<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 April 3, 1999
                  --------------------------------------------

                                       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                                         April 3, 1999
          -----                                    ------------------------

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>
                                                              April 3,      December 31,
                           Assets                               1999           1998
                           ------                          -------------    -----------
                                                            (Unaudited)
<S>                                                         <C>               <C>
Current Assets:

  Cash and cash equivalents                                 $    1,679          2,165
                                                              --------       --------


  Accounts and notes receivable:
    Trade                                                       21,123         22,662
    Notes receivable, affiliate                                    500            500
    Due from affiliate                                           3,323          4,089
                                                              --------       --------
                                                                24,946         27,251
  Less allowance for discounts and doubtful accounts             1,587          1,317
                                                              --------       --------

                                                                23,359         25,934
                                                              --------       --------


  Inventories                                                   17,975         14,666

  Prepaid expenses and other current assets                      2,870          2,567
                                                              --------       --------

               Total current assets                             45,883         45,332
                                                              --------       --------


Property, plant and equipment, at cost                          32,935         32,874
  Less accumulated depreciation and amortization                20,824         20,380
                                                              --------       --------

                                                                12,111         12,494
                                                              --------       --------


Other assets                                                       337            337
                                                              --------       --------





                                                            $   58,331        58,163
                                                              ========      ========
</TABLE>


                                                                     (Continued)


                                      - 2 -
<PAGE>   3
                      FAIRWOOD CORPORATION AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                             April 3,      December 31,
                 Liabilities and Deficit                       1999            1998
                 -----------------------                   ------------    -----------
                                                           (Unaudited)
<S>                                                         <C>             <C>
Current Liabilities:
  Line of credit and term loan                              $   26,356         27,480
  Overdraft                                                      1,860          2,212
  Current maturities of long-term debt:
    Revolving credit                                           320,030              -
    Senior subordinated debentures                              80,000              -
    Senior subordinated pay-in-kind debentures                 105,853        105,853
    Merger debentures                                           62,928         62,928
    Other                                                           45             45
  Accounts payable                                               9,004          7,092
  Accrued interest                                             121,862        118,462
  Accrued expenses                                              11,544          8,389
  Federal and state income taxes                                 5,027          5,027
                                                              --------       --------

               Total current liabilities                       744,509        337,488
                                                              --------       --------

Long-term debt:
  Revolving credit                                                   -        305,855
  Senior subordinated debentures                                     -         80,000
  Mortgage payable                                               1,995          2,006
                                                              --------       --------

                                                                 1,995        387,861
                                                              --------       --------

Deferred income taxes                                            1,957          1,957
Other liabilities                                                  245             72
                                                              --------       --------

                                                                 2,202          2,029
                                                              --------       --------

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 income                     (      27)     (      27)
  Accumulated deficit                                        ( 746,396)     ( 725,236)
                                                              --------       --------
                                                             ( 690,475)     ( 669,315)
                                                              --------       --------


                                                            $   58,331         58,163
                                                              ========       ========
</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
                                                                     ------------------


                                                                   April 3,      March 28,
                                                                     1999           1998
                                                                   --------      ---------
<S>                                                               <C>              <C>
Net sales                                                         $  44,851         43,024
                                                                    -------        -------


Cost of sales                                                        41,990         39,900

Selling, administrative and
  general expenses                                                    5,752          6,222
                                                                    -------        -------

                                                                     47,742         46,122
                                                                    -------        -------

Operating loss                                                     (  2,891)      (  3,098)


Interest income                                                           7              4


Interest on indebtedness                                           ( 18,267)      ( 17,134)


Other income (expenses), net                                             14             50
                                                                    -------        -------


Loss before income taxes                                           ( 21,137)      ( 20,178)


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


Net loss                                                          $( 21,137)      ( 20,178)
                                                                    =======        =======
</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      
                                                                                    ------------------      
                                                                                                            
                                                                                   April 3,      March 28,  
                                                                                     1999          1998     
                                                                                   --------      ---------  
                                                                                                            
<S>                                                                               <C>            <C>        
Cash flows from operating activities:                                                                       
  Net loss                                                                        $( 21,137)     ( 20,178)  
  Adjustments to reconcile net loss to net cash                                                             
    used in operating activities:                                                                           
      Depreciation and amortization                                                     444           459   
      (Gain) loss on disposal of property, plant and equipment                     (     14)            -   
      Changes in assets and liabilities:                                                                    
        Accounts receivable                                                           2,575      (  3,953)  
        Inventories                                                                (  3,309)     (  2,187)  
        Prepaid expenses and other current assets                                  (    303)     (    524)  
        Accounts payable                                                              1,889      (  2,686)  
        Accrued expenses and interest                                                 6,555        18,931   
        Federal and state income taxes                                                    -      (     30)  
        Other, net                                                                      173           339   
                                                                                    -------       -------   
Cash used in operating activities                                                  ( 13,127)     (  9,829)  
                                                                                    -------       -------   
                                                                                                            
Cash flows from investing activities:                                                                       
  Disposition of property, plant and equipment                                           14             -   
  Capital expenditures                                                             (     61)     (    382)  
                                                                                    -------       -------   
Cash used in investing activities                                                  (     47)     (    382)  
                                                                                    -------       -------   
Cash flows from financing activities:                                                                       
  Overdraft                                                                        (    352)        2,247   
  Proceeds (payments) from line of credit                                                                   
   and term loan facility, net                                                     (  1,124)        4,300   
  Proceeds from note payable                                                              -        19,241   
  Repayments of long-term debt                                                     (     11)     (     11)  
  Proceeds from revolving credit                                                     14,175             -   
  Repayments of factoring facility, net                                            (      -)     ( 15,554)  
                                                                                    -------       -------   
Cash provided by financing activities                                                12,688        10,223   
                                                                                    -------       -------   
Increase (decrease) in cash and cash equivalents                                   (    486)           12   
Cash and cash equivalents:                                                                                  
  Beginning of period                                                                 2,165           605   
                                                                                    -------       -------   
  End of period                                                                   $   1,679           617   
                                                                                    =======       =======   
                                                                                                            
Supplemental schedule of cash flow information                                                              
----------------------------------------------                                                              
Cash paid during period for:                                                                                
  Interest                                                                        $  14,867           615   
  Income tax refunds (payments), net                                                      -             -   

Supplemental schedule of noncash operating and financing activities
-------------------------------------------------------------------
In the three month periods ending April 3, 1999 and March 28, 1998 the Company
recognized $23 thousand and $19 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 April 3, 1999 and
       March 28, 1998, and the financial position at April 3, 1999 and December
       31, 1998. The results of operations for the three-month period ended
       April 3, 1999 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 1998
       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 Futorian Furnishings, Inc. ("Futorian", formerly
       Furniture Comfort Corporation), whose two operating divisions, Stratford
       Division ("Stratford") and Barcalounger Division ("Barcalounger")
       manufacture motion upholstered residential furniture.

       Fairwood's comprehensive income includes a minimum pension liability
       which is calculated and reported annually. As a result, the minimum
       pension liability has no effect on the quarterly unaudited condensed
       consolidated statement of operations.

3.     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>
                                           April 3, 1999    December 31, 1998
                                           -------------    -----------------
                                            (Unaudited)         

        <S>                                 <C>                  <C>
        Raw materials                       $ 14,370             10,740
        In process                             4,306              3,054
        Finished goods                         6,892              8,579
                                              ------             ------
        Inventories at
          first-in, first out                 25,568             22,373
        LIFO reserve                           7,593              7,707
                                              ------             ------
        Inventories at LIFO                 $ 17,975             14,666
                                              ======             ======
</TABLE>

4.     On February 11, 1998, Futorian entered into a line of credit and term
       loan agreement (the "Futorian Loan Agreement") with a domestic
       corporation which replaced the two factoring agreements of its two
       operating divisions, Barcalounger and Stratford. The Futorian Loan
       Agreement provides for an aggregate maximum commitment of $30,750,000 and
       expires in 2001. The agreement consists of a term loan in the amount of
       $1,020,000 and a line of credit with a limit of $29,730,000. These
       loans bear interest at either the prime rate plus 1% or the adjusted
       eurodollar rate plus 3-1/4% at the option of the borrower provided
       certain conditions are met. The loan is collateralized by accounts
       receivable, inventory, property and equipment and other assets and has
       priority over Fairwood's Long-term debt. Other loan costs include a
       monthly servicing fee of $5,000 and a monthly
                                      - 6 -
<PAGE>   7
                      FAIRWOOD CORPORATION AND SUBSIDIARIES

         Notes to Unaudited Condensed Consolidated Financial Statements

       unused line fee at a rate equal to three-eighths (3/8%) percent per annum
       calculated upon the amount by which $21,500,000 exceeds the average daily
       principal balance on the term loans and line of credit accommodations
       term loans and line of credit accommodations during the immediately 
       preceding month. The amount outstanding under the line of credit and term
       loan, including accrued interest, totaled $26,356,000 at April 3, 1999, 
       and Futorian continues to use the facility.

       The terms of the Futorian Loan Agreement provide for maintenance of
       certain financial covenants. Futorian is in default of certain of these
       financial covenants in 1999. As a result, the amounts outstanding under
       the revolving credit and term loan are due on demand in 1999. Based on
       current estimates of available cash flows, Futorian's management does not
       believe it will have sufficient cash to make the mandatory payment,
       should it be requested by the lender.

5.     No provision for income taxes has been provided during the three months
       ended April 3, 1999 and March 28, 1998 as the Company is in a net
       operating loss carryforward position.

6.     The United States Bankruptcy Court (the "Bankruptcy Court") has approved
       the settlement of issues arising out of an Internal Revenue Service
       ("IRS") audit examination of the consolidated Federal income tax returns
       of Fairwood and its subsidiaries for the periods ended July 11, 1988
       through December 31, 1991. The net federal tax cost, including statutory
       interest and the claim for refund as described below, to Fairwood and its
       subsidiaries under the terms of the settlement is estimated to be
       approximately $5.0 million. The settlement would also significantly
       reduce Fairwood's available net operating loss carryforwards. This
       settlement does not include consideration of the state tax impact.
       Management is currently reviewing the state tax effect of this settlement
       and believes there will not be a material impact. As approved by the
       Bankruptcy Court, the settlement would be funded by additional borrowings
       under Consolidated Furniture's existing revolving credit agreement, with
       any refund obtained (as described below) returned to the lender under
       that facility.

       This settlement provides Fairwood the opportunity to claim a refund of
       certain taxes paid through carrying the interest component of the
       settlement back up to 10 years. Management believes that it is currently
       more likely than not that taxes totaling $1.3 million will be recovered.
       Fairwood has accrued the estimated Federal and state obligations, net of
       expected recoveries of previous taxes paid, in Federal and state income
       taxes on the accompanying balance sheet.

7.     On April 1, 1995, October 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 $121.6

                                      - 7 -
<PAGE>   8
                      FAIRWOOD CORPORATION AND SUBSIDIARIES

         Notes to Unaudited Condensed Consolidated Financial Statements

       million on the Fairwood Debentures, which includes $73.8 million due to
       Court Square Capital Limited ("CSCL"), is included in accrued interest on
       the accompanying unaudited condensed consolidated balance sheet as of
       April 3, 1999. 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, Futorian
       Furnishings, Inc., as well as the operating divisions, Stratford and
       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.
       The Bondholders' have taken an appeal of that ruling. Fairwood is in 
       the process of formulating a Chapter 11 plan which it expects to file 
       in the next several weeks. The plan will address, among other things, 
       Fairwood's existing capital structure.

8.     Consolidated Furniture's revolving credit under its Credit Agreement with
       CSCL (the "Credit Agreement") and senior subordinated debentures mature
       on January 3, 2000 and, accordingly, have been classified as current
       liabilities in the accompanying unaudited condensed consolidated balance
       sheet of the Company as of April 3, 1999. Consolidated Furniture expects
       to negotiate an extension of these maturity dates or refinance such
       indebtedness prior to January 3, 2000. However, there can be no assurance
       that the 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 April 3, 1999.

                                      - 8 -
<PAGE>   9
9.     Stratford continues to provide new product development and selling
       activities to Simmons, an affiliate. Under the agreement to provide
       services, Stratford was reimbursed by Simmons approximately $150,000 in
       each of the three-month periods ended April 3, 1999 and March 28, 1998,
       respectively, and approximately $729,000 for selling expenses in the
       three months ended April 3, 1999. Also in the three months ended April 3,
       1999 Stratford recognized as a reduction in general and administrative
       expenses, approximately $850,000 of reimbursements for general and
       administrative expenses.

10.    On April 7, 1999, Futorian and Simmons entered into preliminary
       discussions to sell substantially all the assets and certain liabilities
       of Stratford, a division of Futorian, and Simmons, an affiliated company
       through common ownership, to an unrelated third party.

11.    Fairwood's reportable segments include the Stratford division and the
       Barcalounger division. These segments continue to be managed separately
       because of their distinctly different markets and facilities.

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

<TABLE>
<CAPTION>
                                           Three months ended April 3, 1999
                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    --------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers              $   30,499     $     14,352    $       -     $          -    $   44,851
Intersegment income            546                -            -       (      546)            -
Interest expense, net          684                7       17,569                -        18,260
Segment profit (loss)     (  4,581)             715     ( 17,271)               -      ( 21,137)

<CAPTION>
                                           Three months ended March 28, 1998 
                         Stratford     Barcalounger    Corporate     Eliminations      Totals
                         ---------     ------------    ---------     ------------    --------

<S>                     <C>            <C>             <C>           <C>             <C>
Revenues from external
 customers               $  29,166     $     13,858    $       -     $          -    $   43,024
Intersegment income            546                -            -       (      546)            -
Interest expense, net          608                5       16,517                -        17,130
Segment profit (loss)     (  3,915)             616     ( 16,879)               -      ( 20,178)
</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 April 3, 1999, the Company had long-term debt of approximately $570.9 million
of which approximately $568.9 million is current and approximately $505.9 is
owed to Court Square Capital Limited ("CSCL"), an affiliate. Long-term debt was
approximately $556.7 million at December 31, 1998, of which $168.8 million was
current and approximately $491.7 million was owed to CSCL. Accrued interest on
long-term debt was approximately $121.9 million and $118.5 million at April 3,
1999 and December 31, 1998, respectively. Approximately $74.1 million and $73.3
million of the accrued interest was owed to CSCL at April 3, 1999 and December
31, 1998, 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. The Company 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 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 Futorian Furnishings,
Inc. ("Futorian", formerly Furniture Comfort Corporation), which has operations
that it conducts through its two divisions, Stratford and Barcalounger. Futorian
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. Futorian is not an obligor on the Fairwood Debentures.

On each of April 1, 1995 and October 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 $121.6 million on the
Fairwood Debentures, which includes $73.8 million due to CSCL, is included in
accrued interest in the accompanying unaudited condensed consolidated balance
sheet as of April 3, 1999.

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, Futorian Furnishings, Inc., as well as the operating
divisions, Stratford and 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. The Bondholders' have
taken an appeal of that ruling. Fairwood is in the process of formulating a
Chapter 11 plan which it expects to file in the next several weeks. The plan 
will address, among other things, Fairwood's existing capital structure.

                                     - 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 April
3, 1999.

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 1998 and the first quarter of 1999 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 1999 were approximately $14.2 million. There were
no principal  repayments to CSCL during the first three months of 1999.
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, 1999.

Consolidated Furniture's revolving credit and senior subordinated debentures
mature on January 3, 2000 and, accordingly, have been classified as current
liabilities in the accompanying unaudited condensed consolidated balance sheet
as of April 3, 1999. Consolidated Furniture expects to negotiate an extension of
these maturity dates with CSCL or refinance such indebtedness prior to January
3, 2000. However, there can be no assurance that the 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.

On February 11, 1998, Futorian entered into a line of credit and term loan
agreement (the "Futorian Loan Agreement") with a domestic corporation which
replaced the two factoring agreements of its two operating divisions,
Barcalounger and Stratford. The Futorian Loan Agreement provides for an
aggregate maximum commitment of $30,750,000 and expires in 2001. The Futorian
Loan Agreement consists of a term loan in the amount of $1,020,000 and a line of
credit with a limit of $29,730,000. These loans bear interest at either the
prime rate plus 1% or the adjusted eurodollar rate plus 3-1/4% at the option of
the borrower provided certain conditions are met. The loan is collateralized by
accounts receivable, inventory, property and equipment and other assets and has
priority over Fairwood's Long-term debt (Note 7). Other loan costs include a
monthly servicing fee of $5,000 and a monthly unused line fee at a rate equal

                                      - 12 -
<PAGE>   13
to three-eighths (3/8%) percent per annum calculated upon the amount by which
$21,500,000 exceeds the average daily principal balance on the outstanding
Revolving Loans and Letter of Credit Accommodations during the immediately
preceding month.

The terms of the Futorian Loan Agreement provide for maintenance of certain
financial covenants. Futorian was not in compliance with the financial covenants
in 1998, however, a waiver was obtained from the lender to remedy such
noncompliance. Futorian is in default of certain of these financial covenants in
1999. As a result, the amounts outstanding under the revolving credit and term
loan are due on demand in 1999. Based on current estimates of available cash
flow, Futorian's management does not believe it will have sufficient cash to
make the mandatory payment, should it be requested by the lender.

For a discussion of the status of the IRS examination, refer to Fairwood's
audited consolidated financial statements as of December 31, 1998 included in
Fairwood's Form 10-K, and footnote 6 to Fairwood's unaudited condensed
consolidated financial statements included herein.

Results of Operations

Three Months Ended April 3, 1999 Versus Three Months Ended March 28, 1998

The following discussion presents the material changes in results of operations
which have occurred in the first quarter of 1999 in comparison to the same
period in 1998.

Consolidated net sales were approximately $44.9 million in the first quarter of
1999, an increase of 4.4% from last year's first quarter consolidated net sales
of approximately $43.0 million.

First quarter 1999 net sales (including intercompany sales) by the Stratford
Company increased 4.4% to approximately $31.0 million as compared to $29.7
million for the comparable period in 1998. Excluding sales to Simmons, net sales
for the first quarter of 1999 were approximately $22.3 million compared to
approximately $27.8 million for the first quarter of 1998, a decrease of 19.8%.
First quarter sales in 1999 to Simmons were approximately $8.7 million compared
to approximately $2.0 million for the first quarter of 1998, an increase of
335%.

First quarter sales in 1999 to Stratford's larger national retail chain
customers increased 8.4%, while sales to smaller retail furniture store
customers decreased by 49.9%. Total Stratford volume, excluding frame and coil
sales and sales to Simmons Upholstered Furniture Corporation ("Simmons"), an
affiliate, decreased 16.3% during the first quarter of 1999 as compared to 1998.
Volume to Stratford's larger national retail chain customers increased 8.4%,
while volume to Stratford's smaller retail furniture store customers decreased
49.9%. Sales of frames and coils to other furniture manufacturers decreased
52.7% during the first quarter of 1999 as compared to 1998. Sales to the larger
national retail accounts increased as a result of Stratford's continued focus
on these accounts, which resulted in increased business to existing customers.
Stratford's sales to  Simmons increased as a result of a shift of 100% of
Simmons' production to Stratford from approximately 19% in the first quarter of
1998. This shift resulted from the  shut down of Simmons' Paoli plant. This
increase in sales to Simmons and the larger national retail chain customers
changed Stratford's sales focus resulting in a decrease in Stratford's smaller
retail furniture store sales and a decrease in frame and coil sales.
Stratford's selling prices remained essentially flat for the first quarters of
1999 and 1998.

                                     - 13 -
<PAGE>   14
First quarter 1999 net sales by Barcalounger increased 3.6% to approximately
$14.4 million as compared to $13.9 million in 1998. This increase in sales
reflects an increase of 3.6% in the average selling prices in the first quarter
of 1999 versus 1998. Barcalounger's sales volume remained consistent for the
first quarters of 1999 and 1998.

Consolidated cost of sales increased 5.3% in the first quarter of 1999 to $42.0
million, or 93.6% of net sales, as compared to $39.9 million, or 92.7% of net
sales in 1998. Stratford's cost of sales increased to 100.1% of net sales in the
first quarter of 1999, as compared to 98.5% in the first quarter of 1998.
Stratford's increased percentage of cost of sales is attributable mainly to
training and setup costs and negative variances (inefficiencies) associated with
the move of Simmons production from Paoli to Stratford's facility in Okolona.
Barcalounger's cost of sales decreased to 79.8% of net sales in the first
quarter of 1999, as compared to 80.7% of net sales for the first quarter of
1998, as a result of continuing production efficiencies.

Consolidated selling, administrative and general expenses for the first quarters
of 1999 and 1998 were approximately $5.8 million and $6.2 million, respectively,
representing a decrease of 6.5%. This decrease is due primarily to a $.5 million
reimbursement for the settlement of a lawsuit in prior years, which was received
in 1999.

Interest expense, was approximately $18.3 million and $17.1 million for the
first quarters of 1999 and 1998, respectively, an increase of approximately
7.0%. The increase was primarily due to increased borrowings on the Credit
Agreement. 

No income taxes have been provided in the first quarters of 1999 and 1998,
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
audited consolidated financial statements as of December 31, 1998 included in
the Company's Form 10-K, and footnote 6 to the Company's unaudited condensed
consolidated financial statements included herein.

Year 2000

The Year 2000 issue is the result of computer programs using a two-digit format,
as opposed to four digits to define the applicable year. Such computer systems
will be unable to interpret dates beyond the year 1999, which could cause system
failures and other computer errors, resulting in business and operational
disruptions. The Company recognizes the need to identify and correct problems
associated with its existing computer systems and certain non-information
technology systems as the Year 2000 approaches. Both internal and external
resources are being used to identify, correct, and to test these financial,
information and operational systems for Year 2000 compliance.

While a number of the Company's systems have been determined to be Year 2000
compliant, certain applications required remediation. The Company has
substantially completed its remediation and is currently replacing certain
non-Year 2000 compliant hardware and software as well as testing Year 2000
software changes. The Company anticipates that its remediation efforts and
necessary testing related to the Year 2000 issue will be completed by September
1999 and does not expect the impact of Year 2000 issues to have a material
impact on the financial position or results of operations of the Company.

                                     - 14 -
<PAGE>   15
Costs and expenses incurred through March 31, 1999 in addressing the Year 2000
issue has been less than $400,000. It is estimated that less than $100,000 in
costs will be incurred in 1999 in order to replace voice mail and personal
computer equipment and complete a post implementation phase of an update to
human resource software.

The Company has made inquiries of key third parties to assess the potential
impact on the Company's operations if such parties are not successful in
remediating their systems in a timely manner; however, the Company is awaiting
some responses which are expected before the end of the second quarter. The
Company is in the process of developing contingency plans in the event Year 2000
failures of its key suppliers and service providers, and anticipates that these
contingency plans will be in place by September 1999.

The Company's expectations about future costs necessary to achieve Year 2000
compliance, the impact on its operations and its ability to bring each of its
systems into Year 2000 compliance are subject to a number of uncertainties that
could cause actual results to differ materially. Such factors include the
following:(i) the Company may not be successful in properly identifying all
systems and programs that contain two-digit year codes;(ii) the nature and
number of systems which require reprogramming, upgrading or replacement may
exceed the Company's expectations in terms of complexity and scope;(iii) the
Company may not be able to complete all remediation and testing necessary in a
timely manner;(iv) the Company has no control over the ability of its key
suppliers and customers to achieve Year 2000 compliance; and (v) the impact of
the Year 2000 problems on key customers may be of such magnitude that it may
adversely affect their demand for the Company's products and services. Fairwood
is not able to estimate the potential, worst-case-scenario as a result of Year
2000 failure from these, or other, unanticipated factors.

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, 1998 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


                                     - 15 -
<PAGE>   16
                      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 14, 1999



                                     - 16 -