<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 OCTOBER 2, 1999

                                       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 November 16, 1999: 66,905,348 Class A Common
Shares, $.01 par value (all of which are privately owned and not traded on a
public market).

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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 -- October 2, 1999
                     (Unaudited) and January 2, 1999...........................      2
                   Condensed Consolidated Statement of Operations (Unaudited)
                     for the Three and Nine Months Ended October 2, 1999 and
                     September 26, 1998........................................      3
                   Condensed Consolidated Statement of Cash Flows (Unaudited)
                     for the Nine Months Ended October 2, 1999 and September
                     26, 1998..................................................      4
                   Notes to Condensed Consolidated Financial Statements
                     (Unaudited)...............................................      5
          Item 2.  Management's Discussion and Analysis of Financial Condition
                     and
                     Results of Operations.....................................     18

PART II.  OTHER INFORMATION
          Item 1.  Legal Proceedings...........................................     26
          Item 6.  Exhibits and Reports on Form 8-K............................     26
</TABLE>

                                        1
<PAGE>   3

                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                              OCTOBER 2,     JANUARY 2,
                                                                 1999           1999
                                                              -----------    ----------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
ASSETS
Current Assets
  Cash and cash equivalents (including restricted cash).....  $   37,000     $    1,400
  Notes and accounts receivable (less allowance for possible
     losses of $10,800 and $12,000, respectively)...........      80,200        109,700
  Inventories
     Finished goods.........................................     645,200        500,700
     Work in process........................................     135,800        183,100
     Materials and supplies.................................      52,500         58,200
                                                              ----------     ----------
          Total inventories.................................     833,500        742,000
  Due from receivable financing subsidiary..................      26,800             --
  Other.....................................................      45,400         41,100
                                                              ----------     ----------
          Total current assets..............................   1,022,900        894,200
                                                              ----------     ----------
  Property, Plant and Equipment.............................   1,157,200      1,192,100
     Less accumulated depreciation..........................     745,900        758,200
                                                              ----------     ----------
          Net property, plant and equipment.................     411,300        433,900
                                                              ----------     ----------
Other Assets
  Goodwill (less accumulated amortization of $356,200 and
     $336,200, respectively)................................     666,300        686,300
  Deferred income taxes.....................................      36,700         36,700
  Other.....................................................     146,500        238,700
                                                              ----------     ----------
          Total other assets................................     849,500        961,700
                                                              ----------     ----------
                                                              $2,283,700     $2,289,800
                                                              ==========     ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Current maturities of long-term debt......................  $  650,200     $  270,500
  Trade accounts payable....................................      87,300        119,700
  Other accounts payable and accrued expenses...............     299,200        226,700
                                                              ----------     ----------
          Total current liabilities.........................   1,036,700        616,900
                                                              ----------     ----------
Noncurrent Liabilities
  Long-term debt............................................     682,200        856,600
  Notes and accounts payable -- affiliates..................     438,600             --
  Other.....................................................     266,000        267,400
                                                              ----------     ----------
          Total noncurrent liabilities......................   1,386,800      1,124,000
                                                              ----------     ----------
Preferred Stock.............................................      71,700             --
                                                              ----------     ----------
Common Stockholders' Equity (Deficiency)....................    (211,500)       548,900
                                                              ----------     ----------
                                                              $2,283,700     $2,289,800
                                                              ==========     ==========
</TABLE>

                            See accompanying notes.
                                        2
<PAGE>   4

                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                   NINE MONTHS ENDED
                                          ------------------------------       ------------------------------
                                          OCTOBER 2,       SEPTEMBER 26,       OCTOBER 2,       SEPTEMBER 26,
                                             1999              1998               1999              1998
                                          ----------       -------------       ----------       -------------
<S>                                       <C>              <C>                 <C>              <C>
Net sales
  Unrelated parties...................    $ 548,000          $593,700          $1,508,400        $1,678,900
  Affiliates..........................      275,000                --             275,000                --
                                          ---------          --------          ----------        ----------
                                            823,000           593,700           1,783,400         1,678,900
                                          ---------          --------          ----------        ----------
Cost of sales
  Unrelated parties...................      513,300           414,600           1,253,900         1,145,500
  Affiliates..........................      355,400                --             355,400                --
                                          ---------          --------          ----------        ----------
                                            868,700           414,600           1,609,300         1,145,500
                                          ---------          --------          ----------        ----------
  Gross earnings (loss)...............      (45,700)          179,100             174,100           533,400
Selling, general and
  administrative expenses.............      137,000           100,800             315,400           281,100
Goodwill amortization.................        6,600             6,600              19,900            19,900
                                          ---------          --------          ----------        ----------
  Operating earnings (loss)...........     (189,300)           71,700            (161,200)          232,400
Interest expense......................      (26,200)          (23,100)            (72,700)          (74,600)
Other expense -- net..................      (25,700)           (2,800)            (18,100)           (3,100)
                                          ---------          --------          ----------        ----------
  Earnings (loss) before income tax
     provision........................     (241,200)           45,800            (252,000)          154,700
Income tax provision..................        1,800            (4,600)              1,200             7,800
                                          ---------          --------          ----------        ----------
  Net earnings (loss).................    $(243,000)         $ 50,400          $ (253,200)       $  146,900
                                          =========          ========          ==========        ==========
</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>
                                                                      NINE MONTHS ENDED
                                                                ------------------------------
                                                                OCTOBER 2,       SEPTEMBER 26,
                                                                   1999              1998
                                                                ----------       -------------
<S>                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings (loss).......................................    $(253,200)         $ 146,900
  Adjustments to reconcile to net cash provided by (used
     for) operating activities:
     Depreciation and amortization..........................       90,200             84,900
     Deferred income tax provision..........................           --             (4,900)
     Increase in working capital............................     (117,000)          (189,100)
     Other-net..............................................      (24,700)           (13,600)
                                                                ---------          ---------
       Net cash provided by (used for) operating
        activities..........................................     (304,700)            24,200
                                                                ---------          ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures......................................      (28,000)           (25,000)
  Proceeds from asset sales.................................       20,500             68,200
  Payment on Acme Boot debt guarantee.......................           --            (60,800)
  Other-net.................................................      (19,600)            (4,100)
                                                                ---------          ---------
       Net cash used for investing activities...............      (27,100)           (21,700)
                                                                ---------          ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of long-term debt..................      240,200                 --
  Proceeds under line-of-credit agreements..................      676,800            754,300
  Payments under line-of-credit agreements..................     (486,800)          (643,400)
  Principal payments on long-term debt and capital leases...     (236,400)          (122,200)
  Increase in affiliate notes and accounts payable..........      174,700                 --
  Preferred stock dividends.................................       (1,100)                --
  Common stock issued.......................................           --              6,800
  Common stock repurchased..................................           --             (3,000)
                                                                ---------          ---------
       Net cash provided by (used for) financing
        activities..........................................      367,400             (7,500)
                                                                ---------          ---------
Net increase (decrease) in Cash and cash equivalents
  (including restricted cash)...............................       35,600             (5,000)
Cash and cash equivalents (including restricted cash) at
  beginning of period.......................................        1,400             16,100
                                                                ---------          ---------
Cash and cash equivalents (including restricted cash) at end
  of period.................................................    $  37,000          $  11,100
                                                                =========          =========
</TABLE>

                            See accompanying notes.
                                        4
<PAGE>   6

                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

     1.  On March 4, 1999 Fruit of the Loom, LTD. ("FTL, Ltd."), a Cayman
Islands company, became the parent holding company of Fruit of the Loom, Inc.
("FTL, Inc." or the "Company") pursuant to a reorganization (the
"Reorganization") approved by the stockholders of FTL, Inc. on November 12,
1998. At the beginning of the third quarter, FTL, Inc. transferred ownership of
its Central American subsidiaries that perform essentially all of the Company's
sewing and finishing operations for the U.S. market to FTL Caribe Ltd., a Cayman
Islands company directly wholly owned by FTL, Ltd. Ownership of essentially all
of the businesses or subsidiaries of the Company located outside the United
States, other than certain interests of the Company in Canada and Mexico, and
the beneficial ownership of certain trademarks will be transferred to FTL, Ltd.
when the Reorganization is fully implemented. The Reorganization has been
accounted for at the historical cost basis of the combining companies.

     The condensed consolidated financial statements contained herein should be
read in conjunction with the consolidated financial statements and related notes
contained in the Company's Annual Report on Form 10-K for the year ended January
2, 1999. 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 nine months ended October 2, 1999
are not necessarily indicative of results that may be expected for the full
year.

     In connection with the Reorganization, all outstanding shares of Class A
common stock of FTL, Inc. were automatically converted into Class A ordinary
shares of FTL, Ltd., and all outstanding shares of Class B common stock of FTL,
Inc. were automatically converted into shares of exchangeable participating
preferred stock of FTL, Inc. (the "FTL, Inc. Preferred Stock"). The FTL, Inc.
Preferred Stock (5,229,000 shares outstanding) in the aggregate (i) has a
liquidation value of $71,700,000, which is equal to the fair market value of the
FTL, Inc. Class B common stock based upon the $13.71 average closing price of
FTL, Inc. Class A common stock on the New York Stock Exchange for the 20 trading
days prior to March 4, 1999, (ii) is entitled to receive cumulative cash
dividends of 4.5% per annum of the liquidation value, payable quarterly, (iii)
is exchangeable at the option of the holder, in whole or from time to time in
part, at any time for 4,981,000 FTL, Ltd. Class A ordinary shares, (iv) is
convertible at the option of the holder, in whole or from time to time in part,
at any time for 4,981,000 shares of FTL, Inc. common stock, (v) participates
with the holders of FTL, Inc. common stock in all dividends and liquidation
payments in addition to its preference payments on an as converted basis, (vi)
is redeemable by FTL, Inc., at its option, after three years at a redemption
price equal to the then fair market value of FTL, Inc. Preferred Stock as
determined by a nationally recognized investment banking firm, and (vii) has the
right to vote on all matters put to a vote of the holders of FTL, Inc. common
stock, voting together with such holders as a single class, and is entitled to
the number of votes which such holder would have on an as converted basis.

     The fixed dividend on the FTL, Inc. Preferred Stock of 4.5% of the
liquidation preference of $71,700,000 equals $3,200,000 on an annual basis. In
addition, preferred stockholders participate in FTL, Inc.'s earnings after
provision for the fixed preferred stock dividend. Participation in earnings is
determined as the ratio of preferred shares outstanding to the total of
preferred and common shares outstanding (7.2% at October 2, 1999). Preferred
stockholder participation in losses is limited to the preferred stockholders'
prior participation in earnings. Because FTL, Inc. had a loss in the three and
six months ended October 2, 1999, the preferred stock participation is limited
to the fixed preferred dividend of $800,000 and $1,900,000, respectively.

     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.

     FTL, Inc. sells cut cloth to FTL, Ltd. and purchases finished goods from
FTL, Ltd. Total sales of cut cloth aggregated $275,000,000 for the three and
nine months ended October 2, 1999 (none in corresponding periods in 1998). In
addition, cost of sales affiliates aggregated $355,400,000 for the three and
nine months

                                        5
<PAGE>   7
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

ended October 2, 1999 (none in corresponding periods in 1998). Cost of
sales-affiliates includes $80,400,000 representing FTL, Ltd.'s gross margin on
sales of finished goods to the Company for the three months ended October 2,
1999.

     2.  No dividends were declared on the Company's common stock for the
nine-month periods ended October 2, 1999 and September 26, 1998.

     3.  The Company's income tax provision for the first nine months of 1999
reflects a provision for European income taxes. The Company has increased its
deferred tax asset valuation allowances to offset U.S. Federal and state income
tax benefits potentially available from the carryforward of its 1999 operating
loss to future tax years.

     The Company's effective income tax rate of 5.0% for the first nine months
of 1998 differed from the U.S. Federal statutory rate of 35% primarily due to
the impact of foreign earnings, certain of which are taxed at lower rates than
in the U.S., and to reduction of deferred tax asset valuation allowances
attributable to 1997 special charges. These favorable factors were partially
offset by goodwill amortization, a portion of which is not deductible for U.S.
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.

                                        6
<PAGE>   8
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

     A rollforward of the 1995 special charges from January 2, 1999 through
October 2, 1999 is presented below (in thousands of dollars):

<TABLE>
<CAPTION>
                                           RESERVE                                        RESERVE
                                           BALANCE                                        BALANCE
                                          JANUARY 2,     CASH      INCOME      OTHER     OCTOBER 2,
                                             1999      PAYMENTS   (EXPENSE)   ACTIVITY      1999
                                          ----------   --------   ---------   --------   ----------
<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............        --          --        --         --            --
Changes in estimates of insurance
  liabilities...........................     9,500       6,300        --         --         3,200
Costs related to expected increases in
  workers' compensation and health and
  welfare costs.........................        --          --        --         --            --
Costs related to termination of certain
  lease obligations.....................        --          --        --         --            --
Costs related to severance of the hourly
  workforce.............................        --          --        --         --            --
Other...................................       200          --        --         --           200
                                           -------     -------       ---        ---        ------
                                             9,700       6,300        --         --         3,400
Severance...............................        --          --        --         --            --
Other asset write downs, valuation
  reserves and other reserves...........        --          --        --         --            --
Changes in estimates of certain retained
  liabilities of former subsidiaries....    10,500       6,500        --         --         4,000
Termination of management agreement.....        --          --        --         --            --
                                           -------     -------       ---        ---        ------
                                           $20,200     $12,800       $--        $--        $7,400
                                           =======     =======       ===        ===        ======
</TABLE>

     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).

                                        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 January 2, 1999 through
October 2, 1999 is presented below (in thousands of dollars):

<TABLE>
<CAPTION>
                                                RESERVE                                            RESERVE
                                                BALANCE                                            BALANCE
                                               JANUARY 2,      CASH       INCOME       OTHER      OCTOBER 2,
                                                  1999       PAYMENTS    (EXPENSE)    ACTIVITY       1999
                                               ----------    --------    ---------    --------    ----------
<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.................................   $ 60,100     $   100      $10,200     $25,200      $ 24,600
Impairment of mills to be sold...............     75,400          --           --      54,900        20,500
Lease residual guarantees....................     61,000      12,900           --          --        48,100
Other equipment..............................      6,200          --           --          --         6,200
                                                --------     -------      -------     -------      --------
                                                 202,700      13,000       10,200      80,100        99,400
Severance costs..............................        200          --           --          --           200
Other accruals...............................      2,400         500           --          --         1,900
                                                --------     -------      -------     -------      --------
                                                 205,300      13,500       10,200      80,100       101,500
                                                --------     -------      -------     -------      --------
IMPAIRMENT OF EUROPEAN MANUFACTURING AND
  DISTRIBUTION FACILITIES
Impairment of long lived assets..............         --          --           --          --            --
Other accruals...............................      1,100          --           --         600           500
                                                --------     -------      -------     -------      --------
                                                   1,100          --           --         600           500
                                                --------     -------      -------     -------      --------
PRO PLAYER INCENTIVE COMPENSATION
  AGREEMENT..................................         --          --           --          --            --
                                                --------     -------      -------     -------      --------
OTHER ASSET WRITE-DOWNS AND RESERVES
Inventory valuation provisions...............         --          --           --          --            --
Other accruals...............................     11,300         900           --       1,800         8,600
                                                --------     -------      -------     -------      --------
                                                  11,300         900           --       1,800         8,600
                                                --------     -------      -------     -------      --------
CHANGES IN ESTIMATES OF CERTAIN RETAINED
  LIABILITIES OF FORMER SUBSIDIARIES.........     10,600         500           --         800         9,300
                                                --------     -------      -------     -------      --------
Total pretax charges.........................   $228,300     $14,900      $10,200     $83,300      $119,900
                                                ========     =======      =======     =======      ========
</TABLE>

     Other activity includes $64,400,000 related to distribution centers and
yarn mills to be retained by the Company under its current operating plan. The
decision in the first quarter of 1999 to retain one distribution center and two
yarn mills was the result of continuing evolution in the mix of distribution
resources needed to service the Company's customers and overcapacity in U.S.
yarn production which prevented the Company from selling its two largest yarn
mills at acceptable prices. The Company had continued to operate these
facilities pending their sale. In accordance with GAAP these facilities have
been included in property, plant and equipment and are being depreciated at
their impaired value which approximates current fair value. Other activity also
includes an additional $15,700,000 related to facilities that have been sold.
The total selling price of the facilities sold aggregated $16,400,000 and
resulted in a gain of $10,200,000.

     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 provision of
$5,100,000 in the first nine months of 1998, substantially all of which occurred
in the first quarter of 1998.

                                        8
<PAGE>   10
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

     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 ("CERCLA"), 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 October 2, 1999 related to discontinued operations consist primarily
of certain environmental reserves of approximately $27,900,000 and product
liability reserves of approximately $3,800,000. During 1998, the Company
purchased insurance coverage for potential cleanup cost expenditures from
approximately the level of current environmental reserves up to $100,000,000 for
certain sites with on-going remediation, pollution liability coverage for claims
arising out of pollution conditions at owned locations including continuing
operations, sold facilities and non-owned sites and product liability coverage
for claims arising out of products manufactured by the sold operations.
Management believes that adequate reserves have been established to cover
potential claims based on facts currently available and current Superfund and
CERCLA 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 1999 and future years.

     On February 24, 1999, the Board of Directors, excluding Mr. Farley,
authorized the Company to guarantee a bank loan of $65,000,000 to Mr. Farley in
connection with Mr. Farley's refinancing and retirement of his $26,000,000 and
$12,000,000 loans previously guaranteed by the Company and other indebtedness of
Mr. Farley. The Company's obligations under the guarantee are secured by
2,507,512 shares of FTL, Inc. Preferred Stock and all of Mr. Farley's assets. In
consideration of the guarantee, which is scheduled to expire in September 2000,
Mr. Farley pays an annual guarantee fee equal to 2% of the outstanding principal
balance of the loan. The Board of Directors received an opinion from an
independent financial advisor that the terms of the transaction are commercially
reasonable. As of November 15, 1999, the balance outstanding under the loan
approximated $59,100,000, with an additional $1,300,000 available to Mr. Farley
solely to fund interest as determined under the agreement. Based on management's
assessment of existing facts and circumstances of Mr. Farley's financial
condition, the Company recorded a $10,000,000 charge in the third quarter of
1999 related to the Company's evaluation of its exposure under the guarantee.
The Company continues to evaluate its exposure under the guarantee.

     William Farley, Chairman of the Company's Board of Directors, relinquished
the additional duties of chief executive officer and chief operating officer in
August 1999 at the direction of the Board. The Company recorded a provision of
$27,400,000 in the third quarter of 1999 for estimated future severance and
retirement obligations under Mr. Farley's employment agreement.

     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 October 2, 1999, the Company
had a contingent liability to repay, in whole or in part, grants received of
approximately $25,500,000 in the event that the Company does not meet defined
employment levels or terminates operations in the Republic of Ireland, Northern
Ireland and Germany.

                                        9
<PAGE>   11
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

     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 are current or former officers of
the Company, in the United States District Court for the Western District of
Kentucky ("New England Action"). 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, the Company,
with the knowledge and assistance of the individual defendants, made certain
material misrepresentations and failed to disclose certain material facts about
the Company's condition and prospects during the Class Period, causing the
plaintiff and the class to buy Company stock or options 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. The defendants filed a motion to dismiss the action,
which was denied. The defendants also filed a motion to change venue from
Bowling Green, Kentucky, to Chicago, Illinois. That motion has also been denied.
All defendants have filed an answer to the complaint.

     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 effect 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.

     On August 26, 1998, Carol Bradley filed a purported derivative action on
behalf of the Company, against William Farley, Richard C. Lappin, Omar Z. Al
Askari, Dennis S. Bookshester, Henry A. Johnson, Mark H. McCormack, Larry K.
Switzer, A. Lorne Weil and Sir Brian Wolfson, each of whom is a current or
former director of the Company, and the Company, as a nominal defendant, in the
Warren Circuit Court of the State of Kentucky. The plaintiff asserts various
common law claims against the individual defendants including, inter alia,
breach of fiduciary duty, waste of corporate assets, breach of contract and
constructive fraud claims. The plaintiff also asserts an insider trading claim
against defendants Farley, Lappin and Switzer. The claims asserted against the
individual defendants are based on the same alleged misrepresentations and
omissions which form the basis of the claims asserted by the plaintiff in the
New England Action as described above. The plaintiff seeks unspecified
compensatory and punitive damages, attorneys' fees and costs and ancillary
relief.

     On September 18, 1998, defendant Farley, with the consent of the Company,
removed the action to the United States District Court for the Western District
of Kentucky. Those defendants subsequently filed a motion to dismiss on the
ground that the plaintiff failed to make an appropriate demand on the Company
prior to filing the action. In August 1999, the motion was granted in favor of
the defendants and the case was dismissed. The plaintiffs thereupon filed a
motion to amend their complaint. The court granted the Bradley plaintiffs leave
to amend their complaint by November 7, 1999. As of November 12, 1999 no amended
complaint had been filed in the Bradley case.

     6.  The Company's debt instruments, principally its Credit Agreement,
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. As of the most recent covenant compliance reporting date, the
Company failed to meet certain of the financial covenants under its Credit
Agreement. The Company has obtained a waiver from its bank group for the
financial covenants under the Credit Agreement through January 31, 2000. The
Company expects to renegotiate financial covenants with its bank group based on
its 2000 business plan. The entire outstanding balances under the bank term loan
and revolving credit agreement have been classified

                                       10
<PAGE>   12
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

as Current maturities of long-term debt in the accompanying condensed
consolidated balance sheet as of October 2, 1999. If the Company ultimately
fails to comply with the financial covenants in its Credit Agreement, the
lenders are entitled to demand payment and/or foreclose upon their collateral.
If the lenders accelerate payment on the debt, a cross default will occur on the
Company's other existing debt agreements, entitling these lenders to demand
payment and/or foreclose upon their collateral. There can be no assurance that
the Company would be able to obtain financing to satisfy the obligations to its
lenders. Under such circumstances, the Company may be required to pursue other
alternatives such as the sale of substantial assets or the issuance of new
securities.

     7.  Comprehensive income was as follows (in thousands of dollars).

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED           NINE MONTHS ENDED
                                      --------------------------   --------------------------
                                      OCTOBER 2,   SEPTEMBER 26,   OCTOBER 2,   SEPTEMBER 26,
                                         1999          1998           1999          1998
                                      ----------   -------------   ----------   -------------
<S>                                   <C>          <C>             <C>          <C>
Net earnings (loss).................  $(243,000)      $50,400      $(253,200)     $146,900
Foreign currency translation
  adjustments -- net................      5,900         7,900        (10,700)       (4,400)
                                      ---------       -------      ---------      --------
  Comprehensive income (loss).......  $(237,100)      $58,300      $(263,900)     $142,500
                                      =========       =======      =========      ========
</TABLE>

     8.  The Company's 8 7/8% senior notes due April 2006 ("8 7/8% Senior
Notes") are fully and unconditionally guaranteed on a senior unsecured basis,
jointly and severally, by each of the Company's principal, wholly-owned domestic
subsidiaries (the "Guarantor Subsidiaries"). Substantially all of the Company's
operating income and cash flow is generated by its subsidiaries. As a result,
funds necessary to meet the Company's debt service obligations are provided in
part by distributions or advances from its subsidiaries. Under certain
circumstances, contractual and legal restrictions, as well as the financial
condition and operating requirements of the Company's subsidiaries could limit
the Company's ability to obtain cash from its subsidiaries for the purpose of
meeting its debt service obligations. There are currently no significant
restrictions on the ability of the Guarantor Subsidiaries to make distributions
to the Company.

     The supplemental guarantor condensed consolidating financial statements
present:

          (a) Supplemental condensed consolidating balance sheets as of October
     2, 1999 and January 2, 1999, and supplemental condensed consolidating
     summaries of operations and cash flows for the nine months ended October 2,
     1999 and September 26, 1998;

          (b) The non-guarantor subsidiaries combined;

          (c) The Guarantor Subsidiaries combined, with investments in
     non-guarantor subsidiaries accounted for using the equity method;

          (d) Fruit of the Loom, Inc. with investments in subsidiaries accounted
     for using the equity method; and

          (e) Elimination entries necessary to consolidate the Company and all
     of its subsidiaries.

     Separate financial statements of individual Guarantor Subsidiaries are not
presented because the Guarantor Subsidiaries are jointly, severally and
unconditionally liable under the guarantees, are wholly-owned by the Company,
and the Company believes the supplemental guarantor/non-guarantor condensed
consolidating financial statements as presented are more meaningful in
understanding the financial position of the Company and its Guarantor
Subsidiaries.

                                       11
<PAGE>   13
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                  (UNAUDITED)
                                OCTOBER 2, 1999
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                             COMBINED         COMBINED                          ELIMINATION
                                           NON-GUARANTOR     GUARANTOR         FRUIT OF             AND
                                           SUBSIDIARIES     SUBSIDIARIES    THE LOOM, INC.    RECLASSIFICATION    CONSOLIDATED
                                           -------------    ------------    --------------    ----------------    ------------
<S>                                        <C>              <C>             <C>               <C>                 <C>
ASSETS
Current Assets
  Cash and cash equivalents
    (including restricted cash)........      $  8,200        $    2,100       $   26,700        $                  $   37,000
  Notes and accounts receivable
    (less allowance for possible losses
    of $10,800)........................        63,300            13,400            3,500                               80,200
  Inventories
    Finished Goods.....................        65,400           579,800               --                              645,200
    Work in process....................        11,100           124,700               --                              135,800
    Materials and supplies.............         8,600            43,900               --                               52,500
                                             --------        ----------       ----------        -----------        ----------
        Total inventories..............        85,100           748,400               --                              833,500
  Due from receivable financing
    subsidiary.........................            --            26,800               --                               26,800
  Other................................         3,700            38,000            3,700                               45,400
                                             --------        ----------       ----------        -----------        ----------
        Total current assets...........       160,300           828,700           33,900                            1,022,900
                                             --------        ----------       ----------        -----------        ----------
Property, Plant and Equipment..........       202,900           951,900            2,400                            1,157,200
Less accumulated depreciation..........        87,500           656,300            2,100                              745,900
                                             --------        ----------       ----------        -----------        ----------
  Net property, plant and equipment....       115,400           295,600              300                              411,300
                                             --------        ----------       ----------        -----------        ----------
Other Assets
  Goodwill (less accumulated
    amortization of $356,200)..........            --            57,700          608,600                              666,300
  Affiliate notes and accounts
    receivable -- net..................         5,400                --        1,163,700         (1,169,100)
  Investment in subsidiaries...........            --           210,400               --           (210,400)
  Deferred income taxes................            --            36,700               --                               36,700
  Other................................         3,200           101,700           41,600                              146,500
                                             --------        ----------       ----------        -----------        ----------
        Total other assets.............         8,600           406,500        1,813,900         (1,379,500)          849,500
                                             --------        ----------       ----------        -----------        ----------
                                             $284,300        $1,530,800       $1,848,100        $(1,379,500)       $2,283,700
                                             ========        ==========       ==========        ===========        ==========
LIABILITIES AND
  STOCKHOLDERS' EQUITY
Current Liabilities
  Current maturities of long-term
    debt...............................      $    600        $       --       $  649,600        $                  $  650,200
  Trade accounts payable...............         8,600            78,300              400                               87,300
  Other accounts payable and accrued
    expenses...........................        24,200           201,400           73,600                              299,200
                                             --------        ----------       ----------        -----------        ----------
        Total current liabilities......        33,400           279,700          723,600                            1,036,700
                                             --------        ----------       ----------        -----------        ----------
Noncurrent Liabilities
  Long-term debt.......................        40,400            17,700          624,100                              682,200
  Affiliate notes and accounts
    payable -- net.....................            --         1,607,700               --         (1,169,100)          438,600
  Losses in excess of investment in
    subsidiaries.......................            --                --          498,600           (498,600)               --
  Other................................           100           124,300          141,600                              266,000
                                             --------        ----------       ----------        -----------        ----------
        Total noncurrent liabilities...        40,500         1,749,700        1,264,300         (1,667,700)        1,386,800
                                             --------        ----------       ----------        -----------        ----------
Preferred Stock........................            --                --           71,700                               71,700
                                             --------        ----------       ----------        -----------        ----------
Common Stockholder's Equity
  (Deficiency).........................       210,400          (498,600)        (211,500)           288,200          (211,500)
                                             --------        ----------       ----------        -----------        ----------
                                             $284,300        $1,530,800       $1,848,100        $(1,379,500)       $2,283,700
                                             ========        ==========       ==========        ===========        ==========
</TABLE>

                                       12
<PAGE>   14
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

           SUPPLEMENTAL CONDENSED CONSOLIDATING SUMMARY OF OPERATIONS
                                  (UNAUDITED)
                       NINE MONTHS ENDED OCTOBER 2, 1999
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                        COMBINED         COMBINED                          ELIMINATION
                                      NON-GUARANTOR     GUARANTOR         FRUIT OF             AND
                                      SUBSIDIARIES     SUBSIDIARIES    THE LOOM, INC.    RECLASSIFICATION    CONSOLIDATED
                                      -------------    ------------    --------------    ----------------    ------------
<S>                                   <C>              <C>             <C>               <C>                 <C>
Net sales
  Unrelated parties................     $219,100        $1,289,300       $                   $                $1,508,400
  Affiliates.......................           --           300,100                            (25,100)           275,000
                                        --------        ----------       ---------           --------         ----------
                                         219,100         1,589,400                            (25,100)         1,783,400
                                        --------        ----------       ---------           --------         ----------
Cost of sales
  Unrelated parties................      175,600         1,078,300                                             1,253,900
  Affiliates.......................           --           380,500                            (25,100)           355,400
                                        --------        ----------       ---------           --------         ----------
                                         175,600         1,458,800                            (25,100)         1,609,300
                                        --------        ----------       ---------           --------         ----------
  Gross earnings...................       43,500           130,600                                               174,100
Selling, general and administrative
  expenses.........................       48,700           217,600          49,100                               315,400
Goodwill amortization..............           --             2,200          17,700                                19,900
                                        --------        ----------       ---------           --------         ----------
  Operating earnings...............       (5,200)          (89,200)        (66,800)                             (161,200)
Interest expense...................       (2,600)             (400)        (69,700)                              (72,700)
Affiliated interest income
  (expense)........................         (800)          (56,200)         57,000                                    --
Equity in earnings of
  subsidiaries.....................           --           (11,500)       (162,600)           174,100                 --
Other income (expense) -- net......       (2,200)           (4,800)        (11,100)                              (18,100)
                                        --------        ----------       ---------           --------         ----------
  Earnings (loss) before income tax
    provision......................      (10,800)         (162,100)       (253,200)           174,100           (252,000)
Income tax provision...............          700               500              --                                 1,200
                                        --------        ----------       ---------           --------         ----------
  Net earnings (loss)..............     $(11,500)       $ (162,600)      $(253,200)          $174,100         $ (253,200)
                                        ========        ==========       =========           ========         ==========
</TABLE>

                                       13
<PAGE>   15
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

           SUPPLEMENTAL CONDENSED CONSOLIDATING SUMMARY OF CASH FLOWS
                                  (UNAUDITED)

                       NINE MONTHS ENDED OCTOBER 2, 1999
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                            COMBINED        COMBINED                        ELIMINATION
                                          NON-GUARANTOR    GUARANTOR        FRUIT OF            AND
                                          SUBSIDIARIES    SUBSIDIARIES   THE LOOM, INC.   RECLASSIFICATION   CONSOLIDATED
                                          -------------   ------------   --------------   ----------------   ------------
<S>                                       <C>             <C>            <C>              <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings (loss)..................     $(11,500)      $(162,600)      $(253,200)        $ 174,100        $(253,200)
  Adjustments to reconcile to net
  Cash used for operating activities:
  Equity in earnings of subsidiaries...           --          11,500         162,600          (174,100)              --
  Depreciation and amortization........       10,400          58,000          21,800                             90,200
  Deferred income tax provision........           --              --              --                                 --
  Increase in working capital..........       10,000        (183,900)         56,900                           (117,000)
  Other -- net.........................          400         (18,400)         (6,700)                           (24,700)
                                            --------       ---------       ---------         ---------        ---------
    Net cash used for operating
      activities.......................        9,300        (295,400)        (18,600)               --         (304,700)
                                            --------       ---------       ---------         ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures.................      (11,400)        (16,600)             --                            (28,000)
  Proceeds from asset sales............          200          20,300              --                             20,500
  Affiliate notes and accounts
    receivable.........................       27,300              --        (161,600)          134,300               --
  Other -- net.........................       (6,800)        (12,800)             --                            (19,600)
                                            --------       ---------       ---------         ---------        ---------
    Net cash used for investing
      activities.......................        9,300          (9,100)       (161,600)          134,300          (27,100)
                                            --------       ---------       ---------         ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of long-term
    debt...............................           --              --         240,200                            240,200
  Proceeds under line-of-credit
    agreements.........................       18,100              --         658,700                            676,800
  Payments under line-of-credit
    agreements.........................      (18,100)             --        (468,700)                          (486,800)
  Principal payments on long-term debt
    and capital leases.................      (12,200)           (400)       (223,800)                          (236,400)
  Affiliate notes and accounts
    payable............................           --         309,000              --          (134,300)         174,700
  Preferred stock dividends............           --              --          (1,100)                            (1,100)
                                            --------       ---------       ---------         ---------        ---------
    Net cash provided by financing
      activities.......................      (12,200)        308,600         205,300          (134,300)         367,400
                                            --------       ---------       ---------         ---------        ---------
Net increase in Cash and cash
  equivalents (including restricted
  cash)................................        6,400           4,100          25,100                             35,600
Cash and cash equivalents (including
  restricted cash) at beginning of
  period...............................        1,800          (2,000)          1,600                              1,400
                                            --------       ---------       ---------         ---------        ---------
Cash and cash equivalents (including
  restricted cash) at end of period....     $  8,200       $   2,100       $  26,700         $      --        $  37,000
                                            ========       =========       =========         =========        =========
</TABLE>

                                       14
<PAGE>   16
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                JANUARY 2, 1999
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                             COMBINED         COMBINED                          ELIMINATION
                                           NON-GUARANTOR     GUARANTOR         FRUIT OF             AND
                                           SUBSIDIARIES     SUBSIDIARIES    THE LOOM, INC.    RECLASSIFICATION    CONSOLIDATED
                                           -------------    ------------    --------------    ----------------    ------------
<S>                                        <C>              <C>             <C>               <C>                 <C>
ASSETS
Current Assets
  Cash and cash equivalents (including
    restricted cash)...................      $  1,800        $   (2,000)    $        1,600      $                  $    1,400
  Notes and accounts receivable (less
    allowance for possible losses of
    $12,000)...........................        65,100            35,800              8,800                            109,700
  Inventories
    Finished Goods.....................        80,700           420,000                 --                            500,700
    Work in process....................        13,700           169,400                 --                            183,100
    Materials and supplies.............         5,700            52,500                 --                             58,200
                                             --------        ----------     --------------      -----------        ----------
        Total inventories..............       100,100           641,900                 --                            742,000
  Other................................         1,500            28,500             11,100                             41,100
                                             --------        ----------     --------------      -----------        ----------
        Total current assets...........       168,500           704,200             21,500                            894,200
                                             --------        ----------     --------------      -----------        ----------
Property, Plant and Equipment..........       203,800           986,000              2,300                          1,192,100
Less accumulated depreciation..........        82,100           674,200              1,900                            758,200
                                             --------        ----------     --------------      -----------        ----------
  Net property, plant and equipment....       121,700           311,800                400                            433,900
                                             --------        ----------     --------------      -----------        ----------
  Other Assets
    Goodwill (less accumulated
    amortization of $336,200)..........            --            60,100            626,200                            686,300
  Affiliate notes and accounts
    receivable -- net..................        32,700                --          1,002,100       (1,034,800)               --
  Investment in subsidiaries...........            --           230,300             87,500         (317,800)               --
  Deferred income taxes................            --            36,700                 --                             36,700
  Other................................         2,800           198,100             37,800                            238,700
                                             --------        ----------     --------------      -----------        ----------
        Total other assets.............        35,500           525,200          1,753,600       (1,352,600)          961,700
                                             --------        ----------     --------------      -----------        ----------
                                             $325,700        $1,541,200     $    1,775,500      $(1,352,600)       $2,289,800
                                             ========        ==========     ==============      ===========        ==========
LIABILITIES AND
  STOCKHOLDERS' EQUITY
Current Liabilities
  Current maturities of long-term
    debt...............................      $    600        $      100     $      269,800      $                  $  270,500
  Trade accounts payable...............        11,400           107,600                700                            119,700
  Other accounts payable and accrued
    expenses...........................        26,200           171,400             29,100                            226,700
                                             --------        ----------     --------------      -----------        ----------
        Total current liabilities......        38,200           279,100            299,600                            616,900
                                             --------        ----------     --------------      -----------        ----------
Noncurrent Liabilities
  Long-term debt.......................        57,100            17,700            781,800                            856,600
  Affiliate notes and accounts
    payable -- net.....................            --         1,034,800                 --       (1,034,800)               --
  Other................................           100           122,100            145,200                            267,400
                                             --------        ----------     --------------      -----------        ----------
        Total noncurrent liabilities...        57,200         1,174,600            927,000       (1,034,800)        1,124,000
                                             --------        ----------     --------------      -----------        ----------
Common Stockholder's Equity............       230,300            87,500            548,900         (317,800)          548,900
                                             --------        ----------     --------------      -----------        ----------
                                             $325,700        $1,541,200     $    1,775,500      $(1,352,600)       $2,289,800
                                             ========        ==========     ==============      ===========        ==========
</TABLE>

                                       15
<PAGE>   17
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

           SUPPLEMENTAL CONDENSED CONSOLIDATING SUMMARY OF OPERATIONS
                                  (UNAUDITED)
                      NINE MONTHS ENDED SEPTEMBER 26, 1998
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                        COMBINED         COMBINED                          ELIMINATION
                                      NON-GUARANTOR     GUARANTOR         FRUIT OF             AND
                                      SUBSIDIARIES     SUBSIDIARIES    THE LOOM, INC.    RECLASSIFICATION    CONSOLIDATED
                                      -------------    ------------    --------------    ----------------    ------------
<S>                                   <C>              <C>             <C>               <C>                 <C>
Net sales.........................      $261,300        $1,455,700        $                 $ (38,100)        $1,678,900
Cost of sales.....................       182,300         1,001,300                            (38,100)         1,145,500
                                        --------        ----------        --------          ---------         ----------
  Gross earnings..................        79,000           454,400                                 --            533,400
Selling, general and
  administrative expenses.........        48,400           215,700          17,000                               281,100
Goodwill amortization.............            --             2,200          17,700                                19,900
                                        --------        ----------        --------          ---------         ----------
  Operating earnings..............        30,600           236,500         (34,700)                              232,400
Interest expense..................        (8,100)             (400)        (67,800)             1,700            (74,600)
Affiliated interest income
  (expense).......................          (800)          (70,800)         71,600                                    --
Equity in earnings of
  subsidiaries....................            --             1,400         163,200           (164,600)                --
Other income (expense) -- net.....       (18,000)            1,900          14,700             (1,700)            (3,100)
                                        --------        ----------        --------          ---------         ----------
  Earnings (loss) before income
    tax provision.................         3,700           168,600         147,000           (164,600)           154,700
Income tax provision..............         2,300             5,400             100                                 7,800
                                        --------        ----------        --------          ---------         ----------
  Net earnings (loss).............      $  1,400        $  163,200        $146,900          $(164,600)        $  146,900
                                        ========        ==========        ========          =========         ==========
</TABLE>

                                       16
<PAGE>   18
                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)

           SUPPLEMENTAL CONDENSED CONSOLIDATING SUMMARY OF CASH FLOWS
                                  (UNAUDITED)
                      NINE MONTHS ENDED SEPTEMBER 26, 1998
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                             COMBINED         COMBINED                          ELIMINATION
                                           NON-GUARANTOR     GUARANTOR         FRUIT OF             AND
                                           SUBSIDIARIES     SUBSIDIARIES    THE LOOM, INC.    RECLASSIFICATION    CONSOLIDATED
                                           -------------    ------------    --------------    ----------------    ------------
<S>                                        <C>              <C>             <C>               <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)....................      $   1,400       $ 163,200        $ 146,900          $(164,600)        $ 146,900
Adjustments to reconcile to net cash
  used for operating activities:
  Equity in earnings of subsidiaries...             --          (1,400)        (163,200)           164,600                --
  Depreciation and amortization........          9,100          54,300           21,500                               84,900
  Deferred income tax provision........            200          (5,100)              --                               (4,900)
  Increase in working capital..........        (43,700)       (180,200)          34,800                             (189,100)
  Other -- net.........................         10,500         (22,200)          (1,900)                             (13,600)
                                             ---------       ---------        ---------          ---------         ---------
    Net cash provided by operating
      activities.......................        (22,500)          8,600           38,100                 --            24,200
                                             ---------       ---------        ---------          ---------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................         (4,600)        (20,400)              --                              (25,000)
Proceeds from asset sales..............             --          68,200               --                               68,200
Payment on Acme Boot debt guarantee....             --              --          (60,800)                             (60,800)
Affiliate notes and accounts
  receivable...........................        (26,000)         48,600         (167,400)           144,800                --
Investment in Non-Guarantor Subsidiary
  common stock.........................             --        (299,000)              --            299,000                --
Liquidation of investment in affiliated
  trust................................             --              --          100,800           (100,800)               --
Other -- net...........................             --          (4,100)              --                               (4,100)
                                             ---------       ---------        ---------          ---------         ---------
    Net cash used for investing
      activities.......................        (30,600)       (206,700)        (127,400)           343,000           (21,700)
                                             ---------       ---------        ---------          ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under line-of-credit
  agreements...........................         16,300              --          738,000                              754,300
Payments under line-of-credit
  agreements...........................        (12,900)             --         (630,500)                            (643,400)
Principal payments on long-term debt
  and
  capital leases.......................       (200,300)         (1,000)         (21,700)           100,800          (122,200)
Affiliate notes and accounts payable...        (48,600)        193,400               --           (144,800)               --
Non-Guarantor Subsidiary common stock
  issued to parent.....................        299,000              --               --           (299,000)               --
Common stock issued....................             --              --            6,800                                6,800
Common stock repurchased...............             --              --           (3,000)                              (3,000)
                                             ---------       ---------        ---------          ---------         ---------
    Net cash used for financing
      activities.......................         53,500         192,400           89,600           (343,000)           (7,500)
                                             ---------       ---------        ---------          ---------         ---------
Net decrease in cash and cash
  equivalents (including restricted
  cash)................................            400          (5,700)             300                               (5,000)
Cash and cash equivalents (including
  restricted cash) at beginning of
  period...............................          4,600          10,100            1,400                               16,100
                                             ---------       ---------        ---------          ---------         ---------
Cash and cash equivalents (including
  restricted cash) at end of period....      $   5,000       $   4,400        $   1,700          $      --         $  11,100
                                             =========       =========        =========          =========         =========
</TABLE>

                                       17
<PAGE>   19

                    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 that 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 new products, the Company's
successful planning and execution of production necessary to maintain
inventories at levels sufficient to meet customer demand, the Company's
effective income tax rate, the success of planned advertising, marketing and
promotional campaigns, international activities, the resolution of legal
proceedings and other contingent liabilities and weather conditions in the
locations in which the Company manufactures and sells its products. 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 October 2, 1999 and the Company's consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-K for the year ended January 2, 1999.

  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 provision of
$5,100,000 in the first nine 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 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 required in the future.

     The 1995 and 1997 restructuring activities are generally progressing as
expected except for the decision to retain one distribution center and two yarn
mills at this time due to continuing evolution in the mix of distribution
resources needed to service the Company's customers and overcapacity in U.S.
yarn production which prevented the Company from selling its two largest yarn
mills at acceptable prices. Management currently anticipates completion of these
activities by the end of 2000. There can be no assurance, however, that all
activities will be completed by the end of 2000.

                                       18
<PAGE>   20
                    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)

  Third Quarter and First Nine Months of 1999 Compared with 1998

     The table below sets forth selected operating data for the Company (in
millions of dollars and as percentages of net sales).

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED              NINE MONTHS ENDED
                                        ---------------------------    ---------------------------
                                        OCTOBER 2,    SEPTEMBER 26,    OCTOBER 2,    SEPTEMBER 26,
                                           1999           1998            1999           1998
                                        ----------    -------------    ----------    -------------
<S>                                     <C>           <C>              <C>           <C>
Net sales...........................     $ 823.0         $593.7         $1,783.4       $1,678.9
Gross earnings (loss)...............       (45.7)         179.1            174.1          533.4
Gross margin........................        (5.5)%         30.2%             9.8%          31.8%
Operating earnings (loss)...........      (189.3)          71.7           (161.2)         232.4
Operating margin....................       (23.0)%         12.1%            (9.0)%         13.8%
</TABLE>

     The table below sets forth selected operating data for the Company on sales
to unrelated parties (in millions of dollars and as percentages of net sales).

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED              NINE MONTHS ENDED
                                      ---------------------------    ---------------------------
                                      OCTOBER 2,    SEPTEMBER 26,    OCTOBER 2,    SEPTEMBER 26,
                                         1999           1998            1999           1998
                                      ----------    -------------    ----------    -------------
<S>                                   <C>           <C>              <C>           <C>
Net sales...........................    $548.0         $593.7         $1,508.4       $1,678.9
Gross earnings......................      34.7          179.1            254.5          533.4
Gross margin........................       6.3%          30.2%            16.9%          31.8%
Operating earnings (loss)...........    (112.0)          71.7            (83.9)         232.4
Operating margin....................     (20.4)%         12.1%            (5.6)%         13.8%
</TABLE>

     Net sales increased $229,300,000 and $104,500,000 in the third quarter and
nine months of 1999 when compared with the corresponding periods of 1998;
however, net sales to unrelated parties decreased $45,700,000 or 7.7% in the
third quarter and $170,500,000 or 10.2% in the first nine months of 1999
compared to 1998. Retail products sales increased 10% over last year's third
quarter. Men's and boys' underwear sales experienced a 6.6% increase. Retail
Casualwear fleece sales were sharply higher compared with the 1998 period that
was impacted by unseasonably warm weather in September 1998. Casualwear sales
also increased in the third quarter of 1999 over 1998 as the Company's customers
requested 1999 shipments be shifted from the second quarter to the third
quarter. Activewear sales declined 14.1% due mainly to lower T-shirt prices and
the deferral of 1999 fleece volume from the third quarter to the fourth quarter.
Product shortages affected Activewear shipments early in the quarter. Sports &
Licensing sales in the 1999 quarter were lower on weaker demand for outerwear
apparel and other products. Sports and Licensing sales were also unfavorably
impacted due to a significant increase in merchandise into the market (as a
result of an inventory liquidation) by a major competitor. European retail and
imprint sales also declined. European retail sales of first quality products
declined $11,600,000 in the third quarter of 1999 to $13,900,000. These results
reflect the Company's decision to pursue the up-market retail channel in 1999.
European imprint sales of first quality products declined $6,600,000 in the
third quarter of 1999 to $32,700,000 as a result of reductions in volume of
$4,500,000 and price reductions of $2,100,000 due to competitive pressures.

     For the first nine months of 1999, Retail products sales increased 0.9%.
Men's and boys' underwear sales increased 7.5%, and casualwear sales (both T's
and fleece) were 6.2% ahead of last year, but Intimate apparel and Gitano sales
were down sharply. Intimate apparel sales declined 20.8% from $88,500,000 in the
first nine months of 1998 to $70,100,000 in the first nine months of 1999 due
principally to shortages in product availability. Gitano sales declined 35.5%
from $55,500,000 in the first nine months of 1998 to $35,800,000 in

                                       19
<PAGE>   21
                    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 first nine months of 1999 due to the loss of a major customer offset
partially by increases at other customers. Lower Activewear sales (down 20%)
reflected lower prices throughout the year and product availability problems for
most of the first eight months. Sports & Licensing sales have been unfavorable
to last year throughout 1999 due to the reasons noted in the preceding
paragraph. European sales were down on lower imprint and retail volume and
unfavorable currency effects (stronger U.S. dollar).

     Segment net sales were as follows (in millions of dollars).

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED              NINE MONTHS ENDED
                                      ---------------------------    ---------------------------
                                      OCTOBER 2,    SEPTEMBER 26,    OCTOBER 2,    SEPTEMBER 26,
                                         1999           1998            1999           1998
                                      ----------    -------------    ----------    -------------
<S>                                   <C>           <C>              <C>           <C>
NET SALES
Retail Products.....................    $310.9         $282.3         $  785.1       $  778.3
Activewear..........................     133.9          155.8            416.6          520.6
Sports & Licensing..................      48.6           68.3            102.7          151.1
Europe..............................      47.9           67.7            172.7          209.3
Other...............................       6.7           19.6             31.3           19.6
                                        ------         ------         --------       --------
  Subtotal -- Unrelated parties.....     548.0          593.7          1,508.4        1,678.9
  Affiliates........................     275.0             --            275.0             --
                                        ------         ------         --------       --------
  Total.............................    $823.0         $593.7         $1,783.4       $1,678.9
                                        ======         ======         ========       ========
</TABLE>

     Gross earnings decreased $224,800,000 and $359,300,000 in the third quarter
and nine months of 1999 when compared with the corresponding periods of 1998.
Gross earnings, however, on sales to unrelated parties decreased $144,400,000 or
80.6% in the third quarter and $278,900,000 or 52.3% in the first nine months of
1999 compared with a year ago. Gross margin on sales to unrelated parties
declined 23.9 percentage points to 6.3% of sales for the quarter and 14.9
percentage points to 16.9% of sales for the first nine months of 1999. In the
third quarter of 1999, sales volume and production mix, Activewear pricing,
higher production costs in the first quarter of 1999 and other costs accounted
for $52,600,000 of the decline. The balance of $91,800,000 is the result of
other charges. These charges included $20,000,000 of non-capitalized
manufacturing variances related principally to losses on closing cotton futures
contracts and costs associated with terminating contractors, $31,200,000 of
provisions for slow-moving and discontinued products, a $31,000,000 physical
inventory adjustment and a $9,600,000 charge for the effect of lower market
prices on a supply contract for denim resulting from a previously sold facility.
For the nine-month period, sales volume and production mix, Activewear pricing,
higher production costs and other costs accounted for $179,100,000 of the
decline. Also for the nine-month period in 1999, other charges aggregated
$99,800,000 which was $8,000,000 higher than in the third quarter of 1999 due to
additional provisions for slow moving and discontinued products in the first
half of 1999.

     The operating loss for the third quarter of 1999 on sales to unrelated
parties was unfavorable by $183,700,000 from the level of earnings reported in
the 1998 period, while the operating loss for the first nine months of 1999 on
sales to unrelated parties was unfavorable by $316,300,000 compared with the
level of earnings reported last year. The operating losses on sales to unrelated
parties represented 20.4% of sales to unrelated parties for the quarter and 5.6%
of sales to unrelated parties for the first nine months of 1999. In addition to
the gross earnings and margin factors noted above, selling, general and
administrative expenses on sales to unrelated parties in the third quarter
increased $39,300,000 over the same period last year and included an accrual of
$30,300,000 for nonrecurring severance costs. Shipping costs were higher in both
the third quarter and first nine months of 1999. The timing of advertising and
promotion costs resulted in higher

                                       20
<PAGE>   22
                    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)

expense in the third quarter of 1999 and lower expense in the first nine months
of 1999. Selling, general and administrative expense on sales to unrelated
parties as a percent of sales to unrelated parties increased 8.6 percentage
points to 25.6% for the third quarter of 1999 and 4.4 percentage points to 21.1%
for the first nine months of 1999.

     Segment operating earnings were as follows (in millions of dollars).

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED              NINE MONTHS ENDED
                                      ---------------------------    ---------------------------
                                      OCTOBER 2,    SEPTEMBER 26,    OCTOBER 2,    SEPTEMBER 26,
                                         1999           1998            1999           1998
                                      ----------    -------------    ----------    -------------
<S>                                   <C>           <C>              <C>           <C>
OPERATING EARNINGS (LOSS)
Retail Products.....................   $ (60.6)         $33.9         $ (33.5)        $109.5
Activewear..........................     (35.5)          22.5           (28.7)          93.3
Sports & Licensing..................      (1.3)           6.7            (8.8)           6.7
Europe..............................     (10.7)          10.1            (4.2)          29.1
Other...............................       2.7            5.1            11.2           13.7
Goodwill............................      (6.6)          (6.6)          (19.9)         (19.9)
                                       -------          -----         -------         ------
  Operating earnings (loss) --
     Unrelated parties..............    (112.0)          71.7           (83.9)         232.4
Affiliates..........................     (77.3)            --           (77.3)            --
                                       -------          -----         -------         ------
                                       $(189.3)         $71.7         $(161.2)        $232.4
                                       =======          =====         =======         ======
</TABLE>

     Interest expense increased $3,100,000 or 13.4% in the third quarter of 1999
and decreased $1,900,000 or 2.5% in the first nine months of 1999 compared with
1998. The third quarter increase largely reflected a higher average interest
rate. The nine month decrease largely reflected a lower average borrowing level
earlier in 1999 compared with 1998.

     Other expense -- net in the third quarter of 1999 was unfavorable
$22,900,000 when compared to the same 1998 period. Other expense -- net in the
first nine months of 1999 was unfavorable $15,000,000. Principal factors were
third quarter 1999 charges of $10,000,000 for a loss contingency on the
Company's guarantee of indebtedness and $8,000,000 for a litigation settlement.
The nine month comparison benefited from an increase in net gains from asset
sales, certain investments and a recovery on previously settled litigation in
1999, partially offset by a reduction last year in the liability related to the
Acme Boot guarantee. Receivable securitization costs totalled $2,700,000 in the
third quarter of 1999 compared with $2,600,000 in the 1998 period. Receivable
securitization costs totalled $7,300,000 in the first nine months of 1999
compared with $8,700,000 in last year's first nine months.

     The Company's income tax provision for the first nine months of 1999
reflects a provision for European income taxes. The Company has increased its
deferred tax asset valuation allowances to offset U.S. Federal and state income
tax benefits potentially available from the carryforward of its 1999 operating
loss to future tax years.

     The Company's effective income tax rate of 5.0% for the first nine months
of 1998 differed from the U.S. Federal statutory rate of 35% primarily due to
the impact of foreign earnings, certain of which are taxed at lower rates than
in the U.S., and to reduction of deferred tax asset valuation allowances
attributable to 1997 special charges. These favorable factors were partially
offset by goodwill amortization, a portion of which is not deductible for U.S.
Federal income taxes, and state income taxes.

                                       21
<PAGE>   23
                    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)

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 of its operations
approximately $615,000,000 of revolving lines of credit and $275,000,000 under
its receivables backed facility subject to the level of eligible receivables. As
of November 15, 1999, approximately $31,200,000 was available and unused under
the revolving lines; no amounts were unused under the receivables purchase
agreement.

     Operating activities used a net of $304,700,000 in cash in the first nine
months of 1999, compared with net cash provided of $24,200,000 by operations in
the same 1998 period. The significantly unfavorable cash flow from operations in
1999 is a direct result of the manufacturing problems the Company experienced in
1999, causing both substantially higher manufacturing costs and product
availability problems that impaired sales. In reconciling from Net earnings
(loss) to net operating cash flows, the unfavorable operating results produced a
greater investment in inventories, partially offset by a lower level of accounts
receivable. The working capital increase in 1999 was lower in total than last
year due to a smaller reduction in trade payables in 1999 combined with an
increase in accrued liabilities in 1999 versus a decrease in the 1998 period.

     Investing activities used $27,100,000 in 1999, compared with $21,700,000 in
the 1998 period. Proceeds from asset sales were $47,700,000 lower, and the 1999
period included a payment of $12,900,000 under the Company's synthetic lease
agreement and a repayment of $6,800,000 of employment grants under agreement
with the Republic of Ireland. The 1998 period included a payment of $60,800,000
to settle the Acme Boot debt guarantee. Capital spending, primarily to support
offshore assembly operations, increased $3,000,000 compared with the first nine
months of 1998 and is anticipated to total approximately $40,000,000 for the
full year.

     Net proceeds from financing activities were $367,400,000 in 1999, compared
with a net repayment of $7,500,000 in 1998, due to the unfavorable comparison in
operating cash flows. On March 25, 1999, FTL, Inc. issued $250,000,000 of its
8 7/8% Senior Notes due April 2006 (the "8 7/8% Senior Notes"). Net proceeds of
approximately $240,100,000 were initially used to repay outstanding borrowings
under FTL, Inc.'s Credit Agreement. Affiliate notes and accounts payable
increased by $174,700,000 in the third quarter of 1999.

     In order to satisfy its repurchase obligation arising from the
Reorganization, FTL, Inc. commenced an offer on April 5, 1999 to repurchase all
$250,000,000 of its 7 7/8% Senior Notes due October 15, 1999 (the "7 7/8% Senior
Notes") at a price equal to 101% of the principal amount thereof plus accrued
and unpaid interest. This offer expired on May 20, 1999. Holders of $204,200,000
of aggregate principal amount of the 7 7/8% Senior Notes tendered their notes.
On June 4, 1999, FTL, Inc. paid these tendering holders an aggregate purchase
price of $206,300,000 plus accrued interest. The remaining $45,800,000 principal
amount of the 7 7/8% senior notes matured by the terms of the indenture for
these notes and was repaid on October 15, 1999.

     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 January 1998
were 5,890,000 shares at an aggregate cost of $193,200,000.

     In October 1999, the Company replaced its receivables backed facility with
a commitment from a new lender. The new receivables backed facility is not
subject to defaults based on the Company's credit ratings and allows the Company
to sell to a third party up to a $275,000,000 undivided interest in a defined
pool of its trade accounts receivable, an increase of $25,000,000 over the old
facility. The maximum amount outstanding as defined under the facility varies
based upon the level of eligible receivables. Approximately $304,400,000 of
eligible receivables at October 2, 1999 and $220,700,000 of eligible receivables
at January 2, 1999 were sold to

                                       22
<PAGE>   24
                    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's unconsolidated receivable financing subsidiary, reducing
consolidated notes and accounts receivable. Proceeds of approximately
$221,500,000 and $208,800,000 from the ultimate purchaser at the respective
balance sheet dates were used to reduce borrowings outstanding under the
Company's revolving lines of credit. Such proceeds as of January 2, 1999,
included advances from the ultimate purchaser totalling $55,900,000 which were
included in trade accounts payable.

     Based on the Company's current operating and financial forecast, management
believes the funding available to the Company is sufficient to meet anticipated
requirements for capital expenditures, working capital and other needs through
January 1, 2000 (the Company's fiscal year-end). However, there can be no
assurance the Company will achieve its current forecast. If the Company fails to
achieve its current forecast, adequate funding under its current credit lines
may not be available for operating needs. In order to enhance its cash position,
the Company is closely managing its working capital and exploring the sale of
certain assets.

     The Company's debt instruments, principally its Credit Agreement, 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. As of the most recent covenant compliance reporting date, the
Company failed to meet certain of the financial covenants under its Credit
Agreement. The Company has obtained a waiver from its bank group for the
financial covenants under the Credit Agreement through January 31, 2000. The
Company expects to renegotiate financial covenants with its bank group based on
its 2000 business plan. The entire outstanding balances under the bank term loan
and revolving credit agreement have been classified as Current maturities of
long-term debt in the accompanying condensed consolidated balance sheet as of
October 2, 1999. If the Company ultimately fails to comply with the financial
covenants in its Credit Agreement, the lenders are entitled to demand payment
and/or foreclose upon their collateral. If the lenders accelerate payment on the
debt, a cross default will occur on the Company's other existing debt
agreements, entitling these lenders to demand payment and/or foreclose upon
their collateral. There can be no assurance that the Company would be able to
obtain financing to satisfy the obligations to its lenders. Under such
circumstances, the Company may be required to pursue other alternatives such as
the sale of substantial assets or the issuance of new securities.

THE EURO

     The adoption of a common currency by countries of the European Economic
Community beginning January 1, 1999 may ultimately expose the Company's European
operations to certain risk factors such as the resulting cross-border
transparency of pricing differences. Certain system conversion costs will also
necessarily be incurred. Because the Company already competes throughout Western
Europe, however, the emergence of a single market in this region would not
immediately expose the Company to increased competition and may present
opportunities for further economies of scale. Management has not completed its
study of the impact on the Company but anticipates no material adverse effect on
the Company's financial position or results of operations. Sales in the affected
countries totalled less than 10% of consolidated net sales in 1999 and 1998.

ACCOUNTING STANDARDS

     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 are
unique, they all result in offsetting changes in fair values or cash flows of
both the
                                       23
<PAGE>   25
                    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)

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. As amended by FAS 137
in June 1999, the Statement is effective for years beginning after June 15,
2000, 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.

YEAR 2000

     The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.

     The Company's plan to resolve the Year 2000 Issue involves the following
four phases: inventory/assessment, remediation, testing, and implementation. To
date, the Company has completed its assessment of all systems that could be
affected by the Year 2000 date. The completed assessment indicated that most of
the Company's significant information technology systems could be affected,
particularly the order, billing, and inventory systems. That assessment also
indicated that software and hardware (embedded chips) used in production and
manufacturing systems (hereafter also referred to as operating equipment) also
are at risk. Affected systems include technologies used in various aspects of
the manufacturing/distribution process. In addition, the Company has gathered
information about the Year 2000 compliance status of its significant customers,
suppliers and subcontractors, and continues to monitor their compliance.

     As of this filing, for its information technology exposures of mission
critical systems, the Company is 100% complete with all phases of remediation,
testing and deployment. The Company is 100% complete on the remediation and
testing phases of less critical systems, with redeployment complete for 95% of
them. Deployment of the final 5% of less critical systems will be complete by
the end of November 1999. Additionally, the Company monitors critical software
suppliers, trading partners and customers, so that any compliance changes in
their products are addressed in Company systems as they occur.

     The assessment phase of the Company's operating equipment was completed in
December 1998. Remediation, workaround, and replacement efforts are all now
complete.

     The Company's order entry system interfaces directly with significant
customers. The Company has worked with customers to ensure that the Company's
systems that interface directly with third parties are Year 2000 compliant. The
Company has completed assessment, remediation, testing and implementation of the
system.

     The Company has queried its significant suppliers and subcontractors, none
of which share information systems with the Company (external agents). The
Company has solicited and received Year 2000 compliance responses from suppliers
in an effort to reduce risk. To date, the Company is not aware of any external
agent with a Year 2000 issue that would materially impact the Company's results
of operations, liquidity, or capital resources. However, the Company has no
means of ensuring that external agents will be Year 2000 ready. The inability of
external agents to complete their Year 2000 resolution process in a timely
fashion could materially impact the Company. The effect of non-compliance by
external agents is not determinable.

     The Company utilized both internal and external resources to reprogram or
replace, test, and implement the software, hardware and operating equipment for
Year 2000 modifications. The total cost of the Year 2000

                                       24
<PAGE>   26
                    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)

project is estimated at $18,400,000 and is being funded through operating cash
flows. Through October 2, 1999, the Company has incurred costs, related to all
phases of the Year 2000 project, totaling approximately $17,000,000 (of which
$9,200,000 was incurred and expensed in 1998), all of which has been expensed,
including $1,400,000 in the three months ended October 2, 1999. Any remaining
expenditures related to repair of hardware and software will be expensed as
incurred.

     Management believes the Company has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company has
completed all necessary phases of the Year 2000 program.

     Disruptions in the economy generally resulting from Year 2000 issues could,
however, also materially adversely affect the Company. The Company could be
subject to litigation for computer systems product failure, for example
equipment shutdown or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

     The Company has determined a need for contingency plans to cover loss or
disruption of critical applications, vendors, communication/community systems,
and equipment. These plans were drafted in the first quarter of 1999, were
completed in the second quarter, and were approved in the third quarter of 1999.
Training and other preparations for contingency plan execution will take place
through December 1999 as needed. Continuous updates will be made as more
information is made available by external agents and the Company can better
assess its risks.

                                       25
<PAGE>   27

                    FRUIT OF THE LOOM, INC. AND SUBSIDIARIES

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In July and August 1999, a series of class action lawsuits were filed on
behalf of those who were terminated from the Company's Louisiana manufacturing
facilities between 1997 and 1998 alleging the Company improperly withheld
vacation pay from the employees upon termination. The plaintiff seeks vacation
pay, additional wages, attorneys' fees and all associated costs. In October
1999, the Company entered into a settlement agreement for approximately
$7,400,000 which is subject to the approval of the court and the members of the
class.

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
        (the "Credit Agreement"), 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)*  First Amendment to Credit Agreement dated March 26, 1998;
        Second Amendment to Credit Agreement dated July 2, 1998;
        Third Amendment to Credit Agreement date December 31, 1998;
        Fourth Amendment to Credit Agreement dated March 10, 1999;
        Second Amended and Restated Pledge Agreement dated March 10,
        1999 related to the Credit Agreement; and Bond Pledge
        Agreement dated March 10, 1999 related to the Credit
        Agreement (incorporated herein by reference to Exhibit 4(c)
        to the Company's Annual Report on Form 10-K for the year
        ended January 2, 1999).
 4(c)*  Indenture dated as of March 25, 1999, among Fruit of the
        Loom, Inc., as issuer, Fruit of the Loom, Ltd., as
        guarantor, certain subsidiaries of Fruit of the Loom, Inc.,
        as guarantors, and The Bank of New York, as trustee of the
        8 7/8% Senior Notes due 2006 (incorporated herein by
        reference to exhibit 4(c) to the Company's Quarterly Report
        on Form 10-Q for the quarter ended April 3, 1999).
 4(d)*  Fifth Amendment to Credit Agreement dated July 20, 1999
        (incorporated herein by reference exhibit 4(d) to the
        Company's Quarterly Report on Form 10-Q for the quarter
        ended July 3, 1999).
 4(e)   Security Agreement dated March 10, 1999.
 4(f)   First Amendment to Security Agreement dated July 20, 1999.
 4(g)   Sixth Amendment to Credit Agreement and Limited Waiver dated
        October 13, 1999.
 4(h)   Loan and Security Agreement dated as of October 29, 1999,
        among the financial institutions from time to time parties
        thereto (the "Lenders"), Bank of America, National
        Association as administrative "Agent" for the Lenders, Banc
        of America Securities LLC, as "Syndication Agent", and FTL
        Receivables Company, as "Borrower".
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).

                                       26
<PAGE>   28

     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 October 2, 1999.

                                       27
<PAGE>   29

                                   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)

                                          /s/      G. WILLIAM NEWTON
                                          --------------------------------------
                                                    G. William Newton
                                                  Vice President Finance
                                            and Acting Chief Financial Officer
                                          (Principal Financial Officer and duly
                                             authorized to sign on behalf of
                                                       Registrant)

Date: November 16, 1999

                                       28