<PAGE>   1
 
================================================================================
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-Q
 
<TABLE>
<C>              <S>
      [X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                 THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
                                              OR
      [  ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
                 THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
 
                          COMMISSION FILE NO 001-12211
 
                       ECHELON INTERNATIONAL CORPORATION
             (Exact name of Registrant as specified in its charter)
 
<TABLE>
<C>                                            <C>
                   FLORIDA                                       59-2554218
           (State of incorporation)                           (I.R.S. Employer
                                                           Identification Number)
 
        One Progress Plaza, Suite 1500
        St. Petersburg, Florida 33701                     Telephone (813) 824-6767
   (Address of principal executive offices)           (Registrant's telephone number)
</TABLE>
 
     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 registrant's
classes of common stock, as of the latest practicable date.
 
     Common stock, par value $.01 per share, 6,784,794 shares, as of November 1,
1997.
================================================================================
<PAGE>   2
 
                                    PART I.
 
                             FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
                       ECHELON INTERNATIONAL CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                         THREE MONTHS                NINE MONTHS
                                                     ENDED SEPTEMBER 30,         ENDED SEPTEMBER 30,
                                                     --------------------        -------------------
                                                      1997         1996           1997        1996
                                                     ------      --------        ------      -------
                                                         (UNAUDITED)                 (UNAUDITED)
                                                         (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                                  <C>         <C>             <C>         <C>
SALES AND REVENUES:
  Real estate operations
     Rental income.................................    $3.5        $  3.0         $ 9.6       $  8.9
     Sale of development properties................      .5          11.6            .8         18.2
     Marina and other revenues.....................     2.4           1.5           7.0          5.5
     Equity in losses of partnerships..............     (.2)           --          (1.0)          --
  Lending and leasing operations
     Interest income...............................     1.3           2.8           5.5         10.1
     Earned income on finance leases...............     1.1           1.0           2.6          2.8
     Other.........................................     1.1           1.1           4.0          3.1
                                                       ----        ------         -----       ------
                                                        9.7          21.0          28.5         48.6
                                                       ----        ------         -----       ------
OPERATING EXPENSES:
  Real estate operations...........................     3.7           2.7          10.5          8.6
  Cost of development properties sold..............      .5          11.6            .8         18.5
  Depreciation.....................................     1.1           1.4           3.6          4.3
  Provision for lease, loan and real estate
     losses........................................      --           2.8           (.7)        33.9
  Interest expense:
     Former parent advances........................      --           4.3            --         13.9
     Long-term debt................................     1.9            .5           7.1          1.7
  Allocated administrative expenses of former
     parent........................................      --            .9            --          1.3
  Marketing and other administrative...............     2.2           1.3           6.8          2.9
  Other (income) expenses, net.....................    (1.3)          1.0          (8.4)         2.2
                                                       ----        ------         -----       ------
                                                        8.1          26.5          19.7         87.3
                                                       ----        ------         -----       ------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY
  ITEM.............................................     1.6          (5.5)          8.8        (38.7)
INCOME TAX EXPENSE (BENEFIT).......................      .2          (1.9)          1.3        (14.9)
                                                       ----        ------         -----       ------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............     1.4          (3.6)          7.5        (23.8)
EXTRAORDINARY ITEM:
  Gain (loss) on extinguishment of debt, net of
     income tax effect.............................     (.1)          2.1           (.9)         2.1
                                                       ----        ------         -----       ------
NET INCOME (LOSS)..................................    $1.3        $ (1.5)        $ 6.6       $(21.7)
                                                       ====        ======         =====       ======
Average shares of common stock outstanding.........     6.8           6.5           6.8          6.5
Per share data:
  Income (loss) before extraordinary...............    $.20        $ (.55)        $1.10       $(3.66)
  Extraordinary item...............................    (.01)          .32          (.13)         .32
                                                       ----        ------         -----       ------
          Net income (loss) per common share.......    $.19        $ (.23)        $ .97       $(3.34)
                                                       ====        ======         =====       ======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        1
<PAGE>   3
 
                       ECHELON INTERNATIONAL CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,   DECEMBER 31,
                                                                  1997            1996
                                                              -------------   ------------
                                                               (UNAUDITED)
                                                                     (IN MILLIONS)
<S>                                                           <C>             <C>
                                          ASSETS
LEASES, LOANS, PROPERTY & OTHER INVESTMENTS:
  Leases and loans receivable, net..........................      $205.0         $190.6
  Property, net.............................................       115.2          130.1
  Investments in and advances to unconsolidated
     affiliates.............................................        32.5           32.5
                                                                  ------         ------
                                                                   352.7          353.2
                                                                  ------         ------
ASSETS HELD FOR SALE........................................         2.5           29.4
                                                                  ------         ------
CURRENT ASSETS:
  Cash and equivalents......................................        19.7           63.3
  Marketable securities.....................................        44.5             --
  Accounts receivable, net..................................         0.5            1.1
  Current portion of leases and loans receivable............        32.1           75.9
  Income taxes receivable...................................          .1             --
  Inventories, at cost......................................         1.4            3.1
  Other.....................................................          .3             .7
                                                                  ------         ------
                                                                    98.6          144.1
                                                                  ------         ------
OTHER NON-CURRENT ASSETS....................................         2.1            4.3
                                                                  ------         ------
          Total assets......................................      $455.9         $531.0
                                                                  ======         ======
                           LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and other liabilities....................      $ 10.6         $ 15.7
  Income taxes payable......................................          --             .1
  Accounts and interest payable to former parent............          --             .8
  Current portion of long-term debt and note payable to
     former parent..........................................        15.2           75.6
                                                                  ------         ------
          Total current liabilities.........................        25.8           92.2
LONG-TERM DEBT..............................................        61.7           73.8
DEFERRED INCOME TAXES.......................................       158.2          163.3
OTHER LIABILITIES...........................................          .3             .3
COMMITMENTS AND CONTINGENCIES (See Note 6)
                                                                  ------         ------
          Total liabilities.................................       246.0          329.6
                                                                  ------         ------
STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value, 10,000,000 shares
     authorized, none issued................................          --             --
  Common stock, $.01 par value, 25,000,000 shares
     authorized, 6,783,183 outstanding in 1997 and 6,753,903
     outstanding in 1996....................................          .1             .1
  Additional paid in capital................................       279.5          279.4
  Retained deficit..........................................       (71.6)         (78.1)
  Unrealized gain (loss)....................................         1.9             --
                                                                  ------         ------
          Total stockholders' equity........................       209.9          201.4
                                                                  ------         ------
          Total liabilities and stockholders' equity........      $455.9         $531.0
                                                                  ======         ======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        2
<PAGE>   4
 
                       ECHELON INTERNATIONAL CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                NINE MONTHS
                                                                   ENDED
                                                               SEPTEMBER 30,
                                                              ---------------
                                                              1997     1996
                                                              -----   -------
                                                                (UNAUDITED)
                                                               (IN MILLIONS)
<S>                                                           <C>     <C>
OPERATING ACTIVITIES:
  Income (loss) before extraordinary item...................  $ 7.5   $ (23.8)
  Adjustment for noncash items:
     Depreciation and amortization..........................    4.3       4.3
     Deferred income taxes..................................   (6.2)    (19.4)
     Amortization of investment tax credits.................    (.5)      (.5)
     Amortization of lease income...........................    (.7)      (.5)
     Provision for lease, loan and real estate losses.......    (.7)     33.9
     (Gain) loss on sale of assets..........................   (4.2)       .5
     Equity in income of unconsolidated affiliates, net.....   (2.0)     (2.1)
     Changes in working capital:
       Accounts payable and other liabilities...............   (4.7)       .1
       Income taxes receivable/payable......................     .4      (5.8)
       Other working capital changes........................    2.4       (.2)
     Other operating activities.............................    5.1      (3.3)
                                                              -----   -------
                                                                 .7     (16.8)
                                                              -----   -------
INVESTING ACTIVITIES:
  Purchases of marketable securities........................  (57.1)       --
  Proceeds from sale of marketable securities...............   15.6        --
  Proceeds from sale or collection of leases and loans......   76.5      24.1
  Real estate property additions............................   (7.8)     (7.5)
  Proceeds from sale of real estate properties..............     .4      17.6
  Distributions from unconsolidated affiliates, net of
     investments............................................    2.3       2.8
                                                              -----   -------
                                                               29.9      37.0
                                                              -----   -------
FINANCING ACTIVITIES:
  Repayment of long-term debt...............................  (74.2)    (11.5)
  Decrease in due to former parent..........................     --    (148.9)
  Equity contribution from former parent....................     --     140.0
                                                              -----   -------
                                                              (74.2)    (20.4)
                                                              -----   -------
Net decrease in cash and equivalents........................  (43.6)      (.2)
Beginning cash and equivalents..............................   63.3        .4
                                                              -----   -------
ENDING CASH AND EQUIVALENTS.................................  $19.7   $    .2
                                                              =====   =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest..................................................  $ 6.7   $  10.7
  Income taxes (net of refunds).............................    7.1      13.4
                                                              =====   =======
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Distribution of note receivable by unconsolidated
  affiliate.................................................    3.0        --
                                                              =====   =======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        3
<PAGE>   5
 
                       ECHELON INTERNATIONAL CORPORATION
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  INTERIM FINANCIAL STATEMENTS
 
     In the opinion of management, the accompanying financial statements include
all adjustments deemed necessary to summarize fairly and reflect the financial
position and results of operations of Echelon International Corporation (the
"Company") for the interim periods presented. Results for the third quarter are
not necessarily indicative of results for the full year. These financial
statements should be read in conjunction with the financial statements and notes
thereto in the Company's Annual Report on Form 10-K for the year ended December
31, 1996.
 
2.  INVESTMENTS IN MARKETABLE SECURITIES
 
     The Company's investments in marketable securities are classified as
available-for-sale, except for debt securities with a maturity of three months
or less, which are classified as cash equivalents. The available-for-sale
marketable securities are available to support current operations or to take
advantage of other investment opportunities. These securities are stated at fair
value based upon market quotes. Dividend and interest income is recognized when
earned. Realized gains and losses are included in earnings and are derived using
the specific identification method for determining the cost of securities sold.
Unrealized gains and losses, net of tax, are included as a separate component of
stockholders' equity.
 
     Following is a summary of available-for-sale securities as of September 30,
1997:
 
<TABLE>
<CAPTION>
                                                   AMORTIZED   UNREALIZED   UNREALIZED   FAIR
                                                     COST         GAIN         LOSS      VALUE
                                                   ---------   ----------   ----------   -----
                                                                  (IN MILLIONS)
<S>                                                <C>         <C>          <C>          <C>
Certificates of deposit..........................    $ 2.0          --           --      $ 2.0
U.S. government obligations......................      8.8         0.1           --        8.9
Municipal bonds..................................      5.6         0.1           --        5.7
Corporate debt securities........................      9.3          --         (0.1)       9.2
                                                     -----        ----        -----      -----
          Subtotal...............................     25.7         0.2         (0.1)      25.8
Equity securities................................     15.8         3.0         (0.1)      18.7
                                                     -----        ----        -----      -----
          Total..................................    $41.5        $3.2        ($0.2)     $44.5
                                                     =====        ====        =====      =====
</TABLE>
 
     The amortized cost and estimated fair value of available-for-sale debt
securities as of September 30, 1997, by expected maturity, are as follows:
 
<TABLE>
<CAPTION>
                                                              AMORTIZED   FAIR
                                                                COST      VALUE
                                                              ---------   -----
                                                                (IN MILLIONS)
<S>                                                           <C>         <C>
Due in one year or less.....................................    $12.2     $12.2
Due after one year through five years.......................      9.5       9.6
Due after five years........................................      4.0       4.0
                                                                -----     -----
          Total.............................................    $25.7     $25.8
                                                                =====     =====
</TABLE>
 
3.  IMPAIRMENT WRITE-DOWN
 
     During the second quarter of 1997, the Company revised its strategy with
respect to its commercial real estate assets to include short and medium-term
exit strategies, as well as its original plan of long-term exit strategies.
Given the change in strategy, the Company updated its impairment analysis and
determined that certain assets were impaired. In June 1997, the Company
recognized an impairment of $19.0 million on certain income-producing property
in accordance with Financial Accounting Standard ("FAS") No. 121, "Accounting
for the Impairment of Long-lived Assets and Long-lived Assets to be Disposed
of." The
 
                                        4
<PAGE>   6
 
                       ECHELON INTERNATIONAL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
impairment loss was measured using independent appraisals and is reflected in
the provision for lease, loan, and real estate losses.
 
4.  ASSETS HELD FOR SALE
 
     Assets held for sale consist of the following:
 
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,   DECEMBER 31,
PREVIOUS BALANCE SHEET CLASSIFICATION                             1997            1996
-------------------------------------                         -------------   ------------
                                                                     (IN MILLIONS)
<S>                                                           <C>             <C>
Leases and loans receivable.................................       0.4           $56.8
Property net of depreciation................................       2.1             2.3
Investments in unconsolidated affiliates....................        --             6.4
Valuation allowance.........................................        --           (36.1)
                                                                  ----           -----
                                                                   2.5           $29.4
                                                                  ====           =====
</TABLE>
 
     In June 1997, the Company received $24.3 million on the disposal of two
aircraft loans receivable and an investment in unconsolidated affiliates that
were classified as assets held for sale with a $9.3 million net book value on
the date of disposition. As a result of this transaction, the Company reversed
$15.0 million of previously recorded provision for lease, loan, and real estate
losses related to these assets and used the proceeds to fully repay the
remaining $22.9 million of debt to the Company's former parent. (See Note 5)
 
     Additionally, the retirement of debt to its former parent allowed the
Company to retain a lease receivable which it previously expected to sell in
order to retire the debt. Accordingly, the Company reclassified the lease
receivable from assets held for sale to leases and loans receivable and reversed
$4.7 million of previously recorded provision for lease, loan, and real estate
losses which had been established in contemplation of an accelerated sale of the
lease receivable.
 
5.  LONG-TERM DEBT
 
     Long-term debt outstanding is as follows:
 
<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,   DECEMBER 31,
                                               INTEREST RATE           1997            1996
                                               -------------       -------------   ------------
                                                                          (IN MILLIONS)
<S>                                            <C>                 <C>             <C>
Salomon Brothers Realty Corporation..........       8.61%(a)           $58.3          $95.7
Former parent................................                             --           32.9
Delayed equity obligation on finance lease...      10.00%               18.0           20.2
Other........................................       8.50%(a)             0.6            0.6
                                                                       -----          -----
                                                                        76.9          149.4
Less: current portion of long-term debt......                           15.2           75.6
                                                                       -----          -----
                                                                       $61.7          $73.8
                                                                       =====          =====
</TABLE>
 
---------------
 
(a) Interest rate at September 30, 1997
 
     On January 9, 1997, the Company received an accelerated repayment of $35.5
million (including accrued interest) on a collateralized real estate loan
receivable and, as required by the loan agreement with Salomon Brothers Realty
Corporation ("Salomon Brothers"), used the proceeds to repay $31.0 million to
Salomon Brothers. The early payoff resulted in an approximate $1.3 million
pre-tax write-off of debt issuance costs and was classified as a $.8 million
after-tax extraordinary loss in the statement of operations. The excess proceeds
of approximately $4.5 million together with cash from other asset sales were
used to repay $10.0 million on January 13, 1997 to Echelon's former parent. As
discussed in Note 4, the Company received $24.3 million in
 
                                        5
<PAGE>   7
 
                       ECHELON INTERNATIONAL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
settlement of two aircraft loans receivable and an investment in unconsolidated
affiliates. The proceeds were used to fully repay the remaining $22.9 million of
debt to the company's former parent. In August 1997, the Company received $10.6
million in full repayment of two loans receivable and used $6.0 million of the
proceeds to repay Salomon Brothers. The payoff resulted in an approximate $.2
million pre-tax write-off of debt issuance costs and was recorded as a $.1
million after-tax extraordinary loss in the statement of operations.
 
6.  COMMITMENTS AND CONTINGENCIES
 
     The Company is subject to regulation with respect to the environmental
effects of its operations. The Company's disposal of hazardous waste through
third party vendors may result in costs to clean up facilities found to be
contaminated. Federal and state statutes authorize governmental agencies to
compel responsible parties to clean up certain abandoned or uncontrolled
hazardous waste sites. The Company has been notified by the Environmental
Protection Agency that a former subsidiary is or could be a potentially
responsible party at one site. Liability for cleanup costs of this site is joint
and several. Based upon information currently available, the Company believes
that its liability for cleanup of this site will not be material and does not
believe that it will be required to pay a significantly disproportionate share
of the total cleanup costs. In addition, the Company may also be responsible for
additional environmental cleanup at other sites. Based on information currently
available to the Company, the Company estimates that its proportionate share of
liability for cleaning up all sites ranges from $0.1 million to $1.0 million,
and it has reserved $0.5 million for potential costs that management estimates
to be probable. Management currently believes that the ultimate outcome of these
matters will not have a material adverse effect upon the Company's results of
operations, financial condition or liquidity.
 
     Through a former partnership, the Company remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
the former partnership. The contingent liability reduces over time as the
residency of those who were residents at the time of the sale of the Company's
interest terminates. If the current owners fail to perform their obligations and
if the partnership assets, consisting primarily of land and buildings, were
worthless, the Company could be liable for an additional $30.0 million as of
December 31, 1996. The Company considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to the Company.
 
     During 1996 and 1997, the Company signed commitments to provide capital
contributions of $25.7 million to affordable housing tax credit limited
partnerships. The Company has funded $9.6 million of this amount as of September
30, 1997 and expects to complete funding during 1999.
 
                                        6
<PAGE>   8
 
                       ECHELON INTERNATIONAL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
7.  CONDENSED STATEMENTS OF INCOME OF UNCONSOLIDATED ENTITY
 
     The unaudited statements of income of Progress Potomac Capital Ventures, a
50/50 joint venture between the Company and Potomac Capital Corporation, for the
three and nine month periods ended September 30, 1997 and 1996 are presented
below. Amounts reflect 100% of the joint venture's results of operations. The
Company accounts for the joint venture by the equity method.
 
<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED    NINE MONTHS ENDED
                                                    SEPTEMBER 30,         SEPTEMBER 30,
                                                  ------------------    ------------------
                                                   1997       1996       1997       1996
                                                  -------    -------    -------    -------
                                                                  (000'S)
<S>                                               <C>        <C>        <C>        <C>
REVENUES:
  Finance lease revenue.......................     $1,036     $1,189     $3,226     $3,674
  Rental income...............................        198        199        596        597
  Interest income.............................        485        164        767        226
                                                   ------     ------     ------     ------
                                                    1,719      1,552      4,589      4,497
                                                   ------     ------     ------     ------
EXPENSES:
  Administration fee..........................         15         15         45         45
  Depreciation................................        111        111        333        333
  Miscellaneous...............................          3          3          3          3
                                                   ------     ------     ------     ------
                                                      129        129        381        381
                                                   ------     ------     ------     ------
          NET INCOME..........................     $1,590     $1,423     $4,208     $4,116
                                                   ======     ======     ======     ======
</TABLE>
 
8.  EFFECTIVE INCOME TAX RATE
 
     The Company's effective income tax rate differs from the statutory income
tax rate primarily due to tax credits related to the Company's investment in
housing tax credit limited partnerships, amortization of investment tax credits
related to the Company's leveraged lease portfolio, and differences in rates
between previous and currently deferred taxes.
 
                                        7
<PAGE>   9
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
OVERVIEW
 
     The Company is a real estate and financial services company with operations
in the development, ownership, and management of commercial and multi-family
residential real estate (the "Real Estate Business") and collateralized
financing of commercial real estate and aircraft, and leasing of aircraft and
other assets (the "Lending and Leasing Business").
 
     Prior to December 18, 1996 ("Distribution Date"), the Company operated as a
wholly-owned subsidiary of Florida Progress Corporation ("Florida Progress").
Effective on the Distribution Date, Florida Progress distributed the Company's
stock to Florida Progress shareholders (one share of the Company for each
fifteen shares of Florida Progress) as a tax-free dividend (the "Distribution").
The Distribution established the Company as a publicly held corporation,
separate from Florida Progress. Prior to the Distribution, the Company recorded
approximately $31 million of provision for losses including $21.5 million to
allow for an accelerated disposal of certain non-strategic assets that the
Company identified as assets to be disposed of within two years.
 
     The Company is continuing its strategy of growing the Real Estate Business
and accelerating the disposal of certain non-strategic assets. During the third
quarter of 1997, the Company received $10.6 million in full repayment of two
real estate loans receivable and used $6.0 million of the proceeds to pay down
debt to Salomon Brothers. As a result of the debt repayment, the Company wrote
off approximately $.2 million of debt issuance costs which is reflected as a $.1
million after-tax extraordinary loss. During the second quarter of 1997, the
Company received $24.3 million on the disposal of two aircraft loans receivable
and an investment in unconsolidated affiliates that were classified as assets
held for sale with a $9.3 million net book value on the date of disposition. As
a result of this transaction, the Company reversed $15.0 million of previously
recorded provision for lease, loan, and real estate losses related to these
assets. The proceeds were used to fully repay the remaining $22.9 million of
debt to the Company's former parent. Additionally, the retirement of debt to its
former parent allowed the Company to retain an aircraft lease receivable which
it previously expected to sell in order to retire the debt. Accordingly, the
Company reclassified the lease receivable from assets held for sale to leases
and loans receivable and reversed $4.7 million of previously recorded provision
for lease, loan and real estate losses which had been established in
contemplation of an accelerated sale of the lease receivable.
 
     The Company is continuing to update its strategic plan, with a revised plan
expected by the end of December 1997. As part of this process, the Company
concluded that the original long-term hold strategy for certain real estate
assets limited the Company's flexibility to maximize the value of certain
assets. Therefore, the Company adopted short and medium-term exit strategies for
certain assets, as well as long-term exit strategies. As a result of the change
in strategy in the second quarter of 1997 and an updated impairment analysis,
the Company recorded a $19.0 million pre-tax provision for losses to write-down
certain real estate assets to fair value.
 
     The timing and results of the sale, settlement, and repositioning of
non-strategic assets achieved in the nine month period ending September 30, 1997
are not necessarily indicative of future results.
 
RESULTS OF OPERATIONS
 
     Net income for the three and nine month periods ended September 30, 1997
was $1.3 million or $.19 per share, and $6.6 million or $.97 per share,
respectively. This compares to a net loss of $(1.5) million or $(.23) per share,
and $(21.7) million or $(3.34) per share for the same periods in 1996.
 
REVENUES
 
     Sales and revenues for the three and nine month periods ended September 30,
1997 were $9.7 million and $28.5 million, which were $11.3 million and $20.1
million lower than the same periods in 1996 primarily due to a decrease of $11.1
million and $17.4 million in the sale of development properties and a $1.5
million and $4.6 million decrease in interest income. The decrease in the sale
of development properties was mainly due to fewer sales of land in Carillon in
1997 compared to 1996. The decrease in interest income was due to loan
 
                                        8
<PAGE>   10
 
receivable payoffs and sales. Marina and other revenue for the three and nine
month periods ended September 30, 1997 increased by $.9 million and $1.5 million
over the same periods in 1996, primarily due to higher boat sales in the first
and third quarters of 1997 compared to 1996.
 
     Equity in losses of real estate partnerships reduced 1997 revenues by $.2
million and $1.0 million for the three and nine month periods compared to 1996
as a result of the Company recording its share of losses in housing tax credit
limited partnerships which did not exist in 1996. Tax credits of $.2 million and
$1.0 million for the three and nine month periods ended September 30, 1997
related to these partnerships are recorded as a reduction of income tax expense.
Other lending and leasing income increased by $.9 million for the nine months of
1997 compared to 1996, due to the gain recorded in the first quarter of 1997, on
the sale of an asset in a partnership in which Echelon had approximately a 26%
interest.
 
OPERATING EXPENSES
 
     Operating expenses for the three and nine month periods ended September 30,
1997 were $8.1 million and $19.7 million, which decreased by $18.4 million and
$67.6 million compared to the same periods in 1996, primarily due to the
decrease of $34.6 million in the provision for lease, loan, and real estate
losses as discussed in the Overview, the decline in the sale of development
properties mentioned above and the increase of $2.3 million and $10.6 million in
other income discussed below.
 
     Real estate operations expenses for the three and nine month periods ended
September 30, 1997 increased by $1.0 million and $1.9 million over the same
periods in 1996, primarily due to higher boat sales in the first and third
quarters of 1997 compared to 1996. Cost of development properties sold decreased
$11.1 million and $17.7 million for the three and nine month periods of 1997 due
to the decrease in sales discussed above. Interest expense decreased by $2.9
million and $8.5 million for the three and nine month periods of 1997 compared
to 1996 due to the reduction of debt resulting from loan receivable payoffs,
asset sales, and 1996 equity contributions from the Company's former parent in
connection with the Company's spin-off from its parent. Marketing and other
administrative expenses increased by $.9 million and $3.9 million for the three
and nine month periods of 1997 over 1996 due to increased expenses related to
the hiring of additional staff, increased expenses related to the Company being
a publicly-traded company, and the full year accrual of management incentive and
long-term incentive compensation as a result of the Company achieving in the
first quarter of 1997 its annual 1997 goals. This was largely offset by the
elimination of $.9 million and $1.3 million of allocated administrative expenses
of the former parent which were included in the three and nine month periods
ended September 30, 1996. The increase in other income of $2.3 million and $10.6
million for the three and nine month periods of 1997 compared to 1996 primarily
resulted from the following: investment income of $.7 million in the three month
period and $1.9 million in the nine month period, $4.1 million related to a
previously deferred gain on a loan receivable that was sold at par in January
1997, and $1.3 million related to the sale in March 1997 of the Company's
interest in a previously written-off oil rig lease.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's sources of liquidity are expected to come from the continued
maturity and collection of the Company's loan portfolio, proceeds from the sale
of certain non-strategic assets, operating cash flow, existing cash and
marketable securities, and with respect to real estate development, from
project-based financings. The Company is also considering a general credit
facility to fund its short-term construction needs.
 
     Cash flow from investing activities was $29.9 million for the nine-month
period ended September 30, 1997. Proceeds from the sale or collection of leases
and loans were $76.5 million, including $35.2 million from the sale of a loan
receivable at par, $19.8 million from the payoff of two aircraft loans, and
$10.6 million from the payoff of two real estate loans receivable. Purchases of
marketable securities, including debt securities with maturities greater than
three months, were $57.1 million and proceeds from sales of marketable
securities were $15.6 million.
 
     Capital expenditures, reported as real estate additions, were $7.8 million
for the nine-month period ended September 30, 1997 and were primarily for land
development and office tenant construction improvements. Distributions from
unconsolidated affiliates, including $4.2 million from a partnership that sold
substantially
 
                                        9
<PAGE>   11
 
all of its assets, were $9.6 million and are reported net of investments in
housing tax credit limited partnerships of $7.3 million.
 
     Repayment of long-term debt was $74.2 million, including $37.4 million on
the Salomon Brothers loan and a payoff of the $32.9 million debt to Echelon's
former parent.
 
     In July 1997, the Company closed on a $16.5 million construction loan which
will be used to fund development of a 369-unit apartment project on land that
the Company owns in St. Petersburg, Florida. In November 1997, the Company
expects to close on a $17.5 million construction loan to fund development of a
314-unit apartment project on land that the company owns in Carillon in St.
Petersburg, Florida.
 
     The Company is also in the process of reviewing proposals to refinance all
or a portion of its debt with Salomon Brothers.
 
OUTLOOK
 
     The Company is continuing to divest its non-strategic assets and to use the
proceeds either to pay down debt, or to reinvest in its real estate operations.
 
     The Company has obtained a building permit, hired the general contractor
and started physical construction of a 369 unit multi-family apartment project,
the first phase of its multi-family development on Company-owned land located on
9th Street in St. Petersburg, Florida. Site work has begun and physical
construction is slated to begin in December 1997 on the 314-unit first phase of
the Company's planned multi-family project in Carillon. In addition, the Company
is still pursuing sites in Orlando for future multi-family projects.
 
     The Company is continuing to evaluate the feasibility for an additional
Company-owned commercial office building at Carillon. An architectural firm has
been hired and general contractors are being interviewed to assist in the
development of plans for this project. In addition, the Company is completing
development on one of its downtown St. Petersburg buildings.
 
     On October 1, 1997, the Company hired W. Michael Doramus as executive vice
president. Mr. Doramus was the founder of Mission Development Company, a
Dallas-based multi-family housing developer. He had served as chairman of the
Company and will continue as a board member, but Darryl A. LeClair, the
Company's president and chief executive officer, has assumed the position of
chairman. With the employment of Mr. Doramus, the Company purchased for $365,000
certain assets of Mission Development Company and established a southwest
regional office in Dallas, Texas. The Company is pursuing sites in the southwest
to develop future multi-family apartment projects.
 
     On November 12, 1997, the Company announced that it will purchase up to
$2.5 million worth of its stock from stockholders with ten (10) or fewer shares
of stock as of a record date of November 6, 1997. The program will run from
November 12, 1997 through December 15, 1997 (Program Period), unless extended by
the Company. Stockholders participating in the Program will be paid the average
of the closing market prices of the Company's stock as reported on the New York
Stock Exchange during the Program Period. If more than $2.5 million of stock is
submitted for sale, the excess shares will be sold on the open market through a
registered broker/dealer. Those stockholders will receive a market-based
weighted average price based upon the shares sold in the open market.
Participating stockholders will not incur any commissions, although a $3.00 per
share processing fee will be charged by the vendor administering the program to
help defray the cost of the program. This voluntary program will provide
participating stockholders an inexpensive and convenient method to sell odd-lot
shares through the mail at a small fee, while enabling the Company to save the
annual administrative costs associated with servicing odd-lot accounts.
 
     As discussed in the Overview, the Company expects to complete an update of
its strategic plan by the end of December 1997, after which date, a general
overview will be provided.
 
                                       10
<PAGE>   12
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
     Certain statements contained herein regarding matters that are not
historical facts are forward-looking statements, including certain statements
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," including but not limited to statements concerning
Echelon's strategies, Echelon's expected sources of funds, and Echelon's
expected uses of funds, including its expected capital expenditures and
anticipated dates by which certain real estate development activities are
accomplished. Because such statements involve risks and uncertainties, actual
strategies and the timing and expected results thereof may differ materially
from those expressed or implied by such forward-looking statements. For a
discussion of certain factors which could affect such actual results, see
"Cautionary Statement Regarding Forward-Looking Statements" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
 
                                       11
<PAGE>   13
 
                                    PART II.
 
                               OTHER INFORMATION
 
ITEM 5.  OTHER INFORMATION.
 
     Subsequent to the third quarter of 1997, Echelon International Corporation
issued the following:
 
     1)  News release dated November 12, 1997 regarding the announcement of an
         odd-lot buy-back program for stockholders with 10 shares or less. A
         copy of the news release is being filed as Exhibit 99.1.
 
     2)  News release dated November 14, 1997 regarding 1997 third quarter
         financial results. A copy of the news release is being filed as Exhibit
         99.2.
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.
 
  (a) Exhibits:
 
<TABLE>
<CAPTION>
NUMBER        EXHIBIT
------        -------
<C>      <S>  <C>
  10     --   Employment agreement for W. Michael Doramus dated October 1,
              1997.
  27     --   Financial Data Schedule of Echelon International Corporation
99.1     --   Echelon International Corporation News Release dated
              November 12, 1997 regarding odd-lot buy-back program for
              stockholders with 10 shares or less.
99.2     --   Echelon International Corporation News Release dated
              November 14, 1997 regarding 1997 third quarter financial
              results.
</TABLE>
 
  (b) Reports on Form 8-K:
 
     In October 1997, Echelon International Corporation filed the following
report on Form 8-K:
 
     Form 8-K dated October 1, 1997, reporting under Item 5 "Other Events" the
employment of W. Michael Doramus as executive vice president and the assumption
of chairman of the board of directors by Darryl A. LeClair.
 
                                       12
<PAGE>   14
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
<TABLE>
<S>                                           <C>
                                              ECHELON INTERNATIONAL CORPORATION
 
Date: November 14, 1997                                       /s/ JAMES R. HOBBS, JR.
                                              --------------------------------------------------------
                                              James R. Hobbs, Jr.
                                              Vice President and Controller
 
Date: November 14, 1997                                         /s/ LARRY J. NEWSOME
                                              --------------------------------------------------------
                                              Larry J. Newsome
                                              Senior Vice President,
                                              Chief Financial Officer
                                              and Treasurer
</TABLE>
 
                                       13