<PAGE>   1
                UNITED STATES 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

                   For the quarterly period ended July 1, 2000
                   -------------------------------------------

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________ to __________

                         Commission file number 0-18446

                              Fairwood Corporation
                              --------------------
             (Exact name of registrant as specified in its charter)

                 Delaware                                  13-3472113
                 --------                                  ----------
     (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                   Identification No.)

    One Commerce Center
    1201 N. Orange St., Suite 790, Wilmington, DE             19801
    ---------------------------------------------             -----
      (Address of principal executive offices)              (Zip Code)

                               (302) 884-6749
                               --------------
            (Registrant's telephone number, including area code)

                               Not Applicable
            (Former name, former address and former fiscal year,
                        if changed since last report)


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, 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 practical date.

<TABLE>
<CAPTION>
                                                       Outstanding at
          Class                                         July 1, 2000
          -----                                    ----------------------

<S>                                                <C>
Class A Voting, $.01 Par Value                                   500
------------------------------                     ----------------------

Class B Non-Voting, $.01 Par Value                           999,800
----------------------------------                 ----------------------
</TABLE>


<PAGE>   2

                               FAIRWOOD CORPORATION AND SUBSIDIARIES
                               Condensed Consolidated Balance Sheets
                                      (Dollars in thousands)



<TABLE>
<CAPTION>
                                                               July 1,       December 31,
                           Assets                               2000             1999
                           ------                           ------------     ------------
                                                            (Unaudited)
<S>                                                         <C>               <C>
Current Assets:
  Cash and cash equivalents                                  $   2,048            5,135
                                                              --------         --------

  Trade accounts receivable                                      9,882            8,455
  Less allowance for discounts and doubtful accounts               313              325
                                                              --------         --------

                                                                 9,569            8,130
                                                              --------         --------

  Inventories                                                    8,546            6,841

  Prepaid expenses and other current assets                        245              166
                                                              --------         --------


               Total current assets                             20,408           20,272
                                                              --------         --------



Property, plant and equipment, at cost                           8,224            8,127
  Less accumulated depreciation and amortization                 5,374            5,185
                                                              --------         --------

                                                                 2,850            2,942
                                                              --------         --------



Other assets                                                        40              125
                                                              --------         --------



                                                             $  23,298           23,339
                                                              ========         ========
</TABLE>


                                                                     (Continued)

                                      - 2 -
<PAGE>   3



                      FAIRWOOD CORPORATION AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                             (Dollars in thousands)



<TABLE>
<CAPTION>
                                                            July 1,       December 31,
                 Liabilities and Deficit                     2000             1999
                 -----------------------                  ------------    -----------
                                                           (Unaudited)
<S>                                                         <C>             <C>
Current Liabilities:
  Current maturities of long-term debt:
    Revolving credit                                          $399,949              -
    Senior subordinated debentures                              80,000              -
    Senior subordinated pay-in-kind debentures                 105,853        105,853
    Merger debentures                                           62,928         62,928
  Accrued interest                                             162,709        147,490
  Accounts payable                                               2,952          3,015
  Due to affiliate                                               4,032          4,032
  Accrued expenses                                               2,436          3,611
  Federal and state income taxes                                   133            133
                                                              --------       --------

               Total current liabilities                       820,992        327,062
                                                              --------       --------

Long-term debt:
  Revolving credit                                                   -        372,736
  Senior subordinated debentures                                     -         80,000
                                                              --------       --------

                                                                     -        452,736
                                                              --------       --------

Other liabilities                                                3,335          2,771
                                                              --------       --------

Redeemable preferred stock:
  Junior preferred, cumulative, par value $.01 per share           100            100
                                                              --------       --------

Common stock and other shareowners' deficit:
  Common stock and additional paid-in capital                   55,948         55,948
  Accumulated other comprehensive loss                       (   1,644)     (   1,644)
  Accumulated deficit                                        ( 855,433)     ( 813,634)
                                                              --------       --------

                                                             ( 801,129)     ( 759,330)
                                                              --------       --------


                                                            $   23,298         23,339
                                                              ========       ========
</TABLE>

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.


                                      - 3 -
<PAGE>   4


                      FAIRWOOD CORPORATION AND SUBSIDIARIES

            Unaudited Condensed Consolidated Statements of Operations

                                 (In thousands)




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


                                   July 1,        July 3,           July 1,        July 3,
                                    2000           1999              2000           1999
                                  --------       --------          --------       ---------

<S>                              <C>            <C>               <C>            <C>
Net sales                        $  15,047         33,106            28,510         77,957
                                   -------        -------           -------        -------

Cost of sales                       12,113         32,018            22,788         74,008

Selling, administrative and
  general expenses                   2,572          4,602             4,953         10,354
                                   -------        -------           -------        -------

                                    14,685         36,620            27,741         84,362
                                   -------        -------           -------        -------

Operating income (loss)                362       (  3,514)              769       (  6,405)

Interest income                         31             19                77             26

Interest on indebtedness          ( 22,555)      ( 18,715)         ( 42,576)      ( 36,982)

Loss on sale of Stratford
 Division                                -       (    967)                -       (    967)

Other income (expenses), net      (     14)            88          (     14)           102
                                   -------        -------           -------        --------


Loss before income taxes          ( 22,176)      ( 23,089)         ( 41,744)      ( 44,226)


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


Net loss                         $( 22,176)      ( 23,089)         ( 41,744)      ( 44,226)
                                   =======        =======           =======        =======
</TABLE>



See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.


                                      - 4 -
<PAGE>   5


                      FAIRWOOD CORPORATION AND SUBSIDIARIES
            Unaudited Condensed Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                    Six Months Ended
                                                                 -----------------------

                                                                   July 1,       July 3,
                                                                    2000          1999
                                                                  --------      --------
<S>                                                             <C>            <C>
Cash flows from operating activities:
  Net loss                                                       $( 41,744)     ( 44,226)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                    189           956
      Gain on disposal of property, plant and equipment                  -      (     21)
      Loss on disposal of Stratford Division                             -           967
      Changes in assets and liabilities, net of disposition:
        Accounts receivable                                       (  1,439)        4,838
        Inventories                                               (  1,705)     (  1,247)
        Prepaid expenses and other current assets                 (     79)          285
        Accounts payable                                          (    118)        4,504
        Accrued expenses                                            14,044        14,372
        Federal and state income taxes                                   -      (  4,493)
        Due to affiliate                                                 -         1,073
        Other, net                                                     649           270
                                                                   --------      -------
Cash used - operating activities                                  ( 30,203)     ( 22,722)
                                                                   -------       -------

Cash flows from investing activities:
  Disposition of property, plant and equipment                           -            21
  Disposition of Stratford Division                                      -        14,047
  Capital expenditures                                            (     97)     (    404)
  Advances to affiliate                                                  -           500
                                                                   -------       -------
Cash provided (used) - investing activities                       (     97)       14,164
                                                                   -------       -------

Cash flows from financing activities:
  (Repayments) borrowings - overdraft                                    -      (  2,212)
  Proceeds from revolving credit                                    27,213        45,945
  Repayment of long-term debt                                            -      (     18)
  (Repayment of) proceeds from credit line, net                          -      ( 27,480)
                                                                   -------       -------
Cash provided - financing activities                                27,213        16,235
                                                                   -------       -------

Increase (decrease) in cash and cash equivalents                  (  3,087)        7,677
Cash and cash equivalents:
  Beginning of period                                                5,135         2,165
                                                                   -------       -------
  End of period                                                  $   2,048         9,842
                                                                   =======       =======

Supplemental schedule of cash flow information
----------------------------------------------
Cash paid during year for:
  Interest                                                       $  27,188        21,639
  Income tax payments, net                                               -         4,493
</TABLE>

Supplemental schedule of noncash operating and financing activities In the six
month periods ending July 1, 2000 and July 3, 1999 the Company recognized $55
thousand and $47 thousand, respectively, of accrued dividends payable to
shareholders, which dividends have not been paid.

Cash and cash equivalents include cash in banks and highly-liquid short-term
investments having a maturity of three months or less on date of purchase.

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.

                                      - 5 -

<PAGE>   6


                      FAIRWOOD CORPORATION AND SUBSIDIARIES

         Notes to Unaudited Condensed Consolidated Financial Statements


1.    In the opinion of management, the accompanying unaudited condensed
      consolidated financial statements include all adjustments, consisting of
      only normal recurring adjustments, necessary to present fairly the results
      of operations for the three and six months ended July 1, 2000 and July 3,
      1999, the financial position at July 1, 2000 and December 31, 1999 and the
      cash flows for the six months ended July 1, 2000 and July 3, 1999. The
      results of operations for the three and six month periods ended July 1,
      2000 are not necessarily indicative of the results to be expected for the
      full year.

      Certain reclassifications have been made for 1999 amounts to conform to
      the 2000 presentations.

2.    The accompanying unaudited condensed consolidated financial statements
      should be read in conjunction with Fairwood Corporation's ("Fairwood or
      Company") audited consolidated financial statements included in the 1999
      annual report on Form 10-K. Fairwood is a holding company as is its
      subsidiary, Consolidated Furniture Corporation ("Consolidated Furniture")
      which is the parent of Furniture Comfort Corporation ("Furniture Comfort",
      formerly Futorian Furnishings, Inc.), whose operating division,
      Barcalounger Division ("Barcalounger") manufactures motion upholstered
      residential furniture.

      On June 3, 1999, Furniture Comfort, Consolidated Furniture's operating
      subsidiary, sold substantially all of the assets of the Stratford
      Division. The proceeds from the sale were used to pay-down Furniture
      Comfort's revolving credit and term loan. The sale included substantially
      all of the business and assets of the Stratford Division, including its
      office and showroom in Bannockburn, Illinois and the assignment of leases
      for certain other manufacturing and showroom facilities.

3.    Fairwood's comprehensive loss includes a minimum pension liability on its
      subsidiaries retirement plan, which is calculated and reported annually.
      As a result, the minimum pension liability has no effect on the quarterly
      unaudited condensed consolidated statements of operations.

4.    All inventories (materials, labor and overhead) are valued at the lower of
      cost or market using the last-in, first-out (LIFO) method. The components
      of inventory, in thousands, are as follows:

<TABLE>
<CAPTION>
                                           July 1, 2000     December 31, 1999
                                           ------------     -----------------
                                            (Unaudited)

<S>                                         <C>                 <C>
        Raw materials                        $ 4,821              4,486
        In process                             2,207              2,144
        Finished goods                         2,827              1,612
                                              ------             ------
        Inventories at
          first-in, first out                  9,855              8,242
        LIFO reserve                           1,309              1,401
                                              ------             ------
        Inventories at LIFO                  $ 8,546              6,841
                                              ======             ======
</TABLE>


                                      - 6 -



<PAGE>   7

                      FAIRWOOD CORPORATION AND SUBSIDIARIES

         Notes to Unaudited Condensed Consolidated Financial Statements


5.    In the second quarter of 1999, Fairwood paid an estimated tax liability to
      the Internal Revenue Service ("IRS") arising out of an IRS examination.
      Fairwood continues to be obligated to the extent of any adjustment by the
      IRS to the interest component of the settlement and the state tax effect
      of this settlement. An accrual for additional interest of $3.6 million and
      taxes of $0.1 million remains at July 1, 2000. These accruals for interest
      and taxes are included in accrued interest and Federal and state income
      taxes, respectively, on the accompanying consolidated balance sheet. The
      Company has not reached final settlement with all taxing authorities,
      therefore the amount of the accruals are subject to change.

      With the exception of adjustments resulting from the IRS settlement, no
      provision for Federal income taxes has been provided during the six months
      ended July 1, 2000 and July 3, 1999, as the Company is in a net operating
      loss carryforward position, and the valuation allowance has been increased
      to offset any future benefit from this position.

6.    On April 1, 1995 and each semi-annual interest payment date thereafter,
      Fairwood failed to make the required interest payments due on the senior
      subordinated pay-in-kind debentures and merger debentures (collectively,
      the "Fairwood Debentures") and Fairwood does not expect to make the cash
      interest payments required under the Fairwood Debentures on any future
      semi-annual interest payment date. Accrued interest of $155.4 million on
      the Fairwood Debentures, which includes $94.3 million due to Court Square
      Capital Limited ("CSCL"), is included in accrued interest on the
      accompanying unaudited condensed consolidated balance sheet as of July 1,
      2000. On January 3, 1996, certain holders of the Fairwood public
      debentures (the "Bondholders") filed an involuntary Chapter 7 petition
      against Fairwood in the United States Bankruptcy Court for the Southern
      District of New York (the "Bankruptcy Court.") Fairwood, Consolidated
      Furniture and certain Citicorp affiliates filed a motion in response to
      the involuntary filing seeking to dismiss the petition. By order dated
      December 4, 1996, the Bankruptcy Court denied the motion to dismiss the
      petition.

      Thereafter, on December 26, 1996, Fairwood exercised its right to convert
      the Chapter 7 case to a case under Chapter 11. As of the date hereof,
      Fairwood continues to operate as a debtor in possession under Section 1108
      of the Bankruptcy Code. The Chapter 11 case pertains only to Fairwood
      Corporation. Fairwood Corporation's direct and indirect subsidiaries,
      including Consolidated Furniture Corporation, Furniture Comfort
      Corporation, as well as its operating division, Barcalounger, are not
      parties to the bankruptcy. In April 1997, the Bondholders' filed a motion
      with the Bankruptcy Court seeking to convert Fairwood's Chapter 11 case to
      a case under Chapter 7 or, alternatively, for the appointment of a Chapter
      11 trustee. By order dated March 2, 1999, the Bondholders' motion to
      convert the case or, alternatively, for the appointment of a Chapter 11
      trustee, was denied in its entirety. On March 10, 2000, the District Court
      entered an Order affirming the Bankruptcy Court's decision in all
      respects. By notice dated April 11, 2000, the Bondholder's have appealed
      the District Court's decision to the Second Circuit Court of Appeals.

                                      - 7 -


<PAGE>   8

                      FAIRWOOD CORPORATION AND SUBSIDIARIES

      During the pendency of the appeal, Consolidated Furniture and subsidiaries
      are expecting to continue to operate in the normal course of business.

      Based on uncertainties involved with respect to these matters, Fairwood
      continues to accrue interest on the Fairwood Debentures. The Fairwood
      Debentures and related accrued interest are liabilities subject to
      compromise.

7.    Consolidated Furniture's revolving credit under its Credit Agreement with
      CSCL (the "Credit Agreement") and senior subordinated debentures mature on
      January 2, 2001 and, accordingly, have been classified as current
      liabilities in the accompanying unaudited condensed consolidated balance
      sheet of the Company as of July 1, 2000. Consolidated Furniture intends to
      negotiate an extension of these maturity dates or refinance such
      indebtedness prior to January 2, 2001. However, there can be no assurance
      that Consolidated Furniture will be able to negotiate such an extension,
      or that the terms of such extension or refinancing will not be on terms
      less favorable than those currently in place.

      Fairwood's failure to make the April 1, 1995 and subsequent period
      interest payments constitutes an event of default which permits the
      acceleration of the Fairwood Debentures by the demand of the holders of
      the requisite aggregate principal amount of the debentures. Upon
      acceleration, the Fairwood Debentures would be currently due and payable.
      Accordingly, the Fairwood Debentures have been classified as current
      liabilities in the accompanying unaudited condensed consolidated balance
      sheet as of July 1, 2000.

8.    Until June 3, 1999 Stratford provided new product development and selling
      activities to Simmons, an affiliate. Under the agreement to provide
      services, Stratford recognized approximately $0.1 million for the period
      April 4, 1999 through June 3, 1999 and approximately $0.3 million for
      the period January 1, 1999 through June 3, 1999. Stratford was also
      reimbursed approximately $0.5 million and $1.2 million in selling
      expenses for the period April 4, 1999 through June 3, 1999 and the period
      January 1, 1999 through June 3, 1999, respectively. Also for the period
      April 4, 1999 through June 3, 1999 and the period January 1, 1999 through
      June 3, 1999, respectively, Stratford recognized approximately $.6 million
      and $1.4 million of reimbursements for general and administrative
      expenses.

9.    Prior to the sale of Stratford, Fairwood's reportable segments were
      strategic business units that offer different products. They were managed
      separately because each business had distinctly different markets and they
      had separate marketing and manufacturing facilities.




                                      - 8 -


<PAGE>   9

                      FAIRWOOD CORPORATION AND SUBSIDIARIES

         Notes to Unaudited Condensed Consolidated Financial Statements


      The segment financial information, in thousands, is as follows:

<TABLE>
<CAPTION>
                                   Six months ended July 1, 2000
                                   -----------------------------
                                           (unaudited)


                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    -----------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $        -     $     28,510    $       -     $          -    $   28,510
Interest expense
 (income), net                   -         (     31)      42,530                -        42,499
Segment profit (loss)            -            2,371     ( 44,115)               -      ( 41,744)


<CAPTION>
                                   Six months ended July 3, 1999
                                   -----------------------------
                                           (unaudited)


                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    -----------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $   49,739     $     28,218    $       -     $          -    $   77,957
Intersegment income            882                -            -       (      882)            -
Interest expense, net        1,464               17       35,475                -        36,956
Segment profit (loss)     ( 10,320)           2,352     ( 36,258)               -      ( 44,226)


<CAPTION>
                                  Three months ended July 1, 2000
                                  -------------------------------
                                           (unaudited)


                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    -----------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $        -     $     15,047    $       -     $          -    $   15,047
Interest expense
 (income), net                   -         (      9)      22,533                -        22,524
Segment profit (loss)            -            1,306     ( 23,482)               -      ( 22,176)


<CAPTION>
                                  Three months ended July 3, 1999
                                  -------------------------------
                                           (unaudited)


                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    -----------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $   19,240     $     13,866    $       -     $          -    $   33,106
Intersegment income            336                -            -       (      336)            -
Interest expense, net          780               10       17,906                -        18,696
Segment profit (loss)     (  5,739)           1,188     ( 18,538)               -      ( 23,089)
</TABLE>



                                      - 9 -

<PAGE>   10







Item 2.

                      FAIRWOOD CORPORATION AND SUBSIDIARIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                            AND RESULTS OF OPERATIONS


Certain information in this quarterly report on Form 10-Q, including but not
limited to the Management's Discussion and Analysis of Financial Condition and
Results of Operations, may constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933 (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934. Certain forward-looking
statements can be identified by the use of forward-looking terminology such as,
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "estimated," or "anticipates" or the negative thereof or
other comparable terminology, or by discussions of strategy, plans or
intentions. Forward-looking statements involve risks and uncertainties,
including those described in the Company's Annual Report on Form 10-K, which
could cause actual results to be materially different than those in the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company assumes no obligation to update such information.


Liquidity and Capital Resources

At July 1, 2000, the Company had long-term debt of approximately $648.7 million,
all of which is classified as current liabilities and of which approximately
$585.8 is owed to Court Square Capital Limited ("CSCL"), an affiliate. Long-term
debt was approximately $625.5 million at December 31, 1999, of which $168.8
million was current and approximately $562.6 million was owed to CSCL. Accrued
interest on long-term debt was approximately $162.7 million and $147.5 million
at July 1, 2000 and December 31, 1999, respectively. Approximately $98.1 million
and $89.7 million of the accrued interest was owed to CSCL at July 1, 2000 and
December 31, 1999, respectively. The Company's outstanding indebtedness includes
its senior subordinated pay-in-kind debentures and merger debentures
(collectively, the "Fairwood Debentures"). Fairwood had the option during the
first five years to pay interest on the Fairwood Debentures either through cash
payments or through the distribution of additional securities. During such
five-year period, Fairwood distributed additional securities in satisfaction of
its interest obligations.

Fairwood is a holding company with no operations. Fairwood has effectively no
cash flow from its subsidiaries because the cash produced by the operations of
the subsidiaries is not expected for the foreseeable future to be sufficient to
permit the subsidiaries to transfer funds to Fairwood. Fairwood's sole asset is
the stock of Consolidated Furniture, its wholly-owned subsidiary. Fairwood's
obligations under the Fairwood Debentures (as defined below) are collateralized
by Fairwood's pledge of its interest in Consolidated Furniture's capital stock.
CSCL, as holder of Fairwood's senior subordinated pay-in-kind debentures, has a
first priority collateral interest in all of the outstanding capital stock of
Consolidated Furniture, and the holders of the merger debentures have a second
priority collateral interest in such capital stock. The Fairwood Debentures are
obligations of Fairwood. Consolidated Furniture is not an obligor under the
Fairwood Debentures.

                                     - 10 -


<PAGE>   11

However, Consolidated Furniture is an obligor under a revolving credit agreement
with CSCL (the "Credit Agreement"). The Credit Agreement does not permit
Consolidated Furniture to borrow funds and transfer them to Fairwood to enable
Fairwood to make cash interest payments on the Fairwood Debentures. The
borrowings under the Credit Agreement are collateralized by substantially all of
the assets of Consolidated Furniture. Consolidated Furniture is also a holding
company without operations. Its primary asset is the outstanding capital stock
of Furniture Comfort Corporation ("Furniture Comfort", formerly Futorian
Furnishings, Inc.), which has operations that it conducts through its one
remaining division, Barcalounger. Furniture Comfort is also a direct obligor
under the Credit Agreement and has pledged substantially all of its assets to
collateralize the obligations under the Credit Agreement. Furniture Comfort is
not an obligor under the Fairwood Debentures.

On April 1, 1995 and each semi-annual interest payment date thereafter, Fairwood
failed to make the required interest payments due on the Fairwood Debentures and
Fairwood does not expect to make the cash interest payments required under the
Fairwood Debentures on any future semi-annual interest payment date. Accrued
interest of $155.4 million on the Fairwood Debentures, which includes $94.3
million due to CSCL, is included in accrued interest in the accompanying
unaudited condensed consolidated balance sheet as of July 1, 2000.

There can be no assurance that Fairwood will be able to continue as a going
concern. On January 3, 1996, certain holders of the Fairwood public debentures
(the "Bondholders") filed an involuntary Chapter 7 petition against Fairwood in
the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court.") Fairwood, Consolidated Furniture and certain Citicorp
affiliates filed a motion in response to the involuntary filing seeking to
dismiss the petition. By order dated December 4, 1996, the Bankruptcy Court
denied the motion to dismiss the petition.

Thereafter, on December 26, 1996, Fairwood exercised its right to convert the
Chapter 7 case to a case under Chapter 11. As of the date hereof, Fairwood
continues to operate as a debtor in possession under Section 1108 of the
Bankruptcy Code. The Chapter 11 case pertains only to Fairwood Corporation.
Fairwood Corporation's direct and indirect subsidiaries, including Consolidated
Furniture Corporation, Furniture Comfort Corporation, as well as its operating
division, Barcalounger, are not parties to the bankruptcy. In April 1997, the
Bondholders' filed a motion with the Bankruptcy Court seeking to convert
Fairwood's Chapter 11 case to a case under Chapter 7 or, alternatively, for the
appointment of a Chapter 11 trustee. By order dated March 2, 1999, the
Bondholders' motion to convert the case or, alternatively, for the appointment
of a Chapter 11 trustee, was denied in its entirety. On March 10, 2000, the
District Court entered an Order affirming the Bankruptcy Court's decision in all
respects. By notice dated April 11, 2000, the Bondholder's have appealed the
District Court's decision to the Second Circuit Court of Appeals. During the
pendency of the appeal, Consolidated Furniture and subsidiaries are expecting to
continue to operate in the normal course of business.



                                     - 11 -


<PAGE>   12

Fairwood's failure to make the April 1, 1995 and subsequent period interest
payments constitutes an event of default which permits the acceleration of the
Fairwood Debentures by the demand of the holders of the requisite aggregate
principal amount of the debentures, subject to a 180-day acceleration blockage
provision. Upon acceleration, the Fairwood Debentures would be due and payable.
Accordingly, the Fairwood Debentures have been classified as current liabilities
in the accompanying unaudited condensed consolidated balance sheet as of July 1,
2000.

Consolidated Furniture, Fairwood's wholly-owned subsidiary, is expected to
service its interest payment obligations under the Credit Agreement and senior
subordinated debentures from its cash flow from operations and available credit
facilities. Throughout 1999 and the first six months of 2000, Consolidated
Furniture funded interest obligations related to long-term indebtedness on the
revolving line of credit and the senior subordinated debentures through
increased borrowings from CSCL under the Credit Agreement. Borrowings from CSCL
during the first six months of 2000 were approximately $27.2 million. There were
no principal repayments to CSCL during the first six months of 2000.
Consolidated Furniture is dependent upon CSCL for funding of its debt service
costs. CSCL has in the past increased its revolving credit line to Consolidated
Furniture in order for Consolidated Furniture to meet its debt service
obligations on the revolving line of credit and the senior subordinated
debentures. Under the Credit Agreement, Consolidated Furniture and its
subsidiaries are generally restricted from transferring moneys to Fairwood with
the exception of amounts for (a) specified administrative expenses of Fairwood
and (b) payment of income taxes. The senior subordinated debentures, senior
subordinated pay-in-kind debentures and merger debentures also have certain
restrictions as to the payment and transfer of moneys.

Management believes that cash flow from operations and funding from CSCL will be
adequate to meet Consolidated Furniture's obligations on the revolving credit
and the senior subordinated debentures through December 31, 2000.

Consolidated Furniture's revolving credit and senior subordinated debentures
mature on January 2, 2001 and, accordingly, have been classified as current
liabilities in the accompanying unaudited condensed consolidated balance sheet
as of July 1, 2000. Consolidated Furniture intends to negotiate an extension of
these maturity dates with CSCL or refinance such indebtedness prior to January
2, 2001. However, there can be no assurance that Consolidated Furniture will be
able to negotiate such an extension, or that the terms of such extension or
refinancing will not be on terms less favorable than those currently in place.

For a discussion of the status of the IRS examination, refer to Fairwood's
consolidated financial statements as of December 31, 1999 included in Fairwood's
Form 10-K, and footnote 5 to Fairwood's condensed consolidated financial
statements included herein.

Results of Operations

Three Months Ended July 1, 2000 Versus Three Months Ended July 3, 1999

The following discussion presents the material changes in results of operations,
which have occurred in the second quarter of 2000 in comparison to the same
period in 1999. The comparability of these periods is impacted by the June 3,
1999 sale of the Stratford division.

                                     - 12 -


<PAGE>   13

Net sales on a consolidated basis were approximately $15.0 million in the second
quarter of 2000, a decrease of 54.7% from last year's second quarter
consolidated net sales of approximately $33.1 million. Cost of sales on a
consolidated basis decreased 62.2% in the second quarter of 2000 to $12.1
million, or 80.7% of net sales, as compared to $32.0 million, or 96.7% of net
sales, in 1999. These sales and cost of sales decreases were impacted largely by
the sale of Stratford. The decrease in cost of sales as a percentage of net
sales was primarily the result of the elimination of lower margin Stratford
sales.

Second quarter 2000 net sales by Barcalounger increased 8.7% to approximately
$15.0 million as compared to $13.8 million in 1999. This increase in sales
reflects an increase of 7.3% in the average selling prices and an increase in
sales volume of 1.3% in the second quarter of 2000 versus 1999. The increase is
due to the increase in sale of products with more expensive upper grade leather.
Barcalounger's cost of sales increased to 80.7% of net sales in the second
quarter of 2000, as compared to 80.4% of net sales for the second quarter of
1999.

Selling, administrative and general expenses on a consolidated basis for the
second quarters of 2000 and 1999 were approximately $2.6 million and $4.6
million, respectively, representing a decrease of 43.5%. This decrease is due
primarily to the June 3, 1999 sale of the Stratford division.

Interest expense, was approximately $22.6 million and $18.7 million for the
second quarters of 2000 and 1999, respectively, an increase of 20.9%. The
increase was primarily due to increased borrowings on the Credit Agreement
off-set partially by the repayment of the Furniture Comfort line of credit and
term loan.

Six Months Ended July 1, 2000 Versus Six Months Ended July 3, 1999

The following discussion presents the material changes in results of operations,
which have occurred in the first six months of 2000 in comparison to the same
period in 1999. The comparability of these periods is impacted by the June 3,
1999 sale of the Stratford division.

Net sales on a consolidated basis were approximately $28.5 million in the first
six months of 2000, a decrease of 63.5% from last year's first six months
consolidated net sales of approximately $78.0 million. Cost of sales on a
consolidated basis decreased 69.2% in first six months of 2000 to approximately
$22.8 million, or 80.0% of net sales, as compared to $74.0 million, or 94.9% of
net sales, in 1999. These sales and cost of sales decreases were impacted
largely by the sale of Stratford. The decrease in cost of sales as a percentage
of net sales was primarily the result of the elimination of lower margin
Stratford sales.

Barcalounger net sales for the first six months of 2000 were approximately $28.5
million, an increase of 1.1%, as compared to 1999 second quarter sales of $28.2
million, reflective of a 4.5% decrease in the number of pieces sold and a 5.7%
decrease in average selling prices. The increase is due to the increase in sale
of products with more expensive upper grade leather. Barcalounger's cost of
sales decreased to 80.0% of net sales in the first six months of 2000, as
compared to 80.1% of net sales in the first six months of 1999.




                                     - 13 -


<PAGE>   14

Selling, administrative and general expenses on a consolidated basis for the
first six months of 2000 and 1999 were approximately $5.0 million and $10.4
million, respectively, representing a decrease of 51.9%. This decrease is due
primarily to the June 3, 1999 sale of the Stratford division.

Interest expense, was approximately $42.6 million and $37.0 million for the
first six months of 2000 and 1999, respectively, an increase of 15.1%. The
increase was primarily due to increased borrowings on the Credit Agreement
offset partially by the repayment of the Furniture Comfort line of credit and
term loan.


No income taxes have been provided in the first six months of 2000 and 1999,
respectively, as the Company is in a net operating loss carry forward position,
and a valuation allowance has been increased to offset any future benefit from
these positions.


Part II OTHER INFORMATION

Item 1.  Legal Proceedings

            Reference is made to Item 3, Legal Proceedings, previously reported
            in the Registrant's Form 10-K for the year ended December 31, 1999
            for a description of pending legal action.

            There are certain legal proceedings arising out of the normal course
            of business, the financial risk of which are not considered material
            in relation to the consolidated financial position of the Company.

Item 6.  Exhibits and Reports on Form 8-K

      (a)   Exhibits

            None


      (b)   Reports on Form 8-K

            None







                                     - 14 -


<PAGE>   15

                      FAIRWOOD CORPORATION AND SUBSIDIARIES


                                   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.













                                           FAIRWOOD CORPORATION
                                           --------------------
                                               (Registrant)



                                         /s/ John B. Sganga
                                         -------------------------
                                         John B. Sganga
                                         Chief Financial Officer,
                                         Executive Vice President,
                                         Secretary and Treasurer







Date:  August 14, 2000




                                     - 15 -