<PAGE>   1
===============================================================================
                       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 PERIOD ENDED FEBRUARY 23, 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 33-68412

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

                              AVONDALE INCORPORATED
             (Exact name of registrant as specified in its charter)


                         GEORGIA                            58-0477150
             (State or other jurisdiction of             (I.R.S. employer
              incorporation or organization)            identification no.)

                 506 SOUTH BROAD STREET                         30655
                     MONROE, GEORGIA                          (Zip code)
             (Address of principal executive
                         offices)


       Registrant's telephone number, including area code: (770) 267-2226


               Former name, former address and former fiscal year,
                       if changed since last report: N/A


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]


         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
        Description                      As Of             Shares Outstanding
   ---------------------             -------------         -------------------
   <S>                               <C>                   <C>
   Class A Common Stock              April 6, 2001           11,551,737 Shares
   Class B Common Stock              April 6, 2001              978,939 Shares
</TABLE>



<PAGE>   2

                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>
<S>     <C>                                                                                                      <C>
PART  I  -  FINANCIAL INFORMATION  (UNAUDITED)

        Item 1:     Financial Statements

                    Condensed Consolidated Balance Sheets at August 25, 2000 and February 23, 2001........        1

                    Condensed Consolidated Statements of Income for the Thirteen Weeks Ended
                    February 25, 2000 and February 23, 2001...............................................        2

                    Condensed Consolidated Statements of Income for the Twenty-Six Weeks Ended
                    February 25, 2000 and February 23, 2001...............................................        3

                    Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended
                    February 25, 2000 and February 23, 2001...............................................        4

                    Notes to Condensed Consolidated Financial Statements..................................        5

        Item 2:     Management's Discussion and Analysis of Financial Condition and Results of
                    Operations............................................................................        8

        Item 3:     Quantitative and Qualitative Disclosures about Market Risk............................       12

PART  II  -  OTHER INFORMATION


        Item 1:     Legal Proceedings ....................................................................       13

        Item 2:     Changes in Securities and Use of Proceeds.............................................       13

        Item 3:     Defaults upon Senior Securities.......................................................       13

        Item 4:     Submission of Matters to a Vote of Security Holders...................................       13

        Item 5:     Other Information.....................................................................       13

        Item 6:     Exhibits and Reports on Form 8-K......................................................       13

        Signature   ......................................................................................       14
</TABLE>


<PAGE>   3

PART I  -  FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS


                              AVONDALE INCORPORATED
               CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                    AUG. 25,          FEB. 23,
                                                                                      2000              2001
                                                                                   ---------         ---------
<S>                                                                                <C>               <C>
                                                      ASSETS
Current assets
    Cash                                                                           $   7,867         $   1,802
    Accounts receivable, less allowance for doubtful accounts
       of $2,989 in fiscal 2000 and $2,943 in fiscal 2001                             54,531            54,808
    Inventories                                                                      105,965           136,817
    Prepaid expenses                                                                   2,100             2,861
                                                                                   ---------         ---------
       Total current assets                                                          170,463           196,288

Property, plant and equipment
    Land                                                                               8,400             8,400
    Buildings                                                                         85,907            89,868
    Machinery and equipment                                                          494,590           524,650
                                                                                   ---------         ---------
                                                                                     588,897           622,918
    Less accumulated depreciation                                                   (346,006)         (365,903)
                                                                                   ---------         ---------
                                                                                     242,891           257,015
Other assets                                                                          25,354            21,573
                                                                                   ---------         ---------
                                                                                   $ 438,708         $ 474,876
                                                                                   =========         =========

                                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Accounts payable                                                               $  32,358         $  35,502
    Accrued compensation, benefits and related expenses                               23,277            17,431
    Other accrued expenses                                                            20,618            17,806
    Long-term debt due in one year                                                     2,500             1,500
    Income taxes payable                                                               2,375             4,609
                                                                                   ---------         ---------
       Total current liabilities                                                      81,128            76,848

Long-term debt                                                                       185,175           220,625
Deferred income taxes and other long-term liabilities                                 41,900            43,109
Shareholders' equity
    Preferred stock
      $.01 par value; 10,000 shares authorized                                            --                --
    Common stock
       Class A, $.01 par value; 100,000 shares
          authorized, 11,552 issued and outstanding                                      115               115
       Class B, $.01 par value; 5,000 shares
          authorized, 979 issued and outstanding                                          10                10
    Capital in excess of par value                                                    39,696            39,669
    Accumulated other comprehensive loss                                                  --              (200)
    Retained earnings                                                                 90,684            94,700
                                                                                   ---------         ---------
       Total shareholders' equity                                                    130,505           134,294
                                                                                   ---------         ---------
                                                                                   $ 438,708         $ 474,876
                                                                                   =========         =========
</TABLE>


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


                                       1
<PAGE>   4

                              AVONDALE INCORPORATED
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                      THIRTEEN WEEKS ENDED
                                                                                   ---------------------------
                                                                                    FEB. 25,          FEB. 23,
                                                                                      2000              2001
                                                                                   ---------         ---------
<S>                                                                                <C>               <C>
Net sales                                                                          $ 186,710         $ 190,518

Operating costs and expenses
    Cost of goods sold                                                               151,956           160,671

    Depreciation                                                                      10,501            11,253

    Selling and administrative expenses                                                9,774             9,290
                                                                                   ---------         ---------

       Operating income                                                               14,479             9,304

Interest expense                                                                       5,417             5,063
Discount and expenses on sale of receivables                                           1,278             1,316
Other income, net                                                                        (30)              (35)
                                                                                   ---------         ---------

     Income before income taxes                                                        7,814             2,960

Provision for income taxes                                                             3,065             1,080
                                                                                   ---------         ---------

       Net income                                                                  $   4,749         $   1,880
                                                                                   =========         =========


Per share data:
       Net income-basic                                                            $     .37         $     .15
                                                                                   =========         =========

       Net income-diluted                                                          $     .37         $     .15
                                                                                   =========         =========

       Dividends declared                                                          $     .10         $     .10
                                                                                   =========         =========
</TABLE>


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


                                       2
<PAGE>   5

                              AVONDALE INCORPORATED
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                     TWENTY-SIX WEEKS ENDED
                                                                                   ---------------------------
                                                                                   FEB. 25,          FEB. 23,
                                                                                     2000              2001
                                                                                   ---------         ---------
<S>                                                                                <C>               <C>
Net sales                                                                          $ 392,048         $ 391,055

Operating costs and expenses
    Cost of goods sold                                                               319,890           326,351

    Depreciation                                                                      20,938            22,096

    Selling and administrative expenses                                               19,698            19,047
                                                                                   ---------         ---------

       Operating income                                                               31,522            23,561

Interest expense                                                                      10,704            10,052
Discount and expenses on sale of receivables                                           2,617             2,849
Other expense, net                                                                       128               127
                                                                                   ---------         ---------

     Income before income taxes                                                       18,073            10,533

Provision for income taxes                                                             7,085             3,850
                                                                                   ---------         ---------

       Net income                                                                  $  10,988         $   6,683
                                                                                   =========         =========


Per share data:
       Net income-basic                                                            $     .87         $     .53
                                                                                   =========         =========

       Net income-diluted                                                          $     .85         $     .53
                                                                                   =========         =========

       Dividends declared                                                          $     .20         $     .20
                                                                                   =========         =========
</TABLE>


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


                                       3
<PAGE>   6

                              AVONDALE INCORPORATED
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                      TWENTY-SIX WEEKS ENDED
                                                                                   ----------------------------
                                                                                    FEB. 25,           FEB. 23,
                                                                                      2000              2001
                                                                                   ---------         ---------
<S>                                                                                <C>               <C>
Operating activities
    Net income                                                                     $  10,988         $   6,683
    Adjustments to reconcile net income to net
      cash provided by operating activities:
          Depreciation and amortization                                               21,221            22,454
          Benefit of deferred income taxes                                            (2,857)             (318)
          Gain on sale of equipment                                                       (8)             (198)
          Changes in operating assets and liabilities                                  8,303           (21,421)
                                                                                   ---------         ---------

            Net cash provided by operating activities                                 37,647             7,200

Investing activities
    Purchases of property, plant and equipment                                       (11,190)          (36,319)
    Proceeds from sale of property, plant and equipment                                  373               297
                                                                                   ---------         ---------

            Net cash used in investing activities                                    (10,817)          (36,022)

Financing activities
    Net borrowings (payments) on revolving line of credit and
        long-term debt                                                                (9,550)           34,450
    Sale of accounts receivable, net                                                 (20,000)           (9,000)
    Issuance of common stock                                                             314                20
    Purchase and retirement of common stock                                               --              (204)
    Dividends paid                                                                    (2,538)           (2,509)
                                                                                   ---------         ---------

            Net cash provided by (used in) financing activities                      (31,774)           22,757
                                                                                   ---------         ---------

Decrease in cash                                                                      (4,944)           (6,065)

Cash at beginning of period                                                            8,545             7,867
                                                                                   ---------         ---------

            Cash at end of period                                                  $   3,601         $   1,802
                                                                                   =========         =========
</TABLE>


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


                                       4
<PAGE>   7

                            AVONDALE INCORPORATED
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)
                              FEBRUARY 23, 2001


         1. Basis of Presentation: The accompanying unaudited condensed
consolidated financial statements include the accounts of Avondale Incorporated
and its wholly owned subsidiaries, Avondale Mills, Inc. and Avondale Receivables
Company (collectively, the "Company"). These statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. Certain prior year
financial statement amounts have been reclassified to conform with the current
year's presentation. The August 25, 2000 balance sheet has been derived from the
audited financial statements at that date. The accounting policies and basis of
presentation followed by the Company are presented in Note 1 to the August 25,
2000 Audited Consolidated Financial Statements.

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

         In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation. Operating results for the
twenty-six weeks ended February 23, 2001 are not necessarily indicative of the
results that may be expected for the fiscal year ending August 31, 2001.


         2. Inventories: Components of inventories are as follows (amounts in
thousands):

<TABLE>
<CAPTION>

                                                            AUG. 25,        FEB. 23,
                                                             2000            2001
                                                           --------        --------
                <S>                                        <C>             <C>
                Finished goods                             $ 34,179        $ 56,789
                Work in process                              39,462          46,178
                Raw materials                                15,088          17,317
                Dyes and chemicals                            5,872           6,086
                                                           --------        --------
                Inventories at FIFO                          94,601         126,370

                Premium to adjust carrying value to
                     LIFO basis                               4,700           3,700
                                                           --------        --------
                                                             99,301         130,070
                Supplies at average cost                      6,664           6,747
                                                           --------        --------

                                                           $105,965        $136,817
                                                           ========        ========
</TABLE>


                                       5
<PAGE>   8

                              AVONDALE INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             (UNAUDITED) (CONTINUED)
                                FEBRUARY 23, 2001


         Valuation of the Company's inventories under the last-in, first-out
(LIFO) method at February 23, 2001 and the related impact on the statement of
income for the twenty-six weeks then ended has been determined using estimated
quantities and costs as of the fiscal 2001 year-end. As a result, interim
amounts are subject to the final year-end LIFO valuation.

         3. Earnings Per Share: Earnings per share is calculated by dividing the
reported net income for the period by the appropriate weighted average number of
shares of common stock outstanding, as shown below (amounts in thousands):

<TABLE>
<CAPTION>

                                                            THIRTEEN WEEKS ENDED            TWENTY-SIX WEEKS ENDED
                                                         --------------------------      ----------------------------
                                                          FEB. 25,        FEB. 23,         FEB. 25,         FEB. 23,
                                                            2000            2001            2000             2001
                                                         ----------      ----------      -----------      -----------
             <S>                                         <C>             <C>             <C>              <C>
             Weighted average shares outstanding -
                 Basic                                       12,695          12,536           12,687           12,541
             Effect of employee stock options                   182             145              186              160
                                                         ----------      ----------      -----------        ---------
             Weighted average shares outstanding -
                 diluted                                     12,877          12,681           12,873           12,701
                                                         ==========      ==========      ===========      ===========
</TABLE>


         4. Segment Information: Condensed segment information is as follows
(amounts in thousands):

<TABLE>
<CAPTION>

                                                                       TWENTY-SIX WEEKS ENDED
                                                                     ---------------------------
                                                                      FEB. 25,         FEB. 23,
                                                                        2000             2001
                                                                     ---------         ---------
                <S>                                                  <C>               <C>
                Revenues:
                    Apparel fabrics                                  $ 281,201         $ 296,910
                    Yarns                                               97,574            94,302
                    Other                                               48,412            47,245
                                                                     ---------         ---------
                                                                       427,187           438,457
                      Less intersegment sales                           35,139            47,402
                                                                     ---------         ---------
                        Total                                        $ 392,048         $ 391,055
                                                                     =========         =========

                Income (loss):
                    Apparel fabrics                                  $  38,175         $  34,738
                    Yarns                                                5,454             1,129
                    Other                                                5,012             3,417
                    Unallocated                                        (17,119)          (15,723)
                                                                     ---------         ---------
                        Total operating income                          31,522            23,561
                    Interest expense                                    10,704            10,052

                    Discount and expenses on sale of
                         receivables                                     2,617             2,849
                    Other expense, net                                     128               127
                                                                     ---------         ---------
                        Income before income taxes                   $  18,073         $  10,533
                                                                     =========         =========
</TABLE>


                                       6
<PAGE>   9


                              AVONDALE INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             (UNAUDITED) (CONTINUED)
                                FEBRUARY 23, 2001

         5. Contingencies: The Company is involved in certain environmental
matters and claims. The Company has provided reserves to cover management's
estimates of the cost of investigating, monitoring and remediating these and
other environmental conditions. If more costly remediation measures are
necessary than those believed to be probable based on current facts and
circumstances, actual costs may exceed the reserves provided. However, based on
the information currently available, management does not believe that the
outcome of these matters will have a material adverse effect on the Company's
future results of operations or financial condition.

         For discussion of certain legal proceedings to which the Company is a
party, see Item 3 "Legal Proceedings" in the Company's Annual Report on Form
10-K for the fiscal year ended August 25, 2000 and Part II - Other Information,
Item 1 "Legal Proceedings" in this quarterly report on Form 10-Q. The Company is
also a party to other litigation incidental to its business from time to time.
The Company is not currently a party to any litigation, other than as referenced
above, that management, in consultation with legal counsel, believes would have
a material adverse effect on the Company's financial condition or results of
operations.

         6. Comprehensive Income: Comprehensive income includes unrealized gains
and losses in the fair value of certain derivative instruments which qualify for
hedge accounting. A reconciliation of net income to comprehensive income is as
follows:

<TABLE>
<CAPTION>

                                                                                 TWENTY-SIX WEEKS ENDED
                                                                               ---------------------------
                                                                                FEB. 25,         FEB. 23,
                                                                                  2000             2001
                                                                               ----------       ----------
             <S>                                                               <C>              <C>
             Net income                                                        $   10,988       $     6,683
             Change in fair value of interest rate swaps, net
               of income taxes                                                         --              (627)
                                                                               ----------       -----------
             Comprehensive income                                              $   10,988       $     6,056
                                                                               ==========       ===========
</TABLE>

         7. Derivatives: The Company has adopted Financial Accounting Standards
Board Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, which requires that derivative instruments be recorded
in the balance sheet as either assets or liabilities measured at fair value, and
that changes in the fair value of the derivative instruments be recorded as
unrealized gains or losses in either net income or other comprehensive income
depending on whether specific hedge accounting criteria are met.

         At February 23, 2001, the Company had interest rate swap agreements
with notional amounts aggregating $60 million. The agreements, which have been
classified as cash flow hedges, effectively convert a portion of the Company's
outstanding revolving credit facility and industrial revenue bonds to a fixed
rate basis, thus reducing the impact of interest rate changes on future income.
The differential between floating rate receipts and fixed rate payments is
accrued as market rates fluctuate and recognized as an adjustment to interest
expense.

         Upon adoption of Statement No. 133, the Company recorded the fair value
of the interest rate swap agreements, approximately $427,000 net of income
taxes, in other assets and accumulated other comprehensive income at the
beginning of fiscal 2001. For the twenty-six weeks ended February 23, 2001, a
decline in fair value of approximately $627,000, net of income taxes, was
recorded as an unrealized loss in other comprehensive income.


                                       7
<PAGE>   10


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

RESULTS OF OPERATIONS

Thirteen Weeks Ended February 23, 2001 Compared to Thirteen Weeks Ended
February 25, 2000

         NET SALES. Net sales increased 2.0% to $190.5 million for the thirteen
weeks ended February 23, 2001 from $186.7 million for the thirteen weeks ended
February 25, 2000, primarily due to improvements in apparel fabrics sales.
Selling prices for all products remained highly competitive as global supply of
textile and apparel products continued to exceed demand. The Company expects
adverse pricing conditions to continue into the third quarter of fiscal 2001.

         OPERATING INCOME. Operating income decreased 35.7% to $9.3 million for
the thirteen weeks ended February 23, 2001 from $14.5 million for the thirteen
weeks ended February 25, 2000 reflecting little improvement in average selling
prices while the costs of raw materials, dyes and chemicals, and energy
increased. In response to the intensely competitive market conditions, the
Company continued its increased consumption of internally produced yarns and
greige fabrics in the production of finished apparel fabrics, improving capacity
utilization and sales rationalization. In addition, the Company responded to the
strengthening demand for denim by shifting weaving production from greige
fabrics to denim. This improvement in capacity utilization plus unit cost
reductions achieved through plant management programs and capital expenditure
projects partially offset the impact of higher costs of raw materials, dyes and
chemicals, and energy. Cost of goods sold increased 5.7% to $160.7 million for
the thirteen weeks ended February 23, 2001 from $152.0 million for the thirteen
weeks ended February 25, 2000. Cost of goods sold as a percentage of net sales
increased to 84.3% for the thirteen weeks ended February 23, 2001 from 81.4% for
the thirteen weeks ended February 25, 2000.

         Selling and administrative expenses decreased 5.0% to $9.3 million for
the thirteen weeks ended February 23, 2001 from $9.8 million for the thirteen
weeks ended February 25, 2000, primarily reflecting reduced accrual of certain
associate benefits and performance based incentives corresponding to the decline
in operating income for the period. Selling and administrative expenses as a
percentage of net sales decreased to 4.9% for the thirteen weeks ended February
23, 2001 from 5.2% for the thirteen weeks ended February 25, 2000.

         SEGMENT PERFORMANCE. Apparel fabrics sales increased 8.0% to $143.7
million for the thirteen weeks ended February 23, 2001 from $133.0 million for
the thirteen weeks ended February 25, 2000. The increase in sales reflected a
7.6% increase in yards sold as demand for denim and bottomweight fabrics
strengthened. Average selling prices improved 0.4%. Operating income for apparel
fabrics decreased 20.5% to $12.9 million for the thirteen weeks ended February
23, 2001 from $16.2 million for the thirteen weeks ended February 25, 2000,
primarily due to higher costs of raw materials, dyes and chemicals, and energy.

         Yarns sales increased 9.0% to $49.6 million for the thirteen weeks
ended February 23, 2001 from $45.5 million for the thirteen weeks ended February
25, 2000, reflecting an 8.1% increase in pounds sold, including the increase in
intracompany sales to the Apparel fabrics operations, and a 0.9% increase in
average selling prices. Market pricing for sales yarns, especially open end
yarns, remained very competitive, reflecting continued excess production
capacity within the domestic industry and continued imports of yarns and knitted
apparel from Asia. Operating income for yarns decreased 59.1% to $1.4 million
for the thirteen weeks ended February 23, 2001 from $3.4 million for the
thirteen weeks ended February 25, 2000 as a result of higher raw material costs.

         Other sales, which includes sales of greige and specialty fabrics and
revenues from the Company's trucking operation, decreased 7.1% to $22.3 million
for the thirteen weeks ended February 23, 2001 from $24.0 million for the
thirteen weeks ended February 25, 2000 reflecting considerable softness in the
greige fabric market. Operating income decreased 43.0% to $1.6 million for the
thirteen weeks ended February 23, 2001 from $2.8 million for the thirteen weeks
ended February 25, 2000 as a result of lower fabric volumes, and increased raw
material costs.

         Intersegment sales increased 58.7% percent to $25.1 million for the
thirteen weeks ended February 23, 2001 from $15.8 million for the thirteen weeks
ended February 25, 2000, primarily reflecting the significant increase in
consumption of internally produced yarns within the Company's apparel fabrics
operation.


                                       8
<PAGE>   11

         INTEREST EXPENSE, NET. Interest expense, net decreased 6.5% to $5.1
million for the thirteen weeks ended February 23, 2001 from $5.4 million for the
thirteen weeks ended February 25, 2000, reflecting a decline in market interest
rates and the lower average balance of borrowings outstanding in the current
fiscal quarter.

         DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES. Discount and expenses on
sale of receivables were $1.3 million for the thirteen weeks ended February 23,
2001 compared to $1.3 million for the thirteen weeks ended February 25, 2000.

         PROVISION FOR INCOME TAXES. Provision for income taxes decreased to
$1.1 million for the thirteen weeks ended February 23, 2001 from $3.1 million
for the thirteen weeks ended February 25, 2000, reflecting the decline in income
before income taxes. The Company's effective income tax rate was 36.5% for the
thirteen weeks ended February 23, 2001 compared to 39.2% for the thirteen weeks
ended February 25, 2000, primarily due to state incentive program credits
relating to the Company's investments in its manufacturing facilities.


Twenty-Six Weeks Ended February 23, 2001 Compared to Twenty-Six Weeks Ended
February 25, 2000

         NET SALES. Net sales decreased 0.3% to $391.1 million for the
twenty-six weeks ended February 23, 2001 from $392.0 million for the twenty-six
weeks ended February 25, 2000, as improvements in apparel fabric sales offset a
reduction in outside yarn sales. Selling prices for all products remained highly
competitive as global supply of textile and apparel products continued to exceed
demand. The Company expects adverse pricing conditions to continue into the
third quarter of fiscal 2001.

         OPERATING INCOME. Operating income decreased 25.3% to $23.6 million for
the twenty-six weeks ended February 23, 2001 from $31.5 million for the
twenty-six weeks ended February 25, 2000 reflecting declines in average selling
prices and higher costs of raw materials, dyes and chemicals, and energy. In
response to the intensely competitive market conditions, the Company continued
its increased consumption of internally produced yarns and greige fabrics in the
production of finished apparel fabrics, improving capacity utilization and sales
rationalization. In addition, the Company responded to the strengthening demand
for denim by shifting weaving production from greige fabrics to denim. This
improvement in capacity utilization plus unit cost reductions achieved through
plant management programs and capital expenditure projects partially offset the
impact of lower selling prices and higher costs of raw materials, dyes and
chemicals, and energy. Cost of goods sold increased 2.0% to $326.4 million for
the twenty-six weeks ended February 23, 2001 from $319.9 million for the
twenty-six weeks ended February 25, 2000. Cost of goods sold as a percentage of
net sales increased to 83.5% for the twenty-six weeks ended February 23, 2001
from 81.6% for the twenty-six weeks ended February 25, 2000.

         Selling and administrative expenses decreased 3.3% to $19.0 million for
the twenty-six weeks ended February 23, 2001 from $19.7 million for the
twenty-six weeks ended February 25, 2000, primarily reflecting reduced accrual
of certain associate benefits and performance based incentives corresponding to
the decline in operating income for the period. Selling and administrative
expenses as a percentage of net sales decreased to 4.9% for the twenty-six weeks
ended February 23, 2001 from 5.0% for the twenty-six weeks ended February 25,
2000.

         SEGMENT PERFORMANCE. Apparel fabrics sales increased 5.6% to $296.9
million for the twenty-six weeks ended February 23, 2001 from $281.2 million for
the twenty-six weeks ended February 25, 2000. The increase in sales reflected a
5.8% increase in yards sold as demand for denim and bottomweight fabrics
strengthened. Average selling prices declined 0.2%. Operating income for apparel
fabrics decreased 9.0% to $34.7 million for the twenty-six weeks ended February
23, 2001 from $38.2 million for the twenty-six weeks ended February 25, 2000,
primarily due to higher costs of raw materials, dyes and chemicals, and energy.

         Yarns sales decreased 3.4% to $94.3 million for the twenty-six weeks
ended February 23, 2001 from $97.6 million for the twenty-six weeks ended
February 25, 2000, reflecting a 1.5% increase in pounds sold, including the
increase in intracompany sales to the Apparel fabrics operations, and a 4.8%
decrease in average selling prices. Market pricing for sales yarns, especially
open end yarns, remained very competitive, reflecting continued excess
production capacity within the domestic industry and continued imports of yarns
and knitted apparel from Asia. Operating income for yarns decreased 79.3% to
$1.1 million for the twenty-six weeks ended February 23, 2001 compared to $5.5
million for the twenty-six weeks ended February 25, 2000. Operating income
declined as a result of the decrease in average selling price and higher raw
material costs.


                                       9
<PAGE>   12

         Other sales, which includes sales of greige and specialty fabrics and
revenues from the Company's trucking operation decreased 2.4% to $47.2 million
for the twenty-six weeks ended February 23, 2001 from $48.4 million for the
twenty-six weeks ended February 25, 2000, reflecting considerable softness in
the greige fabric market. Operating income decreased 31.8% to $3.4 million for
the twenty-six weeks ended February 23, 2001 from $5.0 million for the
twenty-six weeks ended February 25, 2000 as a result of lower fabric volumes and
increased raw material costs.

         Intersegment sales increased 34.9% percent to $47.4 million for the
twenty-six weeks ended February 23, 2001 from $35.1 million for the twenty-six
weeks ended February 25, 2000, primarily reflecting the significant increase in
consumption of internally produced yarns within the Company's apparel fabrics
operation.

         INTEREST EXPENSE, NET. Interest expense, net decreased 6.1% to $10.0
million for the twenty-six weeks ended February 23, 2001 from $10.7 million for
the twenty-six weeks ended February 25, 2000, reflecting a decline in market
interest rates and the lower average balance of borrowings outstanding during
the twenty-six weeks ended February 23, 2001.

         DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES. Discount and expenses on
sale of receivables were $2.8 million for the twenty-six weeks ended February
23, 2001 compared to $2.6 million for the twenty-six weeks ended February 25,
2000. The increase was primarily attributable to higher market interest rates
and the corresponding increase in discounts on the sale of accounts receivable
under the securitization facility.

         PROVISION FOR INCOME TAXES. Provision for income taxes decreased to
$3.9 million for the twenty-six weeks ended February 23, 2001 from $7.1 million
for the twenty-six weeks ended February 25, 2000, reflecting the decline in
income before income taxes. The Company's effective income tax rate was 36.6%
for the twenty-six weeks ended February 23, 2001 compared to 39.2% for the
twenty-six weeks ended February 25, 2000, primarily due to state incentive
program credits relating to the Company's investments in its manufacturing
facilities.


LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities was $7.2 million for the
twenty-six weeks ended February 23, 2001. Principal working capital changes
included an $8.7 million decrease in accounts receivable and a $30.9 million
increase in inventories. Investing activities were predominantly equipment
purchases and plant improvements of $36.3 million made in connection with the
ongoing modernization of the Company's manufacturing facilities. Financing
activities included a $35.5 million net increase in borrowings under the
revolving credit facility, payment of $1.0 million on long-term debt, payment of
$2.5 million in dividends on outstanding common stock and payment of $9.0
million due to the decrease in accounts receivable sold under the securitization
facility.

         At February 23, 2001, the Company had borrowings of $85.6 million
outstanding under its revolving line of credit and $31.6 million of borrowing
availability thereunder.

         The Company's capital expenditures, aggregating $36.3 million for the
twenty-six weeks ended February 23, 2001, were primarily used to fund the
modernization of a fabric finishing facility in South Carolina, the purchase and
installation of new air jet weaving equipment and "linked" ring spinning
equipment at various plant locations, and other equipment purchases. Management
estimates that capital expenditures for the balance of fiscal 2001 will be
approximately $45.0 million.

         Management believes that cash generated from operations, together with
borrowings available under its revolving credit facility and proceeds received
in connection with sales of trade receivables, will be sufficient to meet the
Company's working capital and capital expenditure needs in the foreseeable
future.


                                       10
<PAGE>   13

FORWARD LOOKING STATEMENTS

         Statements herein regarding the Company's anticipated capital
expenditures and anticipated performance in future periods constitute
forward-looking statements within the meaning of the Securities Act of 1933 and
Securities Exchange Act of 1934. Such statements are subject to certain risks
and uncertainties that could cause actual amounts to differ materially from
those projected. With respect to anticipated capital expenditures, management
has made certain assumptions regarding, among other things, maintenance of
existing facilities and equipment, availability and desirability of new,
technologically advanced equipment, installation and start up times, cost
estimates and continued availability of financial resources. The estimated
amount of capital expenditures is subject to certain risks, including, among
other things, the risk that unexpected capital expenditures will be required and
unexpected costs and expenses will be incurred. Statements herein regarding the
Company's performance in future periods are subject to risks relating to, among
other things, the cyclical and competitive nature of the textile industry in
general, pressures on sales prices due to competitive and economic conditions,
deterioration of relationships with, or loss of, significant customers,
availability, sourcing and pricing of cotton and other raw materials,
technological advancements, employee relations, continued availability of
financial resources, difficulties integrating acquired businesses and possible
changes in governmental policies affecting raw material costs. Management
believes these forward-looking statements are reasonable; however, undue
reliance should not be placed on such forward-looking statements, which are
based on current expectations.

                                      11
<PAGE>   14

OTHER DATA

         EBITDA, which is presented not as an alternative measure of operating
results or cash flow from operations (as determined in accordance with generally
accepted accounting principles) but because it is a widely accepted financial
indicator of the ability to incur and service debt, is calculated by the Company
as follows (amounts in thousands):


<TABLE>
<CAPTION>

                                                                    TWENTY-SIX WEEKS ENDED
                                                                    -----------------------
                                                                    FEB. 25,       FEB. 23,
                                                                      2000           2001
                                                                    -------        -------
                <S>                                                 <C>            <C>
                Net income                                          $10,988        $ 6,683
                Interest expense                                     10,704         10,052
                Discount and expenses on sale of receivables          2,617          2,849
                Provision for income taxes                            7,085          3,850
                Depreciation and amortization                        21,221         22,454
                Net change in allowance to adjust carrying
                     value of inventory to LIFO basis                    --          1,000
                                                                    -------        -------

                EBITDA                                              $52,615        $46,888
                                                                    =======        =======
</TABLE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         For discussion of certain market risks related to the Company, see Part
II, Item 7A. "Quantitative and Qualitative Disclosures about Market Risk" in the
Company's Annual Report on Form 10-K for fiscal year ended August 25, 2000.

                                      12
<PAGE>   15

                              AVONDALE INCORPORATED


  PART II - OTHER INFORMATION



Item 1.           Legal Proceedings

                           On March 3, 1993, a case was filed in the Circuit
                  Court of Jefferson County, Alabama by Joe and Darnell Sullivan
                  and Tommy and Stella Fay Gould and other parties against the
                  Alabama Power Company, Russell Corporation, the Company and
                  certain other parties ("Sullivan"). The complaint alleges that
                  the Company and such other parties negligently or willfully
                  discharged industrial wastewater containing hazardous
                  materials, which allegedly damaged the plaintiffs' real
                  properties and caused mental anguish to the plaintiffs. The
                  complaint sought an award of compensatory and punitive
                  damages. After two years and eleven months of litigation, the
                  plaintiffs amended their complaint to include class action
                  claims and treatment. Although the Trial Court granted class
                  certification, the Supreme Court of Alabama reversed the class
                  certification order, and the case proceeded as to the
                  individual claims of the five plaintiffs.

                           On November 17, 1998, the trial court handed down a
                  verdict of $155,200 in compensatory damages and $52,398,000 in
                  punitive damages against the Alabama Power Company, Russell
                  Corporation and the Company, on a joint and several basis, in
                  favor of the plaintiffs. This case was appealed to the Supreme
                  Court of Alabama. Oral argument was held in January 2000, and
                  on August 4, 2000, the Alabama Supreme Court issued a 6-3
                  opinion reversing and ordering a judgment to be entered in
                  favor of the defendants because of plaintiff's failure of
                  proof. The plaintiffs filed an Application for Rehearing on
                  August 18, 2000, and the Company filed its response on
                  September 1, 2000. On November 16, 2000, the Supreme Court of
                  Alabama heard oral arguments on the application from all
                  parties except the Alabama Power Company. On January 12, 2001,
                  the Alabama Supreme Court issued a 6-3 final order, denying
                  rehearing and reversing and rendering the case in favor of the
                  defendants.

                           On February 28, 1999, a case was filed in the Circuit
                  Court of Jefferson County, Alabama by Chris and Regina
                  Christian against Russell Corporation, Russell Lands, Inc.,
                  Alabama Power, the Company and certain other parties. The
                  complaint alleged that the Company, among others, negligently
                  and/or wantonly caused or permitted the discharge and disposal
                  of sewage sludge and contaminants into the lake adjacent to
                  the plaintiffs' property, which allegedly interfered with the
                  plaintiffs' use of the property. As a result of these alleged
                  actions, the plaintiffs claimed that the value of their
                  property had been diminished and that they suffered mental
                  anguish, bodily injury and other pecuniary loss. Subsequent to
                  the final decision by the Alabama Supreme Court in the
                  Sullivan case, the plaintiffs in this complaint elected to
                  voluntarily dismiss their case. Consequently, on February 1,
                  2001, the Circuit Court entered an order dismissing the
                  complaint with prejudice.

Item 2.           Changes in Securities and Use of Proceeds

                  None


Item 3.           Defaults upon Senior Securities

                  None


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

                  None

Item 5.           Other Information

                  None


Item 6.           Exhibits and Reports on Form 8-K

                  (a)      Exhibits

                           None

                  (b)      Reports on Form 8-K

                           None


                                      13
<PAGE>   16

                                    SIGNATURE


         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.




                                      AVONDALE INCORPORATED



                             By:      /S/  JACK R. ALTHERR, JR.
                                      ------------------------------------------
                                      Jack R. Altherr, Jr.
                                      Vice Chairman and Chief Financial Officer







Date:      April 6, 2001

                                      14