<PAGE>   1


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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

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

                                       OR

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

                     FOR QUARTERLY PERIOD ENDED JULY 4, 1998

                         Commission File Number: 0-18054

                             BRAZOS SPORTSWEAR, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                        91-1770931
    (STATE OR OTHER JURISDICTION                        (IRS EMPLOYER
  OF INCORPORATION OR ORGANIZATION)                  IDENTIFICATION NO.)

                             4101 FOUNDERS BOULEVARD
                               BATAVIA, OHIO 45103
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

         Registrant's telephone number including area code 513-753-3400

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 [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date.


                                    4,421,752
                         ------------------------------
           (SHARES OF COMMON STOCK OUTSTANDING AS OF AUGUST 17, 1998)

--------------------------------------------------------------------------------
================================================================================



<PAGE>   2





                             BRAZOS SPORTSWEAR, INC.

                                    FORM 10-Q
                         FOR THE QUARTERLY PERIOD ENDED
                                  JULY 4, 1998

<TABLE>
<CAPTION>
                                                                                                 PAGE
                                                                                                 ----
<S>                                                                                              <C>
PART I - FINANCIAL INFORMATION

         ITEM 1:  FINANCIAL STATEMENTS

                  Consolidated Condensed Balance Sheets as of July 4, 1998
                  and December 27, 1997 (unaudited).......................................         1

                  Consolidated Condensed Statements of Operations for the
                  twenty-seven weeks ended July 4, 1998 (unaudited) and the
                  twenty-six weeks ended June 28, 1997 (unaudited) and the
                  thirteen weeks ended July 4, 1998 (unaudited) and
                  June 28, 1997 (unaudited)...............................................         3

                  Consolidated Condensed Statements of Cash Flows for the
                  twenty-seven weeks ended July 4, 1998 (unaudited) and the
                  twenty-six weeks ended June 28, 1997 (unaudited)........................         4

                  Notes to Financial Statements (unaudited)...............................         5

         ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS..............................................................        12

PART II - OTHER INFORMATION...............................................................        19

</TABLE>










<PAGE>   3




                         PART I. FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

                             BRAZOS SPORTSWEAR, INC.


                CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

                    AS OF JULY 4, 1998 AND DECEMBER 27, 1997
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                         1998                 1997
                                                                                       ---------           ---------
<S>                                                                                   <C>                 <C>     
ASSETS
CURRENT ASSETS:
     Cash                                                                              $  1,310            $  2,679
     Accounts receivable, net of allowance for doubtful accounts
        of $6,945 and $7,930, respectively                                               36,055              41,989
     Inventory (Note 2(b))                                                               74,308              55,551
     Prepaid expenses                                                                     9,696               8,861
     Income tax receivable                                                                5,621               2,841
     Deferred tax assets                                                                  4,649               4,649
                                                                                       --------            --------
                  Total current assets                                                  131,639             116,570
                                                                                       --------            --------

PROPERTY, PLANT AND EQUIPMENT-net, at cost                                               14,447              13,336
                                                                                       --------            --------
INTANGIBLE ASSETS:
     Costs in excess of fair value of assets acquired                                    50,869              50,869
     Less- accumulated amortization                                                      (2,268)             (1,655)
                                                                                       --------            --------
                                                                                         48,601              49,214
                                                                                       --------            --------
     Other                                                                                7,661               7,661
     Less- accumulated amortization                                                      (2,267)             (1,740)
                                                                                       --------            --------
                                                                                          5,394               5,921
                                                                                       --------            --------
                  Total intangible assets                                                53,995              55,135
                                                                                       --------            --------
OTHER ASSETS                                                                                249                 269
                                                                                       --------            --------
                                                                                       $200,330            $185,310
                                                                                       ========            ========
</TABLE>

                   The accompanying notes are an integral part
                 of these consolidated condensed balance sheets.




                                       1
<PAGE>   4


                             BRAZOS SPORTSWEAR, INC.


                CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

                    AS OF JULY 4, 1998 AND DECEMBER 27, 1997
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                         1998                1997
                                                                                       --------            --------
<S>                                                                                   <C>                 <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
     Borrowings pursuant to revolving                                                  $ 59,928            $ 31,504
         credit agreement (Note 2(c)) 
     Current portion of other debt                                                          939                 947
     Accounts payable                                                                    25,590              13,902
     Accrued liabilities                                                                  9,093              16,976
                                                                                       --------            --------
                  Total current liabilities                                              95,550              63,329
                                                                                       --------            --------

LONG-TERM OBLIGATIONS - LESS SCHEDULED MATURITIES:
     Senior notes payable                                                                99,317              99,277
     Subordinated debt due to related parties                                             1,500               1,500
     Capital lease liability                                                                546                 795
                                                                                       --------            --------
                                                                                        101,363             101,572
                                                                                       --------            --------

DEFERRED INCOME TAXES PAYABLE                                                             1,141               1,141

OTHER LIABILITIES                                                                         1,162               2,036

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK                                        9,027               8,577
 
COMMITMENTS AND CONTINGENCIES (Note 5)

SHAREHOLDERS' EQUITY (DEFICIT):
     Common stock, $.001 par value, 15,000,000 shares 
       authorized and 4,419,479 and 4,412,655 shares issued and 
       outstanding at July 4, 1998 and December 27, 1997, respectively                        4                   4
     Additional paid-in capital                                                          11,330              11,312
     Retained deficit                                                                   (19,247)             (2,661)
                                                                                       --------            --------
                  Total shareholders' equity (deficit)                                   (7,913)              8,655
                                                                                       --------            --------
                                                                                       $200,330            $185,310
                                                                                       ========            ========
</TABLE>

                   The accompanying notes are an integral part
                 of these consolidated condensed balance sheets.



                                       2
<PAGE>   5



                             BRAZOS SPORTSWEAR, INC.


           CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                       FOR THE PERIOD ENDED                 FOR THE PERIOD ENDED
                                                                  ------------------------------       -----------------------------
                                                                  JULY 4, 1998     JUNE 28, 1997       JULY 4, 1998    JUNE 28, 1997
                                                                   (13 WEEKS)       (13 WEEKS)          (27 WEEKS)       (26 WEEKS)
                                                                  ------------     -------------       ------------    -------------
<S>                                                                <C>              <C>                 <C>             <C>
    NET SALES                                                       $   54,272       $   56,198          $  107,254      $   91,105
    COST OF GOODS SOLD                                                  46,009           41,967              89,095          68,650
                                                                    ----------       ----------          ----------      ----------
                      Gross profit                                       8,263           14,231              18,159          22,455

    OPERATING EXPENSES:
         Selling, general and administrative expenses                   13,880           11,654              28,752          19,810
         Restructuring charge (Note (2(e))                                 -                -                   745             -
         Amortization of intangible assets and non-compete
           payments                                                        604              305               1,140             590
                                                                    ----------       ----------          ----------      ----------
                      Total operating expenses                          14,484           11,959              30,637          20,400
                      Operating income (loss)                           (6,221)           2,272             (12,478)          2,055
                                                                    ----------       ----------          ----------      ----------

    OTHER EXPENSE (INCOME):
         Interest expense                                                3,752            1,791               7,415           2,934
         Other, net                                                         (5)             (71)                (18)             54
                                                                    ----------       ----------          ----------      ----------
                      Income (loss) before provision (credit)
                        for income taxes                                (9,968)             552             (19,875)           (933)

    PROVISION (CREDIT) FOR INCOME TAXES                                    222              236              (3,740)           (373)
                                                                    ----------       ----------          ----------      ----------
                      Net income (loss)                                (10,190)             316             (16,135)           (560)

    DIVIDENDS AND ACCRETION ON PREFERRED STOCK                             231              247                 450             412
                                                                    ----------       ----------          ----------      ----------
         Net income (loss) available for common shareholders        $  (10,421)      $       69          $  (16,585)     $     (972)
                                                                    ==========       ==========          ==========      ==========

    PER SHARE DATA (Note 2(d)):
    BASIC EARNINGS PER SHARE
         Earnings (loss) per share                                  $    (2.36)      $      .02          $    (3.75)     $     (.24)
                                                                    ==========       ==========          ==========      ==========
         Weighted average shares outstanding                         4,419,479        4,319,158           4,418,107       4,053,214
                                                                    ==========       ==========          ==========      ==========
    DILUTED EARNINGS PER SHARE
         Earnings (loss) per share                                  $    (2.36)      $      .01          $    (3.75)     $     (.24)
                                                                    ==========       ==========          ==========      ==========
         Weighted average shares outstanding                         4,419,479        5,001,648           4,418,107       4,053,214
                                                                    ==========       ==========          ==========      ==========

</TABLE>

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



                                       3
<PAGE>   6



                             BRAZOS SPORTSWEAR, INC.


           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

                FOR THE TWENTY-SEVEN WEEKS ENDED JULY 4, 1998 AND
                    THE TWENTY-SIX WEEKS ENDED JUNE 28, 1997
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                                1998           1997
                                                                                              ---------     ---------
<S>                                                                                          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                                 $(16,135)     $   (560)
     Adjustments to reconcile net loss to net cash used in operating activities-
         Depreciation                                                                            1,181           758
         Amortization of intangible assets                                                       1,140           590
         Decrease (increase) in accounts receivable                                              5,934        (4,312)
         Increase in inventory                                                                 (18,757)      (20,439)
         Increase in prepaid expenses                                                             (834)         (121)
         Increase in income tax receivable                                                      (2,779)         (256)
         Decrease (increase) in other noncurrent assets                                             21        (1,993)
         Increase in accounts payable and accrued liabilities                                    3,075        14,540
                                                                                              --------      --------
                  Net cash used in operating activities                                        (27,154)      (11,793)
                                                                                              --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of Sun Sportswear, Inc., net of cash acquired                                        -          (4,613)
     Purchases of property, plant and equipment, net                                            (2,292)         (211)
                                                                                              --------      --------
                  Net cash used in investing activities                                         (2,292)       (4,824)
                                                                                              --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings pursuant to revolving credit agreement, net                                     28,424        18,239
     Borrowings of long-term debt pursuant to credit agreement                                     -           1,000
     Repayments of long-term debt pursuant to credit agreement                                     -          (1,250)
     Repayments of subordinated debt                                                               -          (2,998)
     Repayment of capital lease obligations and industrial revenue bonds                          (217)         (290)
     Payments made under non-compete agreements                                                   (150)          (58)
     Payments for deferred financing costs                                                         -            (140)
     Issuance of common stock                                                                       20           100
     Issuance of preferred stock and related stock purchase warrants                               -           2,000
                                                                                              --------      --------
                  Net cash provided by financing activities                                     28,077        16,603
                                                                                              --------      --------

NET DECREASE IN CASH                                                                            (1,369)          (14)

CASH AT BEGINNING OF PERIOD                                                                      2,679           561
                                                                                              --------      --------
CASH AT END OF PERIOD                                                                         $  1,310      $    547
                                                                                              ========      ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for interest                                                                   $ 12,672      $  2,763
     Cash paid for income taxes (refunds received)                                                (949)        1,479

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
     Payments of PIK dividends and accretion of preferred stock                                    450           412

</TABLE>

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




                                       4
<PAGE>   7




                             BRAZOS SPORTSWEAR, INC.


                          NOTES TO FINANCIAL STATEMENTS

                    AS OF JULY 4, 1998 AND DECEMBER 27, 1997



(1)    Organization and Structure-

       On March 14, 1997, BSI Holdings, Inc. ("Holdings") consummated a merger
       with Sun Sportswear, Inc. ("Sun") (hereinafter referred to as the
       "Merger") whereby the stockholders of Holdings acquired an 86% ownership
       interest in Sun. The Merger has been accounted for as a reverse
       acquisition with Sun being the surviving legal entity and Holdings being
       the acquirer for accounting purposes. Concurrent with the Merger, Sun was
       reincorporated in the State of Delaware under the name Brazos Sportswear,
       Inc. ("Brazos" or "the Company"). See Note 3 for further information.

       Effective April 6, 1998, the Company's principal operating subsidiary,
       Brazos, Inc., a Texas corporation, was reincorporated in Delaware as a
       limited liability company and was renamed Brazos Sportswear, LLC.

(2)    Significant Accounting Policies-

       (a)    Interim Financial Statements--The accompanying consolidated
              condensed financial statements of Brazos for the twenty-seven week
              period ended July 4, 1998 reflect the results of operations of the
              Company. The accompanying historical consolidated condensed
              financial statements of Brazos include the results of operations
              of Sun from the date of acquisition, and prior to March 14, 1997,
              reflect Holdings' historical results.

              The accompanying consolidated condensed financial statements of
              Brazos are unaudited. These unaudited interim financial statements
              and related notes have been prepared pursuant to the rules and
              regulations of the Securities and Exchange Commission.
              Accordingly, certain information and footnote disclosures normally
              included in financial statements prepared in accordance with
              generally accepted accounting principles have been omitted
              pursuant to such rules and regulations. However, in the opinion of
              management, the accompanying consolidated condensed financial
              statements include all adjustments, consisting of only normal
              recurring adjustments, necessary for a fair presentation of the
              results for the interim periods. These consolidated condensed
              financial statements and notes thereto should be read in
              conjunction with the consolidated financial statements and notes
              thereto included in Brazos' Annual Report on Form 10-K dated March
              27, 1998.

              The results of operations for the interim periods are not
              necessarily indicative of the results to be expected for the year.
              The Company regularly evaluates whether events and circumstances
              have occurred that indicate that the amounts of intangible assets 
              or deferred tax assets may not be realizable.




                                       5
<PAGE>   8




       (b)    Inventories--Inventories are comprised of:

<TABLE>
<CAPTION>
                                                                        JULY 4,               DECEMBER 27,
                    INVENTORY CATEGORY               METHOD              1998                     1997
                    ------------------               ------             -------               ------------
          <S>                                        <C>              <C>                      <C>
           Raw Materials                              LIFO             $ 2,476                  $ 3,605
           Finished Goods                             LIFO              17,008                   12,725
                                                                       -------                  -------
                                                                        19,484                   16,330
           Less--LIFO reserve                                             (182)                    (182)
                                                                       -------                  -------
                    Total LIFO                                          19,302                   16,148
                                                                       -------                  -------
           Raw Materials                              FIFO              34,695                   24,663
           Work-in-Process                            FIFO               4,811                    5,926
           Finished Goods                             FIFO              15,500                    8,814
                                                                       -------                  -------
                    Total FIFO                                          55,006                   39,403
                                                                       -------                  -------
                    Total inventory                                    $74,308                  $55,551
                                                                       =======                  =======
</TABLE>

              Finished goods on a LIFO basis include blank garments of $15.5
              million and $11.3 million at July 4, 1998 and December 27, 1997,
              respectively which are sold by Brazos' wholesale distribution
              division.

       (c)    Debt--The Company maintains a loan and security agreement which
              provides a revolving line of credit (the "Credit Facility") to the
              Company's principal operating subsidiary, Brazos Sportswear, LLC
              (the "Borrower") . On June 30, 1998, the Company and its senior
              lenders amended the Company's Credit Facility to include a
              forbearance agreement and to increase the amount of the facility
              from $70 million to $75 million, subject to collateral
              limitations. Interest on the line of credit increased from prime
              plus .25% or the Eurodollar base rate plus 1.75% to prime
              plus 1.25% or the Eurodollar base rate plus 2.75%. Under the
              forbearance agreement, the Company's lenders agreed to refrain
              from exercising their rights and remedies under the Credit
              Facility as a result of existing defaults through November 30,
              1998. The forbearance agreement requires the Company to achieve
              certain levels of earnings before interest, taxes, depreciation
              and amortization ("EBITDA") on a monthly basis. As of July 4,
              1998, the Company was in compliance with the EBITDA covenant.
              Borrowings pertaining to the Credit Facility are classified as
              current liabilities as of July 4, 1998 and December 27, 1997.

       (d)    Earnings (Loss) Per Share--In 1997, the company adopted SFAS No.
              128, "Earnings per Share". As a result, the Company's reported
              earnings per share for 1997 have been restated. The effect of this
              accounting change on previously reported earnings per share (EPS)
              data is as follows for the thirteen weeks ended and twenty-six
              weeks ended June 28, 1997:



                                       6
<PAGE>   9




<TABLE>
<CAPTION>
                                                                          THIRTEEN              TWENTY-SIX 
                                                                         WEEKS ENDED            WEEKS ENDED
                                                                         -----------            -----------
                     <S>                                                 <C>                    <C>       
                       Per share amounts
                            Primary EPS as reported                       $     .01              $    (.23)
                            Effect of SFAS No. 128                              .01                   (.01)
                                                                          ---------              ----------
                            Basic EPS as restated                         $     .02              $    (.24)
                                                                          =========              ==========

                            Fully Diluted EPS as reported                 $    -                 $    (.23)
                            Effect of SFAS No. 128                              .01                   (.01)
                                                                          ---------              ----------
                            Diluted EPS as restated                       $     .01              $    (.24)
                                                                          =========              ==========
</TABLE>

              Basic earnings per share were computed by dividing net income
              available to common shareholders by the weighted average number of
              shares of common stock outstanding during the period. Diluted
              earnings per share for the thirteen weeks and twenty-seven weeks
              ended July 4, 1998 and the twenty-six weeks ended June 28, 1997
              are equal to basic earnings per share because of the loss periods.
              During loss periods, all options and warrants are excluded from
              the dilutive calculation since they are anti-dilutive.

<TABLE>
<CAPTION>
                                                                     FOR THE THIRTEEN WEEKS ENDED JULY 4, 1998
                                                                   --------------------------------------------
                                                                                                      PER-SHARE
                                                                        INCOME         SHARES          AMOUNT
                                                                   ---------------     ------         ---------
                                                                   (000's Omitted)
              <S>                                                   <C>              <C>              <C>
               Net Loss                                              $(10,190)

               Less: dividends and accretion on preferred stock          (231)
                                                                     --------
               BASIC AND DILUTED EARNINGS PER SHARE
               Loss available to common shareholders                 $(10,421)        4,419,479        $(2.36)
                                                                     ========         =========        ======
</TABLE>


<TABLE>
<CAPTION>
                                                                    FOR THE THIRTEEN WEEKS ENDED JUNE 28, 1997
                                                                   --------------------------------------------
                                                                                                      PER-SHARE
                                                                        INCOME         SHARES          AMOUNT
                                                                   ---------------     ------         ---------
                                                                   (000's Omitted)
              <S>                                                   <C>              <C>              <C>
               Net Income                                            $    316

               Less: dividends and accretion on preferred stock          (247)
                                                                     --------
               BASIC EARNINGS PER SHARE
               Income available to common shareholders               $     69         4,319,158        $  .02

               Effect of Dilutive Securities
                 Options
                                                                                        300,435
                 Warrants
                                                                                        245,692
                 Convertible Debt
                                                                                        136,363
                                                                                      ---------
               DILUTED EARNINGS PER SHARE
               Income available to common shareholders               $     69         5,001,648        $  .01
                                                                     ========         =========        ======
</TABLE>




                                       7
<PAGE>   10




<TABLE>
<CAPTION>
                                                                   FOR THE TWENTY-SEVEN WEEKS ENDED JULY 4, 1998
                                                                   ---------------------------------------------
                                                                                                      PER-SHARE
                                                                        INCOME         SHARES          AMOUNT
                                                                   ---------------     ------         ---------
                                                                   (000's Omitted)
              <S>                                                   <C>              <C>              <C>
               Net Loss                                              $ (16,135)

               Less: dividends and accretion on preferred stock           (450)
                                                                     ---------
               BASIC AND DILUTED EARNINGS PER SHARE
               Loss available to common shareholders                 $ (16,585)       4,418,107        $(3.75)
                                                                     =========        =========        ======

</TABLE>


<TABLE>
<CAPTION>
                                                                  FOR THE TWENTY-SIX WEEKS ENDED JUNE 28, 1997
                                                                  --------------------------------------------
                                                                                                      PER-SHARE
                                                                        INCOME         SHARES          AMOUNT
                                                                   ---------------     ------         ---------
                                                                   (000's Omitted)
              <S>                                                   <C>              <C>              <C>
               Net Loss                                              $    (560)

               Less: dividends and accretion on preferred stock           (412)
                                                                     ---------
               BASIC AND DILUTED EARNINGS PER SHARE
               Loss available to common shareholders                 $    (972)       4,053,214        $ (.24)
                                                                     =========        =========        ======

</TABLE>

              Loss per share amounts for all periods have also been computed in
              accordance with Securities and Exchange Commission Staff
              Accounting Bulletin No. 98. There were no nominal shares issued as
              defined by SAB No. 98.

       (e)    Restructuring of Operations--In the first quarter of 1998, the
              Company continued with its plan initiated in the fourth quarter of
              1997 to reduce costs and improve operating efficiencies and
              recorded an additional restructuring charge of approximately $.7
              million. This charge principally relates to additional lease
              termination costs and the physical movement of assets and
              personnel associated with the closure and consolidation of two
              manufacturing facilities into one existing facility. Total charges
              incurred from the inception of this restructuring plan are $6.4
              million.

        (f)   New Accounting Pronouncements--In June 1997, the FASB issued
              Statement of Financial Accounting Standards No. 130, Reporting
              Comprehensive Income (SFAS No. 130), effective for fiscal years
              beginning after December 15, 1997. After reviewing the provisions
              of SFAS No. 130, the Company concluded that the statement was not
              applicable to the Company for any periods presented and does not
              anticipate it being applicable in the future.

              In June 1997, the FASB issued Statement of Financial Accounting
              Standards No. 131, Disclosures about Segments of an Enterprise and
              Related Information (SFAS No. 131), which requires disclosures for
              each segment in which the chief operating decision maker organizes
              these segments within a company 





                                       8
<PAGE>   11




              for making operating decisions and assessing performance.
              Reportable segments are based on products and services, geography,
              legal structure, management structure and any manner in which
              management disaggregates a company. The Company intends to adopt
              SFAS No. 131 in the fourth quarter of fiscal 1998. The Company
              anticipates that adoption of SFAS No. 131 will expand disclosures
              but will not have an impact on reported consolidated financial
              position, results of operations or cash flows.

       (g)    Reclassification--Certain amounts in the 1997 consolidated 
              condensed financial statements have been reclassified to
              conform to the 1998 presentation.

(3)    Mergers and Acquisitions-

       During 1997, the Company made the following acquisitions, all of which
       have been accounted for as purchases. The results of operations of each
       acquisition are included in the Company's consolidated results of
       operations from the effective date of each acquisition.

       (a)    Sun Sportswear, Inc. ("Sun")--Effective March 14, 1997, BSI
              Holdings, Inc. consummated a merger with Sun whereby the
              stockholders of Holdings acquired an 86% ownership interest in
              Sun. The purchase price of approximately $12.7 million consisted
              of cash ($4.7 million), the issuance of a subordinated debenture
              to the former majority shareholder ($1.5 million) and the value of
              the Company's equity interest subsequent to the Merger ($6.5
              million).

       (b)    SolarCo, Inc.--Effective July 2, 1997, the Company acquired all of
              the outstanding capital stock of SolarCo, Inc. the parent company
              to Morning Sun, Inc. ("Morning Sun") for approximately $31.3
              million, consisting of approximately $30.5 million in cash and
              deferred payments, and the issuance of 73,171 shares of common
              stock valued at approximately $.8 million. Goodwill from this
              acquisition (approximately $25.9 million) is being amortized over
              a period of 40 years.

       (c)    Premier Sports Group, Inc. ("Premier")--Effective July 2, 1997,
              the Company also acquired certain assets and assumed certain
              liabilities of Premier for approximately $3.5 million, consisting
              of approximately $2.0 million in cash and $1.5 million in
              subordinated debt to the selling shareholders. The purchase price
              for Premier also includes a contingent earnout of up to $4.0
              million to the former owner of Premier. The payment of the earnout
              is contingent upon financial performance measures being achieved
              for calendar years 1997 through 2000. No earnout payments were
              achieved in 1997. Goodwill from this acquisition (approximately
              $3.5 million, subject to 




                                       9
<PAGE>   12




              revision pending the outcome of the contingent earnout) is being
              amortized over a period of 40 years.

       (d)    CS Crable Sportswear, Inc.--Effective September 29, 1997, the
              Company acquired certain assets of CS Crable Sportswear, Inc.
              ("Crable"), a wholly owned subsidiary of The Midland Company
              ("Midland"), for approximately $13.3 million in cash. Concurrent
              with this transaction, the Company's principal operating
              subsidiary, Brazos Sportswear, LLC, entered into a long term lease
              commitment with Midland for the former Crable facility.

       Pro forma results of the Company, Sun, Morning Sun, Premier, and Crable
       combined, assuming the acquisitions were consummated at the beginning of
       fiscal 1997, follow. Such pro forma information reflects adjustments to
       reflect the elimination of Sun's historical depreciation expense for the
       write-off of net equipment and leasehold improvements resulting from the
       application of purchase accounting, elimination of pre-merger acquisition
       expenses incurred by Sun, elimination of compensation expense to reflect
       compensation levels on a post-acquisition basis pursuant to
       post-acquisition employment and advisory agreements for Morning Sun and
       Premier, elimination of severance costs for Crable employees terminated
       as a result of the acquisition, increased rent expense for the lease of
       the Crable facility, increased amortization expense for Morning Sun and
       Premier as a result of purchased goodwill, additional interest expense
       related to increased net indebtedness and dividends on additional
       preferred stock issued.

<TABLE>
<CAPTION>
                                                                                 THIRTEEN              TWENTY-SIX
                                                                                WEEKS ENDED            WEEKS ENDED
                                                                               -------------          ------------
                                                                               JUNE 28, 1997          JUNE 28,1997
                                                                               -------------          ------------
                         (000's omitted except per share amounts)
               <S>                                                                 <C>                  <C>
                Net sales                                                           $74,453              $131,731
                Net loss                                                               (881)               (5,063)
                Loss available to common shareholders                                (1,099)               (5,495)
                Loss per share                                                      $  (.25)             $  (1.26)
</TABLE>

 (4)   Significant Customers-

       Brazos had net sales of $18.1 million to one customer for the
       twenty-seven week period ended July 4, 1998 and $13.6 million to one
       customer for the twenty-six week period ended June 28, 1997. These
       amounts represented 17% and 15% of total net sales during the
       twenty-seven week period ended July 4, 1998 and the twenty-six-week
       period ended June 28, 1997, respectively. The accompanying consolidated
       condensed balance sheets include accounts receivable of $11.7 million and
       $7.8 million at July 4, 1998 and December 27, 1997, respectively, due
       from such customer.



                                       10
<PAGE>   13





(5)    Commitments and Contingencies-

       The Company is involved in litigation arising in the ordinary course of
       business, which in the opinion of management, will not have a material
       effect on the Company's consolidated financial position, results of
       operations or cash flows.



                                       11
<PAGE>   14




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

         The following discussion should be read in conjunction with the
Company's Financial Statements and related Notes contained elsewhere herein.

GENERAL

         During the fourth quarter of 1997, the Company initiated a
restructuring plan (the "Restructuring Plan") intended to improve operating
efficiencies principally by consolidating two facilities into the Cincinnati,
Ohio facility ( the "Cincinnati Facility") acquired upon the purchase of CS
Crable Sportswear, Inc. ("Crable") in September 1997. As a result of the
Restructuring Plan, the Company recorded pre-tax restructuring charges of $5.7
million in 1997 and $.7 million in the first quarter of 1998.

         The key components of the Restructuring Plan are the following:

         o    In December, 1997, the Company closed a manufacturing facility in
              Seattle, Washington, which was operated by Sun Sportswear, Inc.
              prior to its acquisition by Brazos in March, 1997. By January,
              1998, the Company had completed the move of substantially all of
              the manufacturing equipment located at this facility, which
              consisted primarily of advanced-technology screen printing
              machines, to the Cincinnati Facility. In connection with the
              Seattle plant closure, approximately 350 employees were
              terminated.

         o    In February, 1998, the Company closed its "Velva Sheen" facility
              located in Cincinnati, Ohio, and relocated certain manufacturing
              equipment to the Cincinnati Facility. Of the 240 persons employed
              at the Velva Sheen facility approximately 160 remained with the
              Company after the facility consolidation. At July 4, 1998,
              approximately 460 persons were employed at the Cincinnati
              Facility, which includes approximately 150 persons hired
              subsequent to the facility consolidation, 150 persons who were
              formerly employed by Crable and 160 persons previously employed at
              the Velva Sheen Facility.

         o    The Company is establishing a centralized product sourcing
              operation to coordinate the procurement of garments for all
              divisions.

         o    The Company intends to divest its "Red Fox" athletic uniform
              business and expects that the sale of this business will be
              completed in the third quarter of 1998, although no assurances can
              be made that such a transaction will be consummated.

         The consolidation of manufacturing facilities has caused operational
inefficiencies at the Cincinnati Facility, which together with lower than
expected





                                       12
<PAGE>   15





revenues at the Company's Plymouth facility, have resulted in a net loss of
$16.1 million for the twenty-seven week period ended July 4, 1998. Operational
difficulties at the Cincinnati Facility were caused by (i) delays in the
commencement of production with relocated equipment, (ii) reductions in
productivity resulting from an insufficient number of available, experienced
manufacturing personnel, (iii) disruptions in the timely delivery of raw
materials meeting Company specifications and (iv) generally inefficient
manufacturing processes. As a result, the Company (a) incurred increased costs
associated with third-party contract manufacturing, (b) experienced increased
levels of product returns and allowances due to the failure to meet customer
performance expectations, (c) achieved lower than expected revenues due to
delays in product shipments and (d) received reduced future product orders from
its customers. Further, gross margins have been negatively impacted by
competitive pressures in the mass merchant segment of the Company's customer
base and soft demand for the Company's products by mid-tier customers. In
addition, the lower than expected sales at the Cincinnati Facility resulted in
excess inventory levels.

         During the second quarter, the Company began aggressively addressing
the operational problems resulting from the Restructuring Plan. At the
Cincinnati Facility, (i) production rates and quality have improved, (ii)
product shipment performance has improved, (iii) charge backs/returns have
decreased from an average of $390,000 per week in May and June 1998 to an
average of $193,000 per week in July 1998 and (iv) the use of third-party
contract manufacturers has decreased, resulting in improved product quality and
a greater percentage of on-time customer deliveries. Additionally, management
has begun addressing raw material procurement issues by reorganizing its
sourcing operation.

         Although the Company has made progress in correcting the operational
problems at the Cincinnati Facility, increased revenue levels at that facility
and the Company's Plymouth facility will be required (i) in order for the
Company's overall margins to return to expected levels and (ii) for the Company
to return to profitability. Management has focused the Company's sales and
marketing efforts on reassuring customers, particularly its significant mass
merchant and mid-tier customers, that the Company's production and delivery
performance is returning to normal levels. In order to return to profitability,
the Company also must (a) reduce inventory levels, (b) continue to reduce charge
back and return rates, (c) reduce reliance on third-party contract
manufacturers, (d) address royalty rates and minimum royalties in light of the
Company's expected levels of licensed product sales and (e) continue to improve
operational efficiencies at the Cincinnati Facility.

         The Company believes that it will achieve positive EBITDA (earnings
before interest, taxes, depreciation and amortization) for the second half of
fiscal 1998. This expected improvement is due to the seasonal increase in 
product demand and the impact of the operational improvements described above.




                                       13
<PAGE>   16




RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, the
components of Brazos' statements of operations expressed as a percentage of net
sales on a historical basis.

<TABLE>
<CAPTION>
                                      THIRTEEN WEEKS        THIRTEEN WEEKS      TWENTY-SEVEN WEEKS    TWENTY-SIX WEEKS
                                    ENDED JULY 4, 1998   ENDED JUNE 28, 1997    ENDED JULY 4, 1998   ENDED JUNE 28, 1997
                                    ------------------   -------------------    ------------------   -------------------
<S>                                      <C>                   <C>                   <C>                   <C>
Net sales                                 100.0%                100.0%                100.0%                100.0%
Cost of goods sold                         84.8%                 74.7%                 83.1%                 75.4%
                                          ------                ------                ------                ------
        Gross profit                       15.2%                 25.3%                 16.9%                 24.6%
Operating expenses, excluding
restructuring charge                       26.7%                 21.3%                 27.9%                 22.4%
Restructuring charge                        -                     -                      .7%                  -
                                          ------                ------                ------                ------
        Operating income (loss)           (11.5%)                 4.0%                (11.6%)                 2.3%
Other expense (income)
        Interest expense                    6.9%                  3.2%                  6.9%                  3.2%
        Other, net                          -                     (.1%)                 -                      .1%
                                          ------                ------                ------                ------
Income (loss) before provision
(credit) for income taxes                 (18.4%)                 1.0%                (18.5%)                (1.0%)
Provision (credit) for income taxes          .4%                   .4%                 (3.5%)                 (.4%)
                                          ------                ------                ------                ------
Net income (loss)                         (18.8%)                  .6%                (15.0%)                 (.6%)
                                          ======                ======                ======                ======
</TABLE>

         Thirteen Weeks Ended July 4, 1998 compared with the Thirteen Weeks
Ended June 28, 1997

         The Company's net sales decreased approximately $1.9 million, or 3.4%,
from $56.2 million in 1997 to $54.3 million in 1998. This decrease was
attributable to (i) the disruption in operations resulting from implementation
of the Restructuring Plan, (ii) late deliveries of specialized products from
suppliers which hindered the Company's ability to fulfill sales commitments to
retailers and (iii) overall weakness in the decorated apparel industry. The
decrease was partially offset by sales from the acquisitions completed by the
Company in the second half of 1997. See Note 3 of the Notes to Financial
Statements for further information related to the acquisitions made in 1997.

         Brazos' gross profit decreased $6.0 million, or 41.9%, from $14.2
million in 1997 to $8.3 million in 1998. Overall gross profit margin decreased
to 15.2% in 1998 from 25.3% in 1997, primarily as a result of increased costs
associated with the Restructuring Plan. In addition, the seasonality of the
acquired businesses contributed a lower gross profit margin than Brazos'
historical gross profit margin.

         Operating expenses increased $2.5 million, or 21.1%, from $12.0 million
in 1997 to $14.5 million in 1998. The increase in operating expenses was
directly attributable to the acquisitions completed in 1997. As a percentage of
sales, operating expenses




                                       14
<PAGE>   17



increased from 21.3% in 1997 to 26.7% in 1998. This increase principally relates
to reduced sales volume resulting from difficulties associated with the
implementation of the Restructuring Plan. Also, the seasonality of the acquired
businesses contributed higher operating expenses as a percentage of sales than
Brazos' historical operating expenses as a percentage of sales.

         Interest expense increased $2.0 million, or 109.5%, from $1.8 million
in 1997 to $3.8 million in 1998. The increase was a result of the issuance of
$100 million of 10.5% Senior Notes (the "Notes") in July, 1997 and increased
borrowings under Brazos' credit facility to fund its greater working capital
needs in connection with fiscal 1998 operating losses and the acquisitions made
by the Company in 1997.

         Income tax benefit was not recorded in 1998 due to management's
uncertainty concerning the realizability of any further net operating loss
carryforwards. In 1997, income tax expense of $.2 million was recorded at an
effective tax rate of 40%.

         Twenty-Seven Weeks Ended July 4, 1998 compared with the Twenty-Six
Weeks Ended June 28, 1997

         The Company's net sales increased approximately $16.1 million, or
17.7%, from $91.1 million in 1997 to $107.3 million in 1998. This increase was
attributable to the four acquisitions completed by the Company in 1997 as well
as the additional week of operations provided by a twenty-seven week accounting
period in 1998. See Note 3 of the Notes to Financial Statements for further
information related to the acquisitions made in 1997. Net sales were
significantly less than expected due to (i) the disruption in operations
resulting from implementation of the Restructuring Plan, (ii) late deliveries of
specialized products from suppliers which hindered the Company's ability to
fulfill sales commitments to retailers and (iii) overall weakness in the
decorated apparel industry.

         Brazos' gross profit decreased $4.3 million, or 19.1%, from $22.5
million in 1997 to $18.2 million in 1998. Overall gross profit margin decreased
to 16.9% in 1998 from 24.6% in 1997, primarily as a result of increased costs
associated with the Restructuring Plan. In addition, the seasonality of the
acquired businesses contributed a lower gross profit margin than Brazos'
historical gross profit margin.

         Operating expenses increased $10.2 million, or 50.2%, from $20.4
million in 1997 to $30.6 million in 1998. The increase in operating expenses was
directly attributable to the acquisitions completed in 1997. As a percentage of
sales, operating expenses increased from 22.4% in 1997 to 28.6% in 1998. This
increase principally relates to reduced sales volume resulting from difficulties
associated with the implementation of the Restructuring Plan. Also, the
seasonality of the acquired businesses contributed higher operating expenses as
a percentage of sales than Brazos' historical operating expenses as a percentage
of sales.



                                       15
<PAGE>   18




         Interest expense increased $4.5 million, or 152.7%, from $2.9 million
in 1997 to $7.4 million in 1998. The increase was a result of the issuance of
the Notes in July, 1997 and increased borrowings under Brazos' credit facility
to fund its greater working capital needs in connection with fiscal 1998
operating losses and the acquisitions made by the Company in 1997.

         An income tax benefit of $4.0 million has been recorded in 1998 based
on management's estimate of future taxable income and net operating loss
carryback ability. In 1997, an income tax benefit of $.4 million was recorded
based on management's estimate of future taxable income and net operating loss
carryback potential.

LIQUIDITY AND CAPITAL RESOURCES

         Brazos has financed its acquisitions and operations through borrowings
under its bank lines of credit, private placements of debt and equity
securities, seller financing and operating cash flow. The Company's cash
requirements consist of its general working capital needs, required interest
payments, including those on the Notes, capital expenditures and obligations
under its leases.

         The Company has entered into a loan and security agreement with its
senior secured lenders, which provides a revolving line of credit (the "Credit
Facility") to the Company's principal operating subsidiary, Brazos Sportswear,
LLC (the "Borrower"). Advances under this line are based on a percentage of the
Borrower's inventory and receivables and various other reserves established from
time to time by the lenders. Interest on the line of credit is payable at prime
plus 1.25% or the Eurodollar base rate plus 2.75%. The Credit Facility has an
initial expiration of July 1, 2000, subject to extension, and borrowings under
the Credit Facility are guaranteed by the Company.

         During the first quarter, the Company incurred a net loss of $5.9
million. As a result, the Company was not in compliance with its minimum fixed
charge coverage ratio under the Credit Facility. On June 30, 1998, the Company
and its senior lenders amended the Credit Facility to include a forbearance
agreement which provides for a waiver of the covenant noncompliance. The amended
Credit Facility increased aggregate available borrowings from $70 million to $75
million, subject to collateral limitations. Under the forbearance agreement, the
Company's lenders agreed to refrain from exercising their rights and remedies
under the Credit Facility as a result of existing defaults through November 30,
1998. The forbearance agreement requires the Company to achieve certain levels
of earnings before interest, taxes, depreciation and amortization ("EBITDA") on
a monthly basis. As of July 4, 1998, the Company was in compliance with the
EBITDA covenant of the forbearance agreement, and Brazos had an aggregate
borrowing base of $63.5 million, based on existing collateral, under its Credit
Facility. Of its borrowing base, $3.9 million remained unused at July 4, 1998.

         For the twenty-seven week period ended July 4, 1998, the Company
incurred a 




                                       16
<PAGE>   19




net loss of $16.1 million. The Company anticipates that it will require
additional liquidity from equity or debt financing in fiscal 1999 to meet its
seasonal working capital requirements. The sources of financing may include
additional bank debt or the public or private sale of equity or debt securities.
In connection with any financing, the Company may be required to issue
securities that dilute the interests of the Company's stockholders. There can be
no assurance that the Company will be successful in arranging such financing,
and the failure to obtain such financing, if required, will adversely impact the
Company's operations and financial condition.

         The Company also expects that it will require additional waivers of
covenant noncompliance under the Credit Facility or further amendments
reflecting the Company's current level of operations and cost structure. There
can be no assurance that the Company will be able to obtain future waivers of
noncompliance or amendments to the Credit Facility, and if the Company is unable
to do so or obtain a new credit facility, its operations and financial condition
will be adversely impacted.

         Brazos used $27.2 million of cash for operating activities in 1998
versus cash used for operating activities in 1997 of $11.8 million. Contributing
to the use of cash in 1998 were: (i) a net loss of approximately $16.1 million
and (ii) working capital investments of $13.3 million, offset by depreciation
and amortization of $2.3 million. Working capital investments consisted
primarily of an increase in inventory as the Company began building stock to
support the seasonal nature of higher sales levels in the third quarter of
fiscal 1998.

         The Company incurred capital expenditures net of disposals of $2.3
million in 1998. Capital expenditures consisted primarily of computer hardware
and software, embroidery equipment and leasehold improvements related to the
consolidation of facilities into the Cincinnati Facility.

         Financing activities provided $28.1 million of cash in 1998 principally
through net borrowings under existing credit facilities. In 1997, net borrowings
of debt and the issuance of preferred stock with detachable common stock
purchase warrants provided $16.6 million.

YEAR 2000

         The Company expects its financial systems to become Year 2000 compliant
during the fourth quarter of 1998. The Company has not completed an assessment
of its current operating systems. However, in 1997, the Company began the
implementation of a new operating software package as part of a reorganization
and consolidation of the Company's numerous operating systems. The software
package being implemented is Year 2000 compliant. The Company is implementing
the new software in phases and expects the process to be complete by the end of
the third quarter of fiscal 1999. In addition, the Company has not completed an
assessment of the effects on the Company of Year 2000 issues at third party
suppliers, vendors and customers.



                                       17
<PAGE>   20




SEASONALITY

         The Company's sales levels are generally higher in the second and third
quarters of each year. During these periods, spring, summer, back-to-school and
pre-holiday season products are produced and sold. The Company expects that the
seasonable nature of apparel sales will continue in future periods.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

         This Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
such expectations will be achieved. Other factors could cause actual results to
differ materially from those in the forward-looking statements herein.










                                       18
<PAGE>   21



                           PART II - OTHER INFORMATION

ITEM 5.  OTHER INFORMATION.

         In the second quarter, Brazos' Board of Directors accepted the
resignation of the Company's president and CEO, J. Ford Taylor, and appointed
his successor, Robert C. Klein, as the new president and CEO of the Company. Mr.
Klein was also appointed to fill the vacancy on the board of directors created
by Mr. Taylor's resignation as a director. Additionally, in the second quarter,
Alan B. Elenson resigned as a director of the Company. The vacancy created by
his resignation has not yet been filled.

         In the third quarter, Mr. Taylor's employment with the Company was
terminated and all benefits relating to the remainder of his employment
agreement were expensed.

         Because the Company's common stock does not meet the listing
requirements of the Nasdaq National Market, the Company is seeking to list its
stock on the Nasdaq SmallCap Market, although no assurances can be made
regarding whether the listing will be approved. Pending review of the Company's
application, Brazos' stock will continue to trade on the Nasdaq National Market.

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

         (a)      Exhibits

                  10.1     Forbearance Agreement and Second Amendment to Third
                           Amended and Restated Loan and Security Agreement
                           dated June 30, 1998 between Brazos Sportswear, LLC,
                           and The First National Bank of Boston and Fleet
                           Capital (the "Senior Lenders")

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K.  None.



                                       19
<PAGE>   22





                                    SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    BRAZOS SPORTSWEAR, INC.



                                    /s/ F. CLAYTON CHAMBERS
                                    ------------------------------------------
                                    F. Clayton Chambers,
                                    Vice President and Chief Financial Officer

                                    /s/ STEVEN P. RATTERMAN
                                    -------------------------------------------
                                    Steven P. Ratterman
                                    Controller and Principal Accounting Officer


DATE:  August 17, 1998








                                       20