<PAGE>   1
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                     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 28, 1997
                         -----------------

                                     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 4, 1997             12,312,034  Shares
  Class B Common Stock           April 4, 1997                978,939  Shares
</TABLE>


================================================================================
<PAGE>   2



                                   FORM  10-Q

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION (UNAUDITED)  
     <S>                                                                                                             <C>  
     Condensed Consolidated Balance Sheets at February 28, 1997 and August 30,                                       1
                                                                               
     Condensed Consolidated Statements of Income for the Thirteen Weeks Ended  
     February 28, 1997 and February 23, 1996                                                                         2    
                                                                               
     Condensed Consolidated Statements of Income for the Twenty-Six Weeks Ended
     February 28, 1997 and February 23, 1996                                                                         3    
                                                                               
     Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended                                       
     February 28, 1997 and February 23, 1996                                                                         4    
                                                                               
     Notes to Condensed Consolidated Financial Statements                                                            5    
                                                                               
     Management's Discussion and Analysis of Financial Condition and Results of Operations                           7    
                                                                               
PART II - OTHER INFORMATION                                                    
     Item 1:      Legal Proceedings                                                                                 11
                                                                                                                     
     Item 2:      Changes in Securities                                                                             11
                                                                                                                     
     Item 3:      Defaults upon Senior Securities                                                                   11
                                                                                                                     
     Item 4:      Submission of Matters to a Vote of Security Holders                                               11
                                                                                                                     
     Item 5:      Other Information                                                                                 11
                                                                                                                     
     Item 6:      Exhibits and Reports on Form 8-K                                                                  11
                                                                                                                     
     Signature                                                                                                      12
</TABLE>

<PAGE>   3

PART I.  FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>

                                                          AUG. 30,    FEB. 28,
                                                            1996        1997
                                                         ----------  ----------
                                    ASSETS
<S>                                                      <C>         <C>       
Current assets                                                                 
 Cash                                                    $    7,253  $    4,112
 Accounts receivable, less allowance for doubtful                              
    accounts of $4,920 in 1996 and $5,607 in 1997            84,428      87,195
 Due from Triarc                                              7,250          --
 Inventories                                                127,698     135,590
 Prepaid expenses                                             2,792       7,394
                                                         ----------  ----------
    Total current assets                                    229,421     234,291
                                                                               
Property, plant and equipment                                                  
 Land                                                         8,490       8,490
 Buildings                                                   64,275      65,189
 Machinery and equipment                                    355,155     363,624
                                                         ----------  ----------
                                                            427,920     437,303
 Less accumulated depreciation                             (190,838)   (210,736)
                                                         ----------  ----------
                                                            237,082     226,567
Other assets                                                 26,576      21,048
                                                         ----------  ----------
                                                                               
                                                         $  493,079  $  481,906
                                                         ==========  ==========
                                                                               
                                                                               
                     LIABILITIES AND SHAREHOLDERS' EQUITY                      
                                                                               
Current liabilities                                                            
  Accounts payable                                       $   47,045  $   48,372
  Accrued compensation, benefits and related expenses        20,182      15,106
  Other accrued expenses                                     26,530      23,729
  Long-term debt due in one year                              3,250       2,250
  Income taxes payable                                           88          --
                                                         ----------  ----------
     Total current liabilities                               97,095      89,457
                                                                               
Long-term debt                                              299,850     294,150
Deferred income taxes and other long-term liabilities        28,622      31,006
Shareholders' equity                                                           
 Preferred Stock                                                               
    $.01 par value; 10,000 shares authorized                     --          --
 Common Stock                                                                  
    Class A, $.01 par value; 100,000 shares                                    
       authorized, 12,312 issued and outstanding                123         123
    Class B, $.01 par value; 5,000 shares                                      
       authorized, 979 issued and outstanding                    10          10
 Capital in excess of par value                              41,844      41,844
 Retained earnings                                           25,535      25,316
                                                         ----------  ----------
     Total shareholders' equity                              67,512      67,293
                                                         ----------  ----------
                                                                               
                                                         $  493,079  $  481,906
                                                         ==========  ==========
</TABLE>

          See notes to 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. 23,  FEB. 28,
                                                               1996      1997
                                                            --------- ----------
<S>                                                         <C>       <C> 
Net sales                                                   $ 114,547 $ 247,630
                                                                               
Operating costs and expenses                                                   
  Cost of goods sold                                           96,605   215,228
  Depreciation                                                  6,379    10,282
  Selling and administrative expenses                           6,567    11,146
                                                            --------- ---------
                                                                               
   Operating income                                             4,996    10,974
                                                                               
  Interest expense                                              3,028     6,915
  Discount and expenses on sale of receivables                     --     1,625
  Loss attributable to investment in Oneita                        --     1,466
  Other (income) expense, net                                     (70)      171
                                                            --------- ---------
                                                                               
  Income before income taxes                                    2,038       797
                                                                               
Provision for income taxes                                        795       326
                                                            --------- ---------
                                                                               
   Net income                                               $   1,243 $     471
                                                            ========= =========
                                                                               
Per share data:                                                                
   Net income                                               $     .11 $     .04
                                                            ========= =========
                                                                               
   Dividends declared                                       $     .07 $     .07
                                                            ========= =========
                                                                               
Weighted average shares outstanding                            11,069    13,400
                                                            ========= =========
</TABLE>

          See notes to 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. 23,    FEB. 28,
                                                      1996        1997
                                                   ----------  ----------
<S>                                                <C>         <C>
Net sales                                          $  243,496  $  501,694
                                                   
Operating costs and expenses                       
  Cost of goods sold                                  205,565     433,531
  Depreciation                                         12,607      20,561
  Selling and administrative expenses                  13,292      22,616
                                                   ----------  ----------
                                                   
   Operating income                                    12,032      24,986
                                                   
Interest expense                                        6,036      13,413
Discount and expenses on sale of receivables               --       3,236
Loss attributable to investment in Oneita                  --       5,156
Other (income) expense, net                              (540)        429
                                                   ----------  ----------
                                                   
  Income before income taxes                            6,536       2,752
                                                   
Provision for income taxes                              2,540       1,110
                                                   ----------  ----------
                                                   
   Net income                                      $    3,996  $    1,642
                                                   ==========  ==========
                                                   
Per share data:                                    
   Net income                                      $      .36  $      .12
                                                   ==========  ==========
                                                   
   Dividends declared                              $      .14  $      .14
                                                   ==========  ==========
                                                   
Weighted average shares outstanding                    11,133      13,400
                                                   ==========  ==========
</TABLE>

            See notes to 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. 23,      FEB. 28,     
                                                                                                1996          1997       
                                                                                              --------      --------     
<S>                                                                                           <C>           <C>          
Operating activities                                                                                                     
  Net income                                                                                  $  3,996      $  1,642     
  Adjustments to reconcile net income to net                                                                             
      cash provided by operating activities:                                                                             
        Depreciation and amortization                                                           12,629        20,586     
        Loss attributable to investment in Oneita                                                   --         5,156     
        Provision for deferred income taxes                                                        142         2,384     
        Interest expense on payment-in-kind notes                                                1,229            --     
        Gain on sale of equipment                                                                 (639)          (41)    
        Changes in operating assets and liabilities                                            (18,447)      (14,774)    
                                                                                              --------      --------     
                                                                                                                         
           Net cash provided by operating activities                                            (1,090)       14,953     
Investing activities                                                                                                     
  Purchases of property, plant and equipment                                                   (13,275)       (9,599)    
  Proceeds from sale of property, plant and equipment                                              640            66     
                                                                                              --------      --------     
                                                                                                                         
           Net cash used in investing activities                                               (12,635)       (9,533)    
Financing activities                                                                                                     
  Net additions to (payments on) revolving line of credit and long-term debt                    16,825        (6,700)    
  Dividends paid                                                                                (1,550)       (1,861)    
                                                                                              --------      --------     

          Net cash provided by (used in) financing activities                                   15,275        (8,561)    
                                                                                              --------      --------     
Increase (decrease) in cash                                                                      1,550        (3,141)            
                                                                                                                         
Cash at beginning of period                                                                      1,335         7,253     
                                                                                              --------      --------     

          Cash at end of period                                                               $  2,885      $  4,112     
                                                                                              ========      ========     
</TABLE>

          See notes to condensed consolidated financial statements.


                                      4
<PAGE>   7

                             AVONDALE INCORPORATED
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               FEBRUARY 28, 1997



     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 generally accepted accounting principles for
interim financial information.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The August 30, 1996 balance sheet has been
derived from the audited financial statements at that date. Certain prior year
balances have been reclassified to conform to the current year's presentation.
The accounting policies and basis of presentation followed by the Company are
presented in Note 1 to the August 30, 1996 Audited Consolidated Financial
Statements.

     Effective September 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of Long-lived
Assets and Long-Lived Assets to be Disposed Of." The adoption of this statement
had no impact on the Company's financial results.

     The preparation of financial statements in conformity with generally
accepted accounting principles 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 thirteen weeks and twenty-six weeks ended February 28, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending August 29, 1997.


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

<TABLE>
<CAPTION>
                                                                      AUG. 30,  FEB. 28, 
                                                                        1996      1997
                                                                      --------  --------
        <S>                                                           <C>       <C>           
        Finished goods                                                $ 35,746  $ 39,910      
        Work in process                                                 56,826    57,241      
        Raw materials                                                   28,812    31,715      
        Dyes and chemicals                                               6,353     5,411      
                                                                      --------  --------      
        Inventories at FIFO                                            127,737   134,277      
                                                                                              
        Less allowance to reduce carrying value to                                            
          LIFO basis                                                    (7,725)   (6,925)      
                                                                      --------  --------      
                                                                       120,012   127,352      
        Supplies at average cost                                         7,686     8,238      
                                                                      --------  --------      
                                                                                              
                                                                      $127,698  $135,590      
                                                                      ========  ========      
</TABLE>


                                       5
<PAGE>   8


                             AVONDALE INCORPORATED
          NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                  (UNAUDITED)
                               FEBRUARY 28, 1997

     Valuation of the Company's inventories under the last-in, first-out (LIFO)
method at February 28, 1997 and the related impact on the statement of income
for the thirteen weeks and twenty-six weeks then ended has been determined
using estimated quantities and costs as of the fiscal 1997 year-end. As a
result, interim amounts are subject to the final year-end LIFO valuation.

     3.  Investment in securities:   In January 1996, the Company purchased a
$7.5 million subordinated note due February 26, 1999, having convertible
features, from Oneita Industries, Inc. ("Oneita"). On August 27, 1996, the
Company converted the subordinated note plus accrued interest into 2,270,833
shares of common stock of Oneita, representing ownership of 24.8% of Oneita's
outstanding shares. This investment, which is accounted for under the equity
method, is included in Other assets in the Consolidated Balance Sheet.

     The following summarizes the results of operations reported by Oneita for
its two fiscal quarters ended December 28, 1996 (amounts in thousands):

<TABLE>
<CAPTION>
                                                  Two Fiscal Quarters Ended  
                                                      December 28, 1996       
                                                  -------------------------  
     <S>                                                  <C>  
     Net Sales                                            $  68,608             
                                                          =========  
     Loss from Operations                                 $ (20,645)           
                                                          =========  
     Net Loss                                             $ (24,738)   
                                                          =========  
</TABLE>

     During the thirteen weeks and twenty-six weeks ended February 28, 1997,
the Company recorded a loss of  approximately $1.5 and $5.2 million,
respectively, attributable to its investment in Oneita. Such loss represented
the Company's pro rata share of the net loss incurred by Oneita for its two
fiscal quarters noted above.

     4.  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 its future
results of operations or financial position.

     The Company is also a party to 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, if determined
adversely to the Company, would have a material adverse effect on the Company's
financial condition or results of operations.




                                       6
<PAGE>   9

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Thirteen Weeks Ended February 28, 1997  Compared to Thirteen Weeks Ended
February 23, 1996

     NET SALES.  Net sales increased 116.2% to $247.6 million for the thirteen
weeks ended February 28, 1997 from $114.5 million for the thirteen weeks ended
February 23, 1996, primarily as a result of the Company's acquisition of
substantially all of the textile assets of Graniteville Company
("Graniteville")  in April 1996.

     Apparel fabric sales increased 251.8% to $167.7 million for the thirteen
weeks ended February 28, 1997 from $47.7 million for the thirteen weeks ended
February 23, 1996. This increase in sales reflected a 293.4% increase in yards
sold, which was partially offset by a 10.6% decline in average selling prices.
The increase in yards sold was primarily attributable to the acquisition of
Graniteville in April 1996. The decline in average selling prices resulted from
the inclusion of net sales attributable to Graniteville, which generally were
at lower average selling prices than the Company's other apparel fabric sales,
and softening market prices for certain denim fabrics caused by excess
inventories of denim fabric and garments within the industry, as well as
increased production capacity of domestic and Mexican suppliers.

     Greige and specialty fabric sales increased 70.1% to $17.4 million for the
thirteen weeks ended February 28, 1997 from $10.2 million for the thirteen
weeks ended February 23, 1996. This increase in sales was primarily the result
of an increase in yards sold due to the inclusion of net sales attributable to
Graniteville, which was acquired in April 1996.

     Yarn sales increased 10.3% to $62.5 million for the thirteen weeks ended
February 28, 1997 from $56.6 million for the thirteen weeks ended February 23,
1996. This increase reflected a 12.8% increase in pounds sold and a 2.2%
decrease in average selling prices. These fluctuations reflected a more
aggressive marketing strategy aimed at improving capacity utilization and
reducing unit conversion costs. Market prices remained very competitive,
reflecting continued excess production capacity within the yarn industry during
the thirteen weeks ended February 28, 1997.

     COST OF GOODS SOLD.  Cost of goods sold increased 122.8% to $215.2 million
for the thirteen weeks ended February 28, 1997 from $96.6 million for the
thirteen weeks ended February 23, 1996. Cost of goods sold as a percentage of
net sales increased to 86.9% for the thirteen weeks ended February 28, 1997
from 84.3% for the thirteen weeks ended February 23, 1996, primarily due to
higher production costs of certain Graniteville products and the impact of
lower average selling prices. Raw material costs as a percentage of net sales
decreased to 46.9% for the thirteen weeks ended February 28, 1997 from 50.0%
for the thirteen weeks ended February 23, 1996, while conversion costs as a
percentage of net sales increased to 40.1% for the thirteen weeks ended
February 28, 1997 from 34.4% for the thirteen weeks ended February 23, 1996.

     SELLING AND ADMINISTRATIVE EXPENSES.  Selling and administrative expenses
increased 69.7% to $11.1 million for the thirteen weeks ended February 28, 1997
from $6.6 million for the thirteen weeks ended February 23, 1996, primarily due
to additional expenses attributable to Graniteville. Selling and administrative
expenses as a percentage of net sales decreased to 4.5% for the thirteen weeks
ended February 28, 1997 from 5.7% for the thirteen weeks ended February 23,
1996.

     INTEREST EXPENSE, NET.  Interest expense, net increased 128.4% to $6.9
million for the thirteen weeks ended February 28, 1997 from $3.0 million for
the thirteen weeks ended February 23, 1996. This increase reflected a higher
average of outstanding borrowings during the thirteen weeks ended February 28,
1997 as a result of borrowings incurred to finance the acquisition of
Graniteville.



                                       7
<PAGE>   10


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)


RESULTS OF OPERATIONS (CONT.)

     DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES.  Discount and expenses on
sale of receivables were $1.6 million for the thirteen weeks ended February 28,
1997, which related to the receivables securitization facility established by
the Company in April 1996.

     LOSS ATTRIBUTABLE TO INVESTMENT IN ONEITA.  During the thirteen weeks
ended February 28, 1997 the Company recorded a loss of approximately $1.5
million attributable to its investment in Oneita. Such loss represented the
Company's pro rata share of the net loss incurred by Oneita for its fiscal
quarter ended December 28, 1996.  The carrying value of this investment at
February 28, 1997 was less than the aggregate market value of such investment
based upon the last reported close price of Oneita's common stock as reported
on the New York Stock Exchange as of February 28, 1997.

     PROVISION FOR INCOME TAXES.  Provision for income taxes decreased 59.0% to
$0.3 million for the thirteen weeks ended February 28, 1997 from $0.8 million
for the thirteen weeks ended February 23, 1996. The Company's effective tax
rate was 40.1% for the thirteen weeks ended February 28, 1997 compared to 39.0%
for the thirteen weeks ended February 23, 1996.

Twenty-Six Weeks Ended February 28, 1997  Compared to Twenty-Six Weeks Ended
February 23, 1996

     NET SALES.  Net sales increased 106.0% to $501.7 million for the
twenty-six weeks ended February 28, 1997 from $243.5 million for the twenty-six
weeks ended February 23, 1996, primarily as a result of the Company's
acquisition of substantially all of the textile assets of Graniteville.

     Apparel fabric sales increased 248.3% to $346.3 million for the twenty-six
weeks ended February 28, 1997 from $99.4 million for the twenty-six weeks ended
February 23, 1996. This increase in sales reflected a 291.4% increase in yards
sold, which was partially offset by a 11.0% decline in average selling prices.
The increase in yards sold was primarily attributable to the acquisition of
Graniteville in April 1996. The decline in average selling prices resulted from
the inclusion of net sales attributable to Graniteville, which generally were
at lower average selling prices than the Company's other apparel fabric sales,
and softening market prices for certain denim fabrics caused by excess
inventories of denim fabric and garments within the industry, as well as
increased production capacity of domestic and Mexican suppliers.

     Greige and specialty fabric sales increased 50.1% to $32.5 million for the
twenty-six  weeks ended February 28, 1997 from $21.6 million for the twenty-six
weeks ended February 23, 1996. This increase in sales was primarily the result
of an increase in yards sold due to the inclusion of net sales attributable to
Graniteville, which was acquired in April 1996.

     Yarn sales increased 0.4% to $122.9 million for the twenty-six weeks ended
February 28, 1997 from $122.4 million for the twenty-six weeks ended February
23, 1996. This increase reflected a 4.2% increase in pounds sold and a 3.7%
decrease in average selling prices. These fluctuations reflected a more
aggressive marketing strategy aimed at improving capacity utilization and
reducing unit conversion costs. Market prices remained very competitive,
reflecting continued excess production capacity within the yarn industry during
the twenty-six weeks ended February 28, 1997.

     COST OF GOODS SOLD.  Cost of goods sold increased 110.9% to $433.5 million
for the twenty-six weeks ended February 28, 1997 from $205.6 million for the
twenty-six weeks ended February 23, 1996. Cost of goods sold as a percentage of
net sales increased to 86.4% for the twenty-six weeks ended February 28, 1997
from 84.4% for the twenty-six weeks ended February 23, 1996, primarily due to
higher production costs of certain Graniteville


                                       8
<PAGE>   11

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)


RESULTS OF OPERATIONS (CONT.)

products and the impact of lower average selling prices. Raw material costs as
a percentage of net sales decreased to 48.5% for the twenty-six weeks ended
February 28, 1997 from 51.1% for the twenty-six weeks ended February 23, 1996,
while conversion costs as a percentage of net sales increased to 38.0% for the
twenty-six weeks ended February 28, 1997 from 33.3% for the twenty-six  weeks
ended February 23, 1996.

     SELLING AND ADMINISTRATIVE EXPENSES.  Selling and administrative expenses
increased 70.1% to $22.6 million for the twenty-six weeks ended February 28,
1997 from $13.3 million for the twenty-six weeks ended February 23, 1996,
primarily due to additional expenses attributable to Graniteville. Selling and
administrative expenses as a percentage of net sales decreased to 4.5% for the
twenty-six weeks ended February 28, 1997 from 5.5% for the twenty-six weeks
ended February 23, 1996.

     INTEREST EXPENSE, NET.  Interest expense, net increased 122.2% to $13.4
million for the twenty-six weeks ended February 28, 1997 from $6.0 million for
the twenty-six weeks ended February 23, 1996. This increase reflected a higher
average of outstanding borrowings during the twenty-six weeks ended February
28, 1997 as a result of  borrowings incurred to finance the acquisition of
Graniteville.

     DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES.  Discount and expenses on
sale of receivables were $3.2 million for the twenty-six weeks ended February
28, 1997, which related to the receivables securitization facility established
by the Company in April 1996.

     LOSS ATTRIBUTABLE TO INVESTMENT IN ONEITA.  During the twenty-six weeks
ended February 28, 1997 the Company recorded a loss of approximately $5.2
million attributable to its investment in Oneita. Such loss represented the
Company's pro rata share of the net loss incurred by Oneita for its two fiscal
quarters ended December 28, 1996. The carrying value of this investment at
February 28, 1997 was less than the aggregate market value of such investment
based upon the last reported close price of Oneita's common stock as reported
on the New York Stock Exchange as of February 28, 1997.

     PROVISION FOR INCOME TAXES.  Provision for income taxes decreased 56.3% to
$1.1 million for the twenty-six weeks ended February 28, 1997 from $2.5 million
for the twenty-six weeks ended February 23, 1996. The Company's effective tax
rate was 40.3% for the twenty-six weeks ended February 28, 1997 compared to
38.9% for the twenty-six weeks ended February 23, 1996.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities was $15.0 million for the
twenty-six weeks ended February 28, 1997. Principal working capital changes
included a $2.8 million increase in Accounts Receivable, a $7.9 million
increase in Inventories, and a $6.6 million decrease in Accounts Payable and
Accrued Expenses. The Company's investing activities included $9.6 million in
capital improvements relating to the ongoing modernization of the Company's
manufacturing facilities. Net cash used in financing activities aggregated $8.6
million, including $6.7 million to repay debt and $1.9 million to pay dividends
on outstanding capital stock.

     At February 28, 1997, the Company had borrowings of $156.4 million
outstanding under its revolving line of credit and $68.6 million of borrowing
availability thereunder.

     The Company's capital expenditures aggregated $9.6 million for the
twenty-six weeks ended February 28, 1997. These expenditures were primarily for
the expansion of the Company's denim manufacturing operations and other
equipment purchases.  Management estimates that capital expenditures for the
balance of fiscal 1997 will be


                                       9
<PAGE>   12

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)


RESULTS OF OPERATIONS (CONT.)

approximately $30.0 million, and that such amounts will be used primarily to
upgrade weaving equipment and to improve fabric finishing facilities.

     Management believes that cash generated from operations, together with
borrowings available under its revolving line of credit 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. The Company will also continue to consider other options available to
it in connection with future working capital and capital expenditure needs,
including the issuance of additional debt and equity securities.













                                       10
<PAGE>   13


                             AVONDALE INCORPORATED


<TABLE>
<CAPTION>

 PART II - OTHER INFORMATION

<S>          <C>                                                              
Item 1       Legal Proceedings                                                
                                                                              
             None                                                             
                                                                              
Item 2       Changes in Securities                                            
                                                                              
             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                                                  
                                                                              
             27.   Financial Data Schedule                                   
                                                                              
             (b)   Reports on Form 8-K                                        
                                                                              
                   None                                                       
</TABLE>

                                       11
<PAGE>   14

                                   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/  G. STEPHEN FELKER                         
                                ------------------------------------------------
                                G. Stephen Felker                            
                                Chairman, President, and Chief Executive Officer






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






Date:   April 11, 1997
        --------------
                                       12