SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549

                                    FORM 10-Q
  Mark One

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


                          For the Quarter Ended May 4, 1997

                                         OR

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


                              Commission File No. 1-5400

                                  FARAH INCORPORATED
                (Exact name of registrant as specified in its charter)


                          Texas                       74-1061146
        (State or other jurisdiction of            (I.R.S. Employer
        incorporation or organization)            Identification No.)

 4171 N. Mesa, Bldg, D, Suite 500, El Paso, Texas     79902-1433
       (Address of principal executive offices)       (Zip Code)


     Registrant's telephone number, including area code   (915) 496-7000



     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 and 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 .

     As of June  17,  1997  there  were  outstanding  10,278,989  shares  of the
registrant's  common stock,  no par value,  which is the only class of common or
voting stock of the registrant.

<PAGE>



PART 1.  FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>

                                        FARAH INCORPORATED AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                                Quarter and Six Months Ended May 4, 1997 and May 5,1996
------------------------------------------------------------------------------------------------------------------------------
                                                            (Unaudited)

<CAPTION>
                                                                   Quarter Ended                      Six Months Ended
                                                      ------------------------------------    --------------------------------
                                                           May 4,              May 5,             May 4,           May 5,
                                                            1997                1996               1997             1996
                                                      ------------------    --------------    ---------------   --------------
                                                                     (Thousands of dollars except per share data)
<S>                                                   <C>                      <C>                <C>              <C>
Net sales                                             $          70,771            64,058            132,709          115,568

Cost of sales                                                    51,460            47,924             95,962           85,637
                                                      ------------------   ---------------    ---------------   --------------
    Gross profit                                                 19,311            16,134             36,747           29,931

Selling, general and administrative expenses                     16,881            15,792             32,882           29,581
Non-recurring charge                                                  -                 -              2,462                -
                                                      ------------------   ---------------    ---------------   --------------

     Operating income                                             2,430               342              1,403              350
                                                      ------------------   ---------------    ---------------   --------------

Other income (expense):
     Interest expense                                             (921)           (1,268)            (1,628)          (2,633)
     Interest income                                                205               194                396              430
     Foreign currency transaction gains                              13                26                124               93
     Other, net                                                      82               754                124              964
                                                      ------------------   ---------------    ---------------   --------------
                                                                  (621)             (294)              (984)          (1,146)

 Income (loss) before income taxes                                1,809                48                419            (796)

     Income tax provision (benefit)                             (1,402)               224              (837)              369
                                                      ------------------   ---------------    ---------------   --------------

     Net income (loss)                                            3,211             (176)              1,256          (1,165)

Retained earnings:
     Beginning                                                    6,361               571              8,316            1,560
                                                      ------------------   ---------------    ---------------   --------------
                                                      ==================   ===============    ===============   ==============
     Ending                                           $           9,572               395              9,572              395
                                                      ==================   ===============    ===============   ==============

Net income (loss) per share                           $            0.31             (0.02)              0.12            (0.11)
                                                      ==================   ===============    ===============   ==============

Weighted average shares of common stock
    (all periods) and common stock equivalents
    (income periods only) outstanding                        10,434,026        10,161,647         10,312,565       10,155,290
                                                      ==================   ===============    ===============   ==============

See accompanying notes to condensed consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                               FARAH INCORPORATED AND SUBSIDIARIES
                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 MAY 4, 1997 AND NOVEMBER 3, 1996
----------------------------------------------------------------------------------------------------------------
                                                            (Unaudited)
<CAPTION>
                                                                              May 4,             November 3,
                                                                               1997                 1996
                                                                         -----------------    ------------------
                                                                                  (Thousands of dollars)
<S>                                                                      <C>                            <C>
ASSETS
Current assets:
   Cash                                                                  $          3,267                 3,777
   Trade receivables, net                                                          38,643                41,671
   Inventories:
        Raw materials                                                              14,218                11,404
        Work in process                                                            18,377                15,251
        Finished goods                                                             36,380                35,378
                                                                         -----------------    ------------------
                                                                                   68,975                62,033
   Other current assets                                                            11,867                10,857
                                                                         -----------------    ------------------
                Total current assets                                              122,752               118,338

Notes receivable                                                                    7,636                 5,260
Property, plant and equipment, net                                                 27,005                25,370
Other non-current assets                                                            6,083                 4,895
                                                                         -----------------    ------------------
                                                                            $     163,476               153,863
                                                                         =================    ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Short-term debt                                                          $      29,146                20,744
   Current installments of long-term debt                                           1,802                 1,288
   Trade payables                                                                  25,701                24,038
   Other current liabilities                                                       12,898                13,737
                                                                         -----------------    ------------------
                 Total current liabilities                                         69,547                59,807

Long-term debt, excluding current installments                                      5,549                 4,706
Other non-current liabilities                                                       3,135                 3,992

Deferred gain on sale of building                                                   2,202                 3,218

Shareholders' equity:
   Common stock, no par value, $.01 stated value,
     authorized 20,000,000 shares; issued 10,200,586
     in 1997 and 10,181,601 in 1996                                                46,026                46,024
   Additional paid-in capital                                                      30,590                29,894
   Cumulative foreign currency
     translation adjustment                                                       (1,793)                 (742)
   Minimum pension liability adjustment                                           (1,243)               (1,243)
   Retained earnings                                                                9,572                 8,316
                                                                         -----------------    ------------------
                                                                                   83,152                82,249
   Less: Treasury stock, 36,275 shares in
    1997 and 1996, at cost                                                            109                   109
                                                                         -----------------    ------------------
                 Total shareholders' equity                                        83,043                82,140
                                                                         -----------------    ------------------
                                                                            $     163,476               153,863
                                                                         =================    ==================

See accompanying notes to condensed consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                           FARAH INCORPORATED AND SUBSIDIARIES
                                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       Six Months Ended May 4, 1997 and May 5, 1996
------------------------------------------------------------------------------------------------------------
                                                       (Unaudited)
<CAPTION>
                                                                            May 4,              May 5,
                                                                             1997                1996
                                                                        ----------------   -----------------
                                                                             (Thousands of dollars)
<S>                                                                        <C>                     <C>
Cash flows from (used in) operating activities:
     Net income (loss)                                                     $      1,256            ( 1,165)
     Adjustments to reconcile net income (loss) to net cash from
          (used in) operating activities:
                 Depreciation and amortization                                    2,531               2,699
                 Amortization of deferred gain on building sale                 (1,016)             (1,016)
                 Amortization of deferred gain on subsidiary sale               (1,322)                   -
                 Deferred income taxes                                          (1,107)                   -
                 Non-recurring charge                                             2,462                   -
                 Gain on sale of assets                                            (19)               (643)

     Decrease (increase) in:
                 Trade receivables                                                3,028               3,328
                 Inventories                                                    (7,817)              13,384
                 Insurance proceeds from fire damage                              1,070                   -
                 Other current assets                                             (594)               1,090
     Increase (decrease) in:
                 Trade payables                                                   1,663                  27
                 Other current liabilities                                      (2,894)             (2,143)
                                                                        ----------------   -----------------

                         Net cash from (used in) operating                      (2,759)              15,561
activities
                                                                        ----------------   -----------------

Cash flows from (used in) investing activities:
     Purchases of property, plant and equipment                                 (3,271)             (1,023)
     Proceeds from sale of property, plant and equipment                             19               1,059
                                                                        ----------------   -----------------

              Net cash from (used in) investing activities                      (3,252)                  36

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

Cash flows from (used in) financing activities:
     Net change in revolving credit facility                                      8,402            (14,084)
     Proceeds from issuance of debt                                                   -                   7
     Repayment of long-term debt                                                  (785)             (1,065)
     Note receivable from joint venture                                         (2,558)
     Proceeds from sale of common stock                                             529                   -
     Other                                                                          206               (193)
                                                                        ----------------   -----------------

              Net cash from (used in) financing activities                        5,794            (15,335)
                                                                        ----------------   -----------------

Foreign currency translation adjustment                                           (293)               (218)
                                                                        ----------------   -----------------

Net increase (decrease) in cash                                                   (510)                  44

Cash, beginning of period                                                         3,777               3,657
                                                                        ----------------   -----------------

Cash, end of period                                                     $         3,267               3,701
                                                                        ================   =================

Supplemental cash flow disclosures:
     Interest paid                                                      $         1,459               2,526
     Income taxes paid                                                              275                 329
     Assets acquired through direct financing
        loans or capital leases                                                   2,142                 716

See accompanying notes to condensed consolidated financial statements.
</TABLE>


<PAGE>


                    FARAH INCORPORATED AND SUBSIDIARIES

            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)

     1. The  attached  condensed  consolidated  financial  statements  have been
prepared  pursuant to the rules and  regulations  of the Securities and Exchange
Commission.  As a result,  certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted. The Company believes that
the  disclosures  made  are  adequate  to make  the  information  presented  not
misleading.  These condensed consolidated financial statements should be read in
conjunction  with  the  consolidated  financial  statements  and  related  notes
included in the Company's 1996 Annual Report on Form 10-K.

     2. The foregoing  financial  information  reflects all  adjustments  (which
consist  only of normal  recurring  adjustments)  which are,  in the  opinion of
management,  necessary to present a fair statement of the financial position and
the results of operations and cash flows for the interim periods.

     3.  The  Company  reevaluated  the realizability of its deferred tax assets
pursuant  to  the  criteria of Statement of Financial Accounting  Standards  No.
109 and concluded it is more likely than not that  the Company  will realize tax
benefits  associated  with  its  domestic  net  operating losses,  together with
certain  other  tax benefits,  that were previously reserved.  Accordingly,  the
Company  reversed approximately  $1.1  million  from  its deferred tax valuation
allowance in  the second  quarter of  fiscal  1997.    The  remaining  valuation
allowance at May 4, 1997 is  approximately  $1.7 million.  The Company continues
to believe that it is more likely than not that it will not realize the benefits
of its Irish net  operating loss carry forwards and a portion of its foreign tax
credits totaling approximately $500,000.

     Income  (loss) before taxes for the six months ended May 4, 1997 and May 5,
1996 and income taxes for the same periods are shown below:
<TABLE>
<CAPTION>

                                                                                   Six months ended
                                                                   --------------------------------------------
                                                                       May 4, 1997             May 5, 1996
                                                                   --------------------     -------------------
                                                                                Thousands of dollars
<S>                                                                   <C>                              <C>
      INCOME (LOSS) BEFORE INCOME TAXES:
         Domestic operations                                          $          2,559                 (1,964)
         Foreign operations                                                    (2,140)                   1,168
                                                                   ====================     ===================
                         Total consolidated                           $            419                   (796)
                                                                   ====================     ===================

      INCOME TAX PROVISION (BENEFIT):
         Domestic operations
            Current                                                   $              -                    (55)
            Deferred                                                           (1,057)                       -
                                                                   --------------------     -------------------
                Total domestic                                                 (1,057)                    (55)

         Foreign operations
            Current                                                                220                     424
            Deferred                                                                 -                       -
                                                                   --------------------     -------------------
                Total foreign                                                      220                     424
                                                                   --------------------     -------------------
                         Total consolidated                           $          (837)                     369
                                                                   ====================     ===================
</TABLE>


<TABLE>
     The effective tax rate differs from the U.S. statutory rate of 34% as summarized below:
<CAPTION>

                                                                                   Six months ended
                                                                   --------------------------------------------
                                                                       May 4, 1997              May 5, 1996
                                                                   --------------------       -----------------
                                                                                Thousands of dollars
<S>                                                                  <C>                                 <C> 
      Income tax provision (benefit) at
          statutory rate                                             $             142                   (271)
      Non-deductible expenses                                                      108                     106
      Effect of unused Irish net operating loss                                    225                       -
      Reversal of valuation allowance for deferred tax
          benefits expected to be realized                                     (1,107)                       -
      Reversal of valuation allowance for deferred tax 
          benefits realized                                                    (1,020)                       -
      Effect of unused domestic operating loss                                       -                     613
      Effect of differing tax rates in foreign countries                           550                    (53)
      Other                                                                        265                    (26)
                                                                   ====================       =================
      Income tax provision (benefit), as reported                    $           (837)                     369
                                                                   ====================       =================
</TABLE>

     4. On January 5, 1997,  a fire  occurred at the  Company's  leased  garment
manufacturing  plant in Galway,  Ireland.  The fire destroyed or damaged certain
inventory and  manufacturing  equipment owned by the Company.  In addition,  the
Company's other Irish facility located in Kiltimagh has been adversely  affected
because of its dependency on the operations of the Galway facility.  As a result
of the fire, the Company  recorded a non-recurring  charge (after tax and net of
insurance  proceeds) of $2.5 million in the first quarter of fiscal 1997. During
the second  quarter of 1997,  the Company  received  $1.1  million of  insurance
proceeds related to the fire.

     5. On June 5, 1997, the Company entered into an Amended and Restated Credit
Agreement.  The Credit  Agreement  provides up to $75 million of credit  through
July 1, 2001 for the Company's  United States and United Kingdom  operations for
either  borrowings or letters of credit.  The Credit Agreement is collateralized
by substantially all assets of Farah U.S.A., Farah U.K., and Value Slacks and is
guaranteed by its parent company and each of Farah U.S.A.'s domestic affiliates.
Such guarantees are  collateralized  by  substantially  all of the assets of the
related affiliates. A term loan of $10 million is included in the $75 million of
credit provided by the Credit Agreement.  The term loan is payable in 47 monthly
installments  of  $208,333,  plus  interest,  with the 48th  and  final  monthly
installment  equal to the unpaid  principal  balance of the loan.  The term loan
matures on July 1, 2001.  The interest rate on the Credit  Agreement is prime (8
1/2% at May 4, 1997) plus 1/2% for  borrowings and 1/6% per month for letters of
credit.  The  Company  may  from  time to time  convert  all or part of the loan
outstanding under the Credit Agreement into a loan based on the Libor Rate. Upon
conversion,  the  interest  rate  would  be the  Libor  rate,  plus  2.75%.  The
conversion to and continued  applicability of the Libor Rate is conditioned upon
specific notification requirements,  a minimum of $5 million of Libor Rate loans
outstanding,  and various other  requirements.  Under the Credit  Agreement,  an
unused  credit  line fee is  charged  on the  unused  portion  of the line  when
borrowings decrease below $17.5 million.  The Credit Agreement restricts certain
additional  indebtedness  and requires the  maintenance of minimum  tangible net
worth, minimum working capital and maximum capital expenditures. Maximum capital
expenditures for fiscal 1997 under the Credit Agreement are $30 million.


<PAGE>


      6.  In  February 1997,  the  Financial Accounting Standards  Board  issued
Statement  of Financial  Accounting Standards No. 128 (SFAS 128),  "Earnings Per
Share." SFAS 128 will  supersede APB Opinion No. 15,  "Earnings Per Share." SFAS
128 requires dual  presentation  of basic and diluted  earnings per share on the
face  of the income  statement  for entities  with complex  capital  structures.
SFAS 128  is effective for annual and interim periods ending after  December 15,
1997.  Earlier application  is not permitted.  Implementation  of SFAS 128 would
not  have  had a material  impact on the Company's  earnings per share  for  the
second  quarter of fiscal 1997 or the six months ended May 4, 1997.



<PAGE>


     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.

Results of Operations
<TABLE>

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
financial data as percentages of net sales:
<CAPTION>
                                                  Second Quarter Ended                    Six Months Ended
                                            -----------------------------------     ----------------------------------
                                                   1997              1996                 1997               1996
                                            ---------------    ----------------     ---------------   ----------------
<S>                                               <C>               <C>
Net sales:
     Farah U.S.A.                                  77.6 %            74.5 %               77.2 %             73.6 %
     Farah International                           17.1              19.3                 17.0               19.4
     Value Slacks                                   5.3               6.2                  5.8                7.0
                                            ------------       -----------          -----------       ------------
Total net sales                                   100.0             100.0                100.0              100.0
Cost of sales                                      72.7              74.8                 72.3               74.1
                                            ------------       -----------          -----------       ------------
     Gross profit                                  27.3              25.2                 27.7               25.9
Selling, general and
   administrative expenses                         23.9              24.7                 24.8               25.6
     Non-recurring charge                             -                 -                  1.9                  -
                                            ------------       -----------          -----------       ------------
     Operating income (loss)                        3.4               0.5                  1.0                0.3
Other expense, net                                  0.9               0.5                  0.7                1.0
                                            ------------       -----------          -----------       ------------
     Income (loss) before  income taxes             2.5               0.0                  0.3               -0.7
Income tax provision (benefit)                     -2.0               0.3                 -0.6                0.3
                                            ------------       -----------          -----------       ------------
     Net income (loss)                              4.5 %            -0.3 %                0.9 %             -1.0 %
                                            ============       ===========          ===========       ============
</TABLE>
         Consolidated  sales for the second  quarter of fiscal 1997 increased by
$6.7 million  (10.5%)  compared to the second  quarter of fiscal  1996.  For the
first six months,  sales increased $17.1 million (14.8%) in 1997 compared to the
same period in 1996.  Sales  increased  during both periods at Farah U.S.A.  and
decreased during both periods at Value Slacks.  At Farah  International,  second
quarter sales decreased while sales for the first six months increased, compared
to 1996.

         Farah  U.S.A.  sales for the second  quarter of fiscal  1997 were $54.9
million  compared to $47.7 million in the second quarter of fiscal 1996, a 15.1%
increase.  Unit sales  increased  14.5% while the  average  unit  selling  price
increased 0.5%. In the first six months of 1997, Farah U.S.A.  sales were $102.4
million  compared to $85.1 million in the same period of 1996, a 20.3% increase.
Units sales increased 19.9% and the average unit selling price increased 0.4%.

         During the second quarter and first six months of 1997, sales of Savane
product increased approximately 25.6%  and  20.4%, respectively, compared to the
same  periods a year ago.   This increase  was attributable to a combination  of
factors  including  growth in  sales of women's  casual wear,  men's shirts  and
Deep-Dye dress products.

         Sales of John Henry product increased by $4.1 million and $5.3 million,
respectively  during the second quarter and first six months of 1997 compared to
the same periods in 1996.  During fiscal 1996, the Company was in the process of
repositioning the John Henry label by initially  introducing it to Sears. As the
Company  entered into this  transition  period,  sales of John Henry  product to
other customers declined.  Initial shipments to Sears began in the third quarter
of 1996 and have  continued  to increase  through the first six months of fiscal
1997.

         Sales of private label product  decreased  21.7% compared to the second
quarter of fiscal 1996 and  increased  1.3%  compared to the first six months of
fiscal 1996. The second quarter decrease in private label sales is primarily due
to a decrease in the number of private  label  customers as the Company began to
conduct less business with private label customers with lower gross margins.  In
addition,  during the second quarter of 1996, the Company  reported  significant
non-recurring private label sales in connection with the 1996 Summer Olympics in
Atlanta.

         Sales of Farah product  decreased  30.4% compared to the second quarter
of fiscal  1996 and  increased  0.5%  compared to the first six months of fiscal
1996. An on-going  transition of the Farah product from  department  stores into
the  mass-merchant   distribution   channel  is  the  primary   reason  for  the
decrease in Farah  product  sales versus the second  quarter of 1996.  Shipments
of Farah product to  department  stores began to  decline  significantly  during
the  third  quarter  of  1996,    while   initial shipments in the mass-merchant
distribution channel were just starting. 

        Beginning late in the second quarter of 1997, domestic retail department
store  sales  softened in  certain market  sectors.   As  a  consequence,  order
activity in May 1997  for  Savane  products was  less than anticipated.   Should
depressed  retail sales  activity  continue  in  the  third  quarter,  operating
results  would be negatively affected.  As soft sales at the  retail  level  are
inconsistent  with overall domestic economic conditions,  the  Company  believes
such  softening  to  be temporary.   Based  on  indications  from the  Company's
department  store   customers,   forecasts  of  sales  order  activity  for  the
fall  season  are  encouraging,  indicating  that   the  Company  should  resume
increases in its Savane sales order activity in the fourth quarter.  

     Despite  softening  of  department  store  retail sales, John  Henry  sales
continue to grow as the Company expands this product line to Sears. Furthermore,
transition of Farah label products in the mass-merchant distribution  channel is
progressing and the Company expects sales within this market segment to continue
to increase during the remainder of the fiscal year.

         Farah  International  sales for the second  quarter of fiscal 1997 were
$12.1 million compared to $12.4 million for the second quarter of fiscal 1996, a
2.5% decrease.  Unit sales decreased 3.2%,  while the average unit selling price
increased  0.8%.  In the first six months of fiscal  1997,  Farah  International
sales were $22.5  million  compared to $22.4  million  during the same period of
fiscal 1996.  Unit sales  decreased  4.9%,  while the average unit selling price
increased 5.8%.  Sales at Farah U.K.  represented  62.0% of Farah  International
sales for the first six months of 1997.  Farah U.K. sales decreased by 2.0% over
that period.  Inventory  losses  resulting from a fire at the Company's plant in
Ireland  negatively  impacted  sales  at  Farah U.K. for the first six months of
fiscal 1997.   Sales at  Farah  Australia and New Zealand during the  first  six
months of fiscal 1997  represented  36.6% of  international  sales and increased
5.7%,  compared  to the  first six  months  of fiscal  1996;  while 1997  second
quarter  sales  represented  34.2%  of international sales and decreased by 3.1%
compared to the  second  quarter  of 1996.    The  second  quarter  decrease  is
primarily attributable to a softer retail market in Australia.

         Value  Slacks  sales in the second  quarter  of 1997 were $3.7  million
compared to $3.9 million in the second quarter of 1996, a 4.6% decrease. For the
six month period, sales decreased 3.8% from $8.1 million in 1996 to $7.8 million
in 1997.  Adjusting for an off-site  satellite  sale held during April 1996, the
overall  store sales  increased  by .8% while  operating  39 stores  during 1997
versus 36 stores in 1996.  Same store sales  decreased 2.1% due to the shortened
Easter retail period and  continued  poor weather  conditions in the Midwest and
Eastern United States.

         As  a  percent of sales,  consolidated  gross  profit  was 27.3% in the
second quarter of 1997 compared to 25.2% in the second  quarter of 1996. For the
six month period, gross  profit as a percent of sales was 27.7% in 1997 compared
to 25.9% in the same period of 1996.

         Farah U.S.A. gross profit as a percent of sales was 23.9% in the second
quarter of 1997 compared to 21.4% in the same period of 1996.  For the first six
months of 1997 and 1996, gross profit as a percent of sales for Farah U.S.A. was
24.8% and 21.9%  respectively.  Farah International gross profit as a percent of
sales was 36.4% and 34.1%,  in the second  quarter and first six months of 1997,
respectively, compared with 33.0% and 33.3% for the same periods in fiscal 1996.
Cost reduction efforts, through better production planning and sourcing, as well
as a decrease in the number of  promotional  and closeout  sales,  have been the
principal factors  contributing to the improvement in gross margins. To a lesser
extent,  overall better  pricing in Farah U.S.A.  and Farah  International  also
helped improve gross profit margins.

         Value  Slacks gross profit as a percent of sales  increased  from 46.1%
in the second quarter of 1996 to 48.3% in the  second  quarter of 1997.  For the
six month period,  gross profit  decreased  from 47.8% in 1996 to 47.3% in 1997.
The elimination  of the  operating  costs  incurred  by the 1996  satellite sale
in  conjunction  with  a lower  1997  promotional markdown  contributed  to  the
increase in second  quarter gross profit.  The slight  decrease in  year-to-date
gross  profit  at Value Slacks is  attributable  to  the  effects  of  inventory
shrinkage  and a  reduced  mix  of irregular and closeout sales during the first
quarter of 1997.

         Selling,  general and administrative  expenses ("SG&A") as a percent of
sales  decreased from 24.7% in the second quarter of 1996 to 23.9% in the second
quarter of 1997.  For the six month period SG&A  decreased from 25.6% in 1996 to
24.8% in 1997.  SG&A as a percentage of sales  decreased by 1.0% at Farah U.S.A.
for both the second  quarter  and the first six months of 1997  compared  to the
same periods in 1996.  Value Slacks SG&A as a percentage  of sales  decreased by
4.3% and 1.2%,  respectively,  during the second quarter and first six months of
1997, compared to the same periods in 1996. Cost reduction efforts at both Farah
U.S.A. and Value Slacks, combined with the favorable effects of fixed costs that
did not  increase  with  higher  sales  levels at Farah  U.S.A.  are the primary
sources of the decrease in SG&A as a percentage of sales.  Partially  offsetting
the effects of cost reduction  efforts and favorable  trends in fixed costs were
advertising  expense  increases at Farah  U.S.A..  SG&A as a percentage of sales
increased  at Farah  International  by 4.0% and 3.2%,  respectively  during  the
second  quarter  and  first  six  months  of  1997.  The  increase  in SG&A as a
percentage  of  sales  at  Farah  International   resulted  mainly  from  higher
concession and exhibition expenses at Farah U.K.

         On January 5, 1997, a fire  occurred at the  Company's  leased  garment
manufacturing  plant  in  Galway,   Ireland,  in  which  certain  inventory  and
manufacturing  equipment owned by the Company were either  destroyed or damaged.
In addition,  the Company's  other Irish facility  located in Kiltimagh has been
adversely  affected  because of its  dependency on the  operations of the Galway
facility. As a result of the fire and its related impact, the Company recorded a
non-recurring  charge (after tax and net of insurance  proceeds) of $2.5 million
in the first  quarter of fiscal 1997.  There was some  shortfall in sales in the
Company's United Kingdom  operations  during the first six months of fiscal 1997
because  of the  fire.  Management  believes  the fire will not have a long term
material impact on Farah's United Kingdom operations.

         The Company  recorded a tax benefit on consolidated  net income for the
second  quarter of fiscal  1997 as a result of  recognizing  approximately  $1.1
million of tax  benefits  previously  not  recognized.  The  Company  expects to
recognize  additional  tax benefits  during the  remainder  of  fiscal  1997  as
the valuation  allowance relating to deferred  tax  assets  is  further reduced,
offsetting deferred tax expense recognized in the third and fourth quarters.  In
addition,  in the first  quarter of fiscal 1997 the Company did not record a tax
benefit on the loss in connection with the fire at the Irish facility.

Financial Condition

         At May 4, 1997, the Company's  primary Credit Agreement  provided up to
$50 million of credit through July 1, 1998, for the Company's  United States and
United Kingdom  operations for either borrowings or letters of credit.  Formulas
derived from accounts  receivable  and inventory  limit  availability  under the
Credit  Agreement.  The interest rate under the Credit Agreement is equal to the
prime interest rate (8 1/2% at May 4, 1997) plus 1%, for borrowings and 1/6% per
month for letters of credit. At May 4, 1997, usage under the Agreement was $31.1
million  and the excess  credit line  available  was $18.6  million.  The Credit
Agreement  in effect at May 4, 1997  allowed  for  annual  consolidated  capital
expenditures of $6.5 million.

         On June 5, 1997,  the  Company  entered  into an Amended  and  Restated
Credit Agreement with the same lender.  The Credit Agreement  provides up to $75
million  of credit  through  July 1, 2001 for the  Company's  United  States and
United Kingdom operations for either borrowings or letters of credit. The Credit
Agreement is collateralized  by substantially all assets of Farah U.S.A.,  Farah
U.K., and Value Slacks and is guaranteed by its parent company and each of Farah
U.S.A.'s   domestic   affiliates.   Such   guarantees  are   collateralized   by
substantially  all of the assets of the related  affiliates.  A term loan of $10
million  is  included  in the $75  million  of  credit  provided  by the  Credit
Agreement. The term loan is payable in 47 monthly installments of $208,333, plus
interest,  with the 48th  and  final  monthly  installment  equal to the  unpaid
principal  balance  of the loan.  The term loan  matures  on July 1,  2001.  The
interest rate on the Credit Agreement is prime (8 1/2% at May 4, 1997) plus 1/2%
for  borrowings  and 1/6% per month for letters of credit.  The Company may from
time to time  convert  all or part of the  loan  outstanding  under  the  Credit
Agreement  into a loan based on the Libor Rate.  Upon  conversion,  the interest
rate would be the Libor  rate,  plus  2.75%.  The  conversion  to and  continued
applicability  of the  Libor  Rate is  conditioned  upon  specific  notification
requirements,  a minimum of $5 million  of Libor  Rate  loans  outstanding,  and
various other requirements.  Under the Credit Agreement, as under the old Credit
Agreement,  an unused  credit  line fee is charged on the unused  portion of the
line  when  borrowings  decrease  below  $17.5  million.  The  Credit  Agreement
restricts  certain  additional  indebtedness  and  requires the  maintenance  of
minimum  tangible  net  worth,  minimum  working  capital  and  maximum  capital
expenditures.  Maximum  capital  expenditures  for fiscal  1997 under the Credit
Agreement are $30 million. As of May 4, 1997, the Company was in compliance with
all covenants pursuant to the Credit Agreement.

         Net cash used in  operations in the first six months of fiscal 1997 was
$2.8 million. The largest factor contributing to the use of cash was an increase
in inventories and capital expenditures. Production levels were increased in the
first six months of 1997 in an attempt to better  match  inventory  levels  with
current  demand.  Cash  provided  from  earnings  and  a  decrease  in  accounts
receivable partially offset the need for additional cash.

         Capital  expenditures  through May 4, 1997  approximated  $5.4 million.
Expenditures were mainly for manufacturing equipment and information systems. At
May 4, 1997,  the Company had  commitments  for future capital  expenditures  of
approximately $1.4 million.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards No. 128 (SFAS 128),  "Earnings Per
Share." SFAS 128 will  supersede APB Opinion No. 15,  "Earnings Per Share." SFAS
128 requires dual  presentation  of basic and diluted  earnings per share on the
face of the income statement for entities with complex capital structures.  SFAS
128 is effective for annual and interim  periods ending after December 15, 1997.
Earlier application is not permitted.  Implementation of SFAS 128 would not have
had a material impact on the Company's earnings per share for the second quarter
of fiscal 1997 or the six months ended May 4, 1997.

Factors Affecting the Company's Business and Prospects

         The Company  cautions  readers  that  various  factors  could cause the
actual  results of the  Company to differ  materially  from those  indicated  by
forward-looking  statements  made from time to time in news  releases,  reports,
proxy  statements  registration  statements  and  other  written  communications
(including the preceding sections of this Management's Discussion and Analysis),
as well as oral  statements  made  from time to time by  representatives  of the
Company. Except for historical  information,  matters discussed in such oral and
written  communications  are  forward-looking  statements that involve risks and
uncertainties,  including,  but not limited to, economic and business conditions
in the U.S. and abroad;  the level of demand for apparel products and success of
planned  marketing  programs;  the  intensity  of  competition  and the  pricing
pressures that may result;  changes in labor and import and export  regulations;
the ability of the Company to timely and effectively  manage  production  levels
and sourcing;  the ability of the Company to access the credit market to finance
capital expenditures; and currency fluctuations.



<PAGE>

<TABLE>
Item 6.  Exhibits and Reports on Form 8-K.
<S>      <C>                         <C> 
a)       Exhibit 10.59               Amended and  Restated  Accounts  Financing  Agreement  dated June 1, 1997 among
                                     Congress  Financial  Corporation  (Southwest)  and Farah  U.S.A.,  Inc.,  Value
                                     Clothing Company, Inc. and Farah Manufacturing (U.K.) Limited

         Exhibit 10.60               Exhibit No. 1 to Trademark  Agreement dated June 1, 1997 by Farah  Incorporated
                                     in favor of Congress Financial Corporation (Southwest)

         Exhibit 10.61               Amended and Restated  Inventory and Equipment  Security Agreement dated June 1,
                                     1997

         Exhibit 10.62               Farah (UK) Supplement to Accounts Financing Agreement dated June 1, 1997

         Exhibit 10.63               Amended and Restated  General  Security  Agreement  (Multiple Farah  Companies)
                                     dated June 1, 1997

         Exhibit 10.64               Amended and Restated General Security  Agreement  (Farah  International,  Inc.)
                                     dated June 1, 1997

         Exhibit 10.65               Trade  Financing  Agreement  Supplement to Accounts  Financing  Agreement dated
                                     June 1, 1997

         Exhibit 10.66               General Security Agreement (Farah Incorporated) dated June 1, 1997

         Exhibit 10.67               General  Security  Agreement  (Value Clothing  Company,  Inc. and Value Slacks,
                                     Inc.) dated June 1, 1997

         Exhibit 10.68               Secured  Promissory  Note,  in the original  principal  amount of  $10,000,000,
                                     dated June 1, 1997, made by Farah U.S.A., Inc. to the order of Lender

         Exhibit 10.69               The   Acknowledgment   and   Confirmation   of  Guaranty  and  Other  Financing
                                     Agreements,  dated  June  1,  1997,  executed  by  Guarantors  and  Corporacion
                                     Farah-Costa Rica, S.A. de C.V. for the benefit of Lender

         Exhibit 11                  Statement regarding computation of net income (loss) per share.

         Exhibit 27                  Financial Data Schedule

b)       Reports on Form 8-K

         None
</TABLE>

                                                     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.

                                                FARAH INCORPORATED




Date:        June  18, 1997
                                                /s/ Russell G. Gibson
                                                Russell G. Gibson
                                                Executive Vice President
                                                Principal Financial Officer




                                                /s/ Polly H. Vaughn
                                                Polly H. Vaughn
                                                Principal Accounting Officer



<PAGE>

<TABLE>

                                         FARAH INCORPORATED AND SUBSIDIARIES

                                             FORM 10-Q INDEX TO EXHIBITS

                                                     May 4, 1997

<CAPTION>
                               Description                                                                Page
                                                                                                          Number
       <S>              <C>                                                                               <C> 
       Exhibit 10.59    Amended and Restated  Accounts  Financing  Agreement dated June 1, 1997 among     16
                        Congress  Financial  Corporation  (Southwest) and Farah U.S.A.,  Inc.,  Value
                        Clothing Company, Inc. and Farah Manufacturing (U.K.) Limited

       Exhibit 10.60    Exhibit  No.  1  to  Trademark   Agreement   dated  June  1,  1997  by  Farah     42
                        Incorporated in favor of Congress Financial Corporation (Southwest)

       Exhibit 10.61    Amended and Restated  Inventory and Equipment  Security  Agreement dated June     48
                        1, 1997

       Exhibit 10.62    Farah (UK) Supplement to Accounts Financing Agreement dated June 1, 1997          53

       Exhibit 10.63    Amended and Restated  General Security  Agreement  (Multiple Farah Companies)     72
                        dated June 1, 1997

       Exhibit 10.64    Amended and Restated General Security Agreement (Farah  International,  Inc.)     89
                        dated June 1, 1997

       Exhibit 10.65    Trade Financing  Agreement  Supplement to Accounts Financing  Agreement dated     108
                        June 1, 1997

       Exhibit 10.66    General Security Agreement (Farah Incorporated) dated June 1, 1997                116

       Exhibit 10.67    General Security  Agreement (Value Clothing  Company,  Inc. and Value Slacks,     141
                        Inc.) dated June 1, 1997

       Exhibit 10.68    Secured Promissory Note, in the original principal                                158
                        amount of $10,000,000, dated June 1, 1997, made by Farah
                        U.S.A., Inc. to the order of Lender

       Exhibit 10.69    The   Acknowledgment   and  Confirmation  of  Guaranty  and  Other  Financing     163
                        Agreements,  dated June 1,  1997,  executed  by  Guarantors  and  Corporacion
                        Farah-Costa Rica, S.A. de C.V. for the benefit of Lender

       Exhibit 11       Statement  regarding  computation  of net  income  (loss) per share.              165

       Exhibit 27       Financial Data Schedule                                                           166
</TABLE>