<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

     FOR 13-WEEK PERIOD ENDED MARCH 31, 2001    COMMISSION FILE NO. 0-26228

                             MARTIN INDUSTRIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               DELAWARE                                 63-0133054
               --------                                 ----------
    (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NO.)

       301 EAST TENNESSEE STREET
           FLORENCE, ALABAMA                               35630
           -----------------                               -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)

                                 (256) 767-0330
                                 --------------
              (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 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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

                    8,572,797 SHARES OF COMMON STOCK, $0.01
                         PAR VALUE, AS OF MAY 11, 2001


<PAGE>   2

                             MARTIN INDUSTRIES, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----

<S>                                                                              <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements:

                  Unaudited Condensed Consolidated Balance Sheets as of
                  March 31, 2001 and December 31, 2000                             2

                  Unaudited Condensed Consolidated Statements of
                  Operations and Comprehensive Loss for the 13-Week
                  Periods Ended March 31, 2001 and April 1, 2000                   4

                  Unaudited Condensed Consolidated Statements of
                  Cash Flows for the 13-Week Periods Ended
                  March 31, 2001 and April 1, 2000                                 5

                  Notes to Condensed Consolidated Financial Statements             6

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                             13

         Item 3.  Quantitative and Qualitative Disclosure About
                  Market Risk                                                     20

PART II. OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K                                21
</TABLE>


                                       1
<PAGE>   3

PART 1  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                             MARTIN INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                                     ASSETS

<TABLE>
<CAPTION>
                                                                              March 31,       December 31,
                                                                                2001              2000
                                                                            ------------      ------------

<S>                                                                         <C>               <C>
Current assets:
   Cash and short-term investments                                          $      5,000      $      3,000
   Accounts and notes receivable, less allowance for
      doubtful accounts of $1,581,000 and $1,634,000 respectively             11,123,000         8,365,000
   Inventories                                                                16,901,000        16,974,000
   Prepaid expenses and other assets                                           1,023,000           800,000
                                                                            ------------      ------------

      Total current assets                                                    29,052,000        26,142,000
                                                                            ------------      ------------

   Property, plant and equipment, net                                         12,283,000        12,904,000
   Goodwill, net of accumulated amortization of
      $246,000 and $246,000, respectively                                        447,000           483,000
   Cash value of life insurance                                                1,667,000         1,638,000
   Other                                                                         183,000           341,000
                                                                            ------------      ------------

                                                                               2,297,000         2,462,000
                                                                            ------------      ------------

      Total assets                                                          $ 43,632,000      $ 41,508,000
                                                                            ============      ============
</TABLE>

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


                                       2
<PAGE>   4

                             MARTIN INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                    March 31,       December 31,
                                                                      2001              2000
                                                                  ------------      ------------

<S>                                                               <C>               <C>
LIABILITIES
   Current Liabilities:
     Short-term borrowings                                        $ 11,130,000      $  8,519,000
     Current portion of long-term debt                               2,455,000         2,461,000
     Accounts payable                                                9,399,000         6,833,000
     Accrued liabilities:
      Payroll and employee benefits                                  2,091,000         2,135,000
      Product liability                                              1,064,000         1,076,000
      Warranty                                                         693,000           707,000
      Workers' compensation                                            774,000           777,000
      Restructuring costs                                               35,000            44,000
      Other                                                            687,000           743,000
                                                                  ------------      ------------

        Total current liabilities                                   28,328,000        23,295,000
                                                                  ------------      ------------

   Deferred compensation                                             1,870,000         1,917,000
                                                                  ------------      ------------

        Total liabilities                                           30,198,000        25,212,000
                                                                  ------------      ------------

STOCKHOLDERS' EQUITY
   Preferred stock, $.01 par value; 1,000,000 shares
      authorized; no shares issued and outstanding                           0                 0
   Common stock, $.01 par value; 20,000,000 shares
      authorized; 9,764,942 shares issued at March 31,
      2001 and 9,764,802 at December 31, 2000                           98,000            98,000
   Paid-in capital                                                  26,566,000        26,801,000
   Accumulated deficit                                              (6,305,000)       (3,596,000)
   Accumulated other comprehensive loss                             (1,048,000)         (831,000)
                                                                  ------------      ------------

                                                                    19,311,000        22,472,000
   Less:
   Treasury stock at cost (1,192,145 shares at
      March 31, 2001 and at December 31, 2000)                       3,789,000         3,789,000
   Unearned compensation                                             2,088,000         2,387,000
                                                                  ------------      ------------

        Total stockholders' equity                                  13,434,000        16,296,000
                                                                  ------------      ------------

        Total liabilities and stockholders' equity                $ 43,632,000      $ 41,508,000
                                                                  ============      ============
</TABLE>

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


                                       3
<PAGE>   5

                             MARTIN INDUSTRIES, INC.
                        CONDENSED CONSOLIDATED STATEMENTS
                      OF OPERATIONS AND COMPREHENSIVE LOSS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 13-WEEK
                                                               PERIOD ENDED
                                                        ------------------------------
                                                          MARCH 31,         APRIL 1,
                                                            2001              2000
                                                        ------------      ------------

<S>                                                     <C>               <C>
NET SALES                                               $ 15,266,000      $ 22,635,000

Cost of sales                                             14,021,000        19,695,000
                                                        ------------      ------------

GROSS PROFIT                                               1,245,000         2,940,000
                                                        ------------      ------------

Operating expenses:
   Selling                                                 2,044,000         2,766,000
   General and administrative                              1,578,000         2,121,000
   Non-cash ESOP compensation                                 63,000           130,000
   Restructure credit                                              0          (100,000)
                                                        ------------      ------------

                                                           3,685,000         4,917,000
                                                        ------------      ------------

OPERATING LOSS                                            (2,440,000)       (1,977,000)

Gain on sales of assets                                            0           (75,000)
Interest expense                                             292,000           167,000
Interest and other income                                    (23,000)          (96,000)
                                                        ------------      ------------

LOSS BEFORE INCOME TAXES                                  (2,709,000)       (1,973,000)

Provision for income taxes                                         0                 0
                                                        ------------      ------------

NET LOSS                                                $ (2,709,000)     $ (1,973,000)
                                                        ============      ============

Other comprehensive loss, net of tax:
  Foreign currency translation adjustment                   (217,000)          (23,000)
                                                        ------------      ------------

Comprehensive loss                                      $ (2,926,000)     $ (1,996,000)
                                                        ============      ============

BASIC AND DILUTED PER SHARE DATA:

Net loss                                                $      (0.34)     $      (0.26)
                                                        ============      ============

Weighted average number of common
   shares outstanding                                      7,921,426         7,572,390
                                                        ============      ============
</TABLE>

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


                                       4
<PAGE>   6

                             MARTIN INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       13-WEEK
                                                                                    PERIOD ENDED
                                                                            ------------------------------
                                                                              MARCH 31,         APRIL 1,
                                                                                2001              2000
                                                                            ------------      ------------

<S>                                                                         <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                 $ (2,709,000)     $ (1,973,000)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
      Depreciation and amortization                                              605,000           526,000
      Gain on sales of assets                                                          0           (75,000)
      Provision (credit) for doubtful accounts and notes receivable              (47,000)           12,000
      Non-cash ESOP compensation                                                  63,000           130,000
      Other changes in operating assets and liabilities                         (512,000)       (1,550,000)
                                                                            ------------      ------------

          Net cash used in operating activities                               (2,600,000)       (2,930,000)
                                                                            ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                          (94,000)       (1,123,000)
   Proceeds from sales of assets                                                   5,000           126,000
                                                                            ------------      ------------

     Net cash used in investing activities                                       (89,000)         (997,000)
                                                                            ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net short-term borrowings                                                   2,689,000         2,604,000
   Principal payments on long-term debt                                           (6,000)       (3,850,000)
                                                                            ------------      ------------

     Net cash provided by (used in) financing activities                       2,683,000        (1,246,000)
                                                                            ------------      ------------

NET DECREASE IN CASH AND SHORT-TERM
   INVESTMENTS                                                                    (6,000)       (5,173,000)

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                            8,000            (2,000)

CASH AND SHORT-TERM INVESTMENTS AT THE
   BEGINNING OF THE PERIOD                                                         3,000         5,218,000
                                                                            ------------      ------------

CASH AND SHORT-TERM INVESTMENTS AT THE
   END OF THE PERIOD                                                        $      5,000      $     43,000
                                                                            ============      ============

Cash paid during the period for:
  Interest                                                                  $    233,000      $    145,000
  Income taxes                                                              $          0      $          0
</TABLE>

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


                                       5
<PAGE>   7

                             MARTIN INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

Unaudited Interim Condensed Consolidated Financial Statements

         The accompanying unaudited interim condensed consolidated financial
statements of Martin Industries, Inc. and subsidiary (the "Company") have been
prepared in accordance with accounting principles generally accepted in the U.S.
for interim financial information and are presented in accordance with the
requirements of Form 10-Q and Article 10 of Regulation S-X. The financial
statements should be read in conjunction with the audited financial statements
and notes thereto for the year ended December 31, 2000 included on Form 10-K, as
filed with the Securities and Exchange Commission on April 2, 2001.

         In the opinion of management, the unaudited interim condensed
consolidated financial statements included herein reflect all adjustments
necessary to present fairly the information set forth therein. The Company's
business is seasonal and cyclical with the potential for significant
fluctuations in quarterly earnings; therefore, the consolidated results of
operations for the periods presented are not necessarily indicative of results
for the full year.

Principles of Consolidation and Fiscal Periods

         The unaudited interim condensed consolidated financial statements
include the accounts and transactions of the Company and its wholly owned
Canadian subsidiary, 1166081 Ontario Inc. All significant intercompany accounts
and transactions have been eliminated in consolidation.

         The Company's fiscal quarters end on the Saturday nearest each calendar
quarter-end. The Company utilizes a December 31 fiscal year-end.

Prior Year Reclassification

         Certain prior year amounts have been reclassified to conform with the
current year's presentation.

2. INVENTORIES

         During fiscal year 2000, the Company changed its method of accounting
for inventories from the last-in, first-out ("LIFO") method to the first-in,
first-out ("FIFO") method, whereby the LIFO reserve of $5.3 million was
retroactively restated in the consolidated financial statements in accordance
with Accounting Principles Board Opinion No. 20, Accounting Changes. There was
no effect of this restatement on the statement of operations for the quarter
ended April 1, 2000. Management believes the FIFO method provides a better
measurement of inventory valuation and operating results. Inventory costs
include material, labor and overhead, and the Company evaluates raw materials,
purchased parts, work-in-process and finished goods to ensure that inventory is
not recorded at amounts in excess of estimated net realizable value. Inherent in
the estimates of net realizable value are management's estimates related to the
Company's customer demand, product mix and salvage value. At March 31, 2001 and
December 31,


                                       6
<PAGE>   8

2000, the reserve for excess and obsolete inventory was $1,383,000 and
$1,820,000, respectively. An analysis of inventories at March 31, 2001 and
December 31, 2000 follows:

<TABLE>
<CAPTION>
                                                                    March 31,       December 31,
                                                                      2001              2000
                                                                  ------------      ------------

<S>                                                               <C>               <C>
Inventories valued at first-in, first-out ("FIFO") cost:
     Raw materials and purchased parts                            $  8,295,000      $  7,756,000
     Work-in-process                                                 2,220,000         2,129,000
     Finished goods                                                  6,386,000         7,089,000
                                                                  ------------      ------------

                                                                  $ 16,901,000      $ 16,974,000
                                                                  ============      ============
</TABLE>

3. INCOME TAXES

         The Company has net deferred tax assets resulting primarily from net
operating loss ("NOL") carryforwards in United States jurisdictions of
approximately $10,988,000 expiring in fiscal years 2019 through 2021, and NOL
carryforwards in Canada of approximately $2,473,000 expiring in fiscal years
2001 through 2008.

         The Company establishes valuation allowances in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, and will continually review the adequacy of the valuation
allowance.

         In assessing the valuation allowance established at December 31, 2000,
the Company concluded that it should fully-reserve its net deferred tax assets
as a result of continuing losses from operations and realization of the assets
was not considered more likely than not. At March 31, 2001 and December 31,
2000, the valuation allowance reserve for deferred taxes was $14,577,000 and
$13,533,000, respectively.

4. EARNINGS PER SHARE

         Basic earnings per share ("EPS") excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. Diluted EPS has
been computed based on the weighted average number of shares outstanding,
including the effect of outstanding stock options, if dilutive, in each
respective year.


                                       7
<PAGE>   9

A reconciliation of shares as the denominator of the basic EPS computation to
the diluted EPS computation is as follows:

<TABLE>
<CAPTION>
                                                          13-Week Period Ended
                                                       --------------------------
                                                        March 31,       April 1,
                                                          2001            2000
                                                       ----------      ----------

         <S>                                           <C>             <C>
         Weighted average shares-basic
         and diluted, excluding ESOP
         and stock effects                              5,755,379       5,653,684

         Weighted average effect of ESOP
         shares committed to be released                2,166,047       1,918,706
                                                       ----------      ----------

         Weighted average number of
         common shares outstanding-basic
         and diluted                                    7,921,426       7,572,390
                                                       ==========      ==========
</TABLE>

Options outstanding of 630,514 and 622,014 for the 13-week periods ended March
31, 2001 and April 1, 2000, respectively, were not included in the table above
as they were anti-dilutive.

5. COMMITMENTS

         On February 1, 1996, 1166081 Ontario Inc. acquired all of the capital
stock of Hunter for a purchase price of approximately $1,943,000 that included
$850,000 in cash, $729,000 in promissory notes payable and $364,000 paid into
escrow. The escrow fund was established at the closing to make funds available
to meet the sellers' indemnification obligations to the Company. During the
first quarter of 1997, the Company notified certain of the sellers that it was
withholding payment on the promissory notes held by them pending resolution of
certain issues with the holders of the notes arising out of the purchase
transaction. The Company also claimed the entire amount in escrow and instituted
litigation to recover these amounts and additional amounts from certain sellers
in the purchase transaction, and certain of the sellers sued to enforce
collection of their notes.

         During 1998, the Company effected a settlement with all but two of the
former shareholders, and a contingent settlement with these two. Pursuant to the
settlement, the Company received approximately $315,000 (including interest)
of funds held in escrow, an additional payment of $32,000, and cancellation of
promissory notes and accrued interest totaling approximately $364,000.
Consequently, during the fourth quarter of 1998, the Company recorded a gain on
settlement of litigation of $422,000. The contingent settlement with the two
former shareholders is subject to the adjudication or dismissal of certain
litigation assumed upon the acquisition of Hunter and will result (if the
contingency is satisfied and that portion of the settlement effectuated) in
receipt by the Company of an additional $106,000 (including interest), and
cancellation of notes and accrued interest totaling approximately $226,000.


                                       8
<PAGE>   10

         The Company is a party to various legal proceedings that are incidental
to its business. Certain of these cases filed against the Company and other
companies engaged in businesses similar to the Company often allege, among other
things, product liability, personal injury and breach of contract and warranty.
Such suits sometimes seek the imposition of large amounts of compensatory and
punitive damages and trials by jury. In the opinion of management, after
consultation with legal counsel responsible for these matters, the ultimate
liability, if any, with respect to the proceedings in which the Company is
currently involved is not presently expected to have a material adverse affect
on the Company. However, the potential exists for unanticipated material adverse
judgments against the Company.

6. SHORT-TERM BORROWINGS

         Effective January 1, 2000, the Company entered into an amended bank
line of credit agreement with its principal lender for up to a maximum of
$10,000,000 which has been utilized to finance inventories, receivables and
operations. As of March 31, 2001 and December 31, 2000, the outstanding balance
on the existing line of credit was $9,620,000 and $7,023,000, respectively. The
line of credit is secured by the receivables and inventory of the Company
(exclusive of the receivables and inventory of Hunter). Interest on the line of
credit is payable monthly at a variable rate based on the 30-day London
Interbank Offered Rate ("LIBOR") plus 1.25%.

         On May 15, 2001, the Company and its current primary lender entered
into an agreement extending its existing credit line through June 15, 2001. This
extension was granted in order to allow the Company and the current lender time
to finalize the documentation required to further extend and amend the existing
credit facility. The extension also effects a current amendment to increase the
interest rate on the current indebtedness to the Lender's prime rate plus 1%.
The current lender has proposed an extension of the Company's credit facility to
January 1, 2002, and to provide up to an additional $1 million under the line of
credit based upon the value from time to time of certain assets securing the
credit facility. The proposed amendment to the credit facility also provides
that the principal payments under the Company's $2.4 million term loan would be
amortized and payable monthly instead of semi-annually and the current waiver of
certain covenants with which the Company is currently not in compliance be
extended. The proposed amendment further contemplates a modification of the
interest rates and fees applicable to the loans and provides for the amendment
of certain financial covenants based upon current financial projections of the
Company. The Company expects to finalize the terms and documentation for the
proposed amended credit facility with the lender on or before June 15, 2001.
However, there can be no assurance that the Company and its lender will
successfully complete the required documentation prior to June 15, 2001, or
that, if necessary, a further extension will be granted.

         As a result of the $24.6 million net loss incurred during fiscal 2000,
and the fact that there can be no assurance that any new credit arrangement will
be finalized or further extensions granted beyond the current extension, the
Company received a going concern qualification from its independent public
accountants in connection with its audited financial statements for the year
ended December 31, 2000, as described more fully in the Report of Independent
Public Accountants included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 2, 2001.

         During 1998, Hunter established a bank line of credit with a Canadian
financial institution. During the third quarter of 2000, the Company, Hunter and
the Canadian financial institution agreed to and began operating under amended
terms with respect to the line of credit and are currently completing the
documentation reflecting such agreements. The credit agreement, as amended,
provides for borrowings up to approximately $1,500,000. The credit line is
subject to an annual renewal on April 1 each year. The line of credit is secured
by Hunter's receivables, inventory, building and equipment. Interest on the line
of credit is payable monthly at a variable rate equivalent to the financial
institution's prime lending rate plus 1.0%, which at March 31, 2001 was 7.5%. As
of March 31, 2001 and December 31, 2000, the outstanding balance of the line of
credit was $1,355,000 and $1,334,000, respectively. In April 2001, the Canadian
financial institution met with management at Hunter and requested that the
institution's appointed consultants review the operations and projections of
Hunter for the purpose of advising the institution whether or not to renew the
credit agreement. As of the date of this filing, the review was substantially
complete and the results are pending. There can be no assurance that the credit
line with the Canadian financial institution will be renewed or, if it is
renewed, that it will be renewed on the same terms as the current line.


                                       9
<PAGE>   11

7. INDUSTRY SEGMENT INFORMATION

         Under SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, certain information is disclosed for the two reportable
operating segments of the Company. The reportable segments were determined using
the internal management reporting system. They are composed of the Company's
significant sales segments. The home heating products segment includes vented
and vent-free gas heaters and furnaces, pre-engineered gas- and wood-burning
fireplaces and gas logs. The leisure and other products segment includes premium
gas barbecue grills, utility trailer kits and replacement parts. The accounting
policies for each segment are the same as those used by the Company. The Company
evaluates performance based on net sales, gross profit and segment contribution,
defined as gross profit less selling expenses. As such, the Company does not
allocate general and administrative expense, non-cash ESOP compensation expense,
interest expense, interest and other income or income taxes to the reportable
operating segments. The segment results include certain overhead allocations,
primarily related to fixed manufacturing and selling expenses. The results and
identifiable net assets for the two reportable segments of the Company are
included in the following table.


                                       10
<PAGE>   12

<TABLE>
<CAPTION>
                                                             Segment Information
                                                        ------------------------------
                                                             13-Week Period Ended
                                                        ------------------------------
                                                          March 31,         April 1,
                                                            2001              2000
                                                        ------------      ------------

<S>                                                     <C>               <C>
Gross sales:
  Home heating products                                 $  8,004,000      $ 10,218,000
  Leisure and other products                               7,329,000        12,462,000
                                                        ------------      ------------

                                                        $ 15,333,000      $ 22,680,000
                                                        ============      ============

Reconciliation to net sales:
Gross sales                                             $ 15,333,000      $ 22,680,000
Freight revenue                                              103,000           231,000
Discounts and royalties                                     (170,000)         (276,000)
                                                        ------------      ------------

Net sales                                               $ 15,266,000      $ 22,635,000
                                                        ============      ============

Gross margin:
  Home heating products                                 $  2,861,000      $  3,850,000
  Leisure and other products                               2,380,000         4,679,000
                                                        ------------      ------------

                                                        $  5,241,000      $  8,529,000
                                                        ============      ============

Reconciliation to gross profit:
Gross margin                                            $  5,241,000      $  8,529,000
Freight revenue                                              103,000           231,000
Discounts and royalties                                     (170,000)         (276,000)
Fixed costs, variances, reserves and other                (3,929,000)       (5,544,000)
                                                        ------------      ------------

Gross profit                                            $  1,245,000      $  2,940,000
                                                        ============      ============

<CAPTION>
                                                          March 31,         Dec. 31,
                                                            2001              2000
                                                        ------------      ------------

<S>                                                     <C>               <C>
Identifiable net assets(1):
  Home heating products                                 $ 13,696,000      $ 18,898,000
  Leisure and other products                              11,232,000         6,480,000
  Other(2)                                                 4,256,000         4,500,000
                                                        ------------      ------------

                                                        $ 29,184,000      $ 29,878,000
                                                        ============      ============
</TABLE>

(1)      Represents Property, Plant and Equipment and Inventory (each net of
         respective reserves).

(2)      Represents amount attributable to the Company's corporate
         administration.


                                       11
<PAGE>   13

8.  GOING CONCERN MATTERS

         The financial statements as of and for the year ended December 31, 2000
were prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
shown in the financial statements, as presented in the Company's Annual Report
on Form 10-K, as filed with the Securities and Exchange Commission on April 2,
2001, during the year ended December 31, 2000, the Company incurred a net loss
of $24,593,000. The Company also had short-term borrowings of $8,519,000 as of
December 31, 2000. Of the balance, $7,023,000 was payable to the Company's
primary lender under a bank line of credit agreement for up to a maximum of
$10,000,000. The line of credit agreement expired on January 1, 2001. However,
the credit line and the ESOP term loan payments have been extended through June
15, 2001 by the current bank lender in order to give the Company and the lender
time to finalize the documentation of the terms and conditions under which the
lender will further amend and extend its current credit facility. There can be
no assurance, however, that any new credit arrangement will be finalized or
further extensions granted beyond June 15, 2001.

         The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern. The Company's continuation as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to comply with the terms of its existing credit
line agreement, as extended, to obtain additional financing or refinancing as
may be required, and ultimately to re-establish profitable operations.

         Although the Company incurred a substantial net loss in fiscal 2000,
management began implementing and focusing on strategies to return the Company
to profitability. During 2000, payroll expenses were reduced approximately
$10,000,000 (on an annualized basis). The Company's manufacturing facilities
were consolidated into a single US factory and its Canadian factory. The
significant production variances experienced during fiscal 2000 have been, and
continue to be, addressed. The Company intends to continue reducing production
scrap to acceptable minimal levels. Further, the Company intends to demonstrate
to its customers that the Company will return to its historic position of being
a reliable supplier by shipping quality products in a timely manner. Overall,
the Company's operations have been, and will continue to be, restructured so
that costs are in line with the expected level of sales.


                                       12
<PAGE>   14

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

         The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the unaudited
interim condensed consolidated financial statements of the Company and notes
thereto appearing elsewhere in this Form 10-Q. All references to the first
quarter of 2001 and the first quarter of 2000 are referring to the 13-week
periods ended March 31, 2001 and April 1, 2000, respectively.

GENERAL

         On May 15, 2001, the Company and its current primary lender entered
into an agreement extending its existing credit line through June 15, 2001. This
extension was granted in order to allow the Company and the current lender time
to finalize the documentation required to further extend and amend the existing
credit facility. The current lender has proposed an extension of the Company's
credit facility to January 1, 2002, and to provide up to an additional $1
million under the line of credit based upon the value from time to time of
certain assets securing the credit facility. The proposed amendment to the
credit facility also provides that the principal payments under the Company's
$2.4 million term loan would be amortized and payable monthly instead of
semi-annually and the current waiver of certain covenants with which the Company
is currently not in compliance be extended. The proposed amendment further
contemplates a modification of the interest rates and fees applicable to the
loans and provides for the amendment of certain financial covenants based upon
current financial projections of the Company. The  Company expects to finalize
the terms and documentation for the proposed amended credit facility with the
lender on or before June 15, 2001. However, there can be no assurance that the
Company and its lender will successfully complete the required documentation
prior to June 15, 2001, or that, if necessary, a further extension will be
granted.

         As a result of the $24.6 million net loss incurred during fiscal 2000,
and the fact that there can be no assurance that any new credit arrangement will
be finalized or further extensions granted beyond the current extension, the
Company received a going concern qualification from its independent public
accountants in connection with its audited financial statements for the year
ended December 31, 2000, as described more fully in the Report of Independent
Public Accountants included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 2, 2001.

         Although the Company incurred a substantial net loss in fiscal 2000,
management began implementing and focusing on strategies to return the Company
to profitability. During 2000, payroll expenses were reduced approximately $10
million (on an annualized basis). The Company's manufacturing facilities were
consolidated into a single US factory and its Canadian factory. The significant
production variances experienced during fiscal 2000 have been, and continue to
be, addressed. The Company intends to continue reducing production scrap to
acceptable minimal levels. Further, the Company intends to demonstrate to its
customers that the Company will return to its historic position of being a
reliable supplier by shipping quality products in a timely manner. Overall, the
Company's operations have been, and will continue to be, restructured so that
costs are in line with the expected level of sales. However, there can be no
assurance that the Company's cost reductions and plant consolidations will be
successful, that the Company will be able to meet the needs and expectations of
its customers, or that the Company will achieve a level of revenue that will
allow it to return to profitability.

         On March 13, 2001, the Company was notified by Nasdaq staff of Nasdaq's
determination that the Company's Common Stock would be delisted from The Nasdaq
National Market at the opening of business on March 20, 2001, unless the Company
requested a hearing within seven days. The notification from Nasdaq was due to
the Common Stock's failure to maintain a minimum market value of public float of
at least $5 million as required by Nasdaq's rules for continued listing on the
National Market. Over the past several months, the Company's Common Stock has
not met this market capitalization requirement, as well as Nasdaq's requirement
that


                                       13
<PAGE>   15
the stock maintain a minimum per share bid price of $1.00. On March 16, 2001,
the Company requested a hearing before the Nasdaq Listing Qualification Panel to
review the Nasdaq staff's decision. The hearing was held April 26, 2001. The
delisting of the Company's Common Stock has been stayed pending the Panel's
decision, which has not been issued as of the date of this filing. There can be
no assurance the Panel will grant the Company's request for continued listing.
If the Company's Common Stock is delisted from Nasdaq, the Company expects it
would be eligible for trading on the Over-the-Counter Bulletin Board ("OTCBB"),
provided the Company remains current in its filings with the Securities and
Exchange Commission (the "Commission"). In that event, investors would be able
to trade the stock and obtain market information through the operations of the
OTCBB, assuming that current market makers in the Company's Common Stock and
other broker-dealers continue to make a market in the stock. There can be no
assurance, however, that the Company's Common Stock will be eligible to trade on
the OTCBB if it is delisted by Nasdaq, that the current market makers and other
broker-dealers will continue to make a market in the Company's Common Stock if
it begins trading on the OTCBB or that the Company's Common Stock will continue
to trade at the same volume or in the same price range on the OTCBB as it has
historically traded on The Nasdaq National Market.

         As used in the following discussion and elsewhere in this Quarterly
Report, the term "gross sales" reflects total customer invoices billed by the
Company for the applicable period, net of any customer sales credits issued. The
term "net sales" as used herein and elsewhere in this Quarterly Report, reflects
gross sales less deductions for cash discounts and royalties paid by the
Company. Gross margin is defined as gross sales less production costs.


                                       14
<PAGE>   16

RESULTS OF OPERATIONS

         The following tables set forth, for the periods indicated, information
derived from the Company's financial statements expressed as a percentage of net
sales.

<TABLE>
<CAPTION>
                                                  13-Week Period Ended
                                                  --------------------
                                                  March 31,   April 1,
                                                    2001        2000
                                                  ---------   --------

<S>                                               <C>         <C>
Net sales                                           100.0%      100.0%
Cost of sales                                        91.8        87.0
                                                   ------      ------
Gross profit                                          8.2        13.0

Operating expenses:
  Selling                                            13.4        12.2
  General and administrative                         10.3         9.4
  Non-cash ESOP compensation expense                  0.5         0.6
  Restructure credit                                  0.0        (0.5)
                                                   ------      ------
                                                     24.2        21.7
                                                   ------      ------

Operating loss                                      (16.0)       (8.7)
Gain on sales of assets                               0.0        (0.3)
Interest expense                                      1.9         0.7
Interest income                                      (0.2)       (0.4)
                                                   ------      ------

Loss before income taxes                            (17.7)       (8.7)
Provision for income taxes                            0.0         0.0
                                                   ------      ------

Net loss                                            (17.7)%      (8.7)%
                                                   ======      ======
</TABLE>


                                       15
<PAGE>   17

13-WEEK PERIOD ENDED MARCH 31, 2001 COMPARED TO 13-WEEK PERIOD ENDED APRIL 1,
2000

Net Sales

         Net sales in the 13-week period ended March 31, 2001 decreased to $15.3
million from $22.6 million in the 13-week period ended April 1, 2000, a decrease
of $7.4 million, or 32.6%.

Home Heating Products. Gross sales of home heating products decreased to $8.0
million in the first quarter of 2001 from $10.2 million in the first quarter of
2000, a decrease of $2.2 million, or 21.7%. The decrease in gross sales of home
heating products was primarily the result of a decrease in gross hearth products
sales of $2.0 million, or 21.5%, to $7.4 million. Hearth product sales were
negatively impacted by lower housing starts, due to inclement weather,
particularly in the South and Southeast, and the continued depression in the
manufactured home industry. Gross sales of heating appliances decreased $194,000
during the first quarter of 2001 as compared to the first quarter of 2000.

         Leisure and Other Products. Gross sales of leisure and other products
decreased $5.1 million, or 41.2%, in the first quarter of 2001 to $7.3 million
as compared to $12.5 million in the first quarter of 2000. Gross sales of
barbecue gas grills decreased $5.3 million, or 47.1%, in the first quarter of
2001, as compared to the first quarter of 2000, primarily as a result of delays
in orders received from the Company's customers. According to several of these
customers, the delays in orders have been caused by a desire to reduce customer
inventory levels. In previous years, customers have generally purchased the
majority of their forecasted inventory requirements during the first quarter
under the Company's "dating" program. Rather than continue to purchase under the
dating program, many customers have elected to purchase over a longer period of
time as consumer demand dictates. Sales of NuWay utility trailers increased
$250,000, or 43.7%, to $821,000 in the first quarter of 2001. The production of
utility trailers and related sales efforts were transferred to Hunter, the
Company's Canadian facility, during the fourth quarter of 2000.

Gross Profit

         Gross profit in the first quarter of 2001 was $1.2 million as compared
to $2.9 million in the first quarter of 2000, a decrease of $1.7 million, or
57.7%. Gross margin, defined as gross sales less production costs, decreased to
$5.2 million in the first quarter of 2001 from $8.5 million in the first quarter
of 2000.

Home Heating Products. The gross margin on sales of home heating products in the
first quarter of 2001 was $2.9 million, or 35.7% of home heating sales. The
gross margin on home heating products in the first quarter of 2000 was $3.9
million, or 37.7% of home heating sales. The decrease in gross margin percentage
was primarily the result of the decrease in sales of higher margin vent-free
logs.

Leisure and Other Products. The gross margin on sales of leisure and other
products in the first quarter of 2001 was $2.4 million, or 32.5% of leisure and
other sales. The gross margin on sales of leisure and other products in the
first quarter of 2000 was $4.8 million, or 37.5% of leisure and other sales. The
decrease in gross margin percentage was primarily the result of the decrease in
sales of higher margin barbecue grills and the increase in sales of lower margin
utility trailers.


                                       16
<PAGE>   18

Selling Expenses

         Selling expenses in the first quarter of 2001 decreased to $2.0 million
from $2.8 million in the first quarter of 2000, a decrease of $722,000, or
26.1%, primarily the result of decreased administrative and co-op advertising
expenses. Selling expenses as a percentage of net sales increased to 13.4% in
the first quarter of 2001 from 12.2% in the first quarter of 2000.

General and Administrative Expenses

         General and administrative expenses decreased $543,000, or 25.6%, in
the first quarter of 2001 as compared to the first quarter of 2000. The decrease
was primarily the result of a decrease in payroll and related expenses,
partially offset by an increase in depreciation and amortization expense
associated with an additional phase of a computer systems change implemented on
January 1, 2001.

Non-cash ESOP Compensation Expense

         Non-cash ESOP compensation expense was $63,000 in the first quarter of
2001 as compared to $130,000 in the first quarter of 2000, a decrease of
$67,000, or 51.5%. In the first quarter of 2001, 86,835 shares of unallocated
ESOP stock were committed to be released as compensation at an average fair
value of $0.73 per share as compared to 86,835 shares committed to be released
as compensation at an average fair value of $1.50 per share in the first quarter
of 2000.

Restructure Credit

         The restructure credit of $100,000 recorded during the first quarter of
2000 represents a reduction of the reserve for the Huntsville, Alabama plant
closing. The reduction was based on the Company's analysis that the original
reserve for group insurance claims should be reduced based on a
lower-than-anticipated number of terminated employees participating in the
Company's self-insured insurance plan. The estimated reserve remaining at March
31, 2001 and December 31, 2000 was $0.

Gain on Sales of Assets

         The gain on sales of assets of $75,000 recorded during the first
quarter of 2001 includes the sale of certain undeveloped land and rental
property. In connection with this sale, the Company received total proceeds of
$124,000.

Interest Expense

         Interest expense in the first quarter of 2001 was $292,000 as compared
to $167,000 in the first quarter of 2000, an increase of $125,000, or 74.9%. The
increase was attributable to an increase in average outstanding debt.


                                       17
<PAGE>   19

Interest Income

         Interest income in the first quarter of 2001 was $23,000 as compared to
$96,000 in the first quarter of 2000, a decrease of $73,000, or 76.0%. The
decrease was attributable to a decrease in average outstanding investments.

Provision for Income Taxes

         During the first quarter of 2001 and 2000, the Company did not record a
credit for income taxes as the deferred tax assets resulting from the Company's
operating losses were fully reserved. See Note 3 to Notes to Condensed
Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has historically financed its operations from internally
generated funds and seasonal borrowings under its bank lines of credit. The
Company's primary capital requirements are for working capital, capital
expenditures and debt service. In addition, in the event the Company's Common
Stock is delisted from Nasdaq, the terms of the Company's Employee Stock
Ownership Plan ("ESOP") provide that participants will have the option to cause
the Company to repurchase shares distributed to them for the then fair market
value of the shares. If the Company's Common Stock is delisted, the Company
anticipates that ESOP participants could require the Company, upon demand, to
repurchase up to approximately 150,000 shares. In addition to the foregoing, the
Company estimates that participating employees eligible for retirement during
the next five years could require the Company to repurchase approximately 35,000
shares of Common Stock per year over the next five years. However, these
estimates rely on information currently available to the Company and there can
be no assurance that the actual number of shares which the Company is obligated
to repurchase will not be materially different from the Company's estimates.

         The financial statements as of and for the year ended December 31, 2000
were prepared on a going concern basis. As shown in the financial statements, as
presented in the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission on April 2, 2001, during the year ended
December 31, 2000, the Company incurred a net loss of $24.6 million. The Company
has experienced significant losses during the previous two years, which losses
are likely to continue during 2001. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to comply with the terms of its existing
credit line, as extended, to obtain additional financing or refinancing as may
be required, and ultimately to return to profitable operations.

         The Company finances interim working capital requirements with cash and
bank lines of credit, one with its principal lender and one with a Canadian
financial institution. Under its terms, the line of credit with its principal
lender expired on January 1, 2001. Prior to the expiration date, the lender
agreed to extend the expiration date, which has now been further extended to
June 15, 2001. Additionally, the Company is currently not in compliance with
certain debt covenants under its amended credit agreement with its principal
lender. In the agreement extending the expiration date of the line of credit,
the Company has obtained a temporary waiver of these covenants through June 15,
2001. The line of credit is secured by the receivables and inventory of the
Company (exclusive of the receivables and inventory of Hunter). Interest on the
line of credit is payable monthly at a variable rate of 30-day LIBOR plus 1.25%,
which at March 31, 2001 was 6.31%. As of March 31, 2001, the outstanding balance
was $9.6 million.


                                       18
<PAGE>   20

         The lender has also agreed to extend to June 15, 2001, the payment date
of principal payments due under a term loan ("Bank Loan") obtained by the
Company in 1993 to finance the purchase of 3,489,115 shares of Company Common
Stock by the Company's ESOP. The Bank Loan is due in semi-annual principal
payments of $596,700 over a ten-year period. Interest on the Bank Loan is
payable monthly at a variable rate of 79.5% of prime plus 1.35%, which at March
31, 2001 was 7.71%. The Bank Loan is secured by a lien on the Company's
buildings and equipment. As of March 31, 2001, the outstanding balance of the
Bank Loan was $2.4 million. As discussed above, the debt owing under the line of
credit with the Company's principal lender and the Bank Loan has been classified
as current maturities.

          During the third quarter of 2000, the Company, Hunter and the
Company's Canadian lender agreed to and began operating under an amended bank
line of credit that provides for borrowings up to approximately $1.5 million.
The amended credit line is subject to an annual renewal on April 1 each year.
The amended line of credit is secured by Hunter's receivables, inventory,
building and equipment. Interest on the line of credit is payable monthly at a
variable rate equivalent to the financial institution's prime lending rate plus
1.0%, which at March 31, 2001 was 7.5%. As of March 31, 2001, the outstanding
balance of the line of credit was $1.4 million. During the first quarter of
2001, the Canadian financial institution met with management at Hunter and
requested that the institution's appointed consultants review the operations and
projections of Hunter for the purpose of advising the institution whether or not
to renew the credit agreement. As of the date of this filing, the review was
substantially complete and the results are pending.

         As of the date of this filing, the Company is undertaking to finalize
with its current primary lender the documentation of the terms and conditions
under which the lender will amend and extend its current credit facility. The
Company is also working with its Canadian lender to renew the $1.5 million line
of credit utilized by Hunter. There can be no assurance that any new credit
arrangements will be finalized or further extensions granted by the Company's
current primary lender beyond June 15, 2001. If the proposed amendment to the
current credit facility is not completed by June 15, 2001, and the Company's
current credit facility is not extended beyond that date, there can be no
assurance that the Company will continue to generate funds or have credit or
financing available to it that is sufficient to continue to fund its
operations. In the absence of a further extension and waiver, upon the
expiration of the current extension and waiver on June 15, 2001, the Company's
primary lender will have all rights and remedies provided for in the amended
credit agreement between the lender and the Company. There can also be no
assurance that the Company's Canadian lender will renew the line of credit
utilized by Hunter. If the line of credit is not renewed, the Company may not
have sufficient funds available to retire or refinance the debt and in such case
the Canadian lender will have all rights and remedies provided for in the line
of credit agreement between the Company and said lender.


                                       19
<PAGE>   21

         On October 29, 1999, the Company announced that its Board of Directors
had discontinued the payment of regular quarterly cash dividends. The Company's
Board of Directors decided that it would be in the best interests of the Company
and its stockholders for the Company to discontinue the payment of a cash
dividend at that time and to invest those funds in the business in support and
furtherance of the Company's strategic plan. Any future payment of dividends
will be within the discretion of the Board of Directors and will depend on the
Company's profitability, capital requirements, financial condition, business
opportunities, loan covenants associated with the Company's current borrowing
agreements and any future agreements and other factors which the Board of
Directors may deem relevant.

FINANCIAL POSITION

         Cash and short-term investments in the first quarter of 2001 decreased
$6,000 primarily as a result of a net loss of $2.7 million, partially offset by
net short-term borrowings of $2.7 million. Accounts receivable increased $3.3
million in the first quarter of 2001. The increase in accounts receivable was
primarily the result of an increase in dating receivables for grills and heating
appliances. In an effort to better control its production schedule in light of
the seasonal nature of its barbecue gas grill and heating appliance business,
the Company utilizes early booking programs under which customers receive
favorable dating terms for placing their orders early and permitting the Company
to ship the products at "factory convenience." However, as noted previously,
participation in the dating program for grills has decreased as customers desire
to reduce their inventory levels.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The Company is exposed to market risk from changes in foreign currency
exchange rates and interest rates as part of its normal operations. The Company
has estimated its market risk exposures using sensitivity analyses assuming a
10% change in market rates.

FOREIGN CURRENCY EXCHANGE RATE RISK

         Due to its Canadian operations, the Company has assets, liabilities,
operations and cash flows in the Canadian currency. Fluctuations in foreign
currency exchange rates impact the U.S. dollar value of Canadian dollar assets,
liabilities, operations and cash flows. The Company translates the Canadian
dollar income statement to U.S. dollars using the average rate of exchange and
translates the Canadian dollar balance sheet to U.S. dollars using the closing
rate of exchange. Certain accounts (e.g., capital stock) are translated using an
historical exchange rate. Consequently, unrealized foreign currency translation
adjustments are reported as a separate component of stockholders' equity. To
illustrate the potential impact of changes in foreign currency exchange rates on
the unrealized foreign currency translation adjustment, a hypothetical 10%
change (decrease) in the average and closing exchange rates for the three-month
period ended March 31, 2001 would have increased the unrealized foreign currency
translation adjustment (a loss) by $432,000.

INTEREST RATE RISK

         At March 31, 2001, the Company had $2.4 million of debt outstanding at
a variable interest rate of 79.5% of prime plus 1.35%. The debt is scheduled to
mature in September 2002. Therefore, the Company is exposed to interest rate
fluctuations on the debt balance. A hypothetical increase of 10%


                                       20
<PAGE>   22

(for example, the prime rate of 8.0% would increase to 8.80%) in the prime
lending rate would not cause the Company's interest expense to increase
significantly.

         Effective January 1, 2000, the Company entered into a secured bank line
of credit of up to a maximum of $10 million which is to be utilized to finance
inventories, receivables and operations on an interim basis. Interest on the
line of credit is payable monthly at a variable rate based on the 30-day LIBOR
plus 1.25%. A hypothetical increase of 10% in the LIBOR rate would not cause the
Company's interest expense to increase significantly. As previously stated, this
credit line expired on January 1, 2001, but has been extended through June 15,
2001 to afford the Company and its current primary lender additional time to
finalize the documentation of the terms and conditions under which the lender
will further amend and extend its current credit facility.

         Further, Hunter maintains a secured bank line of credit of up to a
maximum of approximately $1.5 million which is to be utilized to finance
inventories, receivables and operations. Interest on the line of credit is
payable monthly at a variable rate based on the lender's prime rate plus 1.0%. A
hypothetical increase of 10% in the prime lending rate would not cause the
Company's interest expense to increase significantly.

         Certain statements contained in this section and the estimated amounts
generated from the sensitivity analyses referred to above include
forward-looking statements of market risk which assume that certain adverse
market conditions may occur. Actual future market conditions may differ
materially from such assumptions. Accordingly, the forward-looking statements
should not be considered projections by the Company of future events or losses.

PART II. OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

<TABLE>
         <S>      <C>
         *3(a)    Form of Restated Certificate of Incorporation of Martin
                  Industries, Inc. which was filed as Exhibit 3(a) to the
                  Registrant's Registration Statement on Form S-1 filed with the
                  Commission on July 10, 1995 (Registration No. 33-90432).

         *3(b)    Bylaws of Martin Industries, Inc. as amended and restated on
                  May 16, 1997 which were filed as Exhibit 3(b) to the
                  Registrant's Quarterly statement on Form 10-Q for the 26-week
                  period ended June 28, 1997 (Commission File No. 0-26228).

         *3(c)    Amendments to the By-laws of Martin Industries, Inc. which
                  were filed as Exhibit 99.1 to the Company's Form 8-K on
                  February 24, 1999 (Commission File No. 0-26228).

         *4(a)    Article 4 of the Restated Certificate of Incorporation of
                  Martin Industries, Inc. (included in Exhibit 3(a)).
</TABLE>


                                       21
<PAGE>   23

<TABLE>
         <S>      <C>
         *4(b)    Rights Agreement, dated as of February 23, 1999, between
                  Martin Industries, Inc. and SunTrust Bank, Atlanta, Rights
                  Agent, which was filed as Exhibit 1 to the Company's
                  Registration Statement on Form 8-A (Commission File No.
                  0-26228).
</TABLE>

         (b) Reports on Form 8-K

         On March 19, 2001 the Company filed a Current Report on Form 8-K in
         which the Company reported under Item 5 the issuance of a press release
         with respect to the proposed delisting of the Company's Common Stock
         from Nasdaq.

---------------
 (*) Incorporated by reference

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995:

With the exception of historical information, the matters and statements
discussed, made or incorporated by reference in this Quarterly Report on Form
10-Q constitute forward-looking statements and are discussed, made or
incorporated by reference, as the case may be, pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Specifically, this Quarterly Report on Form 10-Q contains forward-looking
statements regarding:

         -        the Company's efforts to negotiate amended or new credit
                  facilities for its domestic and Canadian operations;

         -        the Company's beliefs with respect to the funding of its
                  operations during fiscal year 2001;

         -        the possible outcome of the Company's appeal of Nasdaq's
                  decision to delist the Company's Common Stock;

         -        the ability of the Company's Common Stock to trade on the
                  OTCBB and the likely trading volume and price if the Company's
                  Common Stock begins trading on the OTCBB;

         -        the likely benefits from cost reductions and plant
                  consolidations;

         -        the short-term and long-term programs being undertaken by the
                  Company and expectations regarding the future competitiveness
                  of the Company's products;

         -        the Company's future ability to meet the needs and
                  expectations of its customers;

         -        results in future quarters;


                                       22
<PAGE>   24

         -        the estimated reserve for excess and obsolete inventories;

         -        the utilization of deferred tax assets related to net
                  operating loss carryforwards; and

         -        the Company's expectations and estimates regarding its foreign
                  currency exchange rate and interest rate risk.

Wherever possible, the Company has identified these forward-looking statements
(as defined in Section 21E of the Securities Exchange Act of 1934) by words such
as "anticipates," "may," "believes," "estimates," "projects," "expects,"
"intends," and words of similar import. In addition to the statement included in
this Quarterly Report of Form 10-Q, the Company and its representatives may from
time to time make other oral or written statements that are also forward-looking
statements.

Forward-looking statements contained in this Quarterly Report on Form 10-Q and
those that may be made in the future involve certain assumptions, risks and
uncertainties that could cause actual results to differ materially from those
included in or contemplated by the statements. In particular, there can be no
assurance that the Company will be successful in amending and extending its
current credit facilities or securing new lines of credit or, if necessary,
obtaining additional extensions of its current credit facilities with its
domestic and Canadian lenders; that, pending the securing of amended or new
financing, the Company will continue to generate funds or have credit available
to it that is sufficient to continue to fund its operations; that the Company's
cost reduction and plant consolidations will be successful or that the Company
will achieve a level of revenue that will allow the Company to return to
profitability; that the Company's appeal will be granted by Nasdaq's Listing
Qualifications Panel; that the Company's Common Stock will be eligible to trade
on the OTCBB if it is delisted by Nasdaq; that the current market makers and
other broker-dealers will continue to make a market in the Company's Common
Stock if it begins trading on the OTCBB; that the Company's Common Stock will
continue to trade at the same volume or in the same price range on the OTCBB as
it has historically traded on The Nasdaq National Market; that the Company will
be able to successfully implement or complete the short-term and long-term
programs being undertaken by the Company; that the Company's new products will
meet its expectations; that the Company will be able in the future to meet the
needs and expectations of its customers; that the Company will not exceed the
estimated reserve for excess and obsolete inventories or will utilize deferred
tax assets related to net operating loss carryforwards. These assumptions, risks
and uncertainties include, but are not limited to, those associated with general
economic cycles; the cyclical nature of the industries in which the Company
operates and the factors related thereto, including consumer confidence levels,
inflation, employment and income levels, the availability of credit, and factors
affecting the housing industry; the potential in the Company's business to
experience significant fluctuations in quarterly earnings; the Company's ability
to generate cash or secure adequate financing to fund its operations; the
Company's business strategy; potential losses from product liability and
personal injury lawsuits; the effects of seasonality and weather conditions on
the Company's home heating product sales and other sales; fluctuations in
quarterly earnings due to ESOP accounting; the effect of existing and new
governmental and environmental regulations applicable to the Company; the
dependence of the Company on key personnel; the highly competitive nature of
each of the industries in which the Company operates; the volatility of the
stock price at which outstanding shares of the Company may trade from time to
time; and the other risks and uncertainties discussed or indicated in all
documents filed by the Company with the Commission, including the Company's
Annual Report on Form 10-K filed with the Commission on April 2, 2001. The
Company expressly disclaims any obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.


                                       23
<PAGE>   25

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.

         MARTIN INDUSTRIES, INC.

         Date: May 15, 2001       By       /s/ James W. Truitt
                                     ------------------------------------------
                                     James W. Truitt
                                     Vice President and Chief Financial Officer
                                     and Secretary
                                     (Executed on behalf of Registrant and
                                     as Principal Financial Officer)


                                       24
<PAGE>   26

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number            Description of Exhibits                                                     Page No.
------            -----------------------                                                     -------

<S>               <C>                                                                         <C>
*3(a)             Form of Restated Certificate of Incorporation of Martin Industries,
                  Inc. which was filed as Exhibit 3(a) to the Registrant's Registration
                  Statement on Form S-1 filed with the Commission on July 10, 1995
                  (Registration No. 33-90432).

*3(b)             By-laws of Martin Industries, Inc. as amended and restated on May 16,
                  1997 which were filed as Exhibit 3(b) to the Registrant's Quarterly
                  Statement on Form 10-Q for the 26-week period ended June 28, 1997
                  (Commission File No. 0-26228).

*3(c)             Amendments to the By-laws of Martin Industries, Inc. which were filed
                  as Exhibit 99.1 to the Company's Form 8-K on February 24, 1999
                  (Commission File No. 0-26228).

*4(a)             Article 4 of the Restated Certificate of Incorporation of Martin
                  Industries, Inc. (included in Exhibit 3(a)).

*4(b)             Rights Agreement, dated as of February 23, 1999, between Martin
                  Industries, Inc. and SunTrust Bank, Atlanta, Rights Agent, which was
                  filed as Exhibit 1 to the Company's Registration Statement on Form 8-A
                  (Commission File No. 0-26228).
</TABLE>

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

 (*) Incorporated by reference