<PAGE>   1

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended July 4, 1998
                           Commission File No. 1-11126


                              DYERSBURG CORPORATION
             (Exact name of registrant as specified in its charter)

                  TENNESSEE                               62-1363247
        (State or other jurisdiction of      (I.R.S employer identification no.)
        incorporation or organization)

    1315 PHILLIPS ST., DYERSBURG, TENNESSEE                  38024
    (Address of principal executive offices)               (Zip Code)

                                 (901) 285-2323
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

  Common Stock, Par Value $.01/Share               New York Stock Exchange
      (Title of each class)               (Name of exchange on which registered)

        Securities registered pursuant to Section 12(g) of the Act: NONE

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 issuer's classes of common
stock, as of the latest practicable date.

<TABLE>
<CAPTION>
      Title of each             Number of shares outstanding as of July 31, 1998
---------------------------     ------------------------------------------------
<S>                             <C>
Common Stock $.01 par value                      13,333,318
</TABLE>


<PAGE>   2

INDEX TO FORM 10-Q


DYERSBURG CORPORATION

<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION                                                                   PAGE NUMBER
-----------------------------                                                                   -----------

<S>                                                                                             <C>
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)

         Consolidated Condensed Balance Sheets at
              July 4, 1998, and October 4, 1997 ...............................................           3
         Consolidated Condensed Statements of Income
              for the Three Months Ended July 4, 1998,
              and July 5, 1997; Nine Months Ended
              July 4, 1998, and July 5, 1997 ..................................................           4
         Consolidated Condensed Statements of Cash
              Flows for the Nine Months Ended
              July 4, 1998, and July 5, 1997 ..................................................           5
         Notes to Consolidated Condensed Financial
              Statements ......................................................................           6

ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS .....................................           9


<CAPTION>
PART II--OTHER INFORMATION
--------------------------

<S>                                                                                             <C>
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS .......................................          11

ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K ......................................................          11

SIGNATURES ....................................................................................          11
</TABLE>


                                       2
<PAGE>   3

                              DYERSBURG CORPORATION
                CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                 July 4,   October 4,
                                                                  1998        1997
                                                                --------   ----------
<S>                                                             <C>        <C>     
ASSETS

Current assets:
  Cash ......................................................   $    262   $    948
  Accounts receivable, net of allowance for doubtful accounts
    of $2,675 at July 4, 1998, and $2,075 at October 4, 1997      76,929     68,290
  Inventories ...............................................     57,356     52,222
  Prepaid expenses and other ................................     13,502      6,597
                                                                --------   --------
       Total current assets .................................    148,049    128,057

  Property, plant and equipment, net ........................    137,669    152,523
  Goodwill, net .............................................     95,759     78,277
  Deferred debt costs, net ..................................      6,188      6,674
  Other assets ..............................................        182      1,283
                                                                --------   --------

                                                                $387,847   $366,814
                                                                ========   ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Trade accounts payable ....................................   $ 13,402   $ 23,721
  Accrued expenses ..........................................     16,787     14,758
  Income taxes payable ......................................      1,015      1,564
  Current portion of revolving credit facility ..............     10,000         --
  Current portion of long-term obligations ..................      7,500      7,500
                                                                --------   --------
       Total current liabilities ............................     48,704     47,543

  Revolving credit facility .................................     50,767     28,050
  Other long-term obligations ...............................    170,055    175,400
  Deferred income taxes .....................................      7,591      8,459
  Other liabilities .........................................      3,952      6,258

Shareholders' equity:
  Preferred stock, authorized 5,000,000 shares; none issued
  Common stock, $.01 par value, authorized 40,000,000
    shares; issued and outstanding shares - 13,333,318 at
    July 4, 1998, and 13,280,033 at October 4, 1997 .........        133        133
  Additional paid-in capital ................................     42,710     41,985
  Retained earnings .........................................     63,935     58,986
                                                                --------   --------
Total shareholders' equity ..................................    106,778    101,104
                                                                --------   --------

                                                                $387,847   $366,814
                                                                ========   ========
</TABLE>

See notes to consolidated condensed financial statements.


                                       3
<PAGE>   4

                              DYERSBURG CORPORATION
             CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
                 (in thousands except share and per share data)

<TABLE>
<CAPTION>
                                          Three Months Ended           Nine Months Ended
                                       -------------------------   -------------------------
                                         July 4,       July 5,       July 4,       July 5,
                                          1998          1997          1998          1997
                                       -----------   -----------   -----------   -----------
<S>                                    <C>           <C>           <C>           <C>        
Net sales ..........................   $   113,533   $    68,383   $   315,422   $   158,214

Costs and expenses:

   Cost of sales ...................        92,151        50,419       259,514       120,677
   Selling, general, and
     administrative ................         8,737         7,716        28,446        19,938
   Restructuring charge ............         1,300                       1,300
   Interest and amortization of debt
     costs .........................         5,955         1,516        16,951         4,465
                                       -----------   -----------   -----------   -----------

Total costs and expenses ...........       108,143        59,651       306,211       145,080
                                       -----------   -----------   -----------   -----------

Income before income taxes .........         5,390         8,732         9,211        13,134

Income taxes .......................         2,367         3,449         3,862         5,188
                                       -----------   -----------   -----------   -----------

Net income .........................   $     3,023   $     5,283   $     5,349   $     7,946
                                       ===========   ===========   ===========   ===========

Weighted average shares
   outstanding:
     Basic .........................    13,332,840    13,137,999    13,322,990    13,135,333
                                       ===========   ===========   ===========   ===========
     Diluted .......................    13,371,247    13,238,160    13,364,251    13,204,263
                                       ===========   ===========   ===========   ===========

Earnings per share:
     Basic .........................   $      0.23   $      0.40   $      0.40   $      0.60
                                       ===========   ===========   ===========   ===========
     Diluted .......................   $      0.23   $      0.40   $      0.40   $      0.60
                                       ===========   ===========   ===========   ===========

Dividends per share ................   $      0.01   $      0.01   $      0.03   $      0.03
                                       ===========   ===========   ===========   ===========
</TABLE>


See notes to consolidated condensed financial statements.


                                       4
<PAGE>   5

                              DYERSBURG CORPORATION
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                --------------------
                                                                 July 4,     July 5,
                                                                  1998        1997
                                                                --------    --------
<S>                                                             <C>         <C>     
OPERATING ACTIVITIES
   Net Income ...............................................   $  5,349    $  7,946
   Adjustments to reconcile to net cash (used in)
     provided by operating activities:
       Depreciation and amortization ........................     15,543       9,228
       Increase in accounts receivable, net .................     (8,639)     (6,096)
       Increase in inventory ................................     (5,134)     (7,208)
       (Decrease) increase in trade accounts payable ........     (9,453)      3,877
       Other-net ............................................     (9,015)      4,803
                                                                --------    --------

         Net cash  (used in) provided by operating activities    (11,349)     12,550

INVESTING ACTIVITIES
   Capital expenditures .....................................    (15,378)     (5,685)
   Other-net ................................................     (1,219)         84
                                                                --------    --------

         Net cash used in investing activities ..............    (16,597)     (5,601)

FINANCING ACTIVITIES
   Acquisition of common stock for treasury .................         --        (160)
   Net borrowings (repayments) on long-term obligations .....     26,936      (5,757)
   Dividends paid ...........................................       (399)       (393)
   Issuance of common stock .................................        723          55
                                                                --------    --------

         Net cash provided by (used in) financing activities      27,260      (6,255)
                                                                --------    --------

         Net (decrease) increase in cash ....................       (686)        694
Cash at beginning of period .................................        948         983
                                                                --------    --------

Cash at end of period .......................................   $    262    $  1,677
                                                                ========    ========
</TABLE>


See notes to consolidated condensed financial statements.


                                       5
<PAGE>   6

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION

July 4, 1998


NOTE A--BASIS OF PRESENTATION

         The accompanying unaudited consolidated condensed financial statements
include the accounts of Dyersburg Corporation ("Company") and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. Financial information as of
October 4, 1997, has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated have been included. Due to
seasonal patterns, the results for interim periods are not necessarily
indicative of results to be expected for the year. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the fiscal year ended October 4,
1997.


NOTE B--BUSINESS COMBINATION

         In August 1997, the Company acquired all the outstanding common stock
of AIH, Inc. from West Point Stevens, Inc. AIH, Inc., through its subsidiary,
Alamac Knit Fabrics, Inc. (collectively referred to as "Alamac") is a
manufacturer of knit fabrics sold primarily to domestic apparel producers. The
acquisition was accounted for using the purchase method of accounting. The
purchase price was approximately $128 million.

         The operating results of Alamac are included in the Company's condensed
consolidated statements of income from August 27, 1997, the acquisition date.
The following unaudited pro forma results of operations for fiscal 1997 assume
the Alamac acquisition and related financing transactions occurred at the
beginning of the period presented. In connection with the acquisition of Alamac,
the Company recorded an extraordinary charge of $905,000, or $0.07 per share,
related to the early extinguishment of debt. The pro forma results of operations
do not purport to represent what the Company's results would have been had such
transactions in fact occurred at the beginning of the years presented or to
project the Company's results of operations in any future period.


                                       6
<PAGE>   7

NOTE B - BUSINESS COMBINATION (continued)

<TABLE>
<CAPTION>
                                                                      Nine Months
                                                                         Ended
                                                                      -----------
                                                                        July 5,
                                                                         1997
                                                                      -----------
                                                                     (in thousands,
                                                                  except per share data)
<S>                                                               <C>     
Pro forma
Net sales ...................................................           $341,942
Income before extraordinary loss ............................              7,862
Net income ..................................................              6,957

Earnings per share-basic and diluted:
   Income before extraordinary loss .........................           $   0.60
   Net income ...............................................           $   0.53
</TABLE>


         Included in third quarter earnings is a charge of $1.3 million, or
$0.06 per share after-tax, pertaining to restructuring charges associated with
the Alamac division. During fiscal 1998, Dyersburg also finalized its estimation
of the fair market value of certain Alamac fixed assets, resulting in a
reclassification of approximately $17 million in property, plant and equipment
as goodwill.


NOTE C--INVENTORIES

<TABLE>
<CAPTION>
                                                      July 4,          October 4,
                                                       1998              1997
                                                    ----------         ----------
                                                            (in thousands)
<S>                                                 <C>                <C>
Raw materials ............................            $18,496            $18,243
Work in process ..........................             15,755             14,011
Finished goods ...........................             20,159             17,180
Supplies and other .......................              2,946              2,788
                                                      -------            -------

                                                      $57,356            $52,222
                                                      =======            =======
</TABLE>


                                       7
<PAGE>   8

NOTE D--EARNINGS PER SHARE

         The Company has adopted the Financial Accounting Standards Board (FASB)
Statement No. 128, Earnings per Share, and accordingly, the prior period
presentation has been restated. The table below sets forth the computations of
basic and diluted earnings per share:


<TABLE>
<CAPTION>
                                       Three Months Ended           Nine Months Ended
                                    -------------------------   -------------------------
                                      July 4,       July 5,       July 4,       July 5,
                                       1998          1997          1998          1997
                                    -----------   -----------   -----------   -----------
                                       (in thousands, except share and per share data)
<S>                                 <C>           <C>           <C>           <C>        
Numerator for basic and diluted
   earnings per share--net income   $     3,023   $     5,283   $     5,349   $     7,946

Denominator:
   Denominator for basic earnings
     per share--weighted average
     shares .....................    13,332,840    13,137,999    13,322,990    13,135,333

   Effect of dilutive securities:
     Employee Stock Options .....        38,407       100,160        41,261        68,930
                                    -----------   -----------   -----------   -----------

Denominator for diluted
   earnings per share--adjusted
   weighted average shares ......    13,371,247    13,238,160    13,364,251    13,204,263
                                    ===========   ===========   ===========   ===========


Basic earnings per
share ...........................   $      0.23   $      0.40   $      0.40   $      0.60
                                    ===========   ===========   ===========   ===========

Diluted earnings per
share ...........................   $      0.23   $      0.40   $      0.40   $      0.60
                                    ===========   ===========   ===========   ===========
</TABLE>


NOTE E--LONG-TERM OBLIGATIONS

         In August 1997, the Company issued $125,000,000 principal amount of
9.75% Senior Subordinated Notes due September 1, 2007 (the "Subordinated
Notes"). The Subordinated Notes are unsecured senior subordinated obligations
and are subordinated in right of payment to the prior payment in full of all
senior indebtedness. The Subordinated Notes are guaranteed by all of the
Company's subsidiaries (the "Guarantors"). Separate financial statements of the
Guarantors are not included herein because: (a) the Company is a holding company
with no assets or operations other than its investments in its subsidiaries; (b)
the Guarantors are wholly-owned subsidiaries of the Company and have fully and
unconditionally guaranteed the Subordinated Notes on a joint and several basis;
(c) the Guarantors comprise all of the direct and indirect subsidiaries of the
Company; and (d) management believes that such information is not material to
investors.


                                       8
<PAGE>   9

NOTE E--LONG-TERM OBLIGATIONS (continued)


         During the second quarter of fiscal 1998, the Company entered into two
additional interest rate hedge agreements to reduce the impact of changes in
interest rates on the borrowings under the Credit Agreement. An interest rate
"collar" with a notional principal amount of $10,000,000 was entered into with a
cap of 7.00% and a floor of 5.00%, based on a floating rate of three-month
LIBOR. This Agreement terminates in February 2003. Under the "collar" agreement,
the Company agreed to make interest payments based on a floating rate of
three-month LIBOR if such rate falls below 5.00% and would receive interest
payments based on a floating rate of three-month LIBOR if such rate exceeds
7.00% during the life of the agreement.

         The Company also entered into a $10,000,000 notional amount interest
rate swap agreement. Under the terms of the swap agreement, the Company agreed
to make interest payments based on a fixed rate of 5.85%, in exchange for
payments based on a floating rate of three-month LIBOR. The new swap agreement
terminates in March 2003.

         The new interest rate hedge agreements supplement the existing two
interest rate swap agreements having a notional principal amount of $10,000,000
each. These existing agreements provide for the Company to make interest
payments based on a fixed rate of 7.06% and 6.17%, respectively, in exchange for
payments based on a floating rate of three-month LIBOR. The agreements terminate
in April 2002 and June 2002, respectively.

         As a result of reduced earnings expectations, the Company has amended,
with the full support of its banking group, financial covenants associated with
its bank Credit Agreement, which includes its $44.4 million Term Loan and $110
million Revolving Credit Facility.


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


Results of Operations

         Net sales for the quarter ended July 4, 1998, increased by 66% to
$113.5 million versus $68.4 million for the same quarter of the prior year. The
increase in net sales was due to the inclusion of Alamac sales in fiscal 1998.
Without Alamac sales, net sales decreased by 10%, or $7.0 million, from the
third quarter of fiscal 1997. Net sales for the nine months ended July 4, 1998,
were approximately double the same period of the prior year. Excluding Alamac,
net sales decreased by 5%. The decrease in sales excluding Alamac is a result of
increased imports and softness in the knit market. Gross margins for the quarter
and year-to-date declined to 18.8% and 17.7%, versus 26.3% and 23.7% for the
same periods in fiscal 1997, respectively. The decrease in gross margins
resulted from the inclusion of Alamac's sales in fiscal 1998, which have
historically experienced gross margins of 8 to 14%.


                                       9
<PAGE>   10

         Selling, general and administrative expenses increased 13% for the
third quarter and 43% year-to-date for fiscal 1998 compared to the same periods
in fiscal 1997 due to the inclusion of Alamac in fiscal 1998. As a percentage of
sales, these same expenses decreased to 7.7% and 9.0% for the third quarter and
year-to-date, respectively, for fiscal 1998, versus 11.3% and 12.6% for the same
periods in fiscal 1997. This decrease reflects the impact of Alamac's lower
selling, general and administrative expenses as a percent of sales.

         Interest expense in the third quarter of fiscal 1998 of $6.0 million
and year-to-date of $17.0 million, was significantly higher than that of the
same periods of fiscal 1997 due to the additional debt issued in relation to the
Alamac acquisition. The effective tax rate for the third quarter was 43.9% and
year-to-date was 41.9% of fiscal 1998. The rates exceed the federal statutory
rate due to certain expense items not being deductible for tax purposes,
principally $1.4 million year-to-date from the amortization of goodwill.

         Net income for the quarter ended July 4, 1998, was $3.0 million, or
$0.23 per share, versus $5.3 million, or $0.40 per share, for the same period in
fiscal 1997. For the nine months ended July 4, 1998, net income was $5.3
million, or $0.40 per share, versus $7.9 million, or $0.60 per share, for the
same period in fiscal 1997. Included in third quarter earnings is a charge of
$1.3 million, or $0.06 per share after-tax, pertaining to restructuring charges
associated with the Alamac division. Earnings per share are the same whether
calculated on a basic or diluted basis. The diluted weighted average number of
shares outstanding for the quarter and nine months ended July 4, 1998, was
approximately 13,371,000 and 13,364,000, respectively.

         During the third quarter, Dyersburg completed a comprehensive review of
the Alamac division's product line, eliminating non-contributory product
programs and thereby reducing production. As a consequence of this output
reduction, Alamac shortened its labor shifts to five days per week from seven,
reducing its workforce. The Company incurred the above-mentioned restructuring
charge associated with this workforce reduction. Additionally, the Alamac
product review resulted in an inventory write-down of approximately $700,000,
which is included in the cost of goods sold. During fiscal 1998, Dyersburg also
finalized its estimation of the fair market value of certain Alamac fixed
assets, resulting in a reclassification of approximately $17 million in
property, plant and equipment as goodwill.


Liquidity and Capital Resources

         Working capital increased to $99.3 million and the current ratio
increased to 3.0:1 at July 4, 1998, from $80.5 million and 2.7:1, respectively,
at October 4, 1997. The Company's long-term debt-to-capital ratio was 67.4% at
July 4, 1998, compared to 66.8% at October 4, 1997.

         Net receivables of $76.9 million at July 4, 1998, were relatively
unchanged from their level at April 4, 1998, of $77.0 million. Inventories
decreased to $57.4 million at the end of the third quarter from $68.3 million at
the end of the second quarter of fiscal 1998 due to seasonally high sales and
lower production schedules.


                                       10
<PAGE>   11

         Capital expenditures for the nine months ended July 4, 1998, were $15.4
million versus $5.7 million for the same period in the prior year. Cash outlays
for capital spending are anticipated to approximate $21 million in fiscal 1998.

         At July 4, 1998, the Company had $27.4 million of additional borrowings
available. The Company believes that cash flow from operations and the existing
revolving credit facility will be sufficient to meet operating needs and fund
the capital spending program.

         As a result of reduced earnings expectations, the Company has amended,
with the full support of its banking group, financial covenants associated with
its bank Credit Agreement, which includes its $44.4 million Term Loan and $110
million Revolving Credit Facility.

         As the year 2000 approaches, an issue impacting all companies has
emerged regarding how existing application software programs and operating
systems can accommodate this date value. The Company places significant reliance
on technology for many of its operational systems. A review of all systems has
been undertaken to ensure that they do not malfunction as a result of the year
2000. As a result of this process the Company expects to both replace some
systems and upgrade others. Management does not expect the financial impact of
this effort to be material to the consolidated financial statements.
Management's estimate of the ultimate cost and completion of necessary software
replacement or modification is based on numerous assumptions regarding future
events including continued availability of certain resources, third party
modification plans, and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated.


PART II--OTHER INFORMATION

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

         There were no matters submitted to a vote of shareholders.

ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K

(a)(1)   Exhibits:
10 - Material Contracts
         (a)      Amendment No. 2 to Credit Agreement
         (b)      Stockholders' Agreement between Dyersburg Corporation and PT
                  Texmaco Jaya
         (c)      License Agreement between Dyersburg Corporation and PT Texmaco
                  Jaya
         (d)      Technical Services and License Agreement between Dyersburg
                  Corporation and PT Dyersburg Texmaco Fleece 
27   Financial Data Schedule (for SEC use only)
(b)      The Corporation did not file any reports on Form 8-K during the three
         months ended July 4, 1998.


                                       11
<PAGE>   12

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.


August 17, 1998                         /s/ William S. Shropshire, Jr.
                                        ----------------------------------------

                                        William S. Shropshire, Jr.
                                        Executive Vice President,
                                        Chief Financial Officer,
                                        Secretary and Treasurer


                                       12