<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 March 31, 2001
                  ---------------------------------------------

                                       OR

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

                         Commission file number 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.

                                                       Outstanding at
          Class                                        March 31, 2001
          -----                                    ----------------------

Class A Voting, $.01 Par Value                                   500
------------------------------                     ----------------------

Class B Non-Voting, $.01 Par Value                           999,800
----------------------------------                 ----------------------


<PAGE>   2


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



<TABLE>
<CAPTION>
                                                            March 31,      December 31,
                           Assets                             2001             2000
                           ------                         ------------     ------------
                                                          (Unaudited)
<S>                                                       <C>              <C>
Current Assets:
  Cash and cash equivalents                                  $   4,861            4,580
                                                              --------         --------

  Trade accounts receivable                                      9,758            9,501
  Less allowance for discounts and doubtful accounts               254              228
                                                              --------         --------

                                                                 9,504            9,273
                                                              --------         --------

  Inventories                                                    8,791            7,605

  Prepaid expenses and other current assets                        433              206
                                                              --------         --------


               Total current assets                             23,589           21,664
                                                              --------         --------



Property, plant and equipment, at cost                           8,350            8,327
  Less accumulated depreciation and amortization                 5,583            5,512
                                                              --------         --------

                                                                 2,767            2,815
                                                              --------         --------


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



                                                              $ 26,396           24,519
                                                              ========         ========
</TABLE>


                                                                     (Continued)

See accompanying notes to the Unaudited Condensed Consolidated Financial
Statements.

                                      - 2 -

<PAGE>   3


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


<TABLE>
<CAPTION>
                                                            March 31,     December 31,
                 Liabilities and Deficit                      2001            2000
                 -----------------------                  ------------    -----------
                                                          (Unaudited)
<S>                                                          <C>          <C>
Current Liabilities:
  Current maturities of long-term debt:
    Revolving credit                                          $447,669              -
    Senior subordinated debentures                              80,000              -
    Senior subordinated pay-in-kind debentures                 105,853        105,853
    Merger debentures                                           62,928         62,928
  Accrued interest                                             179,564        176,408
  Accounts payable                                               3,000          1,972
  Due to affiliate                                               3,970          3,976
  Accrued expenses                                               3,196          3,224
  Federal and state income taxes                                   133            133
                                                              --------       --------

               Total current liabilities                       886,313        354,494
                                                              --------       --------

Long-term debt:
  Revolving credit                                                   -        429,772
  Senior subordinated debentures                                     -         80,000
                                                              --------       --------

                                                                     -        509,772
                                                              --------       --------
Other liabilities                                                3,703          3,403
                                                              --------       --------

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 -
    Minimum pension liability                                (   2,102)     (   2,102)
  Accumulated deficit                                        ( 917,566)     ( 897,096)
                                                              --------       --------

                                                             ( 863,720)     ( 843,250)
                                                              --------       --------


                                                             $  26,396         24,519
                                                              ========       ========
</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
                                                                  --------------------------

                                                                   March 31,       April 1,
                                                                     2001           2000
                                                                   --------       ---------

<S>                                                               <C>             <C>
Net sales                                                         $  14,834         13,463
                                                                    -------        -------


Cost of sales                                                        11,866         10,675

Selling, administrative and
  general expenses                                                    2,410          2,381
                                                                    -------        -------


                                                                     14,276         13,056
                                                                    -------        -------



Operating income                                                        558            407


Interest income                                                          66             46


Interest on indebtedness                                           ( 21,060)      ( 20,021)


Loss on sale of property and equipment                             (      2)             -
                                                                    -------        --------


Loss before income taxes                                           ( 20,438)      ( 19,568)


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


Net loss                                                          $( 20,438)      ( 19,568)
                                                                    =======        =======
</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>
                                                                    Three Months Ended
                                                                --------------------------
                                                                  March 31,     April 1,
                                                                    2001          2000
                                                                  --------      --------

<S>                                                              <C>            <C>
Cash flows from operating activities:
  Net loss                                                       $( 20,438)     ( 19,568)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization                                     72            90
      Loss on disposal of property and equipment                         2             -
      Changes in assets and liabilities:
        Accounts receivable                                       (    231)     (    241)
        Inventories                                               (  1,186)     (  2,031)
        Prepaid expenses and other current assets                 (    227)     (    292)
        Accounts payable                                               996      (    205)
        Accrued expenses and interest                                3,128         3,323
        Other, net                                                     300           349
                                                                   -------       -------
Cash used in operating activities                                 ( 17,584)     ( 18,575)
                                                                   -------       -------

Cash flows from investing activities:
  Disposition of property and equipment                                  1             -
  Capital expenditures                                            (     27)     (     49)
                                                                   -------       -------
Cash used in investing activities                                 (     26)     (     49)
                                                                   -------       -------

Cash flows from financing activities:
  Repayments to affiliate                                         (      6)            -
  Proceeds from revolving credit                                    17,897        16,746
                                                                   -------       -------
Cash provided by financing activities                               17,891        16,746
                                                                   -------       -------
Increase (decrease) in cash and cash equivalents                       281      (  1,878)
Cash and cash equivalents:
  Beginning of period                                                4,580         5,135
                                                                   -------       -------
  End of period                                                  $   4,861         3,257
                                                                   =======       =======

Supplemental schedule of cash flow information
----------------------------------------------
Cash paid during period for:
  Interest                                                       $  17,904        16,752

Supplemental schedule of noncash operating and financing activities
-------------------------------------------------------------------
In the three month periods ended March 31, 2001 and April 1, 2000 the Company
recognized $32 thousand and $27 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.
</TABLE>


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, to present fairly the results of
        operations and cash flows for the three months ended March 31, 2001 and
        April 1, 2000, and the financial position at March 31, 2001 and December
        31, 2000. The results of operations for the three-month period ended
        March 31, 2001, are not necessarily indicative of the results to be
        expected for the full year.

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 2000
        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.

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>
                                          March 31, 2001    December 31, 2000
                                          --------------    -----------------
                                            (Unaudited)

<S>                                          <C>                 <C>
        Raw materials                        $ 5,005              4,334
        In process                             2,090              1,838
        Finished goods                         3,033              2,770
                                              ------             ------
        Inventories at
          first-in, first out                 10,128              8,942
        LIFO reserve                           1,337              1,337
                                              ------             ------
        Inventories at LIFO                  $ 8,791              7,605
                                              ======             ======
</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 $3.9 million and taxes of $0.1 million remains at March 31,
        2001. 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.

        No provision for Federal income taxes has been provided during the three
        months ended March 31, 2001 and April 1, 2000, 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 $175.7 million on
        the Fairwood Debentures, which includes $106.6 million due to Court
        Square Capital Limited ("CSCL"), is included in accrued interest on the
        accompanying unaudited condensed consolidated balance sheet as of March
        31, 2001. 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 operated 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. The Bondholders appealed to the Second Circuit
        Court of Appeals, which on

                                      - 7 -


<PAGE>   8

                      FAIRWOOD CORPORATION AND SUBSIDIARIES

         Notes to Unaudited Condensed Consolidated Financial Statements


        January 4, 2001 entered an order affirming the judgment of the District
        Court. Consolidated Furniture and subsidiaries in the meantime
        continue to operate in the normal course of business. (See note 9).

        Fairwood continues to recognize interest expense related to the Merger
        Debentures and Senior Subordinated Debentures although the interest on
        these notes may not be payable upon the final confirmation of the
        Chapter 11 bankruptcy proceedings. Interest expense of $6.8 million was
        recorded related to these notes on the Unaudited Condensed Consolidated
        Statements of Operations in each of the first quarters of 2001 and 2000.

7.      Consolidated Furniture's revolving credit under its Credit Agreement
        with CSCL, an affiliate (the "Credit Agreement") and senior subordinated
        debentures mature on January 2, 2002 and, accordingly, have been
        classified as current liabilities in the accompanying unaudited
        condensed consolidated balance sheet of the Company as of March 31,
        2001. Consolidated Furniture intends to negotiate an extension of these
        maturity dates prior to January 2, 2002. However, there can be no
        assurance that Consolidated Furniture will be able to negotiate such an
        extension, or that the terms of such extension 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 condensed consolidated balance
        sheets as of March 31, 2001 and December 31, 2000.

        The Company's outstanding indebtedness includes its senior subordinated
        pay-in-kind debentures and merger debentures (collectively, the
        "Fairwood Debentures"). All of the Fairwood Debentures at March 31, 2001
        and December 31, 2000, and $175.7 million and $168.9 million of accrued
        interest and $0.7 million and $0.6 million of accrued preferred stock
        dividends at March 31, 2001 and December 31, 2000, respectively, were
        subject to compromise in the bankruptcy proceedings. (See note 9).

8.      Prior to Furniture Comfort's sale of its Stratford operating division,
        Fairwood's reportable segments were two strategic business units that
        offered 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:





                        Three months ended March 31, 2001
                                   (unaudited)


<TABLE>
<CAPTION>
                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    -----------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $        -     $     14,834    $       -     $          -    $   14,834
Interest expense, net            -          (    55)      21,049                -        20,994
Segment profit (loss)            -            1,216     ( 21,654)               -      ( 20,438)
</TABLE>


                        Three months ended April 1, 2000
                                   (unaudited)


<TABLE>
<CAPTION>
                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    -----------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $        -     $     13,463    $       -     $          -    $   13,463
Interest expense, net            -          (    22)      19,997                -        19,975
Segment profit (loss)            -            1,065     ( 20,633)               -      ( 19,568)
</TABLE>


     9. By order dated May 9, 2001 the Bankruptcy Court dismissed Fairwood's
Chapter 11 case. It is not yet known what further action, if any, the
Bondholders will or could take. The Company has not yet determined what effect
this dismissal will have on the Company going forward.



                                      - 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," "estimates," or "anticipates" or the negative thereof or
derivatives 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 for the year ended December 31, 2000, 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 March 31, 2001, the Company had long-term debt of approximately $696.5
million, all of which is classified as current liabilities and approximately
$633.6 is owed to Court Square Capital Limited ("CSCL"), an affiliate. Long-term
debt was approximately $678.6 million at December 31, 2000, of which $168.8
million was current and approximately $615.7 million was owed to CSCL. Accrued
interest on long-term debt was approximately $179.6 million and $176.4 million
at March 31, 2001 and December 31, 2000, respectively. Approximately $106.6
million and $106.1 million of the accrued interest was owed to CSCL at March 31,
2001 and December 31, 2000, respectively. The Company's outstanding indebtedness
includes its senior subordinated pay-in-kind debentures and merger debentures
(collectively, the "Fairwood Debentures"). All of the Fairwood Debentures at
March 31, 2001 and December 31, 2000, and $175.7 million and $168.9 million of
accrued interest and $0.7 million and $0.6 million of accrued preferred stock
dividends at March 31, 2001 and December 31, 2000, respectively, were subject to
compromise in the bankruptcy proceedings.

Fairwood is a holding company with no operations. The Company has effectively no
cash flow from its subsidiaries because the cash produced by the operations of
the subsidiaries will not 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 are collateralized by Fairwood's
pledge of its interest in Consolidated Furniture's stock. CSCL, as holder of
Fairwood's senior subordinated pay-in-kind debentures, has a first priority
collateral interest in all of the outstanding stock of Consolidated Furniture,
and the holders of the merger debentures have a second priority collateral
interest in such 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 the 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 stock of Furniture Comfort
Corporation ("Furniture Comfort", formerly Futorian Furnishings, Inc.), which
has operations that it conducts through its one remaining operating 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 on
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 $175.7 million on the Fairwood Debentures, which includes $106.6
million due to CSCL, is included in accrued interest in the accompanying
unaudited condensed consolidated balance sheet as of March 31, 2001.

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. The Bondholders appealed to the Second Circuit Court of Appeals, which
on January 4, 2001 entered an order affirming the judgment of the District
Court.

By order dated May 9, 2001 the Bankruptcy Court dismissed Fairwood's Chapter 11
case. It is not yet known what further action, if any, the Bondholders will or
could take. The Company has not yet determined what effect this dismissal will
have on the Company going forward.



                                     - 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 condensed consolidated balance sheets as of March 31, 2001
and December 31, 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 2000 and the first quarter of 2001, 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 three months of 2001 were approximately $17.9 million. There
were no principal repayments to CSCL during the first three months of 2001.
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. However, there can be no assurance that CSCL will continue to
increase its revolving credit line to Consolidated Furniture to allow
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, 2001.

Consolidated Furniture's revolving credit and senior subordinated debentures
mature on January 2, 2002 and, accordingly, have been classified as current
liabilities in the accompanying unaudited condensed consolidated balance sheet
as of March 31, 2001. Consolidated Furniture intends to negotiate an extension
of these maturity dates with CSCL prior to January 2, 2002. However, there can
be no assurance that Consolidated Furniture will be able to negotiate such an
extension, or that the terms of such extension 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, 2000 included in Fairwood's
Form 10-K, and footnote 3 to Fairwood's condensed consolidated financial
statements included herein.




                                     - 12 -

<PAGE>   13

Results of Operations

Three Months Ended March 31, 2001 Versus Three Months Ended April 1, 2000

The following discussion presents the material changes in results of operations,
which have occurred in the first quarter of 2001 in comparison to the same
period in 2000.

Net sales on a consolidated basis were approximately $14.8 million in the first
quarter of 2000, an increase of 9.6% from last year's first quarter consolidated
net sales of approximately $13.5 million. This increase in sales reflects an
increase of 9.7% in the average selling prices and an increase in sales volume
of 1.5% in the first quarter of 2001 versus 2000. The increase in average
selling price is the result of price increases, with the results being reflected
with July 2000 shipments.

Cost of sales on a consolidated basis increased 11.2% in the first quarter of
2001 to $11.9 million, or 80.4% of net sales, as compared to $10.7 million, or
79.3% of net sales, in 2000. The increase in cost of sales as a percentage of
net sales was primarily the result of increased costs in 2001 for employee
hospitalization insurance and increases in customer service expenses partially
offset by the April 2000 price increases.

Consolidated selling, administrative and general expenses for the first quarters
of 2001 and 2000 were approximately $2.4 million.

Interest expense, was approximately $21.1 million and $20.0 million for the
first quarters of 2001 and 2000, respectively, an increase of approximately
5.5%. The increase was primarily due to increased borrowings on the Credit
Agreement.

No income taxes have been provided in the first quarters of 2001 and 2000,
respectively, as the Company is in a net operating loss carryforward position.
For a discussion of the status of the IRS examination, refer to the Company's
consolidated financial statements as of December 31, 2000 included in the
Company's Form 10-K, and footnote 5 to the Company's unaudited condensed
consolidated financial statements included herein.





                                     - 13 -

<PAGE>   14
                                   EXHIBIT A

       ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        Fairwood is exposed to risks related to fluctuations in interest rates
on the revolving credit facility and term loan agreement and the Credit
Agreement. Fairwood does not utlilize interest rate swaps, forwards or option
contracts on foreign currencies or commodities, or other types of derivative
instruments. Fairwood has other borrowing facilities, however these have fixed
interest rates.

        For fixed rate debt, changes in interest rates generally affect the fair
value of the underlying indebtedness, but not earnings or cash flows.
Conversely, for variable rate debt, changes in interest rates generally do not
impact fair value, but do affect future earnings and cash flows.

        Assuming the amount outstanding under the Credit Agreement remains at
$447.7 million, the balance at March 31, 2001, each one percentage point
increase in the prime interest rate would result in an increase in interest
expense for the coming year of approximately $4.5 million. The fixed rate debt
includes the following (in thousands):

<TABLE>
<CAPTION>
                                                                                Interest rate
                                                           Amount             At March 31, 2001
<S>                                                   <C>                    <C>
Senior subordinated debentures, due 2002               $   80,000                   18%
Senior subordinated pay-in-kind debentures, due 2001      105,853               15-1/2%
Merger debentures, due 2004                                62,928               16-7/8%
                                                       ----------
                                                       $  248,781
                                                       ----------
</TABLE>

        The fair value of the fixed rate debt, and changes in fair value due to
fluctuations in market rates cannot be reasonably estimated considering
Fairwood's ongoing financial difficulties.

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, 2000 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:  May 15, 2001







                                     - 15 -