cash and cash equivalents, beginning of period               13,745          1,855          7,721              --          23,321
                                                           --------        -------       --------        --------        --------
Cash and cash equivalents, end of period                   $ 15,720        $ 1,193       $  7,642        $     --        $ 24,555
                                                           ========        =======       ========        ========        ========
</TABLE>






                                       13
<PAGE>   14


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


                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                      Six months ended
                                                                               February 27, 2000 (Unaudited)
                                                        --------------------------------------------------------------------------
                                                                                                      Consolidated
                                                                         Subsidiary    Subsidiary     Elimination     Consolidated
                                                         Albecca Inc.    Guarantors   Nonguarantors      Entries          Total
                                                         ------------    ----------   -------------   ------------    ------------
<S>                                                      <C>             <C>          <C>             <C>             <C>

Net sales                                                  $     --       $111,832       $ 86,609        $ (4,168)       $194,273
Cost of sales                                                    --         60,907         52,949          (4,168)        109,688
                                                           --------       --------       --------        --------        --------
  Gross profit                                                   --         50,925         33,660              --          84,585
Operating expenses                                               97         33,898         29,624              --          63,619
Impairment of goodwill                                           --          4,997             --              --           4,997
                                                           --------       --------       --------        --------        --------
  Operating (loss) income                                       (97)        12,030          4,036              --          15,969
Loss on disposition of businesses                                --             --          1,382              --           1,382
Interest income                                              (1,831)            --             --              --          (1,831)
Interest expense                                             10,840            159          1,370              --          12,369
                                                           --------       --------       --------        --------        --------
 (Loss) income before provision for income taxes,
minority interest and extraordinary gain                     (9,106)        11,871          1,284              --           4,049
Provision for income taxes                                       --            240            985              --           1,225
Minority interest                                                --             --            204              --             204
                                                           --------       --------       --------        --------        --------
  (Loss) income before extraordinary gain                    (9,106)        11,631             95              --           2,620
Extraordinary gain on repurchase of debt, net of tax          4,524             --             --              --           4,524
Equity in earnings of subsidiaries                           11,726             --             --         (11,726)             --
                                                           --------       --------       --------        --------        --------
  Net income (loss)                                        $  7,144       $ 11,631       $     95        $(11,726)       $  7,144
                                                           ========       ========       ========        ========        ========

                                            CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NET CASH PROVIDED BY OPERATING
  ACTIVITIES                                               $ 14,194       $  3,009       $  5,107        $     --        $ 22,310
                                                           --------       --------       --------        --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                     --         (3,537)        (2,779)             --          (6,316)
  Proceeds from sales of property, plant
    and equipment                                                --             61          1,350              --           1,411
  Proceeds from disposition of businesses                        --             --         16,278              --          16,278
  Changes in other long-term assets                             722           (196)           161              --             687
                                                           --------       --------       --------        --------        --------
  Net cash provided by (used in) investing activities           722         (3,672)        15,010              --          12,060
                                                           --------       --------       --------        --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from revolving credit facilities                      --             --         14,424              --          14,424
  Repayments of revolving credit facilities                      --             --        (20,242)             --         (20,242)
  Proceeds from long-term debt                                   --             --          2,752              --           2,752
  Repayments of long-term debt                              (19,297)        (1,518)       (15,056)             --         (35,871)
  Distributions to shareholders                              (3,000)           325           (325)             --          (3,000)
                                                           --------       --------       --------        --------        --------
  Net cash used in financing activities                     (22,297)        (1,193)       (18,447)             --         (41,937)
                                                           --------       --------       --------        --------        --------
EFFECT OF EXCHANGE RATE ON CASH                                  --            248             89              --             337
                                                           --------       --------       --------        --------        --------
NET (DECREASE) INCREASE IN CASH                              (7,381)        (1,608)         1,759              --          (7,230)
Cash and cash equivalents, beginning of period               27,424          1,747          5,887              --          35,058
                                                           --------       --------       --------        --------        --------
Cash and cash equivalents, end of period                   $ 20,043       $    139       $  7,646        $     --        $ 27,828
                                                           ========       ========       ========        ========        ========
</TABLE>


                                       14
<PAGE>   15


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           Six months ended
                                                                 ----------------------------  ---------------------------
                                                                 February 27,    February 25,  February 27,   February 25,
                                                                     2000           2001           2000           2001
                                                                 ------------   -------------  ------------   ------------
<S>                                                              <C>            <C>            <C>            <C>

Net sales                                                            100.0%         100.0%         100.0%         100.0%
Cost of sales                                                         55.6           52.0           56.5           52.7
                                                                    ------         ------         ------         ------
  Gross profit                                                        44.4           48.0           43.5           47.3
Operating expenses                                                    33.5           31.4           32.7           30.9
Impairment of goodwill                                                 5.3             --            2.6             --
                                                                    ------         ------         ------         ------
  Operating income                                                     5.6           16.6            8.2           16.4
Loss on disposition of businesses                                      1.5             --            0.6             --
Interest income                                                       (1.1)          (2.3)          (0.9)          (2.1)
Interest expense                                                       6.3            7.1            6.4            7.1
Other income                                                            --           (0.5)            --             --
                                                                    ------         ------         ------         ------
  (Loss) income before provision for income taxes, minority
    interest and extraordinary gain                                   (1.1)          12.3            2.1           11.4
Provision for income taxes                                             0.4            0.5            0.6            0.8
Minority interest                                                      0.1             --            0.1             --
                                                                    ------         ------         ------         ------
  (Loss) income before extraordinary gain                             (1.6)          11.8            1.4           10.6
Extraordinary gain on repurchase of debt, net of tax                   1.6            0.3            2.3            0.3
                                                                    ------         ------         ------         ------
      Net income                                                       0.0%          12.1%           3.7%          10.9%
                                                                    ======         ======         ======         ======
</TABLE>

NET SALES

         For the second quarter ended February 25, 2001, net sales were $81.6
million compared to $94.2 million for the second quarter ended February 27,
2000. For the six months ended February 25, 2001, net sales were $164.9 million
compared to $194.3 million for the six months ended February 27, 2000. The
decrease in net sales for the three and six months ended February 25, 2001 was
primarily the result of the sale of two international operations completed
during the second and fourth quarters of fiscal 2000, the closure of an
international operation completed during the third quarter of fiscal 2000, the
impact of unfavorable changes in foreign exchange rates, as well as a general
softening in the global economy. Currency fluctuations decreased net sales by
$4.0 million and $3.2 million for the first and second quarters of fiscal 2001,
respectively, primarily due to continued strengthening of the U.S. dollar
against major European currencies. U.S. net sales decreased .7% and increased
1.3%, respectively, for the three and six months ended February 25, 2001 from
the comparable periods in fiscal 2000, primarily the result of an increase in
sales of branded moulding, partially offset by a continued loss of sales from
prior acquisitions. Management believes sales were also affected by a decline
in overall consumer purchases during the last three months. International
net sales decreased 31.1% and 36.0% for the three and six months ended
February 25, 2001 from the comparable periods in fiscal 2000, primarily due to
the sale of the Mersch operations completed during the second quarter of fiscal
2000, the sale of the Brio operation completed during the fourth quarter of
fiscal 2000, the closure of the United Kingdom - Northampton operation
completed during the third quarter of fiscal 2000, a decrease in sales in
The Netherlands, Korea and Sweden, and the negative impact of the continued
strengthening of the U.S. dollar.

COST OF SALES

         Cost of sales was $42.4 million and $86.9 million for the three and six
months ended February 25, 2001 compared to $52.4 million and $109.7 million for
the three and six months ended February 27, 2000. In the U.S., gross profit
increased to 51.0% and 49.6% for the three and six months ended February 25,
2001 compared to 46.6% and 45.6% for the comparable periods in fiscal 2000. The
increase for the quarter was primarily the result of continued growth in sales
of branded products and favorable currency exchange rate movements in certain
supplier markets. For the three and six months ended February 25, 2001,
International gross profit margin increased to 41.7% and 42.6% compared to 41.2%
and 41.0% for the comparable periods in fiscal 2000. This increase was primarily
the result of the decrease in net sales of lower margin products associated with
the Mersch and Brio operations sold in the second and fourth quarters of fiscal
2000 and a focus on sales of branded products.


                                       15
<PAGE>   16


OPERATING EXPENSES

         Operating expenses were $25.6 million and $51.1 million for the three
and six months ended February 25, 2001 compared to $31.5 million and $63.6
million for the three and six months ended February 27, 2000. In the U.S.,
operating expenses as a percentage of net sales decreased to 28.6% and 28.4% for
the three and six months ended February 25, 2001 compared to 29.4% and 29.5% for
the comparable periods in fiscal 2000. The decrease is primarily the result of
the continued integration of prior acquisitions and a focused internal effort to
control costs. For the three and six months ended February 25, 2001,
International operating expenses as a percentage of net sales decreased to 37.0%
and 36.2% compared to 39.2% and 36.8% for the comparable periods in fiscal 2000.
The decrease in operating expenses as a percentage of net sales is primarily
attributable to ongoing cost reduction activities and stabilization of sales
revenues, partially offset by increased costs experienced in certain of the
Company's operations.

INTEREST INCOME

         Interest income was $1.9 million and $3.5 million for the three and six
months ended February 25, 2001 compared to $1.0 million and $1.8 million for the
three and six months ended February 27, 2000. The increase resulted primarily
from the interest income associated with the Company's continued acquisition of
its senior subordinated notes.

INTEREST EXPENSE

         Interest expense was $5.8 million and $11.7 million for the three and
six months ended February 25, 2001 compared to $6.0 million and $12.4 million
for the three and six months ended February 27, 2000. The decrease in interest
expense is primarily due to the reduction of debt associated with the sale of
the Mersch and Brio businesses as well as the company's continued focus to
reduce its total debt.

OTHER INCOME

         Other income primarily represents realized and unrealized foreign
currency exchange gains and losses on intercompany account balances and certain
other foreign-denominated assets, as well as gains and losses on derivative
instruments as discussed in Note 10 of the Notes to Consolidated Financial
Statements.

EXTRAORDINARY GAIN ON REPURCHASE OF DEBT

         Consistent with its stated objective of using a portion of its cash to
lower its debt, including its senior subordinated notes, the Company
repurchased a portion of its senior subordinated notes with a face value of $4.0
million during each of the first two quarters of fiscal 2001, for a total
repurchase of $8.0 million. The debt repurchases resulted in extraordinary gains
totaling $.5 million, net of state income taxes of $.12 million.

NET INCOME

         For the reasons set forth above, net income was $9.9 million and $18.0
million for the three and six months ended February 25, 2001 compared to $.1
million and $7.1 million for the three and six months ended February 27, 2000.

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 distributions to the Company's
shareholders to pay income taxes as a result of its status as an S corporation.
As of February 25, 2001, the Company had cash and cash equivalents of $24.6
million compared to $23.3 million as of August 27, 2000.

         Net cash provided by operating activities was $16.2 million for the six
months ended February 25, 2001 compared to $22.3 million for the six months
ended February 27, 2000. Net income for the first six months of fiscal 2001 was
significantly higher than in the same period in the preceding year ($18.0
million vs. $7.1 million). However, the first and second quarters of fiscal 2000
included a number of significant items positively impacting cash flow that did
not recur in the first six months of fiscal 2001. This included a reduction of
inventory both as a result of the disposition of the Mersch businesses as well
as continued sell-down of acquisition inventories and an increase in accrued
liabilities. These items were partially offset by an increase in accounts
receivable. Items negatively impacting cash flow during the first six months of
fiscal 2001 included an increase in inventories and a reduction in accrued
liabilities, partially offset by the positive cash flow effect of an increase in
accounts payable. Net cash used in investing activities was $.8 million for the
six months ended February 25, 2001 compared to net cash provided by investing
activities of $12.1 million for the six months ended February 27, 2000,
primarily due to the proceeds from the disposition of the Mersch entities
received during the second quarter of fiscal 2000, partially offset by a
decrease in capital expenditures in the current year as a result of the
completion of the Company's new manufacturing plant in Ashland, Wisconsin during
fiscal 2000. Net cash used in financing activities decreased to $14.4 million
for the six months ended February 25, 2001 compared to $41.9 million for the six
months ended February 27, 2000, primarily due to the reduction of debt
associated with the disposition of the Mersch and Brio businesses during fiscal
2000 and a decrease in the amount of its senior subordinated debt repurchased by
the Company. The Company repurchased senior subordinated debt with a face value
of $8.0 million for the six months ended February 25, 2001 compared to $23.8
million during the prior comparable period.


                                       16
<PAGE>   17

         As of February 25, 2001, the Company had outstanding indebtedness of
approximately $160.0 million, consisting of $140.9 million in principal amount
of the August 1998 senior subordinated debt and $19.1 million of other
indebtedness. At August 27, 2000, the Company had outstanding indebtedness of
approximately $170.2 million, consisting of $148.9 million in principal amount
of the notes and $21.3 million of other indebtedness.

         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 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.

RECENT ACCOUNTING PRONOUNCEMENTS

         In July and September 2000, the Emerging Issues Task Force (EITF)
reached a consensus on Issue 00-10 "Accounting for Shipping and Handling Fees
and Costs." EITF Issue 00-10 requires that all amounts billed to a customer in a
sale transaction for shipping and handling be classified as sales, and
recommends that shipping and handling expenses be classified as cost of sales.
The Company currently classifies most shipping and handling revenues and costs,
on a net basis, in selling and administrative expense. Accordingly, the Company
has determined that EITF Issue 00-10 will require reclassification of shipping
and handling revenues and costs, but does not believe EITF Issue 00-10 will
impact its financial condition or net income. The effective date of this
standard is the fourth quarter of the Company's fiscal year 2001.

EUROPEAN UNION CURRENCY CONVERSION

         On January 1, 1999, eleven member nations of the European Economic and
Monetary Union began using a common currency, the Euro. For a three-year
transition period ending June 30, 2002, both the Euro and each of the currencies
for such member countries will remain in circulation. After June 30, 2002, the
Euro will be the sole legal tender for those countries. The adoption of the Euro
will affect many financial systems and business applications as the commerce of
those countries may be transacted both in the Euro and the existing national
currency during the transition period. Historically, significant portions of the
Company's revenue have been generated in Europe. Of the eleven countries
currently using the Euro, the Company has subsidiary operations in Austria,
Finland, France, Germany, Italy, and the Netherlands. The Company has assessed
the potential impact of the Euro conversion in a number of areas, particularly
on pricing and other marketing strategies. Although the Company does not
currently expect that the conversion, either during or after the transition
period, will have an adverse effect on its operations or financial condition,
there can be no assurance that it will not have some unexpected adverse impact.

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; and (viii) changes in product mix to
ones which are less profitable. The Company assumes no responsibility to update
forward-looking statements made herein or elsewhere.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         There have been no material changes to the Company's disclosures
related to certain market risks as reported under Item 7A, "Quantitative and
Qualitative Disclosures About Market Risk," in the Company's Form 10-K for the
fiscal year ended August 27, 2000, as filed with the Securities and Exchange
Commission.

                                       17
<PAGE>   18



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 filed with the SEC on November 25, 1998 and
         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 filed with the SEC on November 25, 1998 and declared
         effective by the SEC on February 12, 1999).

4.1      Indenture dated August 11, 1998, among Albecca Inc. and State Street
         Bank & Trust, as trustee, relating to the Notes (the
         "Indenture")(incorporated by reference to Exhibit 4.1 of Albecca's
         Registration Statement on Form S-4 (No. 333-67975) as filed with the
         SEC on November 25, 1998 and declared effective by the SEC on February
         12, 1999).

4.2      Form of 10 3/4% Senior Note due 2008 of Albecca Inc. (the "New
         Notes")(included as Exhibit A of the Indenture filed as Exhibit 4.1).
</TABLE>

      b. Reports on Form 8-K:
         None


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<PAGE>   19


                                   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 thereunto duly authorized.


                                         ALBECCA INC.
                                          (registrant)


Date:  April 11, 2001                 By: /s/ Craig A. Ponzio
       --------------                 -----------------------------------------
                                      Craig A. Ponzio, Chairman of the Board,
                                      President, Chief  Executive Officer
                                      (Principal Executive Officer)

Date:  April 11, 2001                 By: /s/ R. Bradley Goodson
       --------------                 -----------------------------------------
                                      R. Bradley Goodson,
                                      Vice President Finance,
                                      Chief Financial Officer
                                      (Principal Financial Officer)


                                       19