<PAGE>
================================================================================
                       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 MARCH 1, 2002

                                       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 10, 2002         11,551,737  Shares
   Class B Common Stock           April 10, 2002            978,939  Shares
</TABLE>

================================================================================



<PAGE>


INDEX TO FORM  10-Q

                              AVONDALE INCORPORATED

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

        Item 1:     Financial Statements

                    Condensed Consolidated Balance Sheets at August 31, 2001 and March 1, 2002............        1

                    Condensed Consolidated Statements of Income for the Thirteen Weeks Ended
                    February 23, 2001 and March 1, 2002...................................................        2

                    Condensed Consolidated Statements of Income for the Twenty-Six Weeks Ended
                    February 23, 2001 and March 1, 2002...................................................        3

                    Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended
                    February 23, 2001 and March 1, 2002...................................................        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>



PART I  -  FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                        AUG. 31,            MARCH 1,
                                                                          2001                2002
                                                                       ---------           ---------
<S>                                                                    <C>                 <C>
                                     ASSETS
Current Assets
    Cash                                                               $   2,969           $   1,686
    Accounts receivable, less allowance for doubtful accounts
       of $2,616 in fiscal 2001 and $3,056 in fiscal 2002                 46,573              46,355
    Inventories                                                           99,671              88,182
    Prepaid expenses                                                       1,409               2,325
    Income taxes refundable                                                6,721               7,218
                                                                       ---------           ---------
        Total current assets                                             157,343             145,766

Assets held for sale                                                          --               4,474

Property, plant and equipment
    Land                                                                   8,400               6,635
    Buildings                                                             91,383              81,717
    Machinery and equipment                                              566,279             526,219
                                                                       ---------           ---------
                                                                         666,062             614,571
    Less accumulated depreciation                                       (379,228)           (351,980)
                                                                       ---------           ---------
                                                                         286,834             262,591
Other assets                                                              10,641               9,678
                                                                       ---------           ---------
                                                                       $ 454,818           $ 422,509
                                                                       =========           =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                                    $  24,147           $  23,621
   Accrued compensation, benefits and related expenses                    10,194               8,735
   Accrued interest                                                        4,595               4,313
   Other accrued expenses                                                 14,248              13,435
   Long-term debt due in one year                                            500                 500
                                                                       ---------           ---------
          Total current liabilities                                       53,684              50,604

Long-term debt                                                           229,650             213,525
Deferred income taxes and other long-term liabilities                     45,483              44,005
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                                        39,669              39,669
    Accumulated other comprehensive loss                                    (561)               (798)
    Retained earnings                                                     86,768              75,379
                                                                       ---------           ---------
         Total shareholders' equity                                      126,001             114,375
                                                                       ---------           ---------
                                                                       $ 454,818           $ 422,509
                                                                       =========           =========
</TABLE>


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


                                       1
<PAGE>

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


<TABLE>
<CAPTION>
                                                            THIRTEEN WEEKS ENDED
                                                       -----------------------------
                                                        FEB. 23,           MARCH 1,
                                                          2001               2002
                                                       ---------           ---------

<S>                                                    <C>                 <C>
Net sales                                              $ 190,518           $ 143,564

Operating costs and expenses
      Cost of goods sold                                 160,671             123,771

      Depreciation                                        11,253              11,200

      Selling and administrative expenses                  9,290               6,728
                                                       ---------           ---------

           Operating income                                9,304               1,865

Interest expense                                           5,063               4,860
Discount and expenses on sales of receivables              1,316                 345
Other income, net                                            (35)               (138)
                                                       ---------           ---------

      Income (loss) before income taxes                    2,960              (3,202)

Provision for (benefit of) income taxes                    1,080              (1,465)
                                                       ---------           ---------

           Net income (loss)                           $   1,880           $  (1,737)
                                                       =========           =========


Per share data:
           Net income (loss)-basic                     $     .15           $    (.14)
                                                       =========           =========

           Net income (loss)-diluted                   $     .15           $    (.14)
                                                       =========           =========

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


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


                                       2
<PAGE>




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


<TABLE>
<CAPTION>
                                                          TWENTY-SIX WEEKS ENDED
                                                       ---------------------------
                                                       FEB. 23,           MARCH 1,
                                                         2001               2002
                                                       --------          ---------

<S>                                                    <C>               <C>
Net sales                                              $391,055          $ 292,638

Operating costs and expenses
      Cost of goods sold                                326,351            254,686

      Depreciation                                       22,096             22,990

      Selling and administrative expenses                19,047             14,177

      Facility restructuring charges                         --              6,500
                                                       --------          ---------

           Operating income (loss)                       23,561             (5,715)

Interest expense                                         10,052             10,174
Discount and expenses on sales of receivables             2,849                916
Other expense (income), net                                 127               (139)
                                                       --------          ---------

      Income (loss) before income taxes                  10,533            (16,666)

Provision for (benefit of) income taxes                   3,850             (6,530)
                                                       --------          ---------

           Net income (loss)                           $  6,683          $ (10,136)
                                                       ========          =========


Per share data:
           Net income (loss)-basic                     $    .53          $    (.81)
                                                       ========          =========

           Net income (loss)-diluted                   $    .53          $    (.81)
                                                       ========          =========

           Dividends declared                          $    .20          $     .10
                                                       ========          =========
</TABLE>

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


                                       3
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                         TWENTY SIX WEEKS ENDED
                                                                                       ---------------------------
                                                                                       FEB. 23,           MARCH 1,
                                                                                         2001               2002
                                                                                       --------           --------
<S>                                                                                    <C>                <C>
  Operating activities
       Net income (loss)                                                               $  6,683           $(10,136)
       Adjustments to reconcile net income to net
            cash provided by operating activities:
              Depreciation and amortization                                              22,454             23,291
              Benefit of deferred income taxes                                             (318)            (2,276)
              Loss (gain) on disposal of equipment and facility
                restructuring charges                                                      (198)             4,709
              Sale of accounts receivable, net                                           (9,000)           (10,500)
              Changes in operating assets and liabilities                               (21,421)            18,505
                                                                                       --------           --------

             Net cash provided by (used in) operating activities                         (1,800)            23,593

  Investing activities
       Purchases of property, plant and equipment                                       (36,319)            (7,708)
       Proceeds from sale of property, plant and equipment                                  297                210
                                                                                       --------           --------

             Net cash used in investing activities                                      (36,022)            (7,498)

  Financing activities
       Net advances (payments) on revolving line of credit                               34,450            (16,125)
       Issuance of common stock                                                              20                 --
       Purchase and retirement of common stock                                             (204)                --
       Dividends paid                                                                    (2,509)            (1,253)
                                                                                       --------           --------

             Net cash provided by (used in) financing activities                         31,757            (17,378)
                                                                                       --------           --------

Decrease in cash                                                                         (6,065)            (1,283)

Cash at beginning of period                                                               7,867              2,969
                                                                                       --------           --------

Cash at end of period                                                                  $  1,802           $  1,686
                                                                                       ========           ========
</TABLE>

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


                                       4
<PAGE>

                              AVONDALE INCORPORATED
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  MARCH 1, 2002



         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 31, 2001 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 31,
2001 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 March 1, 2002 are not necessarily indicative of the
results that may be expected for the fiscal year ending August 30, 2002.


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


<TABLE>
<CAPTION>
                                                      AUG. 31,         MARCH 1,
                                                        2001             2002
                                                      -------          -------

         <S>                                          <C>              <C>
         Finished goods                               $33,955          $29,390
         Work in process                               39,470           33,771
         Raw materials                                 11,713            8,991
         Dyes and chemicals                             5,058            5,648
                                                      -------          -------
         Inventories at FIFO                           90,196           77,800

         Premium to adjust carrying value to
              LIFO basis                                2,750            3,950
                                                      -------          -------

                                                       92,946           81,750
         Supplies at average cost                       6,725            6,432
                                                      -------          -------

                                                      $99,671          $88,182
                                                      =======          =======
</TABLE>


                                       5
<PAGE>


                              AVONDALE INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             (UNAUDITED) (CONTINUED)
                                  MARCH 1, 2002


         Valuation of the Company's inventories under the last-in, first-out
(LIFO) method at March 1, 2002 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 2002 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. 23,        MARCH 1,        FEB. 23,        MARCH 1,
                                                                 2001            2002            2001            2002
                                                               --------        -------         --------        --------

         <S>                                                   <C>             <C>             <C>             <C>
         Weighted average shares outstanding -basic             12,536          12,531          12,541          12,531
         Effect of employee stock options                          145              --             160              --

                                                                ------          ------          ------          ------
         Weighted average shares outstanding - diluted          12,681          12,531          12,701          12,531
                                                                ======          ======          ======          ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                       TWENTY-SIX WEEKS ENDED
                                                                   -----------------------------
                                                                    FEB. 23,           MARCH 1,
                                                                      2001               2002
                                                                   ---------           ---------

         <S>                                                       <C>                 <C>
         Revenues:
             Apparel fabrics                                       $ 306,909           $ 243,512
             Yarns                                                   117,196              87,033
             Other                                                    40,056              31,899
                                                                   ---------           ---------
                                                                     464,161             362,444
             Less intersegment sales                                  73,106              69,806
                                                                   ---------           ---------
                     Total                                         $ 391,055           $ 292,638
                                                                   =========           =========

         Income (loss):
             Apparel fabrics                                       $  34,817           $  12,755
             Yarns                                                     1,046              (5,116)
             Other                                                     3,417                 685
             Facility restructuring charges                               --              (6,500)
             Unallocated                                             (15,719)             (7,539)
                                                                   ---------           ---------
                     Total operating income (loss)                    23,561              (5,715)
             Interest expense                                         10,052              10,174
             Discount and expenses on sale of receivables              2,849                 916
             Other expense (income), net                                 127                (139)
                                                                   ---------           ---------
                     Income (loss) before income taxes             $  10,533           $ (16,666)
                                                                   =========           =========
</TABLE>


                                       6
<PAGE>


                              AVONDALE INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             (UNAUDITED) (CONTINUED)
                                  MARCH 1, 2002



         5.       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. 23,          MARCH 1,
                                                                        2001              2002
                                                                      -------           --------

         <S>                                                          <C>               <C>
         Net income (loss)                                            $ 6,683           $(10,136)
         Change in fair value of interest rate swaps, net of
             income taxes                                                (627)              (237)
                                                                      -------           --------
         Comprehensive income (loss)                                  $ 6,056           $(10,373)
                                                                      =======           ========
</TABLE>

         6.       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 31, 2001. 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 that management, in consultation with
legal counsel, believes would have a material adverse effect on the Company's
financial condition or results of operations.

         7.       Facility Restructuring: In response to the highly competitive
market conditions and continued oversupply of open-end yarns, in January 2002,
the Company completed the closing of two separate open-end yarn manufacturing
facilities located in North Carolina. In connection with these closings, the
Company recorded facility restructuring charges and other non-operating costs of
approximately $5.3 million during the thirteen weeks ended November 30, 2001.
Additionally, the Company implemented a program in September 2001 to reduce
certain manufacturing overhead costs and selling, general and administrative
expenses. In conjunction with these actions and the two plant closings, the
Company recorded severance expense of approximately $1.2 million related to the
termination of approximately 70 associates holding manufacturing, marketing and
administrative positions. At March 1, 2002, accruals of approximately $300,000
related to the facility restructuring costs, and $50,000 related to severance
expense, remain outstanding and are included in other accrued expenses in the
consolidated balance sheets.

         At March 1, 2002, the two closed plant facilities and certain real
estate properties and other equipment have been identified as available for sale
and are included in assets held for sale in the consolidated balance sheets.


                                       7
<PAGE>

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

RESULTS OF OPERATIONS

Thirteen Weeks Ended March 1, 2002 Compared to Thirteen Weeks Ended February 23,
2001

         NET SALES. Net sales decreased 24.6% to $143.6 million for the thirteen
weeks ended March 1, 2002 from $190.5 million for the thirteen weeks ended
February 23, 2001. Retail sales of apparel continued to reflect weak consumer
demand and a general decline in consumer confidence following the tragic events
of September 11, 2001 and subsequent developments. Expecting reduced demand for
products made using apparel fabrics and yarns, apparel producers and retailers
targeted production and inventory levels far below those normal for the holiday
season. In addition, the strength of the U.S. dollar in comparison to the
currencies of many Asian countries continues to promote the importation of goods
from those countries by U.S. retailers, exacerbating the already highly
competitive market conditions resulting from the imbalance of global supply and
demand for textile and apparel products. While the Company expects these
conditions to continue into the third quarter of fiscal 2002, negatively
impacting pricing, improvement in unit volume of the Company's products is
anticipated.

         OPERATING INCOME. Operating income was $1.9 million for the thirteen
weeks ended March 1, 2002 compared to $9.3 million for the thirteen weeks ended
February 23, 2001, reflecting lower average selling prices for most products and
the negative impact of reduced volumes on unit cost absorption and operational
efficiencies. Cost of goods sold decreased 23.0% to $123.8 million for the
thirteen weeks ended March 1, 2002 from $160.7 million for the thirteen weeks
ended February 23, 2001, reflecting the reduction in unit sales and lower raw
material costs. Cost of goods sold as a percentage of net sales increased to
86.2% for the thirteen weeks ended March 1, 2002 from 84.4% for the thirteen
weeks ended February 23, 2001.

         Selling and administrative expenses decreased 28.0% to $6.7 million for
the thirteen weeks ended March 1, 2002 from $9.3 million for the thirteen weeks
ended February 23, 2001. This decrease reflected the impact of a program
initiated in September 2001 to reduce selling, general and administrative
staffing and related expenses, and a reduction in 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 4.7% for the thirteen weeks ended March 1, 2002 from 4.9% for the
thirteen weeks ended February 23, 2001.

         SEGMENT PERFORMANCE. Apparel fabric sales decreased 17.5% to $122.6
million for the thirteen weeks ended March 1, 2002 from $148.6 million for the
thirteen weeks ended February 23, 2001. The decline in sales reflected a 16.4%
decrease in yards sold as weak demand for denim and bottom-weight fabrics
continued. Average selling prices declined 1.3% for the respective periods.
Operating income for apparel fabrics decreased 45.0% to $7.1 million for the
thirteen weeks ended March 1, 2002 from $12.9 million for the thirteen weeks
ended February 23, 2001, primarily due to the reduced unit volumes and lower
average selling prices.

         Yarn sales, including intracompany sales to the fabric operations,
decreased 31.6% to $41.8 million for the thirteen weeks ended March 1, 2002 from
$61.1 million for the thirteen weeks ended February 23, 2001, reflecting the
closing of two open-end yarn plants in North Carolina, a 23.0% decrease in
pounds sold and an 11.1% decrease in average selling price. Market pricing for
sales yarns remained very competitive, reflecting continued excess production
capacity within the domestic industry and continued imports of yarns and knitted
apparel from Asia. The yarn operations produced an operating loss of $2.4
million for the thirteen weeks ended March 1, 2002 compared to an operating
income of $1.4 million for the thirteen weeks ended February 23, 2001, primarily
as a result of the reduced unit volumes and lower average selling prices.

         Other sales, which include sales of greige and specialty fabrics and
revenues from the Company's trucking operation, decreased 13.9% to $16.1 million
for the thirteen weeks ended March 1, 2002 from $18.7 million for the thirteen
weeks ended February 23, 2001. The decrease in other sales was primarily
attributable to continued softness in the greige and specialty fabrics markets.
Operating income decreased 68.8% to $0.5 million for the thirteen weeks ended
March 1, 2002 from $1.6 million for the thirteen weeks ended February 23, 2001,
primarily due to lower unit volumes.

         Inter-segment sales decreased 2.6% to $36.9 million for the thirteen
weeks ended March 1, 2002 from $37.9 million for the thirteen weeks ended
February 23, 2001, reflecting the decrease in consumption of internally produced
yarns within the Company's apparel fabrics operation.


                                       8
<PAGE>

         INTEREST EXPENSE, NET. Net interest expense decreased 3.9% to $4.9
million for the thirteen weeks ended March 1, 2002 from $5.1 million for the
thirteen weeks ended February 23, 2001. The decrease was primarily the result of
a lower average balance of borrowings outstanding during the thirteen weeks
ended March 1, 2002.

         DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES. Discount and expenses on
sales of receivables were $0.3 million for the thirteen weeks ended March 1,
2002 compared to $1.3 million for the thirteen weeks ended February 23, 2001.
This decrease was attributable to a net decrease in the amount of accounts
receivable sold under the facility, reflecting the overall decline in net sales
of the Company, and to lower market interest rates and the resulting decline in
discounts incurred on the receivables sold.

         PROVISION FOR (BENEFIT OF) INCOME TAXES. An income tax benefit of $1.5
million was recorded for the thirteen weeks ended March 1, 2002, reflecting the
loss before income taxes, compared to a provision for income taxes of $1.1
million for the thirteen weeks ended February 23, 2001.


Twenty-Six Weeks Ended March 1, 2002 Compared to Twenty-Six Weeks Ended February
23, 2001

         NET SALES. Net sales decreased 25.2% to $292.6 million for the
twenty-six weeks ended March 1, 2002 from $391.1 million for the twenty-six
weeks ended February 23, 2001. Retail sales of apparel, already suffering from
weak consumer demand, softened further following the tragic events of September
11, 2001 and subsequent developments. With the resulting decline in consumer
confidence and expecting reduced demand for products made using apparel fabrics
and yarns, apparel producers and retailers targeted production and inventory
levels far below those normal for the holiday season. In addition, the strength
of the U.S. dollar in comparison to the currencies of many Asian countries
continues to promote the importation of goods from those countries by U.S.
retailers, exacerbating the already highly competitive market conditions
resulting from the imbalance of global supply and demand for textile and apparel
products. While the Company expects these conditions to continue into the third
quarter of fiscal 2002, negatively impacting pricing, improvement in unit volume
of the Company's products is anticipated.

         OPERATING INCOME (LOSS). An operating loss of $5.7 million was
experienced for the twenty-six weeks ended March 1, 2002 compared to an
operating income of $23.6 million for the twenty-six weeks ended February 23,
2001, reflecting lower average selling prices for most products, the negative
impact of reduced volumes on unit cost absorption and operational efficiencies,
and the facility restructuring charges recorded upon the closing of two open-end
yarn manufacturing facilities. Cost of goods sold decreased 22.0% to $254.7
million for the twenty-six weeks ended March 1, 2002 from $326.4 million for the
twenty-six weeks ended February 23, 2001, reflecting the reduction in unit sales
and lower raw material costs. Cost of goods sold as a percentage of net sales
increased to 87.0% for the twenty-six weeks ended March 1, 2002 from 83.5% for
the twenty-six weeks ended February 23, 2001.

         Selling and administrative expenses decreased 25.3% to $14.2 million
for the twenty-six weeks ended March 1, 2002 from $19.0 million for the
twenty-six weeks ended February 23, 2001. This decrease reflected the impact of
a program initiated in September 2001 to reduce selling, general and
administrative staffing and related expenses, and a reduction in 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 4.8% for the twenty-six weeks ended March
1, 2002 from 4.9% for the twenty-six weeks ended February 23, 2001.

         SEGMENT PERFORMANCE. Apparel fabric sales decreased 20.7% to $243.5
million for the twenty-six weeks ended March 1, 2002 from $306.9 million for the
twenty-six weeks ended February 23, 2001. The decline in sales reflected a 20.2%
decrease in yards sold as demand for denim and bottom-weight fabrics weakened.
Average selling prices declined 0.6% for the respective periods. Operating
income for apparel fabrics decreased 63.1% to $12.8 million for the twenty-six
weeks ended March 1, 2002 from $34.7 million for the twenty-six weeks ended
February 23, 2001, primarily due to the reduced unit volumes.

         Yarn sales, including intracompany sales to the fabric operations,
decreased 25.8% to $87.0 million for the twenty-six weeks ended March 1, 2002
from $117.2 million for the twenty-six weeks ended February 23, 2001, reflecting
the closing of two open-end yarn plants in North Carolina, a 19.9% decrease in
pounds sold and a 7.3% decrease in average selling price. Market pricing for
sales yarns remained very competitive, reflecting continued excess production
capacity within the domestic industry and continued imports of yarns and knitted
apparel from Asia. The yarn operations produced an operating loss of $5.1
million for the twenty-six weeks ended March 1, 2002 compared to an operating
income of $1.1 million for the twenty-six weeks ended February 23, 2001,
primarily as a result of the reduced unit volumes and lower average selling
prices.


                                       9
<PAGE>

         Other sales, which include sales of greige and specialty fabrics and
revenues from the Company's trucking operation, decreased 20.5% to $31.9 million
for the twenty-six weeks ended March 1, 2002 from $40.1 million for the
twenty-six weeks ended February 23, 2001. The decrease in other sales was
primarily attributable to continued softness in the greige and specialty fabrics
markets. Operating income decreased 79.4% to $0.7 million for the twenty-six
weeks ended March 1, 2002 from $3.4 million for the twenty-six weeks ended
February 23, 2001, primarily due to the lower unit volumes.

         Inter-segment sales decreased 4.5% to $69.8 million for the twenty-six
weeks ended March 1, 2002 from $73.1 million for the twenty-six weeks ended
February 23, 2001, reflecting the decrease in consumption of internally produced
yarns within the Company's apparel fabrics operation.

         INTEREST EXPENSE, NET. Net interest expense increased 1.0% to $10.2
million for the twenty-six weeks ended March 1, 2002 from $10.1 million for the
twenty-six weeks ended February 23, 2001. The increase was primarily the result
of a higher average balance of borrowings outstanding during the twenty-six
weeks ended March 1, 2002.

         DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES. Discount and expenses on
sales of receivables were $0.9 million for the twenty-six weeks ended March 1,
2002 compared to $2.8 million for the twenty-six weeks ended February 23, 2001.
This decrease was attributable to a net decrease in the amount of accounts
receivable sold under the facility, reflecting the overall decline in net sales
of the Company, and to lower market interest rates and the resulting decline in
discounts incurred on the receivables sold.

         PROVISION FOR (BENEFIT OF) INCOME TAXES. An income tax benefit of $6.5
million was recorded for the twenty-six weeks ended March 1, 2002, reflecting
the loss before income taxes, compared to a provision for income taxes of $3.9
million for the twenty-six weeks ended February 23, 2001.

         FACILITY RESTRUCTURING CHARGES. In response to the highly competitive
market conditions and continued oversupply of open-end yarns, in January 2002,
the Company completed the closing of two separate open-end yarn manufacturing
facilities located in North Carolina. In connection with these closings, the
Company recorded facility restructuring charges and other non-operating costs of
approximately $5.3 million during the twenty-six weeks ended November 30, 2001.
Additionally, the Company implemented a program in September 2001 to reduce
certain manufacturing overhead costs and selling, general and administrative
expenses. In conjunction with these actions and the two plant closings, the
Company recorded severance expense of approximately $1.2 million related to the
termination of approximately 70 associates holding manufacturing, marketing and
administrative positions. At March 1, 2002, accruals of approximately $300,000
related to the facility restructuring costs, and $50,000 related to severance
expense, remain outstanding and are included in other accrued expenses in the
consolidated balance sheets.

         At March 1, 2002, the two closed plant facilities and certain real
estate properties and other equipment have been identified as available for sale
and are included in assets held for sale in the consolidated balance sheets.

         The consumption of cotton purchased for the two yarn manufacturing
facilities being closed will be shifted to the Company's remaining manufacturing
facilities, delaying the Company's ability to fully realize the historically low
cotton costs provided by the current marketplace.


LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities was $23.6 million for the
twenty-six weeks ended March 1, 2002. Principal working capital changes included
a $10.7 million decrease in accounts receivable, a $10.5 million decrease in
accounts receivable sold under the securitization facility, an $11.5 million
decrease in inventories, and a $3.1 million decrease in accounts payable and
accrued expenses. Investing activities were predominantly equipment purchases
and related costs of $7.7 million made in connection with the ongoing
modernization of the Company's manufacturing facilities. Financing activities
included a $16.1 million net decrease in borrowings under the revolving credit
facility and payment of $1.3 million in dividends on outstanding common stock.


                                       10
<PAGE>

         At March 1, 2002, the Company had borrowings of $86.5 million
outstanding under its revolving line of credit and $37.3 million of borrowing
availability thereunder.

         The Company's capital expenditures, aggregating $7.7 million for the
twenty-six weeks ended March 1, 2002, were used primarily to complete the
"linked" ring spinning and other modernization projects initiated in fiscal
2001. Having completed these major modernization projects, management estimates
that capital expenditures for the balance of fiscal 2002 will be approximately
$6 million.

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


FORWARD LOOKING STATEMENTS

         Statements herein regarding 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 selling
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>



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. 23,         MARCH 1,
                                                                 2001             2002
                                                               -------          --------

         <S>                                                   <C>              <C>
         Net income (loss)                                     $ 6,683          $(10,136)
         Interest expense                                       10,052            10,174
         Discount and expenses on sale of receivables            2,849               916
         Provision for (benefit of) income taxes                 3,850            (6,530)
         Depreciation and amortization                          22,454            23,291
         Facility restructuring non cash charges                    --             4,838
         Net change in allowance to adjust carrying
              value of inventory to LIFO basis                   1,000            (1,200)
                                                               -------          --------

         EBITDA                                                $46,888          $ 21,353
                                                               =======          ========
</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 31, 2001.


                                       12
<PAGE>


                              AVONDALE INCORPORATED



  PART II - OTHER INFORMATION



Item 1.           Legal Proceedings

                  None

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

                           10.27 - Second Amendment to Second Amended and
                           Restated Credit Agreement, dated as of February 6,
                           2002, among Avondale Mills, Inc., various listed
                           banks and Wachovia Bank, N.A., as agent.

                           10.28 - Third Amendment to Second Amended and
                           Restated Credit Agreement, dated as of March 1, 2002,
                           among Avondale Mills, Inc., various listed banks and
                           Wachovia Bank, N.A. as agent.

                  (b)      Reports on Form 8-K

                           None


                                       13
<PAGE>

                                    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:      /s/ April 12, 2002
           ------------------


                                       14