<PAGE>
 
                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED JULY 4, 1998
                                        
                                       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 NO.  0-21661
                                        

                                THE BIBB COMPANY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                        

           DELAWARE                                             58-2253133
(STATE OR OTHER JURISDICTION OF                              (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                             IDENTIFICATION NO.)


     100 GALLERIA PARKWAY                                          30339
         SUITE 1750                                              (ZIP CODE)
       ATLANTA, GEORGIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 
                                 (770)644-7000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                                        

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

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by court.  Yes X   No  __
                         --        

     As of July 4, 1998, there were 10,061,576 outstanding shares of the
registrant's Common Stock, par value $.01 per share, which is the only class of
common or voting stock of the registrant.
<PAGE>
 
                                THE BIBB COMPANY

                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
                                                                        PAGE NO.
                                                                        --------
<S>                                                                      <C> 
PART I - FINANCIAL INFORMATION:


 Item 1.  Condensed Financial Statements:

  Condensed Balance Sheets - July 4, 1998 and  January 3, 1998               3
                                                                              
  Condensed Statements of Operations for the three months ended               
  and the six months ended July 4, 1998 and June 28, 1997                    4
                                                                              
  Condensed Statement of Changes in Stockholders' Equity for the              
   six months ended July 4, 1998                                             5
                                                                              
  Condensed Statements of Cash Flows for the                                  
   six months ended July 4, 1998 and June 28, 1997                           6
                                                                              
  Notes to Condensed Financial Statements                                    7
                                                                              
 Item 2.  Management's Discussion and Analysis of Financial                   
       Condition and Results of Continuing Operations                       11 
 
PART II - OTHER INFORMATION:


 Item 6.  Exhibits and Reports on Form 8-K                                  14

      (a)  Exhibits
 
      (b)  Reports on Form 8-K
 

 Signature Page                                                             15
</TABLE> 
 

                                       2
<PAGE>
 
                                THE BIBB COMPANY
                           CONDENSED  BALANCE SHEETS
                        JULY 4, 1998 AND JANUARY 3, 1998
                       (In thousands, except share data)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                                                                              July 4,       January 3,
                                                                                               1998            1998
                                                                                             ---------      -----------
<S>                                                                                           <C>              <C>
 
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents                                                                    $     95       $    114
Accounts receivable, net of allowances for doubtful accounts, discounts, and claims
 of $1,676 and $2,686 as of July 4, 1998 and January 3, 1998, respectively                     35,686         34,761
Inventories                                                                                    59,514         54,305
Net assets of discontinued operations                                                           7,193         12,025
Prepaid expenses and other current assets                                                       3,743          3,019
                                                                                             --------       --------
   Total current assets                                                                       106,231        104,224
 
PROPERTY, PLANT and EQUIPMENT, net                                                             80,040         62,829
OTHER ASSETS                                                                                    2,430          2,298
                                                                                             --------       --------
                                                                                             $188,701       $169,351
                                                                                             ========       ========
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt                                                         $  6,678       $  3,617
Accounts payable                                                                               23,819         17,830
Accrued payroll and other compensation                                                          4,765          5,806
Other accrued liabilities                                                                       5,519          9,103
                                                                                             --------       --------
   Total current liabilities                                                                   40,781         36,356
 
LONG-TERM DEBT, less current maturities                                                        87,827         74,898
 
STOCKHOLDERS'  EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized, 0 shares issued
 and outstanding                                                                                    0              0
Common stock, $.01 par value, 25,000,000 shares authorized;
 10,061,576  shares issued and outstanding                                                        101            101
Additional paid-in capital                                                                     88,882         88,882
Accumulated deficit                                                                           (28,890)       (30,886)
                                                                                             --------       --------
   Total stockholders' equity                                                                  60,093         58,097
                                                                                             --------       --------
                                                                                             $188,701       $169,351
                                                                                             ========       ========
</TABLE>

 The accompanying notes are an integral part of these condensed balance sheets
                                  (unaudited).

                                       3
<PAGE>
 
                                THE BIBB COMPANY
                       CONDENSED STATEMENTS OF OPERATIONS
              FOR THE THREE MONTHS ENDED AND THE SIX MONTHS ENDED
                         JULY 4, 1998 AND JUNE 28, 1997
                       (In thousands, except share data)
                                  (unaudited)


<TABLE>
<CAPTION>
 
                                                       Three Months Ended                            Six Months Ended
                                                  -----------------------------              ------------------------------
                                                     July 4,         June 28,                  July 4,           June 28, 
                                                      1998             1997                     1998               1997 
                                                  -----------       -----------              -----------        -----------
 
<S>                                               <C>                <C>                     <C>                <C>
NET SALES                                         $    59,515       $    63,299              $   116,340        $   122,231
COST OF SALES                                          50,629            56,311                   99,587            110,569
                                                  -----------       -----------              -----------        -----------
   Gross Profit                                         8,886             6,988                   16,753             11,662
                                                                                                                
SELLING AND ADMINISTRATIVE                                                                                      
  EXPENSES                                              5,284             5,391                   10,966             10,844
                                                  -----------       -----------              -----------        -----------
   Operating Profit                                     3,602             1,597                    5,787                818
                                                                                                                
OTHER EXPENSES:                                                                                                 
   Interest expense                                    (1,395)           (1,060)                  (3,135)            (2,034)
   Loan fee amortization and related                                                                            
    expenses                                             (322)             (312)                    (656)              (586)
   Other, net                                               0                (6)                       0               (101)
                                                  -----------       -----------              -----------        -----------
INCOME (LOSS) FROM CONTINUING                                                                                   
  OPERATIONS                                      $     1,885       $       219              $     1,996        $    (1,903)
                                                  -----------       -----------              -----------        -----------
NET LOSS OF DISCONTINUED                                                                                        
  OPERATIONS, net of taxes:                                                                                     
   Apparel business                                         0            (1,305)                       0             (1,604)
   Napery business                                          0              (324)                       0                (94)
                                                  -----------       -----------              -----------        -----------
NET INCOME (LOSS)                                 $     1,885       $    (1,410)             $     1,996        $    (3,601)
                                                  ===========       ===========              ===========        ===========
                                                                                                                
PER SHARE INFORMATION:                                                                                          
   Net loss from continuing operations:                                                                         
     Basic                                        $      0.19       $      0.02              $      0.20        $     (0.19)
                                                  ===========       ===========              ===========        ===========
     Diluted                                      $      0.18       $      0.02              $      0.19        $     (0.19)
                                                  ===========       ===========              ===========        ===========
   Net loss of discontinued operations:                                                                         
     Basic                                               0.00             (0.16)                    0.00              (0.17)
                                                  ===========       ===========              ===========        ===========
     Diluted                                             0.00             (0.16)                    0.00              (0.17)
                                                  ===========       ===========              ===========        ===========
   Net loss:                                                                                                    
     Basic                                        $      0.19       $     (0.14)             $      0.20        $     (0.36)
                                                  ===========       ===========              ===========        ===========
     Diluted                                      $      0.18       $     (0.14)             $      0.19        $     (0.36)
                                                  ===========       ===========              ===========        ===========
                                                                                                                
WEIGHTED AVERAGE                                                                                                
  SHARES OUTSTANDING:                                                                                           
   Basic                                           10,061,576       10,061,576                10,061,576         10,061,576
                                                  ===========       ===========              ===========        ===========
   Diluted                                         10,327,287       10,061,576                10,257,465         10,061,576
                                                  ===========      ===========               ===========        ===========
</TABLE>


    The accompanying notes are an integral part of these condensed financial
                            statements (unaudited).

                                       4
<PAGE>
 
                                THE BIBB COMPANY
             CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                     FOR THE SIX MONTHS ENDED JULY 4, 1998
                                 (In thousands)
                                  (unaudited)



<TABLE>
<CAPTION>
                                                   Common
                                                   Stock              Additional
                                                   ($.01                Paid-in               Accumulated
                                                 Par Value)             Capital                 Deficit                 Total
                                              ----------------     -----------------       -----------------      ------------------

<S>                                             <C>                        <C>                    <C>                    <C>
Balance, January 3, 1998                                $  101               $88,882                $(30,886)                $58,097

 
Net Income                                                   0                     0                   1,996                   1,996

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

 
Balance, July 4, 1998                                    $  101              $88,882                $(28,890)                $60,093

                                              =================    =================       =================      ==================

</TABLE>


   The accompanying notes are an integral part of these financial statements
                                  (unaudited).

                                       5
<PAGE>
 
                                THE BIBB COMPANY
                       CONDENSED STATEMENTS OF CASH FLOWS
            FOR THE SIX MONTHS ENDED JULY 4, 1998  AND JUNE 28, 1997
                                 (In thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                                                                  Six Months Ended
                                                                           -----------------------------
                                                                             July 4,          June 28,
                                                                              1998              1997
                                                                           ----------        -----------
<S>                                                                         <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                                                          $  1,996          $  (3,601)
 Adjustments to reconcile net income (loss) to
  net cash provided by operating activities:
  Depreciation and amortization                                                3,361              3,625    
  Loan fee amortization and related expenses                                     656                586   
  Net loss on sales and retirement of assets                                       0                 13
  Changes in operating assets and liabilities:
   Assets held for sale                                                            0             37,012
   Net assets of discontinued operations                                       4,832                  0
   Other working capital accounts                                             (6,069)               816
                                                                            --------          ---------
          Net cash provided by operating activities                            4,776             38,451
                                                                            --------          ---------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                                                        (10,245)            (5,814)
 Proceeds from sale of fixed assets                                                0              2,565
 Other, net                                                                     (694)              (304)
                                                                            --------          ---------
          Net cash used in investing activities                              (10,939)            (3,553)
                                                                            --------          ---------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 Repayments of long-term debt and capital lease obligation                    (1,040)            (3,046)
 Proceeds from sale/leaseback transaction                                      1,933                  0
 Net borrowings (repayments) of senior debt                                    5,973            (34,920)
 Loan fees                                                                      (722)                 0
                                                                            --------          ---------
          Net cash provided by (used in) financing activities                  6,144            (37,966)
                                                                            --------          ---------
 
NET DECREASE IN CASH AND CASH EQUIVALENTS                                        (19)            (3,068)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 114              3,206
                                                                            --------          ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $     95          $     138
                                                                            ========          ========= 
 
SUPPLEMENTAL CASH FLOW DISCLOSURE:
 Interest paid                                                              $  3,979          $   3,205
                                                                            ========          =========  
</TABLE>

    The accompanying notes are an integral part of these condensed financial
                            statements (unaudited).

                                       6
<PAGE>
 
                                THE BIBB COMPANY
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                        

1.  BASIS OF INTERIM PRESENTATION

     The accompanying unaudited condensed  financial statements have been
  prepared in accordance with generally accepted accounting principles for
  interim financial information and with Rule 10-01 of Regulation S-X.
  Accordingly, they 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 normal recurring
  accruals) considered necessary to present fairly the Company's financial
  position as of July 4, 1998, the results of its operations for three month
  periods ended and the six month periods ended July 4, 1998 and June 28, 1997
  and cash flows for the six month periods ended July 4, 1998 and June 28, 1997,
  have been included. Operating results for the three month and six month
  periods ended July 4, 1998 are not necessarily indicative of the results that
  may be expected for the year ending January 2, 1999. Certain information and
  note disclosures normally included in annual financial statements prepared in
  accordance with generally accepted accounting principles have been condensed
  or omitted pursuant to the Securities and Exchange Commission's rules and
  regulations. The condensed financial statements should be read in conjunction
  with the Company's audited financial statements and notes thereto for the year
  ended January 3, 1998. The condensed balance sheet at January 3, 1998, has
  been derived from these statements.

     Unless the context otherwise requires, the "Company" means The Bibb
  Company, a Delaware corporation.

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

  On June 29, 1998, the Company and Dan River Inc., a leading manufacturer and
  marketer of textile products for the home fashions and apparel fabrics
  markets, ("Dan River"), announced a definitive merger agreement, as
  subsequently amended, under which Dan River will acquire the Company for a
  combination of cash and Dan River stock in a tax-free transaction valued in
  excess of $250 million, including assumed debt (the "Merger"). Each of the
  Company's shareholders will be entitled to elect whether to receive $16.50 in
  cash, .84615 shares of Dan River Class A common stock, or a combination
  thereof, for each of the Company's shares held, subject to proration. The
  closing of the Merger is expected to occur in the third quarter of 1998,
  subject to the fulfillment of certain customary closing conditions.


2.  SIGNIFICANT ACCOUNTING POLICIES

  Discontinued Operations

     In December 1997, the Company sold its napery business, which consisted of
  the manufacture and marketing of damask table linen products serving the
  hospitality market (the "Napery Business"), and related inventory, to Mount
  Vernon Mills, Inc. In connection therewith, the Company closed its Roanoke
  Rapids, North Carolina manufacturing plant during the three month period ended
  April 4, 1998 and is actively seeking a buyer for the property. As the assets
  of the Napery Business are currently being liquidated, they have been
  classified, as of July 4, 1998 and January 3, 1998, as net assets of
  discontinued operations, and the results of operations of the Napery Business
  are excluded from the Company's continuing operations.

     During the three month period ended April 4, 1998, the Company exited the
  apparel business, which consisted of the manufacture and marketing of apparel
  fabrics, principally chambray, which is sold primarily to garment
  manufacturers (the "Apparel Business").  As a result, the Company discontinued
  its manufacturing operations at the Company's Columbus, Georgia facility.  The
  assets 

                                       7
<PAGE>
 
  of the Apparel Business are currently being liquidated. As a result, the
  Company classified the assets, except for real estate, of the Apparel Business
  as net assets of discontinued operations, and the results of operations for
  the Apparel Business are excluded from the Company's continuing operations.
  The table below sets forth net sales, net losses, and net loss per common
  share for the discontinued Apparel Business and Napery Business for the three
  months ended July 4, 1998 and June 28, 1997 (in thousands, except per share
  data):

<TABLE>
<CAPTION>
                                                  For the three months ended                For the three months ended
                                                         July 4, 1998                              June 28, 1997
                                              ----------------------------------      ---------------------------------------- 
                                                 Apparel             Napery               Apparel                 Napery
                                                 Business           Business              Business               Business
                                              --------------     ---------------      ----------------      ------------------
<S>                                              <C>                  <C>                  <C>                   <C>
  Net sales                                      $1,229               $   0                $ 6,223                $2,389
 
  Net loss                                       $    0               $   0                $(1,305)               $ (324)
 
  Net loss per common share,
        basic and diluted                        $ 0.00               $0.00                $ (0.13)               $(0.03)
</TABLE>


     Net assets of discontinued operations at July 4, 1998 and January 3, 1998
  are set forth below (in thousands):
<TABLE>
<CAPTION>
                                                                             July 4,                 January 3, 
                                                                               1998                    1998
                                                                      ------------------       ---------------------
<S>                                                                      <C>                      <C>
Accounts receivable, net                                                          $1,268                     $ 5,115
Inventory                                                                              0                       7,486
Property, plant & equipment                                                        6,698                       8,864
Accounts payable and accrued liabilities                                            (773)                     (9,440)
                                                                      ------------------       ---------------------
                                                                                  $7,193                     $12,025
                                                                      ==================       =====================
</TABLE>

  Recent Accounting Pronouncements

     The Company adopted Statement of Financial Accounting Standards No. 130,
  "Reporting Comprehensive Income" ("SFAS 130"), Statement of Financial
  Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
  Related Information" ("SFAS 131"), Statement of Financial Accounting Standards
  No. 132, "Employers' Disclosures About Pensions and Other Postretirement
  Benefits -an amendment of FASB Statements No. 87, 88, and 106" ("SFAS 132"),
  and Statement of Financial Accounting Standards No. 133, "Accounting for
  Derivative Instruments and Hedging Activities" ("SFAS 133"), effective January
  4, 1998. SFAS 130 establishes standards to measure all changes in equity that
  result from transactions and other economic events other than transactions
  with owners. Comprehensive income is the total of net income and all other
  nonowner changes in equity. SFAS 131 introduces a new segment reporting model
  called the "management approach." The management approach is based on the
  manner in which management organizes segments within a company for making
  operating decisions and assessing performance. The management approach
  replaces the notion of industry and geographic segments. SFAS 132 revises
  disclosures about pension and other postretirement benefit plans, yet it does
  not change the measurement or recognition of those plans. SFAS 133 establishes
  accounting standards for derivative instruments and hedging activities. The
  Company does not currently engage in hedging activities or utilize derivative
  instruments. The disclosures relative to SFAS's 130, 131, 132 and 133 do not
  significantly affect the Company's current disclosures.

                                       8
<PAGE>
 
3. INVENTORIES

     The major classes of inventories, exclusive of inventory related to the
  discontinued apparel and napery businesses, were as follows (in thousands):
<TABLE>
<CAPTION>
                                                   July 4,      January 3,    
                                                    1998           1998
                                                  --------      ----------
<S>                                               <C>            <C>
 Raw materials and supplies                       $  8,545       $   7,713
 Work-in-process                                    25,981          24,308
 Finished goods                                     23,541          22,238
                                                  --------       ---------
  Total at FIFO cost                                58,067          54,259
 Excess of LIFO cost over FIFO cost                  1,447              46
                                                  --------       ---------
  Total at LIFO cost                              $ 59,514       $  54,305
                                                  ========       =========
</TABLE> 
 
4. PROPERTY, PLANT AND EQUIPMENT

     Property, plant, and equipment, exclusive of items related to the
  discontinued apparel and napery businesses were as follows (in thousands):
<TABLE> 
<CAPTION> 

                                                     July 4,        January 3,                             
                                                       1998           1998
                                                    ----------     ------------
<S>                                                  <C>            <C> 
 Machinery and equipment                             $ 35,334       $ 27,853
 Land, buildings, and improvements                     22,348         22,348
 Construction in progress                              31,125         18,609    
                                                     --------       --------
                                                       88,807         68,810
 Less accumulated depreciation                          8,767          5,981
                                                     --------       --------
                                                     $ 80,040       $ 62,829
                                                     ========       ========


</TABLE> 
                                                     
 
5. LONG-TERM DEBT
 
     Long-term debt consisted of the following (in thousands):

<TABLE> 
<CAPTION> 
                                                            July 4,        January 3,
                                                             1998             1998
                                                          ----------      ------------
<S>                                                        <C>             <C>  
 Line of credit under New Credit Agreement                 $ 57,253         $  58,615
 
 Term loan under New Credit Agreement                        19,643            12,308
 
 Capital lease obligations                                   17,247             7,162
 
 Other                                                          362               430
                                                           --------         ---------
                                                           $ 94,505         $  78,515
 
 Less current maturities                                      6,678             3,617
                                                           --------         ---------
                                                           $ 87,827         $  74,898
                                                           ========         =========
</TABLE>

     Effective March 6, 1998, the Company entered into an amendment to the Loan
  and Security Agreement dated as of September 12, 1996, by and among Congress
  Financial Corporation, as agent, and the lenders party thereto and the Company
  (the "New Credit Agreement"). Significant provisions of the new amendment are
  as follows:

                                       9
<PAGE>
 
     (i) increase of the term loan to $21.3 million, (ii) extension of the
     renewal date from September 16, 1999 to November 1, 2000, (iii) reduction
     of the tangible net worth covenant from a minimum of $70 million to a
     minimum of $50 million, (iv) reduction of the prepayment fees for replacing
     the credit agreement after September 16, 1998, from $575,000 to $300,000,
     and (v) reduction of the revolving loan limit to $60 million.

6. INCOME TAXES

     The Company accounts for income taxes in accordance with SFAS No. 109,
  "Accounting for Income Taxes," which requires the use of the liability method
  in accounting for income taxes. Under SFAS No. 109, deferred tax assets and
  liabilities are determined based on the difference between the financial
  reporting and tax bases of assets and liabilities using enacted tax rates in
  effect for the year in which the differences are expected to reverse. Deferred
  income taxes also reflect the value of net operating losses and an offsetting
  valuation allowance. There was no net income tax expense or benefit recorded
  in the three months ended and the six months ended July 4, 1998 or the three
  months ended and the six months ended June 28, 1997.

7. EARNINGS PER SHARE

     The Company adopted Statement of Financial Accounting Standards No. 128,
  "Earnings per Share" ("SFAS 128") during 1997.  SFAS 128 replaces primary
  earnings per share with basic earnings per share.  Basic earnings per share
  excludes the effect of any potentially dilutive common equivalent shares.
  Basic earnings per share is calculated based on weighted average number of
  shares of common stock outstanding, which was 10,061,576 for all periods
  presented herein. Fully diluted earnings per share, now called diluted
  earnings per share, is still required. Diluted earnings per share is
  calculated treating all potentially dilutive securities such as stock options
  as outstanding during the entire period, or from grant date if granted during
  the period. For the three months ended and the six months ended July 4, 1998,
  697,000 options were included in the calculation. For the three months ended
  and the six months ended June 28, 1997, all options (200,000) were anti-
  dilutive and thus were not included in the calculation.

                                       10
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF CONTINUING OPERATIONS
 
     On June 29, 1998, the Company and Dan River announced a definitive merger
  agreement under which Dan River will acquire the Company for a combination of
  cash and, as subsequently amended, Dan River stock in a tax-free transaction
  valued in excess of $250 million, including assumed debt (the `Merger"). Each
  of the Company's shareholders will be entitled to elect whether to receive
  $16.50 in cash, .84615 shares of Dan River Class A common stock, or a
  combination thereof, for each of the Company's shares held, subject to
  proration. The closing of the Merger is expected to occur in the third quarter
  of 1998, subject to the fulfillment of certain customary closing conditions.

  (a)  Comparison of the Three Months Ended July 4, 1998 with Three Months Ended
       June 28, 1997 (in thousands).

     Net sales for the three months ended July 4, 1998, were $59,515 compared to
  $63,299 for the three months ended June 28, 1997, a decrease of $3,784 or
  6.0%.

     The Company's gross profit for the three months ended July 4, 1998 was
  $8,886 or 14.9% of net sales compared to $6,988 or 11.0% of net sales for the
  three months ended June 28, 1997.   This increase is due primarily to the
  Company's focused customer programs and associated strengthening of
  partnerships and product offerings.  In addition, the Company is beginning to
  realize the cost savings from its capital improvement program.

     Selling and administrative expenses for the three months ended July 4, 1998
  were $5,284 or 8.9% of net sales compared to $5,391 or 8.5% of net sales for
  the three months ended June 28, 1997.

     As a result of the above factors, operating profit for the three months
  ended July 4, 1998 improved to $3,602 from $1,597 in the three months ended
  June 28, 1997, an increase of $2,005.

     Interest expense for the three months ended July 4, 1998 was $1,395
  compared to $1,060 for the three months ended June 28, 1997, an increase of
  $335 due to the increase in debt outstanding to $94.5 million as of July 4,
  1998 from $51.4 million as of June 28, 1997 partly offset by interest capital-
  ized of $618. The increase in debt resulted primarily from capital
  expenditures made as part of the capital improvement program.

     Net losses from discontinued Napery and Apparel businesses totaled $324 and
  $1,305, respectively in the three months ended June 28, 1997. 

     As a result of the above factors, net income for the three months ended
  July 4, 1998 was $1,885 compared to a net loss of $1,410 in the three months
  ended June 28, 1997, an improvement of $3,295.

  (b)  Comparison of the Six Months Ended July 4, 1998 with Six Months Ended
       June 28, 1997 (in thousands).

     Net sales for the six months ended July 4, 1998, were $116,340 compared to
  $122,231 for the six months ended June 28, 1997, a decrease of $5,891 or 4.8%.

     The Company's gross profit for the six months ended July 4, 1998 was
  $16,753 or 14.4% of net sales compared to $11,662 or 9.5% of net sales for the
  six months ended June 28, 1997.  This increase is due primarily to the
  Company's focused customer programs and associated strengthening of
  partnerships and product offerings.  In addition, the Company is beginning to
  realize the cost savings from its capital improvement program.

     Selling and administrative expenses for the six months ended July 4, 1998
  were $10,966 or 9.4% of net sales compared to $10,844 or 8.9% of net sales for
  the six months ended June 28, 1997.

                                       11
<PAGE>
 
     As a result of the above factors, operating profit for the six months ended
  July 4, 1998 improved to $5,787 compared to $818 in the six months ended June
  28, 1997, an increase of $4,969.

     Interest expense for the six months ended July 4, 1998 was $3,135 compared
  to $2,034 for the six months ended June 28, 1997, an increase of $1,101
  primarily due to the increase in debt outstanding to $94.5 million as of July
  4, 1998 from $51.4 million as of June 28, 1997 partly offset by interest
  capitalized of $618. The increase in debt resulted primarily from capital
  expenditures made as part of the capital improvement program.

     Net losses from discontinued Napery and Apparel businesses totaled $94 and
  $1,604, respectively in the six months ended June 28, 1997.

     As a result of the above factors, net income for the six months ended July
  4, 1998 was $1,996 compared to a net loss of $3,601 in the six months ended
  June 28, 1997, an improvement of $5,597.


  (C)  Liquidity and Capital Resources (in thousands, except where noted)

     General.  Net cash provided by operating activities was $4,776 for the six
  months ended July 4, 1998 compared to $38,451 for the six months ended June
  28, 1997.  In the six months ended June 28, 1997, the Company sold its terry
  operations for net cash proceeds of $37,012.  Excluding the sale of the terry
  operations, net cash flow from operations increased by approximately $3,337 as
  a result of the Company recording net income of $1,996 in the six months ended
  July 4, 1998, as compared to a net loss of $3,601 in the six months ended June
  28, 1997.

     Net cash used in investing activities increased to $10,939 in the six
  months ended July 4, 1998 from $3,553 in the six months ended June 28, 1997.
  This increase is primarily due to an increase in capital expenditures,
  excluding capital leases to $10,245 in the six months ended July 4, 1998 from
  $5,814 in the six months ended June 28, 1997 partly offset by proceeds from
  the sale of fixed assets in the six months ended June 28, 1997 of $2,565.

     Net cash provided by financing activities increased to $6,144 in the six
  months ended July 4, 1998 from net cash used in financing activities of
  $37,966 in the six months ended June 28, 1997. The net cash provided by
  financing activities in the six months ended July 4, 1998 resulted from
  increased borrowings under the New Credit Agreement, as amended. In the six
  months ended June 28, 1997, the Company repaid an outstanding industrial
  development revenue bond in the amount of $3,000 and also repaid outstanding
  indebtedness of $37,012 with the proceeds from the sale of the terry
  operations.   Effective March 6, 1998, the Company amended the New Credit
  Agreement and as a result, increased the borrowings under the agreement.
  Significant provisions of the amendment are as follows:

     (i) increase of the term loan to $21.3 million (ii) extension of the
     renewal date from September 16, 1999 to November 1, 2000, (iii) reduction
     of the tangible net worth covenant from a minimum of $70 million to a
     minimum of $50 million, (iv) reduction of the prepayment fees for replacing
     the credit agreement after September 16, 1998, from $0.575 million to $0.3
     million, and (v) reduction of the revolving loan limit to $60 million.

     Liquidity.  The Company experiences significant fluctuations in its working
  capital requirements primarily associated with its retail customers' late
  summer and fall inventory purchasing.  The Company's primary ongoing cash
  requirements will be to fund debt service, make capital expenditures and
  finance working capital.  The Company believes that it will generate
  sufficient cash flow from operations, supplemented by its available borrowings
  under the New Credit Agreement and anticipated leases, to meet working capital
  and capital expenditure requirements as well as debt service requirements
  under the New Credit Agreement.

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<PAGE>
 
     As a result of the New Credit Agreement, as amended, the Company is
  entitled to borrow up to a maximum of approximately $79.8 million as
  determined by borrowing base availability and applicable revolving loan
  reserves.

     As of July 4, 1998, the Company had $76.9 million in borrowings outstanding
  under the New Credit Agreement, of which approximately $4.1 million is due
  over the next twelve months.

     As of July 4, 1998, the Company had the ability to borrow up to an
  additional $2.9 million for general operating requirements under the revolving
  loan provisions of the New Credit Agreement based on meeting certain
  requirements of the agreement.

     Capital Expenditures.  The Company has made and expects to make,
  significant capital expenditures in the future to modernize its facilities and
  reduce operating costs.  Capital expenditures, excluding capital leases were
  $10,245 in the six months ended July 4, 1998.  The Company's ability to draw
  advances under the New Credit Agreement for the purpose of funding capital
  expenditures, remains subject to compliance with the terms and conditions of
  the New Credit Agreement (including its borrowing base requirements).

  Forward Looking Statements

     A number of the matters and subject areas discussed in "Management's
  Discussion and Analysis of Financial Condition and Results of Continuing
  Operations" that are not historical or current facts deal with potential
  future circumstances and developments. The discussion of such matters and
  subject areas is qualified by the inherent risks and uncertainties surrounding
  future expectations generally, and such discussion also may materially differ
  from the Company's actual future experience involving any one or more of such
  matters and subject areas. The Company has attempted to identify, in context,
  certain of the factors that it currently believes may cause actual future
  experience and results to differ from the Company's current expectations
  regarding the relevant matter or subject area. The operation and results of
  the Company's textile business may also be subject to the effect of other
  risks and uncertainties in addition to the relevant qualifying factors
  identified elsewhere in "Management's Discussion and Analysis of Financial
  Condition and Results of Continuing Operations," including, but not limited
  to, general economic conditions in the markets in which the Company operates,
  the ability to implement the Company's capital improvement program, the
  ability to achieve further market penetration and additional customers, the
  cost of raw materials, particularly cotton, and other risks and uncertainties
  associated with the textile industry.

                                       13
<PAGE>
 
  PART II.  OTHER INFORMATION


  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

     Exhibit 11.  Statement re: computation of diluted per share earnings

     Exhibit 27.   Financial Data Schedule


     (b)  Reports on Form 8-K

     Form 8-K dated July 6, 1998 regarding announcement of the plan of merger
  with Dan River.

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<PAGE>
 
                                   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.



                                 THE BIBB COMPANY
                                        


Date:   August 17, 1998          /s/ MICHAEL L. FULBRIGHT
                                 ------------------------
                                 By:  Michael L. Fulbright
                                 Chairman of the Board, President and 
                                 Chief Executive Officer
 

                                 /s/ CHARLES R. TUTTEROW
                                 -----------------------
                                 By:  Charles R. Tutterow
                                 Vice President, Chief Financial Officer,
                                 Secretary, and
                                 Principal Accounting Officer

                                       15