<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                                WASHINGTON, D.C.
                                      20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended December 30, 2000                   Commission File No. 0-1915


                              THOMASTON MILLS, INC.
--------------------------------------------------------------------------------

            GEORGIA                                              58-0460470
--------------------------------------------------------------------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)



115 East Main Street,    P.O. Box 311,    Thomaston, Georgia          30286
--------------------------------------------------------------------------------
       (Address of principal executive offices)                     (Zip Code)


Registrant's telephone number, including area code (706) 647-7131.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.

Class A        Common Stock $1 Par Value  -  5,620,518 shares including
               710,838 treasury shares

Class B        Common Stock $1 Par Value  -  1,873,506 shares including
               243,140 treasury shares

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 periods 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 [ ]

<PAGE>   2

                                      INDEX
                      THOMASTON MILLS, INC. AND SUBSIDIARY


PART 1.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

         Condensed consolidated balance sheets - December 30, 2000 and July 1,
         2000

         Condensed consolidated statements of operations -- thirteen
         weeks ended December 30, 2000 and thirteen weeks ended January
         1, 2000 and twenty-six weeks ended December 30, 2000 and
         twenty-six weeks ended January 1, 2000

         Consolidated statements of cash flows - twenty-six weeks ended
         December 30, 2000 and twenty-six weeks ended January 1, 2000

         Notes to condensed consolidated financial statements - December 30,
         2000

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

Item 2.  Change in Securities and Use of Proceeds

Item 3.  Defaults upon Senior Securities

Item 4.  Submission of Matters to a Vote of Security Holders

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES


<PAGE>   3

PART 1 - FINANCIAL INFORMATION

                      THOMASTON MILLS, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                           DECEMBER 30, 2000  July 1, 2000
                                                           -----------------  ------------
                                                              (UNAUDITED)       (Note A)
<S>                                                             <C>             <C>
ASSETS
CURRENT ASSETS
   Cash & cash equivalents                                      $    799        $  1,415
   Accounts receivable, less allowance of
      $928 at December 30, 2000 and $621 at July 1, 2000          23,943          29,218
   Inventories--Note C                                            25,175          37,236
   Other current assets                                            1,756             604
                                                                --------        --------
          TOTAL CURRENT ASSETS                                    51,673          68,473

PROPERTY, PLANT AND EQUIPMENT                                    171,852         170,600
   Less allowance for depreciation                               128,129         124,366
                                                                --------        --------
                                                                  43,723          46,234

Assets held for sale                                               3,835           5,628
Deferred income taxes                                              2,645           2,709
Other assets                                                       6,646           8,367
                                                                --------        --------
                                                                $108,522        $131,411
                                                                ========        ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                             $ 16,638        $ 19,857
   Accrued liabilities                                             9,867           9,533
   Current portion of long-term debt                               4,147           4,147
   Revolving credit                                               27,066          34,525
                                                                --------        --------
          TOTAL CURRENT LIABILITIES                               57,718          68,062

OBLIGATIONS UNDER CAPITAL LEASE -
   less current portion                                              355             564

LONG-TERM DEBT, less current portion                              26,780          29,876

OTHER LIABILITIES                                                  1,784           1,489

SHAREHOLDERS' EQUITY
   Class A Common Stock--5,620,518 shares
     outstanding including 710,838 treasury shares                 5,621           5,621
   Class B Common Stock--1,873,506 shares
     outstanding including 243,140 treasury shares                 1,873           1,873
   Additional paid-in capital                                     10,766          10,766
   Retained earnings                                               9,045          18,580
                                                                --------        --------
                                                                  27,305          36,840

   Less treasury stock - at cost                                   5,420           5,420
                                                                --------        --------
                                                                  21,885          31,420
                                                                --------        --------
                                                                $108,522        $131,411
                                                                ========        ========
</TABLE>


NOTE: The Balance Sheet at July 1, 2000 has been derived from the Audited
Financial Statements at that date. See Notes to Condensed Consolidated Financial
Statements.



<PAGE>   4

                      THOMASTON MILLS, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
             (Dollars in Thousands except Share and Per Share Data)



<TABLE>
<CAPTION>
                                                             13 WEEKS          13 Weeks            26 WEEKS           26 Weeks
                                                               ENDED             Ended               ENDED              Ended
                                                        DECEMBER 30, 2000   January 1, 2000    DECEMBER 30, 2000   January 1, 2000
                                                        -----------------   ---------------    -----------------   ---------------
<S>                                                        <C>                <C>                <C>                <C>
Net sales                                                  $    37,152        $    37,195        $    73,785        $    77,919
Cost of sales                                                   37,469             33,348             72,470             69,573
                                                           -----------        -----------        -----------        -----------
  Gross profit                                                    (317)             3,847              1,315              8,346

Selling, general and administrative expenses                     3,379              3,741              6,765              7,798
Other expense (income), net                                        (49)              (289)               (84)              (405)
                                                           -----------        -----------        -----------        -----------
  Operating profit (loss)                                       (3,647)               395             (5,366)               953

Interest expense                                                 2,002              2,241              4,156              4,309
Amortization of credit agreement fees                              164                100                315                174
                                                           -----------        -----------        -----------        -----------
  Loss from continuing operations before income
    tax provision                                               (5,813)            (1,946)            (9,837)            (3,530)

Provision for income taxes                                          64                  0                 64                  0
                                                           -----------        -----------        -----------        -----------
  Loss from continuing operations                               (5,877)            (1,946)            (9,901)            (3,530)

  Income (loss) from discontinued operations                       (55)              (238)               366               (244)
                                                           -----------        -----------        -----------        -----------
  Net loss                                                 $    (5,932)       $    (2,184)       $    (9,535)       $    (3,774)
                                                           ===========        ===========        ===========        ===========

Weighted Average Number of Shares - Basic and Diluted        6,540,046          6,540,046          6,540,046          6,540,046
Basic and diluted loss per share:
  Continuing operations                                    $     (0.90)       $     (0.30)       $     (1.52)       $     (0.54)
  Discontinued operations                                        (0.01)             (0.04)              0.06              (0.04)
                                                           -----------        -----------        -----------        -----------
Net loss per share                                         $     (0.91)       $     (0.34)       $     (1.46)       $     (0.58)
                                                           ===========        ===========        ===========        ===========
</TABLE>


See accompanying notes

<PAGE>   5

                      THOMASTON MILLS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                             26 WEEKS           26 Weeks
                                                               ENDED              Ended
                                                         DECEMBER 30, 2000   January 1, 2000
                                                         -----------------   ---------------
<S>                                                          <C>                <C>
OPERATING ACTIVITIES
Net loss                                                     $ (9,535)          $ (3,774)
Adjustments to reconcile net loss
 to net cash provided by operating
 activities:
      Depreciation and amortization                             4,461              5,047
      Gains on sales of property, plant
      and equipment                                                (9)              (266)
Changes in operating assets and liabilities:
      Accounts receivable                                       5,275              9,887
      Inventories                                              12,061              3,047
      Other assets                                                (65)              (429)
      Assets held for sale                                      1,793              1,029
      Accounts payable and accrued expenses                    (2,590)            (3,604)
      Reserve for discontinued operations                           0             (5,533)
                                                             --------           --------
      NET CASH PROVIDED BY
      OPERATING ACTIVITIES                                     11,391              5,404

INVESTING ACTIVITIES
Purchases of property, plant and equipment                     (1,252)              (926)
Proceeds from sale of property, plant and equipment                 9                237
                                                             --------           --------
      NET CASH USED IN INVESTING
      ACTIVITIES                                               (1,243)              (689)

FINANCING ACTIVITIES
Proceeds from revolving lines of credit
   and long-term debt                                             447              6,936
Principal payments on revolving lines of
   credit, long-term debt and capital lease
   obligations                                                (11,211)           (11,712)
                                                             --------           --------
      NET CASH USED IN
      FINANCING ACTIVITIES                                    (10,764)            (4,776)
                                                             --------           --------

      DECREASE IN CASH
      AND CASH EQUIVALENTS                                       (616)               (61)

Cash and cash equivalents at beginning
   of period                                                    1,415                353
                                                             --------           --------
Cash and cash equivalents at end
   of period                                                 $    799           $    292
                                                             ========           ========
</TABLE>


See accompanying notes

<PAGE>   6

                      THOMASTON MILLS, INC. AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 2000

NOTE A -- MANAGEMENT PLANS AND BASIS OF PRESENTATION

The Company reported a net loss of $9,535,000 and cash on hand decreased
$616,000 for the six months ended December 30, 2000. This compares to a net loss
of $3,774,000 in the six months ended January 1, 2000. Additionally, on February
13, 2001, the Company obtained waivers from its lenders for certain financial
and other covenants as to which the Company was not in compliance as of
November 25, 2000 and December 30, 2000. The Company is subject to changing
business and economic conditions (many of which are beyond the Company's
control), including a general deterioration in the domestic textile industry,
which may affect its ability to generate cash and operating profits and to
comply with its debt covenants in the near term and there can be no assurance of
future debt covenant compliance. If the Company is unable to comply with its
debt covenants, there can be no assurance that the Company's creditors will
provide any additional waivers or amendments with respect to any such
non-compliance. A breach of any of the covenants contained in the Company's Loan
Agreement, Credit Agreement or Promissory Note could result in a default or
event of default under the terms of these credit facilities. Upon the occurrence
of an event of default, the Company's lenders would not be obligated to make
additional advances under the credit facility that is in default; would be
entitled to declare all amounts outstanding under the credit facilities in
default, including accrued interest or other obligations, to be immediately due
and payable; would have the rights to block payment on substantially all of the
Company's other long-term debt; would be entitled to proceed against the
collateral granted to them to secure the applicable debt. In these
circumstances, cross defaults could occur making substantially all of the
Company's other long-term debt due, in which event the Company cannot be certain
that its assets would be sufficient to repay in full all of its long-term debt.

As a result of the operating results and debt covenants described above, the
Company's ability to respond to changing business and economic conditions and to
secure additional financing, if needed, is significantly restricted.

In the fourth quarter of fiscal 1999, the Company began a comprehensive
restructuring of the Company's operations and businesses with a view towards
enhancing and focusing on the Company's operations that are believed to present
the best future profitability and growth potential. As a result of completing
the assessment of various strategic alternatives, the Company concluded that
discontinuing the Company's denim and industrial yarn operations was in the best
interest of the Company. The Company has concluded that it will focus on the
manufacturing and marketing of home furnishings as well as dyeing and finishing
fabrics for casual and career apparel. The Company believes that these
operations offer the most viable opportunity for improving future profitability.
The Company has completed a personnel and operational realignment of these
businesses to improve their future profit margins. Also, at the request of its
lenders, the Company engaged consultants in January of 2001 to provide
consulting services relating to the Company's turnaround and cost reduction
initiatives.

The Company believes that the initiatives discussed above will result in
improved margins and future profitability; however, such plans require
management to make estimates and assumptions regarding future operations. Actual
results could differ from those estimates.

Management is not certain that the Company's cash flow from operations, together
with amounts available under its current borrowings, will be adequate to meet
its anticipated cash requirements for the foreseeable future. Management is
exploring additional sources of capital and seeking other accommodations from
its lenders and suppliers to aid its short-term cash requirements. However,
there can be no assurance that other sources of capital will be available or
that the Company's lenders and suppliers will accommodate the Company, or, if
such alternate sources of capital are available or such accommodations are
offered, that they will be on terms acceptable to the Company. If the Company is
unable to obtain additional or alternative financing or financial accommodations
from its lenders and suppliers, there can be no assurance that the Company will
be able to continue to meet its cash requirements, which may result in
materially adverse consequences on the Company's business, financial conditions
or operations.

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
applicable to a going concern that contemplates continuity of operations and
realization of assets and liquidation of liabilities in the normal course of
business. As a result of the Company's debt structure, operating


<PAGE>   7

results and current economic conditions, realization of assets and liquidation
of liabilities are subject to significant uncertainty.

Also, the Company's accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and 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 for a
fair presentation have been included. Operating results for the thirteen and
twenty-six weeks ended December 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending June 30, 2001. Certain fiscal
2000 balances have been reclassified to conform with the fiscal 2001
classifications. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report for the
year ended July 1, 2000.



NOTE B -- ACCOUNTING POLICIES ADOPTED IN CURRENT FISCAL YEAR

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial
Statements. SAB 101 draws upon the existing accounting rules and explains those
rules, by analogy, to other transactions that the existing rules do not
specifically address. SAB 101 is effective for all of the Company's fiscal
quarters of fiscal year 2001.

Financial Accounting Standards Board Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133), which the Company
adopted effective July 1, 2000, requires companies to recognize all of its
derivative instruments as either assets or liabilities in the statement of
financial position at fair value. The accounting for changes in the fair value
(i.e., gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and further, on
the type of hedging relationship. For those derivative instruments that are
designated and qualify as hedging instruments, a company must designate the
hedging instrument, based upon the exposure being hedged, as either a fair value
hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
For derivative instruments not designated as hedging instruments, the gain or
loss is recognized in current earnings during the period of change.

The adoptions of SAB 101, effective October 1, 2000, and SFAS 133, effective
July 1, 2000, did not have a material effect on the Company's financial position
or operating results.

NOTE C -- INVENTORIES

The components of inventory consist of the following:



                                                   (Dollars in Thousands)
                                           DECEMBER 30, 2000       July 1, 2000
                                           -----------------       ------------
                      Raw materials             $ 3,475               $ 3,936
                      Work in process            13,302                18,946
                      Finished products          15,180                21,301
                      LIFO reserve               (6,782)               (6,947)
                                                -------               -------
                                                $25,175               $37,236
                                                =======               =======

<PAGE>   8

NOTE D -- NET LOSS PER COMMON SHARE


The following table sets forth the computation of the numerator and denominator
used in the calculation of basic and diluted earnings (loss) per share from
continuing operations:

<TABLE>
<CAPTION>
                                                           (Dollars in Thousands except Share and Per Share Data)

                                                      13 WEEKS              13 Weeks              26 WEEKS             26 Weeks
                                                        ENDED                 Ended                ENDED                 Ended
                                                  DECEMBER 30, 2000      January 1, 2000     DECEMBER 30, 2000      January 1, 2000
                                                  -----------------      ---------------     -----------------      ---------------
<S>                                                <C>                    <C>                  <C>                   <C>

Numerator for basic and diluted earnings per share $   (5,877)            $    (1,946)         $   (9,901)           $    (3,530)
                                                   -----------            ------------         -----------           ------------

Denominator:
    Denominator for basic earnings per share -
    Weighted average shares                         6,540,046               6,540,046           6,540,046              6,540,046



Basic and diluted loss per share                   $    (0.90)            $     (0.30)         $    (1.52)           $     (0.54)
                                                   -----------            ------------         -----------           ------------


Potentially dilutive common shares related to
    options and warrants outstanding:
    Not considered in calculation due to net loss     730,618                 736,956             732,082                644,383
                                                   ----------             -----------          ----------            -----------

    Not considered in calculation due to exercise
    price of options exceeding average price of
    Company's common stock                            747,613                 710,750             754,730                760,632
                                                   ----------             -----------          ----------            -----------
</TABLE>

<PAGE>   9

NOTE E  -- SEGMENT INFORMATION

The Company has two reportable segments in its continuing operations: Consumer
Products and Apparel Fabrics. Each reportable segment is organized around
product similarities. The Consumer Products segment manufactures and sells a
complete line of muslin, percale and premium threadcount products for the
bedroom, including fashion-coordinated bedding sets and comforters marketed
under the Thomaston label, and offers home furnishing fabrics for sale to other
manufacturers of home furnishings. The Apparel Fabrics line is directed toward
dyeing and finishing heavier fabrics such as twill and other value-added
fabrics.

The profit performance measure for the Company's segments is defined as Internal
EBIT (earnings before interest and taxes). The aggregate of Internal EBIT for
the reportable segments differs from the Company's consolidated earnings before
interest and taxes by costs that are deemed to be non-operating in nature.

Allocations of corporate general and administrative expenses are used in the
determination of segment profit performance.


<TABLE>
<CAPTION>
                                                             (Dollars in Thousands)


                                                  NET SALES                          PROFIT PERFORMANCE
                                       13 WEEKS             13 Weeks             13 WEEKS              13 Weeks
                                         ENDED                Ended                ENDED                Ended
                                   DECEMBER 30, 2000     January 1, 2000     DECEMBER 30, 2000     January 1, 2000
                                   -----------------     ---------------     -----------------     ---------------
<S>                                 <C>                    <C>                 <C>                    <C>

Reportable segments:
    Consumer products               $   25,323             $    21,927         $   (3,000)            $      (684)
    Apparel fabrics                     11,829                  15,268               (647)                  1,079
                                    ----------             -----------         -----------            -----------
Segment total                       $   37,152             $    37,195             (3,647)                    395
                                    ==========             ===========
Interest expense                                                                    2,002                   2,241
Other non-segment                                                                     164                     100
                                                                               ----------             -----------

Consolidated (loss) before taxes
from continuing operations                                                     $   (5,813)            $    (1,946)
                                                                               ===========            ============



                                                  NET SALES                          PROFIT PERFORMANCE
                                       26 WEEKS             26 Weeks             26 WEEKS              26 Weeks
                                         ENDED                Ended                ENDED                Ended
                                   DECEMBER 30, 2000     January 1, 2000     DECEMBER 30, 2000     January 1, 2000
                                   -----------------     ---------------     -----------------     ---------------

Reportable segments:
    Consumer products               $   49,745             $    49,308         $   (4,400)            $      (440)
    Apparel fabrics                     24,040                  28,611               (966)                  1,393
                                    ----------             -----------         -----------            -----------
Segment total                       $   73,785             $    77,919             (5,366)                    953
                                    ==========             ===========
Interest expense                                                                    4,156                   4,309
Other non-segment                                                                     315                     174
                                                                               ----------             -----------

Consolidated (loss) before taxes
from continuing operations                                                     $   (9,837)            $    (3,530)
                                                                               ===========            ============
</TABLE>

<PAGE>   10

THOMASTON MILLS, INC. AND SUBSIDIARY

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

In the fourth quarter of fiscal 1999, the Company began a comprehensive
restructuring of its operations and businesses with a view towards enhancing and
focusing on the Company's operations which are believed to present the best
future profitability and growth potential. As a result of completing the
assessment of various strategic alternatives, the Company concluded that
discontinuing the Company's denim and industrial yarn operations, which were
unprofitable in recent years, was in the best interest of the Company. In
conjunction with the exit of these businesses, the Company's balance sheet at
December 30, 2000 includes assets held for sale in the amount of $2,684,000. Any
proceeds from the sale of these assets will be applied against outstanding term
loan obligations.

The Company has concluded that it will focus on the manufacturing and marketing
of home furnishings as well as dyeing and finishing fabrics for casual and
career apparel. The Company believes that these operations offer the most viable
opportunity for improving future profitability. The Company completed a
personnel and operational realignment of these businesses which it believes will
improve their future profit margins.

RESULTS OF OPERATIONS

Sales from continuing operations for the second fiscal quarter ended December
30, 2000 were $37,152,000 compared to sales of $37,195,000 for the second fiscal
quarter last year. For the twenty-six weeks ended December 30, 2000, sales were
down 5.3% to $73,785,000 when compared to sales of $77,919,000 for the
twenty-six weeks ended January 1, 2000. Sales in the Consumer Products area of
the Company were up slightly to $49,745,000 compared to sales of $49,308,000 for
the twenty-six weeks ended January 1, 2000. In the Apparel Fabrics area, a shift
in customer demand from heavier, bottom-weight, cotton fabrics to
lighter-weight, blended fabrics resulted in a sales decrease from $28,611,000
for the twenty-six weeks ended January 1, 2000 to $24,040,000 for the twenty-six
weeks ended December 30, 2000.

Cost of sales for the quarter just ended increased to 100.9% of sales or
$37,469,000. For the second quarter fiscal year 2000, cost of sales were 89.7%
of sales or $33,348,000. For the twenty-six weeks ended December 30, 2000, cost
of sales increased to 98.2% of sales or $72,470,000 compared to cost of sales of
89.3% of sales or $69,573,000 for the twenty-six weeks ended January 1, 2000.
During the twenty-six weeks ended December 30, 2000, the Company selectively
idled certain manufacturing facilities in order to better match inventory levels
with orders. Inventories have been reduced $12,061,000, or 32.4%, during the
twenty-six weeks ended December 30, 2000. However, this slowdown of
manufacturing also resulted in decreased manufacturing capacity utilization and
plant productivity and increased volume related negative operating variances.
Raw material prices have also increased during the twenty-six weeks ended
December 30, 2000 as compared to raw material prices during the twenty-six weeks
ended January 1, 2000.

Gross profit for the twenty-six weeks ended December 30, 2000 was 1.8% of sales
compared to 10.7% of sales for the twenty-six weeks ended January 1, 2000.

Selling, general and administrative expenses were 9.1% of sales for the thirteen
weeks and 9.2% of sales for the twenty-six weeks ended December 30, 2000. For
the thirteen weeks and twenty-six weeks ended January 1, 2000, selling, general
and administrative expenses were 10.1% and 10.0% of sales, respectively. The
Company's realignment of its operations has contributed to reductions in certain
selling, general and administrative expenses.

Other income for the quarter and twenty-six weeks ended December 30, 2000 was
$49,000 and $84,000, respectively, compared to $289,000 and $405,000 for the
comparable periods last year. Other income relates to miscellaneous equipment
sales, royalties and interest earned on the Company's short-term investments of
cash.

Interest expense and amortization of credit agreement fees totaled $2,166,000
during second quarter fiscal year 2001 and $4,471,000 for the twenty-six weeks
ended December 30, 2000. For the quarter and twenty-six weeks ended January 1,
2000, interest expense and amortization of credit agreement fees totaled
$2,341,000 and $4,483,000, respectively. This decrease was the result of lower
borrowings under the Company's various credit agreements. Excluding capitalized
leases, total debt at December 30, 2000 was $57,993,000, down $10,555,000 from
total debt at July 1, 2000 of $68,548,000.


<PAGE>   11

Although the Company recorded a pre-tax loss from continuing operations for the
second quarter of fiscal year 2001, an income tax expense of $64,000 was also
recorded during this quarter. This expense is the result of a change in deferred
income taxes valuation allowance. During the twenty-six weeks ended January 1,
2000, the Company did not record an income tax benefit as a result of its
operating loss carry forward position.

For the second quarter fiscal year 2001, the Company sustained a loss from
continuing operations of $5,877,000 or $ .90 per basic and diluted share as
compared to a second quarter fiscal year 2000 loss from continuing operations of
$1,946,000 or $ .30 per basic and diluted share. For the twenty-six weeks ended
December 30, 2000, the Company sustained a loss from continuing operations of
$9,901,000 or $1.52 per basic and diluted share as compared to a loss from
continuing operations of $3,530,000 or $ .54 per basic and diluted share for the
twenty-six weeks ended January 1, 2000.

Discontinued operations income was $366,000 for the twenty-six weeks ended
December 30, 2000 and included curtailment income from the Company's employee
benefit plans. The Company recognized curtailment income of approximately
$518,000 during the first quarter of 2001 that resulted from finalizing the
calculations of the impact of the terminated employees from discontinued
operations upon the benefit plans obligations. For the twenty-six weeks ended
January 1, 2000, discontinued operations loss was $244,000, primarily as a
result of shutdown costs associated with closed facilities.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities provided cash of $11,391,000 during the twenty-six weeks
ended December 30, 2000. During the twenty-six weeks ended January 1, 2000,
operating activities provided cash of $5,404,000. Net cash used in investing
activities amounted to $1,243,000 during the first half of fiscal 2001 compared
to $689,000 used in the first half of fiscal 2000. Capital expenditures are
closely monitored as a result of the Company's realignment of its operations.
Financing activities used cash of $10,764,000 during the first half of fiscal
year 2001 as a result of net repayments of indebtedness. During the first half
of fiscal year 2000, financing activities used funds of $4,776,000.

The Company's Loan and Security Agreement (the Loan Agreement) provides for
borrowing as follows:

-     Revolving advances equal to the lesser of $70,000,000 or a specified
      percentage of certain accounts receivable and inventory as defined in the
      Loan Agreement. At December 30, 2000, $27,066,000 was outstanding and
      $1,200,000 was available for borrowing under the revolving advances
      provisions. The revolving advances bear interest at the Reference Rate
      plus 1% or the Euro-dollar Rate plus 3.25%. The revolving advances are
      payable on July 27, 2004, and provide for an early termination penalty as
      specified in the Loan Agreement. The revolving advances are reduced by
      collections made through a lock box arrangement required under the terms
      and conditions of the Loan Agreement.

-     Tranche A Term Loan of $20,000,000 is payable in monthly installments
      of $333,333 through July 27, 2004 and bears interest at the Reference
      Rate plus 1.75% or the Euro-dollar Rate plus 3.75%.

-     Tranche B Term Loan of $5,000,000 is due July 27, 2004 and bears
      interest at 18.5% of which 15% is payable currently and 3.5% per annum
      is payable on the maturity date.

Borrowings under this Loan Agreement were used to reduce the existing Credit and
Security Agreement to $15,000,000 as discussed below and to repay the senior
notes payable and industrial revenue bonds.

On July 27, 1999, the Company entered into an Amended and Restated Credit and
Security Agreement (the Credit Agreement) which reduced the existing borrowings
to $15,000,000. Interest is accrued at a rate of 15% increasing at the rate of
1% per month to a rate of 20% effective January 1, 2000. Interest is payable
monthly at the Euro-dollar Rate plus 3.5% or the Base Rate plus 1.5%. The
difference in the interest accrued and the interest paid is added to the balance
of the borrowings. Borrowings under the Credit Agreement are due July 27, 2004
unless repaid prior to that date.

On May 31, 2000, the Company entered into a Promissory Note with a bank in the
amount of $10,000,000. Interest is paid monthly at a rate equal to the Prime
Rate plus 1.5%. Borrowings under the Promissory Note are payable monthly
beginning July 1, 2000 through May 31, 2020, unless repaid prior to that date.
Borrowings under this Promissory Note were used to reduce the amount outstanding
under the Credit Agreement by $9,043,000 and to repay $525,000 of the balance
outstanding under the Loan Agreement.

Borrowings under the Loan Agreement and Credit Agreement and Promissory Note are
secured by all assets and properties of the


<PAGE>   12

Company. The Loan Agreement, the Credit Agreement and the Promissory Note
contain various restrictions relating to, among other things, maintaining a
certain level of tangible net worth, a minimum current ratio, a minimum debt to
equity ratio, attainment of certain amounts of earnings before interest, taxes,
depreciation and amortization and restrictions on capital expenditures.

On September 12, 2000, the Company obtained waivers from its lenders for certain
financial covenants as to which the Company was not in compliance as of May 31,
2000 and July 1, 2000, and on February 13, 2001, the Company obtained waivers
from its lenders for certain financial and other covenants as to which the
Company was not in compliance as of November 25, 2000 and December 30, 2000. On
September 12, 2000 and February 13, 2001, the Company also obtained amendments
from its lenders that established certain financial covenants covering the
monthly periods between November 2000 and  June 2001. The Company is subject to
changing business and economic conditions (many of which are beyond the
Company's control), including a general deterioration in the domestic textile
industry, which may affect its ability to comply with the covenants in the near
term and there can be no assurance of such compliance. If the Company is unable
to comply with these covenants, there can be no assurance that the Company's
creditors will provide any additional waivers or amendments with respect to any
such non-compliance.

The Company paid a portion of its real property tax obligations due on December
27, 2000. As a result, the Company is subject to interest on the unpaid amount
of these real property taxes. In addition to interest charges, any property
taxes remaining unpaid after March 27, 2001, will be subject to a late payment
penalty. On February 13, 2001, the Company obtained waivers from its lenders for
certain covenants related to the payment of taxes, as to which the Company was
not in compliance as of December 30, 2000. If the Company does not pay in full
its real property tax obligations, the Company's applicable real properties may
become encumbered by tax liens. Such an encumbrance of the Company's real
property may constitute a breach of the covenants contained in the Company's
Loan Agreement, Credit Agreement or Promissory Note. If the Company is unable to
comply with these covenants by paying in full, on or before March 31, 2001, its
real property tax obligations or otherwise avoid the encumbrance of its real
properties, there can be no assurance that the Company's creditors will provide
additional waivers or amendments with respect to any such non-compliance.

A breach of any of the covenants contained in the Company's Loan Agreement,
Credit Agreement or Promissory Note could result in a default or event of
default under the terms of these credit facilities. Upon the occurrence of an
event of default, the Company's lenders would not be obligated to make
additional advances under the credit facility that is in default; would be
entitled to declare all amounts outstanding under the credit facilities in
default, including accrued interest or other obligations, to be immediately due
and payable; would have the rights to block payment on substantially all of the
Company's other long-term debt; would be entitled to proceed against the
collateral granted to them to secure the applicable debt. In these
circumstances, cross defaults could occur making substantially all of the
Company's other long-term debt due, in which event the Company cannot be certain
that its assets would be sufficient to repay in full all of its long-term debt.

As a result of the covenants described above, the Company's ability to respond
to changing business and economic conditions and to secure additional financing,
if needed, is significantly restricted.

Management is not certain that the Company's cash flow from operations, together
with amounts available under its current borrowings, will be adequate to meet
its anticipated cash requirements for the foreseeable future. Management is
exploring additional sources of capital and seeking other accommodations from
its lenders and suppliers to aid its short-term cash requirements. However,
there can be no assurance that other sources of capital will be available or
that the Company's lenders and suppliers will accommodate the Company, or, if
such alternate sources of capital are available or such accommodations are
offered, that they will be on terms acceptable to the Company. If the Company is
unable to obtain additional or alternative financing or financial accommodations
from its lenders and suppliers, there can be no assurance that the Company will
be able to continue to meet its cash requirements, which may result in
materially adverse consequences on the Company's business, financial conditions
or operations.

At the request of its lenders, the Company engaged in January of 2001 the firm
of Arthur Andersen to provide consulting services relating to the Company's
turnaround and cost reduction initiatives. Arthur Andersen continues its
engagement with the Company, and the Company's management expects Arthur
Andersen to provide a final report of its findings and recommendations in the
near future.

WARRANTS TO LENDERS

As previously disclosed, the Company has issued warrants to its lenders in
connection with the Credit Agreement. The warrants permit the lenders to
purchase Class A and Class B common shares of the Company for nominal
consideration. The warrants are currently exercisable and may be exercised
through December 31, 2004. Although the lenders have not indicated to the
Company that they intend to exercise the warrants, if they elect to exercise all
of their warrants, the lenders would receive an interest equal to 10% of the
outstanding equity of the Company in each class, on a fully diluted basis.


<PAGE>   13

ASSETS HELD FOR SALE

The Company's management intends to utilize the proceeds from the sale of the
assets held for sale to reduce outstanding term loan obligations. Management
believes, based on current appraisals, that $3,835,000 could be realized from
the sale of these assets, including $2,684,000 from the assets related to
discontinued operations. However, actual results could differ significantly from
these estimates. During the twenty-six weeks ended December 30, 2000, the
Company sold $1,596,000 of assets held for sale and used the proceeds to reduce
outstanding term loan obligations.

INVENTORIES

Inventories at December 30, 2000 and July 1, 2000 were $25,175,000 and
$37,236,000, respectively. Improvements in supply-chain inventory control
systems, the selective idling of certain manufacturing facilities and the
selling off of inventories associated with discontinued operations have resulted
in decreased inventory levels at December 30, 2000 as compared to inventory
levels at July 1, 2000. Total inventory turns on an average annualized rate were
5.7 times for the first six months of fiscal 2001 as compared to 3.7 times for
the first six months of fiscal 2000.

RAW MATERIALS

The Company's primary raw material is cotton. As a commodity, cotton is traded
on established markets and periodically experiences price fluctuations. The
Company monitors the cotton market and buys its cotton from brokers. The Company
has not had and does not currently anticipate any difficulty in obtaining
cotton.

In order to assure a continuous supply of cotton, the Company enters into cotton
purchase contracts for several months in advance of delivery which either
provide for (1) fixed quantities to be purchased at a pre-determined price or
(2) fixed quantities to be purchased at a price to be determined (at a later
date). When the Company sells its product to its customers, the cost of cotton
under existing cotton purchase contracts is taken into account in calculating
the price for the Company's product. The Company generally attempts to match
product sales contracts with fixed price cotton purchase contracts and uses
market price cotton contracts to anticipate future needs and subsequent product
sales contracts. To the extent prices are sometimes fixed in advance of
shipment, the Company may benefit from its cotton purchase contracts to the
extent prices thereafter rise, or incur increased cost to the extent prices
thereafter fall.

INTERNATIONAL TRADE

In December 1993, 117 countries reached an agreement under the General Agreement
on Tariffs and Trade (GATT) that would cover new areas of trade, further cut
tariffs and strengthen multilateral free-trade rules by creating a World Trade
Organization (WTO) as its successor. This agreement was ratified by the United
States Congress and went into effect on July 1, 1995. As part of this new
agreement, the Multifiber Arrangement (MFA) under which textile and apparel
trade had been controlled, will be phased out along with its import quotas over
a 10-year period. Tariffs on textiles will be cut by an average of 11.6% over 10
years. Under the agreement, the least import-sensitive products are now
quota-free, and from now until 2005, products which will have more of an effect
on the U. S. market will be on the phase-out schedule.

The WTO agreement contains some provisions which may have a favorable impact on
the textile industry. An assembly rule of origin amendment makes it illegal for
a non-WTO member country to assemble garments from pieces cut in a member
country and then export the garments as originating in the country where they
were cut. Additionally, the agreement preserves the authority of the President
of the United States to control imports from non-WTO countries such as Taiwan or
China. China is currently negotiating its membership application with the WTO,
and if the application is accepted and China is admitted to the WTO, the Chinese
market share of apparel imports is expected to increase significantly over the
phase-in period.

Although the WTO agreement may reduce the cost of certain imported textiles, the
Company believes that upgraded technology resulting in increased productivity
and lower costs will enable it to compete in a global market.

The recently enacted amendment to the Caribbean Basin Economic Recovery Act
accords, for a specified transition period, the same preferential tariff and
quota treatment given certain textile and apparel articles imported from North
American Free Trade Agreement (NAFTA) countries to such articles that are
imported from certain Caribbean countries. In order to qualify for the
preferential tariff and quota treatment, however, apparel goods that are shipped
back to the United States must be sewn in eligible Caribbean countries using U.
S. yarn and fabrics. The Company believes that this new legislation will allow
it to compete favorably with Asian countries for market share in the apparel
area.


<PAGE>   14

RECENT DEVELOPMENTS

The Company's Class A Common Stock did not maintain the minimum bid price
criteria set forth by the Marketplace Rules of the Nasdaq SmallCap Market (the
"Rules"), and the Company's Class B Common Stock did not maintain the minimum
market value of public float criteria set forth by the Rules. As a result, the
Nasdaq Stock Market ("Nasdaq") delisted the Company's Class A and Class B Common
Stock on December 4, 2000. As a result of the delisting, the Company's
shares are no longer traded on the SmallCap Market, but instead are traded on
the over-the-counter bulletin board system.

FORWARD-LOOKING STATEMENTS

Certain of the above statements contained herein under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements express or
implied by such forward-looking statements. Such factors include, among other
things, business conditions, volatility of commodities markets, ability to
control operating costs, developing successful new products and maintaining
effective pricing and promotion of its products. Additionally, there can be no
assurance that the Company (i) will have access to financial capital in the
future or that it can obtain such capital on terms that are favorable to the
Company or otherwise reasonably acceptable to it, or (ii) will be able to
generate profits from, or continue the growth of, the lines of businesses and
operations that the Company has retained subsequent to its restructuring
efforts. A failure by the Company to obtain capital in the future on terms that
are favorable to it or a failure by the Company to generate profits from, or
grow, its remaining business lines may have a material adverse effect on the
Company's business, financial condition or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of certain market risks related to the Company, see Part I Item
7 "Quantitative and Qualitative Disclosures about Market Risks" in the Company's
Annual Report on Form 10-K for the fiscal year ended July 1, 2000. There have
been no significant developments with respect to derivatives or exposure to
market risk.


<PAGE>   15

PART II - OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS

               (a)      As of December 30, 2000, there were no material pending
                        legal proceedings, other than routine litigation
                        incidental to its business, to which the Company was a
                        party or to which any property of the Company was
                        subject. Such routine legal proceedings are not believed
                        to be material to the Company.



               (b)      Not applicable

ITEM 2.        CHANGE IN SECURITIES

               (a)      Not applicable.

               (b)      Not applicable.

               (c)      Not applicable.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

               (a)      Not applicable.

               (b)      Not applicable.

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

               (a)      Not applicable.

               (b)      Not applicable.

               (c)      Not applicable.

               (d)      Not applicable.

ITEM 5.        OTHER INFORMATION

                        On December 4, 2000, the Company's Class A and
                        Class B Common Stock began trading on the Over the
                        Counter Bulletin Board. The Common Stocks had previously
                        traded on the Nasdaq Smallcap Market, but no longer met
                        certain of the listing criteria, including the minimum
                        public float requirement.

               (a)      Exhibits:

                        10.1     Eighth Waiver and Amendment, dated as of
                                 February 13, 2001, to the Loan and Security
                                 Agreement dated as of July 27, 1999 among the
                                 Company, as Borrower, the lender parties
                                 thereto, Foothill Capital Corporation and
                                 General Electric Capital Corporation, as
                                 Co-Agents, and Foothill Capital Corporation, as
                                 Agent.

                        10.2     Fourth Waiver, dated February 13, 2001, to the
                                 Amended and Restated Credit and Security
                                 Agreement, dated as of July 27, 1999, (the
                                 "Amended and Restated Credit and Security
                                 Agreement") among the Company, its subsidiary,
                                 Bank of America, N.A., SunTrust Bank, Atlanta
                                 and Wachovia Bank, N.A. as lenders; SunTrust
                                 Bank, Atlanta, as agent; Wachovia Bank, N.A.,
                                 as agent; and SunTrust Equitable Securities
                                 Corporation, as arranger and lead manager.

                        13.1     Quarterly Report to Shareholders dated
                                 February 13, 2001

               (b)      The Company did not file any reports on Form 8-K during
                        the three months ended December 30, 2000.


<PAGE>   16

                                   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.

                                                   Thomaston Mills, Inc.



                                                   /s/ Neil H. Hightower
                                                   -----------------------------
                                                   Neil H. Hightower
                                                   President and Chief
Date:     February 13, 2001                        Executive Officer




                                                   /s/ A. William Ott
                                                   -----------------------------
                                                   A. William Ott
                                                   Treasurer and Chief
Date:     February 13, 2001                        Financial Officer