<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
 
                  FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1998
 
                                       OR
 
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
 
                         FOR THE TRANSITION PERIOD FROM
                               --------------- TO
                                ---------------
                            ------------------------
                         COMMISSION FILE NUMBER 1-8941
 
                            FRUIT OF THE LOOM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                  DELAWARE                                      36-3361804
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)
</TABLE>
 
                                5000 SEARS TOWER
                             233 SOUTH WACKER DRIVE
                            CHICAGO, ILLINOIS 60606
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
 
                                 (312) 876-1724
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                            ------------------------
     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 [ ]
 
     Common shares outstanding at July 24, 1998: 66,408,559 shares of Class A
Common Stock, $.01 par value, and 5,684,276 shares of Class B Common Stock, $.01
par value.
 
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<PAGE>   2
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                 PAGE NO.
                                                                                 --------
<S>       <C>      <C>                                                           <C>
PART I.   FINANCIAL INFORMATION
          Item 1.  Financial Statements
                   Condensed Consolidated Balance Sheet --
                   June 27, 1998 (Unaudited) and December 31, 1997.............      2
                   Condensed Consolidated Statement of Earnings (Unaudited) for
                   the   Three and Six Months Ended June 27, 1998 and June 30,
                   1997........................................................      3
                   Condensed Consolidated Statement of Cash Flows (Unaudited)
                   for the   Six Months Ended June 27, 1998 and June 30,
                   1997........................................................      4
                   Notes to Condensed Consolidated Financial Statements
                   (Unaudited).................................................      5
          Item 2.  Management's Discussion and Analysis of Financial Condition
                   and
                   Results of Operations.......................................     12
PART II.  OTHER INFORMATION
          Item 1.  Legal Proceedings...........................................     17
          Item 6.  Exhibits and Reports on Form 8-K............................     17
</TABLE>
 
                                        1
<PAGE>   3
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                      CONDENSED CONSOLIDATED BALANCE SHEET
                           (IN THOUSANDS OF DOLLARS)
 
<TABLE>
<CAPTION>
                                                               JUNE 27,      DECEMBER 31,
                                                                 1998            1997
                                                              -----------    ------------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
ASSETS
Current Assets
  Cash and cash equivalents (including restricted cash).....  $    8,000      $   16,100
  Notes and accounts receivable (less allowance for possible
     losses of $11,800 and $11,900, respectively)...........     134,200          98,100
  Inventories
     Finished goods.........................................     607,900         570,400
     Work in process........................................     235,300         212,300
     Materials and supplies.................................      69,800          64,800
                                                              ----------      ----------
          Total inventories.................................     913,000         847,500
  Due from receivable financing subsidiary..................      59,300              --
  Other.....................................................      63,700          53,900
                                                              ----------      ----------
          Total current assets..............................   1,178,200       1,015,600
                                                              ----------      ----------
Property, Plant and Equipment...............................   1,183,800       1,232,200
  Less accumulated depreciation.............................     734,900         717,800
                                                              ----------      ----------
          Net property, plant and equipment.................     448,900         514,400
                                                              ----------      ----------
Other Assets
  Goodwill (less accumulated amortization of $324,700 and
     $311,400, respectively)................................     699,600         712,900
  Deferred income taxes.....................................      31,200          30,300
  Other.....................................................     228,600         209,900
                                                              ----------      ----------
          Total other assets................................     959,400         953,100
                                                              ----------      ----------
                                                              $2,586,500      $2,483,100
                                                              ==========      ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Current maturities of long-term debt......................  $   21,600      $   28,200
  Trade accounts payable....................................      98,900         234,100
  Other accounts payable and accrued expenses...............     274,800         262,900
                                                              ----------      ----------
          Total current liabilities.........................     395,300         525,200
                                                              ----------      ----------
Noncurrent Liabilities
  Long-term debt............................................   1,343,800       1,192,800
  Other.....................................................     334,500         343,000
                                                              ----------      ----------
          Total noncurrent liabilities......................   1,678,300       1,535,800
                                                              ----------      ----------
Common Stockholders' Equity.................................     512,900         422,100
                                                              ----------      ----------
                                                              $2,586,500      $2,483,100
                                                              ==========      ==========
</TABLE>
 
                            See accompanying notes.
                                        2
<PAGE>   4
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
            CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
 
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED         SIX MONTHS ENDED
                                               --------------------    ------------------------
                                               JUNE 27,    JUNE 30,     JUNE 27,      JUNE 30,
                                                 1998        1997         1998          1997
                                               --------    --------    ----------    ----------
<S>                                            <C>         <C>         <C>           <C>
Net sales....................................  $628,000    $640,700    $1,085,200    $1,141,700
Cost of sales................................   421,400     474,500       730,900       832,700
                                               --------    --------    ----------    ----------
          Gross earnings.....................   206,600     166,200       354,300       309,000
Selling, general and administrative
  expenses...................................    97,200     107,200       180,300       190,900
Goodwill amortization........................     6,700       6,700        13,300        13,400
                                               --------    --------    ----------    ----------
          Operating earnings.................   102,700      52,300       160,700       104,700
Interest expense.............................   (26,800)    (21,100)      (51,500)      (40,000)
Other expense -- net.........................    (4,600)     (4,200)         (300)       (6,000)
                                               --------    --------    ----------    ----------
          Earnings before income tax
            expense..........................    71,300      27,000       108,900        58,700
Income tax expense...........................     6,000       7,000        12,400        16,100
                                               --------    --------    ----------    ----------
          Net earnings.......................  $ 65,300    $ 20,000    $   96,500    $   42,600
                                               ========    ========    ==========    ==========
Earnings per common share....................  $    .91    $    .27    $     1.34    $      .56
                                               ========    ========    ==========    ==========
Earnings per common share-assuming
  dilution...................................  $    .90    $    .26    $     1.33    $      .55
                                               ========    ========    ==========    ==========
Average common shares........................    72,000      75,200        71,900        75,800
                                               ========    ========    ==========    ==========
Average common shares-assuming dilution......    72,800      76,100        72,500        76,900
                                               ========    ========    ==========    ==========
</TABLE>
 
                            See accompanying notes.
                                        3
<PAGE>   5
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                           (IN THOUSANDS OF DOLLARS)
 
<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                              ----------------------
                                                              JUNE 27,     JUNE 30,
                                                                1998         1997
                                                              ---------    ---------
<S>                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings..............................................  $  96,500    $  42,600
  Adjustments to reconcile to net cash used for operating
     activities:
     Depreciation and amortization..........................     57,000       76,700
     Deferred income tax expense (benefit)..................       (900)       3,000
     Increase in working capital............................   (309,700)    (224,400)
     Other-net..............................................    (30,500)     (28,100)
                                                              ---------    ---------
          Net cash used for operating activities............   (187,600)    (130,200)
                                                              ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures......................................    (16,100)     (34,500)
  Proceeds from sale of denim production facility...........     35,400           --
  Other-net.................................................     13,300       (2,500)
                                                              ---------    ---------
          Net cash provided by (used for) investing
            activities......................................     32,600      (37,000)
                                                              ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds under line-of-credit agreements..................    639,600      525,100
  Payments under line-of-credit agreements..................   (380,200)    (223,600)
  Principal payments on long-term debt and capital leases...   (116,100)      (4,100)
  Common stock issued.......................................      6,600       10,900
  Common stock repurchased..................................     (3,000)    (138,000)
                                                              ---------    ---------
          Net cash provided by financing activities.........    146,900      170,300
                                                              ---------    ---------
Net increase (decrease) in Cash and cash equivalents
  (including restricted cash)...............................     (8,100)       3,100
Cash and cash equivalents (including restricted cash) at
  beginning of period.......................................     16,100       18,700
                                                              ---------    ---------
Cash and cash equivalents (including restricted cash) at end
  of period.................................................  $   8,000    $  21,800
                                                              =========    =========
</TABLE>
 
                            See accompanying notes.
                                        4
<PAGE>   6
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
1. The condensed consolidated financial statements contained herein should be
   read in conjunction with the consolidated financial statements and related
   notes contained in the Annual Report on Form 10-K, as amended by a Form
   10-K/A, of Fruit of the Loom, Inc. (the "Company") for the year ended
   December 31, 1997. The information furnished herein reflects all adjustments
   (consisting of normal recurring adjustments) which are, in the opinion of
   management, necessary for a fair presentation of the results of operations of
   the interim periods. Operating results for the three and six months ended
   June 27, 1998 are not necessarily indicative of results that may be expected
   for the full year.
 
   Effective January 1, 1998, the Company changed its year end from December 31
   to a 52 or 53 week year ending on the Saturday nearest December 31. All
   quarterly reporting periods are prepared on a 4-4-5 accounting cycle with
   each quarter ending on the Saturday nearest the calendar quarter end.
 
2. No dividends were declared on the Company's common stock for the six-month
   periods ended June 27, 1998 and June 30, 1997.
 
3. The Company's effective income tax rate of 11.4% and 27.4%, respectively, for
   the first six months of 1998 and 1997 differed from the Federal statutory
   rate of 35% primarily due to the impact of foreign earnings, certain of which
   are taxed at lower rates than in the United States, partially offset by
   goodwill amortization, a portion of which is not deductible for Federal
   income taxes, and state income taxes.
 
4. In 1995, management announced plans to close certain manufacturing operations
   and to take other actions to reduce costs and improve operations. As a
   result, the Company recorded charges of approximately $372,900,000
   ($287,400,000 after tax) related to impairment write-downs of goodwill, costs
   associated with the closing or realignment of certain domestic manufacturing
   facilities and attendant personnel reductions and charges related to
   inventory write-downs and valuations, foreign operations and other corporate
   issues.
 
   During the first quarter of 1997, the Company finalized certain of the
   estimates recorded in connection with the above noted charges. As a result of
   finalizing these estimates, earnings before income tax expense for the first
   quarter of 1997 were increased by $7,500,000; these amounts were recorded as
   a reduction to selling, general and administrative expenses.
 
                                        5
<PAGE>   7
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                  (UNAUDITED)
 
   A rollforward of the 1995 special charges from December 31, 1997 through June
   27, 1998 is presented below (in thousands of dollars):
 
<TABLE>
<CAPTION>
                                          RESERVE                                          RESERVE
                                          BALANCE                                          BALANCE
                                       DECEMBER 31,        CASH      INCOME      OTHER     JUNE 27,
                                           1997          PAYMENTS   (EXPENSE)   ACTIVITY     1998
                                     -----------------   --------   ---------   --------   --------
<S>                                  <C>                 <C>        <C>         <C>        <C>
Impairment write-down of
  goodwill.........................       $    --         $   --     $   --      $   --    $    --
Closing or realignment of
  manufacturing operations:
  Loss on disposal of closed
     facilities, improvements and
     equipment.....................           200            200         --          --         --
  Changes in estimates of insurance
     liabilities...................        14,000             --         --          --     14,000
  Costs related to expected
     increases in workers'
     compensation and health and
     welfare costs.................         5,200          4,900         --          --        300
  Costs related to termination of
     certain lease obligations.....         1,000             --         --          --      1,000
  Costs related to severance of the
     hourly workforce..............            --             --         --          --         --
  Other............................         2,700             --         --          --      2,700
                                          -------         ------     ------      ------    -------
                                           23,100          5,100         --          --     18,000
Severance..........................           200            200         --          --         --
Other asset write-downs, valuation
  reserves and other reserves......         3,900             --         --          --      3,900
Changes in estimates of certain
  retained liabilities of former
  subsidiaries.....................        16,200          1,400         --          --     14,800
Termination of management
  agreement........................            --             --         --          --         --
                                          -------         ------     ------      ------    -------
                                          $43,400         $6,700     $   --      $   --    $36,700
                                          =======         ======     ======      ======    =======
</TABLE>
 
                                        6
<PAGE>   8
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                  (UNAUDITED)
 
   In the fourth quarter of 1997, the Company recorded charges for costs related
   to the closing and disposal of a number of domestic manufacturing and
   distribution facilities, impairment of manufacturing equipment and other
   assets and certain European manufacturing and distribution facilities, and
   other costs associated with the Company's world-wide restructuring of
   manufacturing and distribution facilities. These and other special charges
   totalled $441,700,000 ($372,200,000 after tax). Following is a summary of the
   1997 special charges and related reserve balances at December 31, 1997 (in
   thousands of dollars):
 
<TABLE>
<CAPTION>
                                                                                     RESERVE
                                                 1997       CASH        OTHER        BALANCE
                                               SPECIAL    PAYMENTS    ACTIVITY     DECEMBER 31,
                                               CHARGES    IN 1997      IN 1997         1997
                                               --------   --------   -----------   ------------
<S>                                            <C>        <C>        <C>           <C>
Closing and disposal of U.S manufacturing and
  distribution facilities
  Loss on sale of facilities, improvements
     and equipment:
     Sewing, finishing and distribution
       facilities............................  $ 66,600    $   --      $    --       $ 66,600
     Impairment of mills to be sold..........    75,400        --           --         75,400
     Lease residual guarantees...............    61,000        --           --         61,000
     Other equipment.........................    29,600        --       22,100          7,500
                                               --------    ------      -------       --------
                                                232,600        --       22,100        210,500
  Severance costs............................     8,400        --           --          8,400
  Other accruals.............................    10,400        --           --         10,400
                                               --------    ------      -------       --------
                                                251,400        --       22,100        229,300
                                               --------    ------      -------       --------
Impairment of European manufacturing and
  distribution facilities
  Impairment of long lived assets............    42,800        --       42,800             --
  Other accruals.............................     1,300        --           --          1,300
                                               --------    ------      -------       --------
                                                 44,100        --       42,800          1,300
                                               --------    ------      -------       --------
Pro Player incentive compensation
  agreement..................................    22,000        --           --         22,000
                                               --------    ------      -------       --------
Other asset write-downs and reserves
  Inventory valuation provisions.............    49,800        --           --         49,800
  Other accruals.............................    53,800     7,400        9,200         37,200
                                               --------    ------      -------       --------
                                                103,600     7,400        9,200         87,000
                                               --------    ------      -------       --------
Changes in estimates of certain retained
  liabilities of former subsidiaries.........    20,600        --        8,000         12,600
                                               --------    ------      -------       --------
          Total pretax charges...............  $441,700    $7,400      $82,100       $352,200
                                               ========    ======      =======       ========
</TABLE>
 
                                        7
<PAGE>   9
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                  (UNAUDITED)
 
   A rollforward of the 1997 special charges from December 31, 1997 through June
   27, 1998 is presented below (in thousands of dollars):
 
<TABLE>
<CAPTION>
                                        RESERVE                                        RESERVE
                                        BALANCE                                        BALANCE
                                      DECEMBER 31,     CASH      INCOME      OTHER     JUNE 27,
                                          1997       PAYMENTS   (EXPENSE)   ACTIVITY     1998
                                      ------------   --------   ---------   --------   --------
<S>                                   <C>            <C>        <C>         <C>        <C>
Closing and disposal of U.S.
  manufacturing and distribution
  facilities
  Loss on sale of facilities,
     improvements and equipment:
     Sewing, finishing and
       distribution facilities......    $ 66,600     $    --     $   --     $   600    $ 66,000
     Impairment of mills to be
       sold.........................      75,400          --         --         200      75,200
     Lease residual guarantees......      61,000          --         --          --      61,000
     Other equipment................       7,500          --         --          --       7,500
                                        --------     -------     ------     -------    --------
                                         210,500          --         --         800     209,700
Severance costs.....................       8,400       3,200         --          --       5,200
Other accruals......................      10,400       4,300         --          --       6,100
                                        --------     -------     ------     -------    --------
                                         229,300       7,500         --         800     221,000
                                        --------     -------     ------     -------    --------
Impairment of European manufacturing
  and distribution facilities
  Impairment of long lived assets...          --          --         --          --          --
  Other accruals....................       1,300          --         --          --       1,300
                                        --------     -------     ------     -------    --------
                                           1,300          --         --          --       1,300
                                        --------     -------     ------     -------    --------
Pro Player incentive compensation
  agreement.........................      22,000          --         --          --      22,000
                                        --------     -------     ------     -------    --------
Other asset write-downs and reserves
  Inventory valuation provisions....      49,800         600      5,100      13,800      30,300
  Other accruals....................      37,200      12,500         --         400      24,300
                                        --------     -------     ------     -------    --------
                                          87,000      13,100      5,100      14,200      54,600
                                        --------     -------     ------     -------    --------
Changes in estimates of certain
  retained liabilities of former
  subsidiaries......................      12,600          --         --          --      12,600
                                        --------     -------     ------     -------    --------
          Total pretax charges......    $352,200     $20,600     $5,100     $15,000    $311,500
                                        ========     =======     ======     =======    ========
</TABLE>
 
   The Other Activity in 1997 represents assets written off. The Other Activity
   in the first six months of 1998 principally consisted of sales of inventory
   which had been written down as part of the 1997 special charges. Amounts
   received for the inventory sold were in excess of amounts estimated,
   resulting in reductions in cost of sales and increases to earnings before
   income tax expense of $5,100,000 in the first six months of 1998,
   substantially all of which occurred in the first quarter of 1998.
 
5. The Company and its subsidiaries are involved in certain legal proceedings
   and have retained liabilities, including certain environmental liabilities,
   such as those under the Comprehensive Environmental Response, Compensation
   and Liability Act of 1980, as amended, its regulations and similar state
   statutes ("Superfund Legislation"), in connection with the sale of certain
   discontinued operations, some of which were significant generators of
   hazardous waste. The Company and its subsidiaries have also retained certain
   liabilities related to the sale of products in connection with the sale of
   certain discontinued operations. The Company's retained liability reserves at
   June 27, 1998 related to discontinued operations consist primarily of certain
   environmental reserves of approximately $41,300,000 and product liability
 
                                        8
<PAGE>   10
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                  (UNAUDITED)
 
   reserves of approximately $16,400,000. The Company has recorded receivables
   related to these liabilities of approximately $13,800,000, which management
   believes will be recovered from insurance and other sources. Management
   believes that adequate reserves have been established to cover potential
   claims based on facts currently available and current Superfund Legislation.
 
   Generators of hazardous wastes which were disposed of at offsite locations
   which are now superfund sites are subject to claims brought by state and
   Federal regulatory agencies under Superfund Legislation and by private
   citizens under Superfund Legislation and common law theories. Since 1982, the
   United States Environmental Protection Agency (the "EPA") has actively sought
   compensation for response costs and remedial action at offsite disposal
   locations from waste generators under the Superfund Legislation, which
   authorizes such action by the EPA regardless of fault, legality of original
   disposal or ownership of a disposal site. The EPA's activities under the
   Superfund Legislation can be expected to continue during the remainder of
   1998 and future years.
 
   In June 1994, pursuant to authorization from the Company's Board of
   Directors, the Company guaranteed a loan from a bank in an amount up to
   $12,000,000 to Mr. William Farley, the Company's Chairman and Chief Executive
   Officer. In exchange for the guarantee the Company receives an annual fee
   from Mr. Farley equal to 1% of the value of the loan covered by the
   guarantee. The guarantee is secured by a second lien on certain shares of the
   Company held by the bank for other loans made to Mr. Farley.
 
   On November 20, 1997, the Board of Directors, excluding Mr. Farley and other
   employee Directors, upon recommendation of a Special Committee of the Board
   of Directors, comprised of Messrs. Al Askari and Wolfson, guaranteed a bank
   loan to Mr. Farley in the amount of $26,000,000. The proceeds of this loan
   were used by Mr. Farley to purchase all of the Zero Coupon Convertible
   Subordinated Debentures due 2012 of Farley Inc. held by non-affiliated third
   parties. Mr. Farley owns 100% of Farley Inc. In consideration of the
   guarantee, Mr. Farley pays the Company an annual guarantee fee equal to
   1 1/8% of the outstanding principal balance of the loan. The loan is secured
   by a second lien on 2,507,512 shares of Class B Common Shares of the Company
   held by Mr. Farley and the assets held for the benefit of Mr. Farley under
   the Company's Senior Executive Officer Deferred Compensation Trust. The loan
   matures on November 19, 1998. The Special Committee received an opinion from
   an independent financial advisor that the terms of the transaction are
   commercially reasonable.
 
   The Company has negotiated grants from the governments of the Republic of
   Ireland, Northern Ireland and Germany. The grants are being used for employee
   training, the acquisition of property and equipment and other governmental
   business incentives such as general employment. At June 27, 1998, the Company
   had a contingent liability to repay, in whole or in part, grants received of
   approximately $61,500,000 in the event that the Company does not meet defined
   average employment levels or terminates operations in the Republic of
   Ireland, Northern Ireland and Germany.
 
   In connection with the Company's transaction with Acme Boot Company, Inc.
   ("Acme Boot") during 1993, the Company guaranteed, on an unsecured basis, the
   repayment of debt incurred by Acme Boot under Acme Boot's bank credit
   facility (the "Acme Boot Credit Facility"). Farley Inc. owns 100% of the
   common stock of Acme Boot. At June 27, 1998, the Acme Boot Credit Facility
   provided for up to $30,000,000 of loans and letters of credit. The Acme Boot
   Credit Facility is secured by first liens on substantially all of the assets
   of Acme Boot and it subsidiaries. At June 27, 1998, approximately $28,900,000
   in loans and letters of credit were outstanding under the Acme Boot Credit
   Facility.
 
   Also, in April 1995, Acme Boot entered into an additional secured credit
   facility with its bank lender (the "New Acme Credit Agreement"). The New Acme
   Credit Agreement provides for up to $37,000,000 in borrowings and expires in
   August 1998. In April 1995, Acme Boot used approximately $25,400,000 under
   this facility to repurchase certain of its debt, preferred stock and common
   stock. In November 1995, Acme
 
                                        9
<PAGE>   11
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                  (UNAUDITED)
 
   Boot used approximately $11,300,000 under this facility to repurchase
   substantially all of the remaining portions of its publicly held debt,
   preferred stock and common stock. The New Acme Credit Agreement is secured by
   a second lien on substantially all of the assets of Acme Boot and its
   subsidiaries. In addition, the Company has guaranteed, on an unsecured basis,
   repayment of debt incurred or created under the New Acme Credit Agreement. In
   exchange for the additional guarantee, the Company received $6,000,000 of
   initial liquidation preference of Acme Boot's Series C 10% Redeemable Junior
   Preferred Stock (the "Junior Preferred Stock"). The Company has fully
   reserved for the amount of the Junior Preferred Stock. The Acme Boot Credit
   Facility and the New Acme Credit Agreement provide that no dividends may be
   paid in cash on the Junior Preferred Stock subject to certain tests. The
   Junior Preferred Stock carries voting rights representing 5% of the total
   voting power of Acme Boot so long as any of Acme Boot's 12 1/2% Preferred
   Stock is outstanding. The Acme 12 1/2% Preferred Stock currently carries
   voting rights representing in the aggregate 25% of the total voting power of
   Acme Boot. If none of the Acme 12 1/2% Preferred Stock is outstanding, the
   Junior Preferred Stock will carry voting rights representing 25% of the total
   voting power of Acme Boot. At June 27, 1998, approximately $36,700,000
   remained outstanding under the New Acme Credit Agreement. In addition,
   through June 27, 1998, the Company has loaned Acme Boot $9,000,000 to provide
   Acme Boot with supplemental working capital. These loans were made in the
   form of demand notes payable and are senior to all other outstanding
   indebtedness of Acme Boot.
 
   As a result of the operating performance of Acme Boot and management's
   assessment of existing facts and circumstances of Acme Boot's financial
   condition, the Company increased its reserve by $32,000,000 from $35,000,000
   to $67,000,000 at the end of the third quarter of 1997 to fully reserve the
   Company's exposure under the Acme Boot guarantees.
 
   In June 1998, Acme Boot entered into agreements with unrelated parties for
   the sale of certain assets and its business. Financing for the sale of the
   business was completed in July 1998, at which time the Company satisfied the
   Acme Boot guarantees. As a result of the aforementioned transaction, the
   Company had the ability to more precisely estimate its probable liability
   under the Acme Boot guarantees. Therefore, the Company reduced its estimate
   of the probable liability by $6,400,000 to $60,600,000. Accordingly, Other
   expense -- net for the three and six months ended June 27, 1998 in the
   accompanying condensed consolidated statement of earnings includes income of
   $6,400,000 related to this reduction in expected liability.
 
   On July 1, 1998, the New England Health Care Employees Pension Fund filed a
   purported class action on behalf of all those who purchased Fruit of the
   Loom, Inc. Class A Common Stock and publicly traded options between July 24,
   1996 and September 5, 1997 (the "Class Period") against the Company and
   William Farley, Bernhard Hansen, Richard C. Lappin, G. William Newton,
   Burgess D. Ridge, Larry K. Switzer and John D. Wigodsky, each of whom is a
   current or former officer of the Company, in the United States District Court
   for the Western District of Kentucky. The plaintiff claims that the
   defendants engaged in conduct violating Section 10(b) of the Securities
   Exchange Act of 1934, as amended (the "Act"), and that the Company and Mr.
   Farley are also liable under Section 20(a) of the Act. According to the
   plaintiff, during the Class Period, the Company, with the knowledge and
   assistance of the individual defendants, issued misleading positive public
   statements about the Company's condition and prospects, causing the plaintiff
   and the class to buy Company stock at artificially inflated prices. The
   plaintiff also alleges that during the Class Period, the individual
   defendants sold stock of the Company while possessing material non-public
   information. The plaintiff asks for unspecified amounts as damages, interest
   and costs and ancillary relief. Management believes that the suit is without
   merit, and management and the Company intend to defend it vigorously.
   Management believes, based on information currently available, that the
   ultimate resolution of this litigation will not have a material adverse
   affect on the financial condition or results of the operations of the
   Company, but the ultimate resolution of the suit, if unfavorable, could be
   material to the results of operations of a particular future period.
                                       10
<PAGE>   12
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
                                  (UNAUDITED)
 
   In August 1994, the Company acquired Pro Player, Inc. ("Pro Player") for
   approximately $55,700,000, including approximately $14,200,000 of Pro Player
   debt which was repaid by the Company. The principals of Pro Player, who are
   also key employees of that business, may also be entitled to receive
   compensation up to a maximum of $47,100,000, based in part on the attainment
   of certain levels of operating performance by the acquired entity in 1998 and
   1999. In the fourth quarter of 1997, the Company recorded a $22,000,000
   charge related to this compensation agreement, based on its assessment of the
   probability that Pro Player's operating performance would result in such
   amount being earned. During the three and six months ended June 27, 1998, the
   Company recorded an additional $1,700,000 and $3,300,000, respectively,
   representing the amount earned during these periods. These charges are
   included in selling, general, and administrative expenses in the accompanying
   condensed consolidated statement of earnings.
 
6. As of January 1, 1998, the Company adopted Statement of Financial Accounting
   Standards No. 130, Reporting Comprehensive Income ("FAS 130"). FAS 130
   establishes new rules for the reporting and display of comprehensive income
   and its components. The adoption of FAS 130 had no impact on the Company's
   Net earnings or Common stockholders' equity. Rather, FAS 130 requires foreign
   currency translation adjustments, minimum pension liability adjustments and
   unrealized gains or losses on available-for-sale securities, all of which
   were reported separately in Common stockholders' equity prior to adoption, to
   be included in new disclosures related to comprehensive income.
 
   For the second quarter of 1998 and 1997, comprehensive income totalled
   $64,900,000 and $17,900,000, respectively. For the first six months of 1998
   and 1997, comprehensive income totalled $84,200,000 and $26,800,000,
   respectively. The principal differences from reported net income were second
   quarter reductions of $400,000 in 1998 and $2,300,000 in 1997 and six-month
   reductions of $12,300,000 in 1998 and $15,200,000 in 1997 related to foreign
   currency translation adjustments resulting from the financial statement
   translation of the accounts of certain of the Company's foreign operations
   from local currencies to the U.S. dollar. These adjustments reflect the
   strengthening of the U.S. dollar with respect to the currencies of a number
   of Western European countries where the Company has made long-term operating
   commitments.
 
7. The following table sets forth the computation of basic and diluted earnings
   per common share (in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED     SIX MONTHS ENDED
                                                    -------------------   -------------------
                                                    JUNE 27,   JUNE 30,   JUNE 27,   JUNE 30,
                                                      1998       1997       1998       1997
                                                    --------   --------   --------   --------
<S>                                                 <C>        <C>        <C>        <C>
NUMERATOR
Net earnings......................................  $65,300    $20,000    $96,500    $42,600
                                                    =======    =======    =======    =======
DENOMINATOR
For basic earnings per common share --
  Weighted average shares outstanding.............   72,000     75,200     71,900     75,800
Effect of dilutive employee stock options.........      800        900        600      1,100
                                                    -------    -------    -------    -------
For diluted earnings per common share --
  Weighted average shares outstanding and assumed
     conversions..................................   72,800     76,100     72,500     76,900
                                                    =======    =======    =======    =======
Earnings per common share:
  Basic...........................................  $   .91    $   .27    $  1.34    $   .56
                                                    =======    =======    =======    =======
  Diluted.........................................  $   .90    $   .26    $  1.33    $   .55
                                                    =======    =======    =======    =======
</TABLE>
 
                                       11
<PAGE>   13
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                         PART I. FINANCIAL INFORMATION
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS
 
  Forward Looking Information
 
     The Company desires to provide investors with meaningful and useful
information. Therefore, this Quarterly Report on Form 10-Q contains certain
statements which describe the Company's beliefs concerning future business
conditions and the outlook for the Company, based on currently available
information. Wherever possible, the Company has identified these "forward
looking" statements (as defined in Section 21E of the Securities Exchange Act of
1934) by words such as "anticipates," "believes," "estimates," "expects" and
similar expressions. These forward looking statements are subject to risks,
uncertainties and other factors which could cause the Company's actual results,
performance or achievements to differ materially from those expressed in, or
implied by, these statements. These risks, uncertainties and other factors
include, but are not limited to, the following: the financial strength of the
retail industry (particularly the mass merchant channel), the level of consumer
spending for apparel, demand for the Company's activewear screenprint products,
the competitive pricing environment within the basic apparel segment of the
apparel industry, the Company's ability to develop, market and sell new
products, the Company's effective income tax rate, the Company's ability to
successfully move labor-intensive segments of the manufacturing process outside
of the United States, the success of planned advertising, marketing and
promotional campaigns, international activities and the resolution of legal
proceedings and other contingent liabilities. The Company assumes no obligation
to update publicly any forward looking statements, whether as a result of new
information, future events or otherwise.
 
  Results of Operations
 
     The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements and related notes for
the period ended June 27, 1998 and the Company's consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-K, as amended by a Form 10-K/A, for the year ended December 31, 1997.
 
     The table below sets forth selected operating data (in millions of dollars
and as percentages of net sales) of the Company.
 
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED       SIX MONTHS ENDED
                                              --------------------    --------------------
                                              JUNE 27,    JUNE 30,    JUNE 27,    JUNE 30,
                                                1998        1997        1998        1997
                                              --------    --------    --------    --------
<S>                                           <C>         <C>         <C>         <C>
Net sales...................................   $628.0      $640.7     $1,085.2    $1,141.7
Gross earnings..............................    206.6       166.2        354.3       309.0
Gross margin................................     32.9%       25.9%        32.6%       27.1%
Operating earnings..........................    102.7        52.3        160.7       104.7
Operating margin............................     16.4%        8.2%        14.8%        9.2%
</TABLE>
 
SPECIAL CHARGES
 
     During the first quarter of 1998, the Company sold certain inventory which
had been written down as part of the 1997 special charges. Amounts received for
the inventory sold were in excess of amounts estimated, resulting in reductions
in cost of sales and increases to earnings before income tax expense of
$5,100,000 in the first six months of 1998, substantially all of which occurred
in the first quarter of 1998.
 
     In connection with the transfer of substantially all of its sewing
operations to offshore locations, and the related increase in the use of foreign
contract manufacturers, the Company is in the process of completing enhanced
inventory control procedures. Until such time as such procedures are completed,
the Company remains subject to increased risks regarding the management of its
inventory. These risks, such as inventory shrinkage and obsolescence, could
result in the Company incurring additional write-downs, however, the
 
                                       12
<PAGE>   14
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                   PART I. FINANCIAL INFORMATION (CONTINUED)
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS -- (CONTINUED)
Company believes it has adequate reserves for these potential write-downs.
Although the Company is not currently aware of any facts that would require any
substantial write-down of its inventory, there can be no assurance that
write-downs will not be recognized in the future.
 
     The 1995 and 1997 restructuring activities are progressing as expected and
management currently anticipates completion of these activities by the end of
1999. There can be no assurance, however, that all activities will be completed
by the end of 1999.
 
NET SALES
 
     Net sales decreased $12,700,000 or 2% in the second quarter and $56,500,000
or 5% in the first six months due to lower volume in retail (down 4% and 6%,
respectively) and activewear (down 2% and 7%, respectively). Retail comparisons
were unfavorable overall, but casualwear fleece sales were sharply higher in
both periods. In activewear, lower fleece sales were offset substantially in the
quarter and to a lesser extent in the first six months by improved T-shirt
sales. The impact on activewear sales of the December 1997 list price reduction
was essentially offset by the elimination of promotional programs. Second
quarter sales of sports licensed products improved slightly, while improved
sales in the six-month period included first quarter closeout sales. Volume
gains in Europe continued in the second quarter but were offset by the
translation impact of a stronger dollar in the first quarter.
 
GROSS EARNINGS
 
     Gross earnings increased $40,400,000 or 24% in the second quarter and
$45,300,000 or 15% in the first six months. Gross margin improved 7.0 percentage
points to 32.9% for the quarter and 5.5 percentage points to 32.6% for the first
six months. Retail and activewear gross earnings and margin improved
substantially despite lower sales. The most significant factor in the margin
improvement was cost savings from the Company's offshore sewing and other cost
reduction initiatives. In addition, no activewear promotional programs were
offered in the first half of 1998, benefiting both gross earnings and gross
margin. Retail and activewear volume decreases and reductions in list prices on
activewear products in December 1997, however, reduced the rate of improvement
in consolidated gross earnings and margin. Sports & Licensing gross earnings
were slightly ahead of 1997, although gross margin declined slightly for the
first six months, and gross earnings and margin from European operations
improved principally due to cost reductions.
 
OPERATING EARNINGS
 
     Operating earnings increased $50,400,000 or 96% in the second quarter and
$56,000,000 or 53% in the first six months. Operating margin improved 8.2
percentage points to 16.4% for the second quarter and 5.6 percentage points to
14.8% for the first six months. Gross earnings and margin improved as noted
above, while selling, general and administrative expense declined $10,000,000 or
9.3% in the second quarter and $10,600,000 or 5.6% for the first six months. The
decrease in selling, general and administrative expense in the second quarter
and six months represents reductions in advertising expense and personnel,
reduced distribution center depreciation, travel, samples and package design
costs, offset partially by the Pro Player incentive compensation charge and
increased costs for management information systems and communications resulting
from the shift of the Company's sewing and finishing operations to offshore
facilities from domestic facilities. In addition, the decrease in selling,
general and administrative expense for the six months reflected the recording of
compensation expense related to a performance share compensation plan for
certain executive officers in the first quarter of 1997. For the six months,
these favorable variances were partially offset by
 
                                       13
<PAGE>   15
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                   PART I. FINANCIAL INFORMATION (CONTINUED)
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS -- (CONTINUED)
changes in estimates recorded in connection with the special charges taken in
1995 which were finalized in the first quarter of 1997 (reducing selling,
general and administrative expense by $7,500,000 in the first quarter of 1997).
Selling, general and administrative expense was 15.5% and 16.6% of sales in the
second quarter and first six months of 1998, respectively, compared with 16.7%
of sales for both periods in 1997.
 
INTEREST EXPENSE
 
     Interest expense increased $5,700,000 or 27.0% in the second quarter and
$11,500,000 or 28.8% in the first six months. The increases were largely due to
a significantly higher average debt level, resulting principally from the LMP
settlement ($102,200,000 in the second half of 1997), purchases of the Company's
common stock, and a greater investment in working capital needed to better
service customers while the Company consolidates the offshore movement of its
sewing and finishing operations and realigns its domestic manufacturing and
distribution facilities.
 
OTHER EXPENSE -- NET
 
     The unfavorable variance of $400,000 in other expense -- net compared with
the second quarter of 1997 largely reflected a loss on the sale of the Company's
denim manufacturing operation, a write-off of fees related to debt refinanced
and currency translation losses, substantially offset in total by the reduction
recorded in the liability related to the Acme Boot guarantees, all of which
occurred in the second quarter of 1998. Other expense -- net included losses
totalling $3,000,000 and $2,900,000 from sales of accounts receivable pursuant
to the Company's receivables purchase agreement in the second quarter of 1998
and 1997, respectively. The favorable variance of $5,700,000 in other
expense -- net compared with the first six months of 1997 also reflected gains
on the sale of two corporate airplanes in the first quarter of 1998. Other
expense -- net included losses totalling $6,100,000 and $5,500,000 from sales of
accounts receivable pursuant to the Company's receivables purchase agreement in
the first six months of 1998 and 1997, respectively.
 
INCOME TAXES
 
     The Company's effective income tax rate of 11.4% and 27.4%, respectively,
for the first six months of 1998 and 1997 differed from the Federal statutory
rate of 35% primarily due to the impact of foreign earnings, certain of which
are taxed at lower rates than in the United States, partially offset by goodwill
amortization, a portion of which is not deductible for Federal income taxes, and
state income taxes. The Company's estimated annual effective tax rate for 1998
declined from 17.0% for the first quarter to 11.4% for the first six months,
reflecting the impact of a higher proportion of foreign earnings.
 
EARNINGS PER COMMON SHARE
 
     Earnings per common share were $0.91 and $0.27 and earnings per common
share, assuming dilution, were $0.90 and $0.26 in the second quarter of 1998 and
1997, respectively. Earnings per common share were $1.34 and $0.56 and earnings
per common share, assuming dilution, were $1.33 and $0.55 in the first six
months of 1998 and 1997, respectively. Average common shares were reduced
compared with the second quarter and first six months of 1997 by the repurchase
of approximately 5,400,000 shares since January 1, 1997.
 
Liquidity and Capital Resources
 
     Funds generated from the Company's operations are its major source of
liquidity and are supplemented by funds obtained from capital markets, including
bank facilities. The Company has available for the funding
 
                                       14
<PAGE>   16
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                   PART I. FINANCIAL INFORMATION (CONTINUED)
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS -- (CONTINUED)
of its operations approximately $819,000,000 of revolving lines of credit. As of
August 7, 1998, approximately $205,400,000 was available and unused under these
facilities. A portion of the Company's revolving lines of credit totalling
approximately $200,000,000 will expire in September 1998. The Company expects to
pursue debt or equity capital market transactions in the near future in order to
reduce outstanding indebtedness under these facilities and provide additional
liquidity.
 
     Net cash used for operating activities was $187,600,000 in the first six
months of 1998 compared with $130,200,000 in the first six months of 1997. The
primary factor in each period was the seasonal increase in working capital
($309,200,000 and $224,400,000 in 1998 and 1997, respectively) as the Company
prepared to enter its peak selling season. The increase in working capital in
the 1998 period also reflected a reduction in trade payables for advances of
$83,100,000 at December 31, 1997, owed to the ultimate purchaser of the
Company's receivables under its receivables purchase agreement. In addition, the
increase in working capital in the first six months of 1998 reflected
$59,300,000 due from the Company's unconsolidated receivable financing
subsidiary.
 
     Investing activities generated $32,600,000 in the first six months of 1998
compared with net cash uses totalling $37,000,000 in the same 1997 period.
Capital expenditures in 1998 were $16,100,000, or $18,400,000 lower, and 1998
asset sales added $56,600,000 more in proceeds, than the same period last year.
Capital spending, primarily to support offshore assembly operations, is
anticipated to approximate $35,000,000 in 1998.
 
     Net cash provided by financing activities totalled $146,900,000 in the
first six months of 1998 compared with $170,300,000 in the first six months of
1997. The Company borrowed $42,100,000 less under its bank credit facilities in
the first six months of 1998, at the same time payments on long-term debt and
capital leases were higher ($112,000,000), and proceeds from issuance of common
stock were lower ($4,300,000). Payments on long-term debt and capitalized leases
included repayment of a senior unsecured note of the Company's wholly-owned
subsidiary, Fruit of the Loom Canada, Inc., for $102,600,000 principal value.
Substantially offsetting these variances that reflected reductions in Net cash
provided by financing activities was a decrease of $135,000,000 in common stock
repurchases.
 
     In November 1996, the Company's Board of Directors authorized the purchase
of up to $200,000,000 of the Company's common stock in open market and privately
negotiated transactions. Total purchases under the program through June 27, 1998
were 5,890,000 shares at an aggregate cost of $193,200,000.
 
     In December 1996, the Company entered into a three-year receivables
purchase agreement whereby it can currently sell up to a $250,000,000 undivided
interest in a defined pool of its trade accounts receivable. The maximum amount
outstanding as defined under the agreement varies based upon the level of
eligible receivables. Under the agreement, approximately $353,000,000 of
receivables at June 27, 1998 and $183,000,000 of receivables at December 31,
1997 were sold to the Company's unconsolidated receivable financing subsidiary
reducing consolidated notes and accounts receivable. Proceeds of approximately
$250,000,000 and $214,500,000 from the ultimate purchaser at the respective
balance sheet dates were used to reduce amounts outstanding under the Company's
revolving lines of credit.
 
     On July 11, 1997, the Company filed with the Securities and Exchange
Commission a shelf registration statement on Form S-3 (the "S-3 Registration
Statement") to register under the Securities Act of 1933, as amended, the sale
of up to $850,000,000 of its debt securities, preferred stock and Class A Common
Stock (collectively, the "Securities"). The S-3 Registration Statement does not
relate to any particular offering of Securities; rather, the S-3 Registration
Statement was filed to provide the Company with the flexibility to engage in
future offerings without the delay which could result from the filing of new
registration statements at that time. The types of Securities offered, and their
terms, will be determined prior to any particular offering.
                                       15
<PAGE>   17
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                   PART I. FINANCIAL INFORMATION (CONTINUED)
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS -- (CONTINUED)
The Company anticipates that the net proceeds from any future sale of the
Securities would be used for general corporate purposes, including, but not
limited to, working capital, capital expenditures, expansion of existing
properties, development of new projects, prepayment of outstanding indebtedness,
investments and acquisitions. The Board of Directors of the Company has
unanimously approved, and recommended that the stockholders of the Company
adopt, a proposed reorganization pursuant to which a Cayman Islands company
("FTL-Cayman") will become the parent holding company of the Company (the
"Reorganization"). After consummation of the Reorganization, FTL-Cayman will
continue to conduct the businesses (through direct and indirect subsidiaries,
including the Company) in which the Company is now engaged, and substantially
all of the businesses and subsidiaries of the Company located outside the United
States will be transferred to FTL-Cayman (or direct or indirect foreign
subsidiaries of FTL-Cayman), other than certain interests of the Company in
Canada, Germany, Italy and Mexico, along with the beneficial ownership of
certain trademarks. In connection with the Reorganization, FTL-Cayman has filed
a registration statement on Form S-4, File No. 333-46007, with the Securities
and Exchange Commission, which has not yet been declared effective. Until the
Reorganization is consummated, the Company does not anticipate the utilization
of the S-3 Registration Statement for purposes of meeting its liquidity needs
and instead anticipates using other means of financing, including the private
placement of debt securities, for such purposes.
 
     Management believes the funding available to the Company is sufficient to
meet anticipated requirements for capital expenditures, working capital and
other needs. The Company's debt instruments, principally its bank agreements,
contain covenants restricting the Company's ability to sell assets, incur debt,
pay dividends and make investments and require the Company to maintain certain
financial ratios.
 
Accounting Standards
 
     In June 1997, the Financial Accounting Standards Board issued FAS 131,
Disclosures about Segments of an Enterprise and Related Information. FAS 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. FAS 131 is
effective for annual financial statements for fiscal years beginning after
December 15, 1997. Management has not completed its review of FAS 131.
 
     In June 1998, the Financial Accounting Standards Board issued FAS 133,
Accounting for Derivative Instruments and Hedging Activities. The new Statement
requires all derivatives to be recorded on the balance sheet at fair value and
establishes "special accounting" for the following three different types of
hedges: hedges of changes in the fair value of assets, liabilities, or firm
commitments (referred to as fair value hedges); hedges of the variable cash
flows of forecasted transactions (cash flow hedges); and hedges of foreign
currency exposures of net investments in foreign operations. Though the
accounting treatment and criteria for each of the three types of hedges is
unique, they all result in offsetting changes in fair values or cash flows of
both the hedge and the hedged item being recognized in earnings in the same
period. Changes in fair value of derivatives that do not meet the criteria of
one of these three categories of hedges are included in income. The Statement is
effective for years beginning after June 15, 1999, but companies can early adopt
as of the beginning of any fiscal quarter that begins after June 1998.
Management has not completed its review of FAS 133.
 
                                       16
<PAGE>   18
 
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
 
                           PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
     On July 1, 1998, the New England Health Care Employees Pension Fund filed a
purported class action on behalf of all those who purchased Fruit of the Loom,
Inc. Class A Common Stock and publicly traded options between July 24, 1996 and
September 5, 1997 (the "Class Period") against the Company and William Farley,
Bernhard Hansen, Richard C. Lappin, G. William Newton, Burgess D. Ridge, Larry
K. Switzer and John D. Wigodsky, each of whom is a current or former officer of
the Company, in the United States District Court for the Western District of
Kentucky. The plaintiff claims that the defendants engaged in conduct violating
Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Act"),
and that the Company and Mr. Farley are also liable under Section 20(a) of the
Act. According to the plaintiff, during the Class Period, the Company, with the
knowledge and assistance of the individual defendants, issued misleading
positive public statements about the Company's condition and prospects causing
the plaintiff and the class to buy Company stock at artificially inflated
prices. The plaintiff also alleges that during the Class Period, the individual
defendants sold stock of the Company while possessing material non-public
information. The plaintiff asks for unspecified amounts as damages, interest and
costs and ancillary relief. Management believes that the suit is without merit,
and management and the Company intend to defend it vigorously. Management
believes, based on information currently available, that the ultimate resolution
of this litigation will not have a material adverse affect on the financial
condition or results of the operations of the Company, but the ultimate
resolution of the suit, if unfavorable, could be material to the results of
operations of a particular future period.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
a. EXHIBITS
 
<TABLE>
<S>    <C>
4(a)*  $900,000,000 Credit Agreement dated as of September 19,
       1997, among the several banks and other financial
       institutions from time to time parties thereto (the
       "Lenders"), NationsBank, N.A., as administrative agent for
       the Lenders thereunder, Chase Manhattan Bank, Bankers Trust
       Company, The Bank of New York and the Bank of Nova Scotia,
       as co-agents (incorporated herein by reference to Exhibit
       4(a) to the Company's Quarterly Report on Form 10-Q for the
       quarter ended September 30, 1997).
4(b)*  Rights Agreement, dated as of March 8, 1996 between Fruit of
       the Loom, Inc. and Chase Mellon Shareholder Services,
       L.L.C., Rights Agent (incorporated herein by reference to
       Exhibit 4(c) to the Company's Annual Report on Form 10-K for
       the year ended December 31, 1995).
27     Financial Data Schedule.
</TABLE>
 
---------------
* Document is available at the Public Reference Section of the Securities and
  Exchange Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.
  C. 20549 (Commission file No. 1-8941).
 
     The Registrant has not listed nor filed as an Exhibit to this Quarterly
Report certain instruments with respect to long-term debt representing
indebtedness of the Registrant and its subsidiaries which do not individually
exceed 10% of the total assets of the Registrant and its subsidiaries on a
consolidated basis. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
Registrant agrees to furnish such instruments to the Securities and Exchange
Commission upon request.
 
B. REPORTS ON FORM 8-K
 
     No reports on Form 8-K were filed by the Registrant during the quarter
ended June 27, 1998.
 
                                       17
<PAGE>   19
 
                                   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.
 
                                                 FRUIT OF THE LOOM, INC.
 
  ------------------------------------------------------------------------------
                                                       (Registrant)
 
                                                     LARRY K. SWITZER
 
  ------------------------------------------------------------------------------
                                                     Larry K. Switzer
                                             Senior Executive Vice President
                                               and Chief Financial Officer
                                               (Principal Financial Officer
                                               and duly authorized to sign
                                                 on behalf of Registrant)
 
Date: August 7, 1998
 
                                       18
<PAGE>   20
 
                                   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.
 
                                                FRUIT OF THE LOOM, INC.
 
                                               -------------------------
                                                     (Registrant)
 
                                               -------------------------
                                                   Larry K. Switzer
                                                 Senior Executive Vice
                                                       President
                                                  and Chief Financial
                                                        Officer
                                                 (Principal Financial
                                                        Officer
                                                and duly authorized to
                                                         sign
                                               on behalf of Registrant)
 
Date: August 7, 1998