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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

or

Commission File Number 0-24026

MAXWELL SHOE COMPANY INC.

(Exact name of registrant as specified in its charter)

(617) 364-5090

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report.)

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 þ No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Shares of common stock outstanding at March 4, 2004:

Class A   14,837,806            

Class B             None            

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

MAXWELL SHOE COMPANY INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited In Thousands — except per share amounts)

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MAXWELL SHOE COMPANY INC.

STATEMENTS OF INCOME

(Unaudited–In Thousands Except Per Share Amounts)

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MAXWELL SHOE COMPANY INC.

STATEMENTS OF CASH FLOW

(Unaudited–In Thousands)

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MAXWELL SHOE COMPANY INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

January 31, 2004

The accompanying unaudited financial statements of Maxwell Shoe Company Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2003.

Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. The denominator used to compute diluted income per share includes the effects of applying the treasury stock method to outstanding stock options, which assumes that all dilutive options are exercised. Options to purchase 207,500 and 412,500 shares of Common Stock were outstanding as of January 31, 2004 and 2003, respectively, but were not included in the calculation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the Common Shares during the periods and, therefore, the effect would be antidilutive.

On April 18, 2002, the Board of Directors approved a 3 for 2 stock split of the Class A Common Stock of Maxwell Shoe Company Inc. Additional stock certificates were mailed on May 17, 2002 to stockholders of record at the close of business on May 3, 2002. Cash was paid in lieu of fractional shares. All per share and outstanding share data presented in this Quarterly Report has been adjusted to take into account the 3 for 2 stock split.

The presentation of share data and the computations of basic and diluted earnings per share have been adjusted retroactively for all periods presented.

During December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation—Transition and Disclosure an Amendment of FASB Statement No.123.” SFAS 148 amends SFAS 123 to provide alternative methods of transition or a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We adopted the disclosure provision of SFAS 148 and will continue to follow APB 25 in accounting for our employee stock options. The adoption of SFAS 148 did not have any impact on our operating results or financial position.

We account for stock-based awards to employees and directors using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” Under the intrinsic value method, when the exercise price of employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized in the consolidated statements of operations. Restricted stock and discounted stock option awards, which are granted at less than fair market value, result in the recognition of deferred compensation. Deferred compensation is shown as a reduction of stockholders’ equity and is amortized to operating expenses over the vesting period of the stock award. We amortize deferred compensation for each vesting layer of a stock award using the straight-line method. Based on the additional disclosure requirements under SFAS 148 the following table is a reconciliation of net earnings and earnings per share had we adopted the fair value recognition provisions of SFAS 123.

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The fair value of the stock options used to calculate the pro forma net income and earnings per share amounts above was estimated using the Black-Scholes options pricing model.

On February 25, 2004, the Company received an unsolicited acquisition proposal from Jones Apparel Group, Inc. The Company has retained legal and financial advisers to assist the Board of Directors in evaluating this proposal.

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

Results of Operations

The following table sets forth net sales by product line or category of business:

Three Months Ended January 31, 2004 Compared to Three Months Ended January 31, 2003

Net sales were $53.6 million for the three months ended January 31, 2004 compared to $45.7 million for the same period in the prior year, an increase of 17.3%. The net sales increase was primarily due to increases in all the Company’s lines of business. The other sales category represents Kasper and Albert Nipon footwear.

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Gross profits in the first quarter of fiscal 2004 were $14.3 million compared to $12.4 million in the first quarter of fiscal 2003, or 26.7% of net sales as compared to 27.2% for the same quarter in 2003. Gross profit as a percentage of net sales decreased due to the continued promotional environment at retail.

Selling, general and administrative expenses as a percentage of net sales was 17.0% or $9.1 million for the quarter ended January 31, 2004, as compared to 19.1% or $8.7 million for the same quarter in fiscal 2003. While absolute expense increased, the Company was able to favorably leverage its operating expenses.

The Company’s effective tax rate for the first quarter of year 2004 is 40%, the same as the first fiscal quarter of 2003.

At January 31, 2004 and 2003, the Company had unfilled customer orders (backlog), of $81.9 million and $76.9 million, respectively, an increase of 6.5%. The backlog at a particular time is affected by a number of factors, including seasonality and the scheduling of manufacturing and shipment of products. Orders generally may be canceled by customers without financial penalty. Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may not be indicative of eventual actual shipments to customers. The Company expects that substantially all of its backlog at January 31, 2004 will be shipped within six months from such date.

Liquidity and Capital Resources

The Company has relied primarily upon internally generated cash flows from operations to finance its operations and expansion. Net cash used by operating activities totaled approximately $6.5 million in the three month period ended January 31, 2004, as compared to $1.4 million of net cash used for the same period in 2003. Working capital was $147.3 million at January 31, 2004 as compared to $127.9 million at October 31, 2003. Working capital may vary from time to time as a result of seasonal requirements, the timing of early factory shipments and the Company’s in-stock position, which requires increased inventories, and the timing of accounts receivable collections.

The Company currently has in place with a financial institution a $40.0 million discretionary demand credit facility in favor of the Company. A portion of the revolving credit facility can be utilized to issue letters of credit to guarantee payment of the Company’s purchases of footwear manufactured overseas. As of January 31, 2004, total outstanding letters of credit were $21.7 million and $18.3 million was available for future borrowings.

The Company anticipates that it will be able to satisfy its cash requirements for the remainder of fiscal 2004, including its expected growth, primarily with cash flow from operations.

“Forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995 (“the Act”), include certain written and oral statements made, or incorporated by reference, by the Company or its representatives in this report, other reports, filings with the Securities and Exchange Commission (“the S.E.C.”), press releases, conferences, or otherwise. Such forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will likely result,” or any variations of such words with similar meaning. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Investors should carefully review the risk factors set forth in other reports or documents the Company files with the S.E.C., including Forms 10-Q, 10-K and 8-K.

Some of the other risks and uncertainties that should be considered include, but are not limited to, the following: international, national and local general economic and market conditions; the inability to source the Company’s products because of adverse political or economic factors or the imposition of trade or duty restrictions; changing consumer preferences; changing fashion trends; intense competition among other footwear brands; demographic changes; risk of the Company’s licensors of trademarks or other intellectual property rights filing bankruptcy and potentially rejecting license agreements to which the Company is a party; popularity of particular designs and products; seasonal and geographic demand for the Company’s products; fluctuations and difficulty in forecasting operating results, including, without limitation, the ability of the Company to continue, manage or forecast its growth and inventories; risk of unavailability or price increase in raw materials needed to make the Company’s products; new product development and commercialization; the ability to secure and protect trademarks;

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performance and reliability of products; customer service; adverse publicity; the loss of significant customers or suppliers; dependence on distributors, buying agents and independent contractors; increased cost of freight and transportation to meet delivery deadlines; changes in business strategy or development plans; general risks of doing business outside the United States; including without limitation, import duties, tariffs, quotas and political and economic instability; changes in government regulations; liability and other claims asserted against the Company; the ability to attract and retain qualified personnel; the risk of the Company’s customers filing bankruptcy and other factors referenced or incorporated by reference in this report and other reports.

The Company operates in a very competitive and rapidly changing environment. New risk factors can arise and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

Investors should also be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company’s policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report.

Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

The Company undertakes no obligation to release publicly the results of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Item 3.    Quantitative and Qualitative Disclosure About Market Risk

The Company does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this Item 3. The Company’s cash is held in checking accounts or highly liquid investments with original maturities of three months or less.

Item 4.    Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.

(b) Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company’s internal controls or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II.    OTHER INFORMATION

Item 1:    Legal Proceedings.

None.

Item 2:    Changes in Securities.

None.

Item 3:    Defaults Upon Senior Securities.

None.

Item 4:    Submission of Matters to a Vote of Security Holders.

None.

Item 5:    Other Information.

None.

Item 6:    Exhibits and Reports on Form 8-K:

(a) Exhibits

Form of Maxwell Shoe Company Inc. Employee Nonqualified Stock Option Agreement pursuant to the 2003 Stock Incentive Plan of Maxwell Shoe Company Inc.

(b) Report on Form 8-K

On December 19, 2003, the Company issued a press release discussing its results of operations and financial condition for the fourth quarter and the year ended October 31, 2003.

On February 25, 2004, the Company advised shareholders to take no action at such time in response to an acquisition proposal announced by Jones Apparel Group, Inc.

On February 26, 2004, the Company announced it has retained Gibson, Dunn & Crutcher LLP as legal counsel and Lehman Brothers Inc. as financial advisor to assist the Board of Directors in evaluating the acquisition proposal announced by Jones Apparel Group, Inc.

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SIGNATURES

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

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EXHIBIT INDEX

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