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 March 31, 2001

Commission File No. 1-11126

DYERSBURG CORPORATION
Debtor-In-Possession as of September 25, 2000
(Exact name of registrant as specified in its charter)

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

15720 JOHN J. DELANEY DR., SUITE 445
CHARLOTTE, NORTH CAROLINA 28277
(Address of principal executive offices) (Zip Code)

(704) 341-2299
(Registrant's telephone number, including area code)

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

None

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

Common Stock, Par Value $.01/Share
(Title of each class)

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.

Title of each Number of shares outstanding as of April 30, 2001
- --------------------------- -------------------------------------------------
Common Stock $.01 par value 13,388,556

INDEX TO FORM 10-Q

DYERSBURG CORPORATION

PAGE
----

PART I--FINANCIAL INFORMATION

ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Condensed Balance Sheets at
March 31, 2001 and September 30, 2000 ...................................................... 3
Consolidated Condensed Statements
for the Three Months Ended March 31, 2001
and April 1, 2000; Six Months Ended
March 31, 2001 and April 1, 2000 ........................................................... 4
Consolidated Condensed Statements of Cash
Flows for the Six Months Ended
March 31, 2001 and April 1, 2000 ........................................................... 5
Notes to Consolidated Condensed Financial
Statements ................................................................................. 6

ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................................................... 13

PART II--OTHER INFORMATION

ITEM 3--DEFAULTS UPON SENIOR SECURITIES .................................................................. 18

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS .................................................. 18

ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K ................................................................. 18

SIGNATURES ............................................................................................... 18

DYERSBURG CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
Debtor-In-Possession
(in thousands except share data)

MARCH 31, SEPTEMBER 30,
2001 2000
--------- -------------

ASSETS
Current assets:
Cash ............................................................. $ 157 $ 167
Accounts receivable, net of allowance for doubtful
accounts of $2,561 at March 31, 2001 and $2,700 at
September 30, 2000 ............................................ 40,288 48,891
Inventories ...................................................... 34,600 33,483
Income taxes receivable .......................................... 167 1,354
Prepaid expenses and other ....................................... 2,788 2,535
--------- ---------
Total current assets ................................................. 78,000 86,430

Property, plant and equipment, net ................................... 102,963 110,531
Goodwill, net ........................................................ 85,215 86,624
Deferred debt costs, net ............................................. 82 1,480
Assets held for sale and other ....................................... 1,723 3,456
--------- ---------
$ 267,983 $ 288,521
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities not subject to compromise
Current liabilities:
Trade accounts payable ........................................... $ 12,800 $ 13,606
Accrued expenses and other ....................................... 11,913 10,691
Current portion of long-term obligations ......................... 47,256 55,286
--------- ---------
Total current liabilities ............................................ 71,969 79,583

Long-term obligations ................................................ 7,900 7,900

Liabilities subject to compromise
Senior subordinated notes ......................................... 125,000 125,000
Accrued interest .................................................. 7,062 7,062
Commitments and contingencies ........................................ -- --

Shareholders' equity:
Preferred stock, authorized 5,000,000 shares; none issued
Series A Preferred stock, authorized 200,000 shares; none
issued
Common stock, $.01 par value,
Authorized 40,000,000 shares;
Issued and outstanding 13,388,556 shares ...................... 134 134
Additional paid-in capital ....................................... 42,828 42,828
Retained earnings ................................................ 13,822 26,746
Accumulated other comprehensive loss ............................. (732) (732)
--------- ---------
Total shareholders' equity ........................................... 56,052 68,976
--------- ---------
$ 267,983 $ 288,521
========= =========

See notes to consolidated financial statements.

DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Debtor-In-Possession
(in thousands except per share data)

THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
MARCH 31, APRIL 1, MARCH 31, APRIL 1,
2001 2000 2001 2000
--------- --------- --------- ---------

Net Sales ............................................. $ 58,694 $ 78,724 $ 110,674 $ 147,073

Costs and expenses:

Cost of sales ......................................... 57,204 70,519 104,850 128,353

Selling, general and
administrative .................................... 6,591 9,062 14,270 15,313

Restructuring charges ................................. 692 -- 692 --

Net (gain) loss on sale of assets ..................... (3,130) -- (3,130) --
Interest and amortization of
debt costs ........................................ 1,998 4,868 4,173 9,725
-------- -------- --------- ---------

Income (loss) before reorganization
items and income taxes (benefit) ................... (4,661) (5,725) (10,181) (6,318)

Reorganization costs .................................. 1,160 -- 2,571 --
-------- -------- --------- ---------
Income (loss) before income taxes ..................... (5,821) (5,725) (12,752) (6,318)
Federal and state income
taxes (benefit) .................................... 171 (1,697) 171 (1,673)
-------- -------- --------- ---------
Net income (loss) ..................................... $ (5,992) $ (4,028) $ (12,923) $ (4,645)
======== ======== ========= =========

Weighted average shares
outstanding:
Basic ............................................. 13,389 13,383 13,389 13,368
Diluted ........................................... 13,389 13,383 13,389 13,368
======== ======== ========= =========

Basic and diluted earnings per share:
Net income (loss) ................................. $ (0.45) $ (0.30) $ (0.97) $ (0.35)
======== ======== ========= =========

See notes to consolidated condensed financial statements.

DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Debtor-In-Possession
(in thousands)

SIX MONTHS ENDED
----------------------------
MARCH 31, APRIL 1,
2001 2000
--------- ---------

OPERATING ACTIVITIES
Net income (loss) .......................................... $ (12,923) $ (4,645)
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and amortization .......................... 10,287 10,536
Deferred income taxes .................................. (207) (1,463)
Changes in operating assets and liabilities:
Accounts receivable .................................... 8,604 (3,089)
Inventories ............................................ (1,117) (10,211)
Trade accounts payable ................................. (275) 4,936
Gain on sale of assets ................................. (3,130) 191
Other .................................................. 1,830 7,967
--------- ---------
Net cash provided by operating activities .................. 3,069 4,222

INVESTING ACTIVITIES
Capital expenditures ................................... (1,387) (3,796)
Proceeds from sale of assets ........................... 5,519 352
Other .................................................. 819 907
--------- ---------
Net cash used in investing activities ...................... 4,951 (2,537)

FINANCING ACTIVITIES
Net repayment of debt ................................... (8,030) (244)
Other ................................................... -- (1,268)
--------- ---------
Net cash used in financing activities ...................... (8,030) (1,512)
--------- ---------

Net increase (decrease) in cash ............................ (10) 173
Cash at beginning of year .................................. 167 158
--------- ---------
Cash at end of year ........................................ $ 157 $ 331
========= =========

See notes to consolidated condensed financial statements.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION

March 31, 2001

NOTE A--NATURE OF OPERATIONS AND BUSINESS CONDITION

PETITION FOR RELIEF UNDER CHAPTER 11

On September 25, 2000, the Company and 13 of its subsidiaries
(collectively, the "Debtors") filed voluntary petitions with the Bankruptcy
Court for reorganization under Chapter 11 ("Chapter 11 Cases") and orders for
relief were entered by the Bankruptcy Court. The Chapter 11 Cases have been
consolidated for the purpose of joint administration under Case No. 00-3746. The
Debtors are currently operating their businesses as debtors-in-possession
pursuant to the Bankruptcy Code.

Under the Bankruptcy Code, actions to collect pre-petition indebtedness
are stayed and other contractual obligations against the Debtors may not be
enforced. In addition, under the Bankruptcy Code, the Debtors may assume or
reject executory contracts, including lease obligations. Parties affected by
these rejections may file claims with the Bankruptcy Court in accordance with
the reorganization process. Substantially all pre-petition liabilities are
subject to settlement under a plan of reorganization that has been voted upon by
creditors and equity holders and remains subject to approval by the Bankruptcy
Court. However, the Bankruptcy Court entered an order allowing the Company to
pay all pre-petition trade debt, which amounts have substantially been paid in
full. Although the Debtors have filed a reorganization plan that provides for
emergence from bankruptcy in fiscal 2001, there can be no assurance that the
reorganization plan or plans proposed by the Debtors will be confirmed by the
Bankruptcy Court, or that any such plan(s) will be consummated.

The plan of reorganization proposed by the Debtors was submitted to a
vote of the class 4 claimants, holders of the Subordinated Notes, and the
class 8 claimants, holders of the Company's existing common stock. Both classes
of voters accepted the plan, but it remains subject to confirmation.

A plan of reorganization must be confirmed by the Bankruptcy Court,
upon certain findings being made by the Bankruptcy Court. The Bankruptcy Court
may confirm a plan notwithstanding the non-acceptance of the plan by an impaired
class of creditors or equity security holders if certain requirements of the
Bankruptcy Code are met. The plan proposed by the Company involves a debt
conversion of the Company's pre-petition 9 3/4% Subordinated Notes due 2007 (the
"Subordinated Notes") into newly issued common equity of the reorganized Company
and a $15.0 million Senior Subordinated Payment-in-Kind Note with an interest
rate of 13% per annum and a term of seven years (the "PIK Note"). Under the
plan, the existing common stock of the Company would be cancelled and the
holders of our currently outstanding common stock would receive two series of
warrants to acquire up to 15% of the new common stock on a fully-diluted basis.
The exercise price of the Series A Warrants would be $10.39 per share and would
be exercisable for 5% of the new common stock. The exercise price of the Series
B Warrants (together with the Series A Warrants, the "Warrants") would be $12.38
per share and would be exercisable for 10% of the new common stock. The Warrants
expire five years after the date of issuance. Accordingly, the Company believes
the outstanding common stock is highly speculative, and it may have no value.

Prior to the bankruptcy filing, the Company did not make the $6,093,750
interest payment due September 1, 2000 under the terms of the Company's 9.75%
Senior Subordinated Notes due September 1, 2000. The Company is in possession of
its properties and assets, and continues to manage its business as
debtor-in-possession subject to the supervision of the Bankruptcy Court. The
Company has a $80 million debtor-in-possession credit facility in place (the
"DIP Facility").

The Company has filed various motions in the Chapter 11 Cases whereby
it was granted authority or approval with respect to various items required by
the Bankruptcy Code and/or necessary for the Company's reorganizational efforts.
The Company has obtained orders providing for, among other things, (i)
implementation of employee retention and incentive programs, (ii) the ability to
pay vendors and other providers in the ordinary course for goods and services
provided to the Company, and (iii) the extension of time to assume or reject
leases or executory contracts. The Company intends to reject the Shareholders'
Agreement dated April 8, 1997, between the Company and PT Texmaco Jaya, and the
Agreement dated April 8, 1997, among Polysindo Hong Kong Limited and the Company
(the "Texmaco Agreements") pursuant to Section 365(a) of the Bankruptcy Code.
The Company also intends to reject its 1992 Stock Incentive Plan and its
Non-Qualified Stock Option Plan for Employees of Acquired Companies.

FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN MATTERS

The Company's financial statements have been prepared on a going
concern basis of accounting in accordance with AICPA Statement of Position
("SOP") 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." SOP 90-7 does not change the application of generally accepted
accounting principles in the preparation of financial statements. However, it
does require that financial statements for periods including and subsequent to
filing the Chapter 11 petitions distinguish transactions and events that are
directly associated with the reorganization from the ongoing operations of the
business.

The Company's recent losses and the Chapter 11 Cases raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments relating to
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The ability of the Company to continue as
a going concern and appropriateness of using the going concern basis is
dependent upon, among other things, (i) the Company's ability to comply with its
financing agreements, (ii) obtain new financing (iii) confirmation of a plan of
reorganization under the Bankruptcy Code, (iv) the Company's ability to achieve
profitable operations after such confirmation, and (v) the Company's ability to
generate sufficient cash from operations to meet its obligations.

BASIS OF PRESENTATION

As described herein, the Company has submitted a plan for
reorganization to the Bankruptcy Court. Management believes that the proposed
plan of reorganization, subject to approval of the Bankruptcy Court, along with
cash provided by its credit facility and operations, will provide sufficient
liquidity to allow the Company to continue as a going concern; however, there
can be no assurance that the sources of liquidity will be available or
sufficient to meet the Company's needs. The proposed plan of reorganization
could materially change the amounts currently recorded in the consolidated
financial statements. The consolidated financial statements do not give effect
to any adjustment to the carrying value of assets or amounts and classifications
of liabilities that might be necessary as a result of the Chapter 11 Cases.

NOTE A--NATURE OF OPERATIONS AND BUSINESS CONDITION (continued)

In June 1998, the FASB issued Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, which is required to be adopted
in years beginning after June 15, 2000. The Statement will require the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The adoption of Statement No. 133 had no
effect on earnings and the financial position of the Company as the Company had
no derivative instruments at March 31, 2001, or September 30, 2000.

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 accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Financial
information as of September 30, 2000, 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 September 30, 2000.

REORGANIZATION COSTS

Reorganization costs include legal and professional fees incurred and
expenses related to a retention bonus plan.

NOTE B--INVENTORIES

MARCH 31, SEPTEMBER 30,
2001 2000
-------- -------------
(in thousands)

Raw Materials ............................... $ 8,492 $ 10,076
Work in Process ............................. 9,656 9,869
Finished Goods .............................. 14,829 11,971
Supplies and Other .......................... 1,623 1,667
-------- --------

$ 34,600 $ 33,483
======== ========

NOTE C--LONG-TERM OBLIGATIONS

In August 1997, the Company issued $125,000,000 principal amount of 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.

Effective August 17, 1999, the Company entered into a Credit Agreement,
replacing its existing credit facility, consisting of a three-year $84,000,000
revolving line of credit (the "Revolver") and a three-year $26,000,000 term loan
(the "Term Loan"). Borrowings under the Credit Agreement bear interest at either
LIBOR plus a specified margin currently equal to 3.00% for the Revolver and
3.25% for the Term Loan, or, at the Company's option, bear interest at the
lender's base rate plus a margin equal to 0.75%, for the Revolver and 1.25% for
the Term Loan. The availability under the Revolver was limited at all times,
through maturity, to a receivables and inventory borrowing base.

The Company obtained the DIP Facility from the same lenders to replace
the Company's Credit Agreement. The Bankruptcy Court approved the DIP Facility
on an interim basis on September 25, 2000 and on a final basis on October 13,
2000. The DIP Facility originally provided for a term loan facility in an
aggregate principal amount of $23.0 million, and a revolving loan facility in
the aggregate principal amount of $74.0 million under a borrowing base formula.
Scheduled principal payments have reduced the term loan to $20.1 million at
March 31, 2001. Amendments to the DIP Facility have reduced the revolving loan
facility to a maximum of $60.0 million. Term loans bear interest at the LIBOR
rate plus 4.00% for LIBOR rate loans and at the base rate plus 2.00% for base
rate loans. Revolving loans bear interest at the LIBOR rate plus 3.50% for LIBOR
rate loans and at the base rate plus 1.50% for base rate loans. The DIP Facility
expires on the earlier of (a) the substantial confirmation of the Company's
restructuring or (b) June 25, 2001. The Company's obligations under the DIP
Facility are secured by liens on substantially all of the Company's and its
subsidiaries assets and a pledge of the shares of all of the Company's
subsidiaries.

As a result of the decline in revenues and cash flow, the Company was
not in compliance with its cash flow covenant at March 31, 2001. The Company has
entered into an amendment to the DIP Facility, which delayed the implementation
of financial covenants until and for the months ended April 28 and May 26, 2001,
and increased the interest rate by 0.50%. There can be no assurance of future
compliance or that further amendments or waivers of future defaults can be
obtained. The DIP Facility continues to be the Company's primary source of
liquidity. The Company continues to access liquidity from its DIP Facility and
has not realized any significant change in its borrowing availability.

Actual interest expense and amortization of debt costs for the second
fiscal quarter of 2001 was $2.0 million. Had the Company not filed for
bankruptcy and interest continued to accrue on the Subordinated Notes then
interest expense would have increased by approximately $3.0 million for the same
period.

NOTE D--EARNINGS PER SHARE

The table below sets forth the computations of basic and diluted
earnings per share:

THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------- -------------------------------
MARCH 31, APRIL 1, MARCH 31, APRIL 1,
2001 2000 2001 2000
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Numerator for basic and diluted
earnings per share--net loss .......................... $ (5,992) $ (4,028) $ (12,923) $ (4,645)

Denominator for basic and diluted
earnings per share--adjusted
weighted average shares and
assumed conversions ................................... 13,388,556 13,382,929 13,388,556 13,368,372
============ ============ ============ ============

Basic earnings per share .............................. $ (0.45) $ (0.30) $ (0.97) $ (0.35)
============ ============ ============ ============

Diluted earnings per share ............................ $ (0.45) $ (0.30) $ (0.97) $ (0.35)
============ ============ ============ ============

NOTE E--PENSION

The Company elected to freeze benefits under its salaried and hourly
defined benefit pension plans as of December 31, 1999. This resulted in the
recognition of a curtailment gain on the salary plan of approximately $1,700,000
in the quarter ended January 1, 2000. Also, in connection with the curtailment
of the hourly plan, the Company recognized additional minimum pension liability
of $456,000 (net of applicable taxes of $245,000). The additional minimum
pension liability has been recorded as accumulated other comprehensive loss on
the balance sheet at January 1, 2000.

NOTE F--COMPREHENSIVE LOSS

The following table provides a reconciliation of net loss reported in
the Company's consolidated condensed statements of operations to comprehensive
loss:

The table below sets forth the computations of basic and diluted
earnings per share:

THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
MARCH 31, APRIL 1, MARCH 31, APRIL 1,
2001 2000 2001 2000
--------- --------- --------- ---------
(IN THOUSANDS)

Net loss .............................................. $ (5,992) $ (4,028) $ (12,923) $ (4,645)
Other comprehensive loss:
Additional minimum pension liability ............... -- -- -- (701)

Tax effect ......................................... -- -- -- 245
--------- --------- --------- ---------
Net of tax ......................................... -- -- -- (456)
Comprehensive loss .................................... $ (5,992) $ (4,028) $ (12,923) $ (5,101)
========= ========= ========= =========

NOTE G--RESTRUCTURING CHARGES

During the third quarter of fiscal 1999, the Company implemented a
reorganization plan related to its textile business. The textile business had
been running at less than full capacity due to the domestic circular knit
industry experiencing excess supply and low-priced garment imports from Asia.
The duration of these market conditions is uncertain. In response to these
business conditions, the Company decided to reduce its U.S. manufacturing
capacity. The major elements of the reorganization plan include the closing of
the Company's facility in Hamilton, North Carolina and the elimination of yarn
spinning operations at the Company's Trenton, Tennessee facilities, which were
completed during the fourth quarter of fiscal 1999. Additionally, the plan
resulted in the reduction of approximately 500 hourly and salaried employees,
with severance benefits being paid over periods up to twelve months from the
termination date. At October 2, 1999 substantially all employees had been
terminated or notified of their impending termination.

The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter of fiscal
1999, increased by $585,000 during the fourth quarter. The components of the
charge included $4,499,000 for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. The Company recorded
$692,000 in restructuring charges during the second quarter of fiscal 2001.
These charges were for severance related expense allocated to terminated
employees. Assets that are no longer in use have been sold or were held for sale
at March 31, 2001 and were written down to their estimated fair values less
costs of sale based primarily on independent appraisals.

The Company is actively marketing the assets held for sale through the
use of internal resources and outside agents. The estimated fair value of assets
held for sale was $312,000 at March 31, 2001. As a result of the restructuring,
the Company has idle assets of approximately $513,000, which continue to be
depreciated. In addition, the Company continues to actively seek cost savings
and review its equipment and properties to determine whether it is appropriate
to effect further asset sales. It is anticipated that proceeds from any further
asset sales will be used to pay down amounts outstanding under the DIP Facility.

NOTE G--RESTRUCTURING CHARGES (continued)

The following is a summary of activity in the restructuring reserves
for severance and related expenses (in thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
MARCH 31, APRIL 1, MARCH 31, APRIL 1,
2001 2000 2001 2000
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Balance at beginning of period ........................ $ 158 $ 397 $ 415 $ 854

Additional severance recorded ......................... 692 -- 692 --

Payments .............................................. (496) (129) (753) (586)

Balance at end of period .............................. $ 354 $ 268 $ 354 $ 268
====== ====== ====== ======

NOTE H--REPORTING SEGMENT INFORMATION

The Company has adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
reporting by public companies of information about operating segments, products
and services, geographic areas and major customers. The method of determining
what information to report is based on the way management organizes the segments
within the Company for making operating decisions and assessing financial
performance.

The Company's chief operating decision-maker is considered to be the
Chief Executive Officer ("CEO"). The Company's CEO evaluates both consolidated
and disaggregated financial information in deciding how to allocate resources
and assess performance. The CEO uses certain disaggregated financial information
for the Company's primary knit fabric markets: textile and stretch fabrics.
Sales for textile and stretch fabrics for the quarters ended March 31, 2001 and
April 1, 2000 were $52.2 million and $6.2 million, and $63.6 million and $8.8
million, respectively. The Company has aggregated these two markets into a
single reportable textile segment as allowed under SFAS No. 131 because these
product lines have similar long-term economic characteristics such as average
gross margin, and the product lines are similar in regards to nature of
production processes, type of customers, and method used to distribute products.
The Company's textile segment manufactures in U.S. plants and markets fabric
through its sales offices, principally sold to customers in the U.S.

NOTE H--REPORTING SEGMENT INFORMATION (continued)

The Company also has an apparel segment. The apparel segment purchases
fabric, contracts for cutting, sewing and packaging from companies in the U.S.
and Mexico, and markets the finished apparel to customers in the U.S. The
apparel segment has an equity investment in an apparel manufacturing joint
venture in the Dominican Republic, which is not material at March 31, 2001. The
Company holds a 50% equity position in the joint venture, and accordingly does
not include net sales and other items of profit and loss in its Consolidated
Statements of Operations or the following table.

Net Sales
Textile ................................. $ 58,364 $ 72,384 $ 109,832 $ 136,270
Apparel ................................. 330 6,340 842 10,803
--------- --------- --------- ---------
Consolidated net sales ........................... $ 58,694 $ 78,724 $ 110,674 $ 147,073

Operating income (loss)
Textile ................................. $ (2,500) $ 1,991 $ (6,289) $ 7,789
Apparel ................................. (618) (2,133) (880) (2,951)

Amortization of goodwill ......................... 705 715 1,410 1,431
Interest and amortization of debt
costs ......................................... 1,998 4,868 4,173 9,725
--------- --------- --------- ---------
Consolidated income (loss)
before taxes ................................. $ (5,821) $ (5,725) $ (12,752) $ (6,318)
========= ========= ========= =========

Depreciation
Textile ................................. $ 4,389 $ 4,000 $ 8,342 $ 7,775
Apparel ................................. 91 92 183 183
--------- --------- --------- ---------
$ 4,480 $ 4,092 $ 8,525 $ 7,958

Capital Expenditures
Textile ................................. $ 386 $ 2,179 $ 1,387 $ 3,786
Apparel ................................. -- -- -- 10
--------- --------- --------- ---------
$ 386 $ 2,179 $ 1,387 $ 3,796

Assets at end of period
Textile ................................. $ 176,141 $ 206,867 $ 176,141 $ 206,867
Apparel ................................. 2,832 9,986 2,832 9,986
Assets not allocated to
segments .............................. 89,010 101,533 89,010 101,533
--------- --------- --------- ---------
$ 267,983 $ 318,386 $ 267,983 $ 318,386
========= ========= ========= =========

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This report contains certain forward-looking statements within the
meaning of the federal securities laws, all of which are intended to be covered
by the safe harbors created thereby. These statements include all statements
regarding the Company's intent, belief and expectations (such as statements
concerning the Company's future operating and financial strategies and results)
and any other statements that are not limited solely to historical fact.
Investors are cautioned that all forward-looking statements involve known and
unknown risks and uncertainties including, without limitation, risks associated
with the Company's ability to obtain a new credit facility upon the expiration
of the DIP Facility; the Company's approval of plans and activities by the
Bankruptcy Court, including the proposed plan; the ability of the Company to
continue as a going concern; the ability of the Company to operate pursuant to
the terms of its DIP Facility or its anticipated exit facility and to fund
future operations; the Company's ability to achieve cost savings and sell
properties which are held for disposal; the Company's ability to comply with
restrictive financial and operating conditions imposed by the terms of the
Company's DIP Facility; the availability of trade credit and terms from vendors;
the ability of the Company to operate successfully under a Chapter 11 proceeding
and achieve planned sales and margin; potential adverse developments with
respect to the Company's liquidity or results of operations; the ability of the
Company to attract, retain and compensate key executives and associates;
competitive pressures which may affect the nature and viability of the Company's
business strategy; trends in the economy as a whole which may affect consumer
confidence and consumer demand for the Company's products; the seasonal nature
of the Company's business and the ability of the Company to predict consumer
demand as a whole, as well as demand for specific goods; the ability of the
Company to attract and retain customers; potential adverse publicity; the
Company's ability and success in achieving cost savings and identify additional
equipment and properties for sale; potential adverse developments with respect
to the cost and availability of raw materials and labor; risks associated with
governmental regulation and trade policies; and potential adverse developments
regarding product demand or mix. Moreover, although the Company believes that
any assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could prove to be inaccurate. Therefore, in
light of these known and unknown risks and uncertainties, there can be no
assurances that the forward-looking statements included in this report will
prove to be accurate and the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
forward-looking statements included in this report will prove to be accurate.
The Company undertakes no obligation to update any forward-looking statements
contained in this report.

OVERVIEW

Proceedings Under Chapter 11 of the Bankruptcy Code

On September 25, 2000, the Company and 13 of its subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of title 11 of the
Bankruptcy Code in the Bankruptcy Court and orders for relief were entered by
the Bankruptcy Court. The Chapter 11 Cases have been consolidated for the
purpose of joint administration under Case No. 00-3746. The Debtors are
currently operating their businesses as debtors-in-possession pursuant to the
Bankruptcy Code.

OVERVIEW (CONTINUED)

Proceedings Under Chapter 11 of the Bankruptcy Code

Although the Debtors expect to emerge from bankruptcy in the third
quarter of fiscal 2001, there can be no assurance that a plan proposed by the
Debtors will be confirmed by the Bankruptcy Court, or that any such plan will be
consummated. See - Cautionary Note Regarding Forward-Looking Information. As
provided by the Bankruptcy Code, a plan of reorganization must be confirmed by
the Bankruptcy Court. The Bankruptcy Court may confirm a plan notwithstanding
the non-acceptance of the plan by an impaired class of creditors or equity
security holders if certain requirements of the Bankruptcy Code are met. The
plan proposed by the Company involves a debt conversion of the Company's
pre-petition Subordinated Notes into newly issued common equity of the
reorganized Company and the PIK Note. Under such circumstances the existing
common stock of the Company would be cancelled and the holders of our currently
outstanding common stock would receive the Warrants to acquire up to fifteen
(15%) percent of the new common stock on a fully-diluted basis at exercise
prices of $10.29 and $12.38 per share respectively. Accordingly, the Company
believes the outstanding common stock is highly speculative, and may have no
value.

The plan of reorganization proposed by the Debtors was submitted to a
vote of the class 4 claimants, holders of the Subordinated Notes, and the class
8 claimants, holders of the Company's existing common stock. Both classes of
voters accepted the plan, but it remains subject to confirmation.

At the first hearing held on September 26, 2000 before Judge Mary F.
Walrath, the Bankruptcy Court entered first day orders granting authority to the
Debtors, among other things, to pay pre-petition and post-petition employee
wages, salaries, benefits and other employee obligations, to pay vendors and
other providers in the ordinary course for goods and services received after
September 25, 2000, and to pay pre-petition unsecured trade claims to vendors.
Substantially all pre-petition trade claims have been paid in full.

The Company obtained the DIP Facility from the same lenders that
financed the Company's Credit Agreement dated as of August 17, 1999. The
Bankruptcy Court approved the DIP Facility on an interim basis on September 25,
2000 and on a final basis on October 13, 2000. The DIP Facility originally
provided for a term loan facility in an aggregate principal amount of $23.0
million, and a revolving loan facility in the aggregate principal amount of
$74.0 million under a borrowing base formula. Scheduled principal payments have
reduced the term loan to $20.1 million at March 31, 2001. Amendments to the DIP
Facility have reduced the revolving loan facility to a maximum of $60.0 million.
Term loans bear interest at the LIBOR rate plus 4.00% for LIBOR rate loans and
at the base rate plus 2.00% for base rate loans. Revolving loans bear interest
at the LIBOR rate plus 3.50% for LIBOR rate loans and at the base rate plus
1.50% for base rate loans. The DIP Facility expires on the earlier of (a) the
substantial confirmation of the Company's restructuring or (b) June 25, 2001.
The Company's obligations under the DIP Facility are secured by liens on
substantially all of the Company's and its subsidiaries assets and a pledge of
the shares of all of the Company's subsidiaries.

The Company has filed various motions in the Chapter 11 Cases whereby
it was granted authority or approval with respect to various items required by
the Bankruptcy Code and/or necessary for the Company's reorganizational efforts.
The Company has obtained orders providing for, among other things, (i)
implementation of employee retention and incentive programs, (ii) the ability to
pay vendors and other providers in the ordinary course for goods and services
provided to the Company, and (iii) the extension of time to assume or reject
leases or executory contracts. The Company intends to reject the Texmaco
Agreements pursuant to Section 365(a) of the Bankruptcy Code. The Company also
intends to reject its 1992 Stock Incentive Plan and its Non-Qualified Stock
Option Plan for Employees of Acquired Companies.

RESULTS OF OPERATIONS

Net sales for the quarter ended March 31, 2001, decreased by 25.4% to
$58.7 million versus $78.7 million for the same quarter of the prior year. Net
sales for the six months ended March 31, 2001 were $110.7 as compared to $147.1
for the same period in fiscal 2000. Sales were adversely affected by a weaker
than expected retail environment. Gross margins for the quarter decreased to
2.5% versus 10.4% for the same period in fiscal 2000. Sales volume and gross
margins were both negatively impacted by reduced order activity as customers
reacted with caution to the Company's bankruptcy status.

Selling, general and administrative expenses for the six months ended
March 31, 2001 were $14.3 as compared to $15.3 for the six months ended April 1,
2001. Selling, general and administrative expenses for the quarter were $6.6
million compared to $9.1 million for the same period of 2000. Second quarter
2001 contained $3.1 million of net gain from the power plant sale and sale of
Hamilton.

Interest expense in the second quarter of fiscal 2001 was reduced to
$2.0 million compared to $4.9 million in the previous year due to curtailment of
interest on the Subordinated Notes. Although the Company had a loss before
taxes, no income tax benefit was recorded for the quarter as the Company is in a
loss carry-forward position. There was a tax expense recorded of $117,000 in the
second quarter of fiscal 2001 that related to income earned in prior periods.
This amount represents the reconciliation of actual tax return filings to
amounts previously accrued.

Net loss for the quarter ended March 31, 2001 was $6.0 million, or
$0.45 per share, versus net loss of $4.0 million, or $0.30 per share, for the
same period in fiscal 2000. Earnings per share are the same whether calculated
on a basic or diluted basis. The weighted average number of shares outstanding
for the quarter was approximately 13,389,000. Net loss for the six months ended
March 31, 2001 was $12.9 million as compared to a net loss of $4.6 million.

During the third quarter of fiscal 1999, the Company implemented a
reorganization plan related to its textile business. The textile business had
been running at less than full capacity due to the domestic circular knit
industry experiencing excess supply and low-priced garment imports from Asia.
The duration of these market conditions is uncertain. In response to these
business conditions, the Company decided to reduce its U.S. manufacturing
capacity. The major elements of the reorganization plan included the closing of
the Company's facility in Hamilton, North Carolina and the elimination of yarn
spinning operations at the Company's Trenton, Tennessee facilities which were
completed during the fourth quarter of fiscal 1999. Additionally, the plan
resulted in the reduction of approximately 500 hourly and salaried employees,
with severance benefits being paid over periods up to twelve months from the
termination date. At October 2, 1999 substantially all of these employees had
been terminated or notified of their impending termination.

The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter. The components of the charge
included $4,499,000 for severance and related fringe benefits and $7,079,000 for
the write-down of impaired fixed assets. The Company recorded $692,000 in
restructuring charges during the second quarter of fiscal 2001. These charges
were for severance related expense allocated to terminated employees. Assets
that are no longer in use have been sold or were held for sale at March 31, 2001
and were written down to their estimated fair values less costs of sale based
primarily on independent appraisals.

The Company is actively marketing the assets held for sale through the
use of internal resources and outside agents. The estimated fair value of assets
held for sale was $312,000 at March 31, 2001. As a result of the restructuring,
the Company has idle assets of $513,000 million, which continue to be
depreciated. In addition, the Company continues to actively review its equipment
and properties to determine whether it is appropriate to effect further asset
sales. It is anticipated that proceeds from any further asset sales will be used
to pay down amounts outstanding under the DIP Facility.

LIQUIDITY AND CAPITAL RESOURCES

On September 25, 2000, the Debtors filed the Chapter 11 Cases which
will affect the Company's liquidity and capital resources in fiscal 2001.

The Company entered into a loan and security agreement effective
August 17, 1999, with Congress Financial Corporation (Southern) and BankBoston,
N.A. for a revolving credit, term loan and letter of credit facility in an
aggregate principal amount of up to $110.0 million (the "Credit Agreement"), to
replace the Company's previous credit facility and to support the Company's
working capital and general corporate needs.

The Company obtained the DIP Facility from the same lenders to replace
the Credit Agreement. The Bankruptcy Court approved the DIP Facility on an
interim basis on September 25, 2000 and on a final basis on October 13, 2000.
The DIP Facility originally provided for a term loan facility in an aggregate
principal amount of $23.0 million, and a revolving loan facility in the
aggregate principal amount of $74.0 million under a borrowing base formula.
Scheduled principal payments have reduced the term loan to $20.1 million at
March 31, 2001. Amendments to the DIP Facility have reduced the revolving loan
facility to a maximum of $60.0 million. Term loans bear interest at the LIBOR
rate plus 4.00% for LIBOR rate loans and at the base rate plus 2.00% for base
rate loans. Revolving loans bear interest at the LIBOR rate plus 3.50% for LIBOR
rate loans and at the base rate plus 1.50% for base rate loans. The DIP Facility
expires on the earlier of (a) the substantial confirmation of the Company's
restructuring or (b) June 25, 2001. The Company's obligations under the DIP
Facility are secured by liens on substantially all of its and its subsidiaries
assets and a pledge of the shares of all of the Company's subsidiaries.

The Company currently receives trade credit or terms from substantially
all of its vendors and suppliers. There can be no assurance that the Company
will continue to receive trade credit or terms from its vendors. See -
Cautionary Note Regarding Forward-Looking Information.

The Company's primary capital requirements are for working capital,
debt service and capital expenditures. Management believes that cash generated
from operations, borrowings available under the DIP Facility and trade credit
will be sufficient to meet the Company's working capital and capital expenditure
needs while the Company is in bankruptcy.

The Company is in the process of seeking a new credit facility to
replace the DIP Facility, once the Company emerges from bankruptcy. The Company
intends to use the anticipated replacement facility to repay outstanding
borrowings under the Credit Agreement and the DIP Facility, as well as for
working capital requirements. The Company believes its obligations under any new
credit facility will be fully secured by liens on substantially all of the
assets of the Company and its subsidiaries and a pledge of the shares of all of
the Company's subsidiaries. There can be no assurance that the Company will be
able to enter into a new credit facility on favorable terms, or at all. See -
Cautionary Note Regarding Forward-Looking Information.

As a result of the decline in revenues and cash flow, the Company was
not in compliance with its cash flow covenant at March 31, 2001. The Company has
entered into an amendment to the DIP Facility, which delayed the implementation
of financial covenants until and for the months ended April 28 and May 26, 2001,
and increased the interest rate by 0.50%. There can be no assurance of future
compliance or that further amendments or waivers of future defaults can be
obtained. The DIP Facility continues to be the Company's primary source of
liquidity. The Company continues to access its liquidity from its DIP Facility
and has not realized any significant change in its borrowing availability.

On January 31, 2001, the Company exercised its right of first refusal
on the purchase of two power plants adjacent to two of its textile manufacturing
facilities. The Company simultaneously sold these plants to a third party
generating net proceeds of approximately $3.5 million. Additionally, one of the
Company's subsidiaries, Alamac Knit Fabrics, Inc., has sold its facility in
Hamilton, North Carolina on February 28, 2001, generating $2,144,000 in net
proceeds. This facility had been closed since July 1999. Proceeds from both
transactions were applied to pay down the revolving line of credit under the DIP
Facility and increase the borrowing availability under that facility. The
Company continues to actively review its equipment and properties to determine
if it is appropriate to effect further sales of these assets. It is anticipated
that proceeds from any asset sales will be used to pay down the revolving line
of credit under the DIP Facility. See - Cautionary Note Regarding
Forward-Looking Information.

Management believes that cash generated from operations, borrowings
available under a new credit facility, if obtained, trade credit and proceeds
from the potential sale of some of its equipment and properties, will be
sufficient to meet the Company's working capital needs from the time it emerges
from bankruptcy through the end of fiscal 2001. Any adverse developments with
respect to any of the foregoing could materially adversely affect the Company's
liquidity. In such an event, the Company would seek alternative sources of
liquidity, but there can be no assurance that any such sources would be
available to the Company. Accordingly, there can be no assurance that the
Company will generate sufficient liquidity after it emerges from bankruptcy. The
Company continues to actively review its equipment and properties to determine
if it is appropriate to effect further sales of its assets. It is anticipated
that proceeds from any asset sales will be used to pay down the revolving line
of credit under the DIP Facility. See -- Cautionary Note Regarding
Forward-Looking Information.

Working capital at March 31, 2001, was $5.8 million versus $6.8 million
at September 30, 2000. The current ratio at March 31, 2001 was 1.1:1, equaling
September 30, 2000's current ratio. The Company's debt-to-capital ratio was
75.2% at March 31, 2001 compared to 73.9% at September 30, 2000.

Net receivables of $40.3 million at March 31, 2001, decreased from
$48.9 million at September 30, 2000, due to reduced sales levels. Inventories
increased to $34.6 million at the end of the second quarter of fiscal 2001 from
$33.4 million at the end of the fourth quarter of fiscal 2000.

Capital expenditures for the three months ended March 31, 2001, were
$0.4 million versus $1.6 million for the same period in the prior year. Cash
outlays for capital spending are anticipated to approximate $5 million in fiscal
2001.

Based on the borrowing base computation within the DIP Facility, the
amount of additional borrowing available at March 31, 2001, was approximately
$11.4 million, subject to applicable reserves. 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.

PART II--OTHER INFORMATION

ITEM 3--DEFAULTS UPON SENIOR SECURITIES

The Company commenced the Chapter 11 Cases on September 25, 2000. As a
result of filing the Chapter 11 Cases, no principal or interest payments will be
made on the Subordinated Notes. The plan proposed by the Company involves a debt
conversion of the Subordinated Notes into newly issued common equity of the
reorganized Company and the PIK Note.

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of shareholders during the
three months ended March 31, 2001.

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

(a) (1) Exhibits:

10.19 Material Contract

(a) Third Amendment to Post Petition Loan and
Security Agreement among Dyersburg Corporation
and its Lenders dated April 2, 2001.

(b) The Corporation did not file any reports on Form 8-K during
the three months ended March 31, 2001.

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.

May 14, 2001 /s/ William S. Shropshire, Jr.
----------------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer