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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended April 4, 2004

OR

For the transition period from              to             

Commission file number 0-1790

RUSSELL CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

(678) 742-8000

(Registrant’s Telephone Number, Including Area Code)

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: None

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  ¨

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

The number of shares outstanding of each of the issuer’s classes of common stock.

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INDEX

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PART I. – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RUSSELL CORPORATION

Condensed Consolidated Balance Sheets

(In thousands Except Share and Per Share Amounts)

See accompanying notes to condensed consolidated financial statements.

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RUSSELL CORPORATION

Condensed Consolidated Statements of Income

(In Thousands Except Share and Per Share Amounts)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

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RUSSELL CORPORATION

Condensed Consolidated Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

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RUSSELL CORPORATION

Notes to Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States for complete financial statements. In our opinion, the accompanying interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly our financial position as of April 4, 2004 and April 6, 2003, and the results of our operations for the thirteen-week periods ended April 4, 2004 and April 6, 2003, and our cash flows for the thirteen-week periods ended April 4, 2004 and April 6, 2003. The unaudited condensed consolidated financial statements as of April 4, 2004 include the consolidation of Frontier Yarns, LLC (“Frontier Yarns”), our 45.3% owned yarn joint venture. Historically, we have accounted for our investment in Frontier Yarns using the equity method of accounting (see Note 3, Impact from Newly Adopted Accounting Standards, for additional discussion).

The condensed consolidated balance sheet at January 3, 2004 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

For further information about our significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended January 3, 2004. See also Note 3 for further information on changes in our accounting policies during the first quarter of 2004 and pending changes in accounting policies.

Certain prior year amounts have been reclassified to conform to the 2004 presentation. These changes had no impact on previously reported results of operations or stockholders’ equity.

Our revenues and income are subject to seasonal variations. Consequently, the results of operations for the thirteen-week period ended April 4, 2004, are not necessarily indicative of the results to be expected for the full year.

The components of inventories consist of the following: (in thousands)

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In January 2003, the FASB issued Financial Interpretation No. 46, Consolidation of Variable Interest Entities, (“FIN 46”). In December 2003, the FASB issued a revised interpretation of FIN 46 (“FIN 46-R”), which supercedes FIN 46 and clarifies certain aspects of FIN 46. FIN 46-R addresses whether business enterprises must consolidate the financial statements of entities known as “variable interest entities”. A variable interest entity is defined by FIN 46-R to be a business entity which has one or both of the following characteristics: (1) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity; and (2) the equity investors lack one or more of the following essential characteristics of a controlling financial interest: (a) direct or indirect ability to make decisions about the entity’s activities through voting rights or similar rights, (b) the obligation to absorb the expected losses of the entity if they occur, which makes it possible for the entity to finance its activities, or (c) the right to receive the expected residual returns of the entity if they occur, which is the compensation for risk of absorbing expected losses. Under FIN 46-R, the party with an ownership, contractual or other financial interest that absorbs the majority of the variable interest entity’s expected losses, or is entitled to receive a majority of the residual returns, or both, is deemed to be the primary beneficiary, and is required to consolidate the variable interest entity’s assets, liabilities and non-controlling interests. We have performed a review of all of our ownership and contractual interests in entities including Frontier Yarns. We have determined that Frontier Yarns meets the criteria for being a variable interest entity and that we are the primary beneficiary of the entity. In accordance with FIN 46-R, we consolidated the balance sheet of Frontier Yarns at April 4, 2004, which increased our total assets by $23.5 million, total liabilities by $11.6 million and non-controlling interests by $12.1 million. This consolidation decreased our consolidated stockholders’ equity by $0.2 million but did not impact our results of operations for the thirteen weeks ended April 4, 2004.

In October 2003, we announced an Operational Improvement Program (the “OIP”) designed to reduce costs to offset anticipated selling price decreases, higher fiber costs and other cost increases for fiscal 2004. The OIP included improving operating efficiencies and asset utilization, while streamlining processes in both our manufacturing and administrative areas such as: (i) expanded production with lower cost contractors in Central America; (ii) lower sourcing costs; (iii) increased efficiencies in domestic textile operations; and (iv) improved distribution costs. We incurred no additional special charges associated with the OIP during the thirteen weeks ended April 4, 2004, other than to adjust the related severance accrual to reflect our best estimate of its ultimate settlement. After approximately $1.3 million of payments made during the thirteen weeks ended April 4, 2004, the remaining liabilities (primarily severance) associated with the OIP were $1.9 million at April 4, 2004.

In July 1998, we adopted a restructuring and reorganization program (the “1998 Program”) with the objectives of (1) transitioning our company from a manufacturing-driven business to a consumer-focused organization that markets branded apparel products and (2) creating an efficient, low-cost operating structure with the flexibility to take advantage of future opportunities to reduce our costs. We substantially completed the 1998 Program in 2001, and there were no additional special charges incurred during the thirteen weeks ended April 4, 2004 and April 6, 2003, other than to adjust related accruals to reflect our best estimate of their ultimate settlement and to adjust the carrying values of assets idled in prior periods to properly reflect the assets at their net realizable value. After approximately $0.2 million and $1.4 million of payments made during the thirteen weeks ended April 4, 2004 and April 6, 2003, respectively, the remaining 1998 Program liabilities (consisting of employee terminations, terminations of licenses and contracts and exit costs related to facilities) were $0.2 million and $0.9 million at April 4, 2004 and April 6, 2003, respectively.

At April 4, 2004, we held for sale certain closed facilities with an adjusted carrying value of approximately $5.1 million, which have been included in property, plant and equipment as part of the Domestic segment.

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Commitments. Refer to Note 8 to our consolidated financial statements in our 2003 Annual Report on Form 10-K for a description of our commitments.

Contingencies. We are a co-defendant in Locke, et al. v. Russell Corporation, et al. in Jefferson County, Alabama. Fifteen families who own property on Lake Martin in the Raintree Subdivision in Alexander City, Alabama, were the original plaintiffs in the case, which sought unspecified money damages for trespass and nuisance. However, 10 families dropped out of the case and there are five remaining plaintiff families. In May 2002, the trial court entered summary judgment in our favor on all but one of the plaintiffs’ claims. The remaining claim, which involves a private right of action for public nuisance, was scheduled for trial in October 2003; however, the trial court has continued the case until 2004 and allowed us to move for summary judgement on the remaining claim. We filed our summary judgment motion on October 31, 2003, which is pending before the court. A complaint substantially identical to the one filed in the Locke case was filed on November 20, 2001, in the Circuit Court of Jefferson County, Alabama, by two residents of the Raintree Subdivision (Gould v. Russell Corporation, et al.). The trial court has entered summary judgment in our favor on all claims in that case, and the plaintiffs in the case have filed a motion to alter that determination, which remains pending. The allegations in the Locke and Gould cases are similar to those contained in a case styled Sullivan, et al. v. Russell Corporation, et al., which was resolved in our favor by a ruling of the Alabama Supreme Court in 2001. We plan to vigorously defend the Locke and Gould suits.

We also are a party to various other lawsuits arising out of the conduct of our business. We do not believe that any of these lawsuits, if adversely determined, would have a material adverse effect upon us.

On January 5, 2003, we adopted the prospective transition provisions of FASB Statement of Financial Accounting Standards (“SFAS”) No. 148, which amended SFAS No. 123, Accounting and Disclosure of Stock-based Compensation. SFAS No. 148 uses a fair value based method of accounting for employee stock options and similar equity instruments. By electing the prospective transition method of SFAS No. 148, our results of operations and our financial position are not affected by stock compensation awards granted prior to January 5, 2003. We recognized approximately $0.4 million and $0.1 million of stock-based employee compensation during the thirteen-week periods ended April 4, 2004 and April 6, 2003, respectively. For stock compensation awards granted prior to January 5, 2003, we used the intrinsic value approach under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.

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The following table presents a comparison of reported results versus pro forma results that assumes the fair value based method of accounting had been applied to all stock compensation awards granted. For purposes of calculating the pro forma amounts below, the estimated fair value of the options is determined using the Black-Scholes option valuation model and is amortized to expense over the options’ vesting period.

Our diluted weighted-average common shares outstanding are calculated as follows:

Options to purchase 1.8 million and 2.4 million shares of our common stock were excluded from the computation of diluted weighted-average common shares outstanding for the thirteen weeks ended April 4, 2004 and April 6, 2003, respectively, because the exercise prices of the options exceeded the average market price.

Accumulated other comprehensive loss as shown in the condensed consolidated balance sheet is comprised of foreign currency translation adjustments, minimum pension liabilities and foreign currency forward contracts. The components of comprehensive income, net of tax, for the periods indicated below are as follows:

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We operate our business in two segments: Domestic and International. Beginning in 2004, we have realigned our business in the Domestic segment to focus on brands versus distribution channels. The two brand groupings in the Domestic segment are Athletic/Outdoor and Activewear. Athletic/Outdoor and Activewear have been aggregated into the Domestic reportable segment because these brand groupings are similar in economic characteristics, products, production processes, type of customer, distribution method, and regulatory environment. The International segment, which makes up the majority of our sales outside the United States, distributes athletic, outdoor and activewear products.

Our management evaluates performance and allocates resources based on profit or loss from operations before interest, income taxes and special charges (Segment operating income). Segment operating income as presented by us may not be comparable to similarly titled measures used by other companies. The accounting policies of the reportable segments are the same as those described in Note One to the consolidated financial statements in our Annual Report on Form 10-K for the year ended January 3, 2004. Intersegment transfers are recorded at cost, and there is no intercompany profit or loss on intersegment transfers.

A reconciliation of combined segment operating income to consolidated income before income taxes is as follows:

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The following table presents the components of net periodic pension benefit cost for our qualified, noncontributory, defined benefit pension plan and unfunded plans that provide retirement benefits in excess of qualified plan formulas or regulatory limitations for certain employees:

The following tables present condensed consolidating financial information for: (a) Russell Corporation (the “Parent”) on a stand-alone basis; (b) on a combined basis, the guarantors of the Senior Notes (“Subsidiary Guarantors”), which include Jerzees Apparel, LLC; Mossy Oak Apparel Company; Cross Creek Apparel, LLC; Cross Creek Holdings, Inc.; DeSoto Mills, Inc.; Russell Financial Services, Inc.; Russell Asset Management, Inc.; Russell Apparel LLC; RINTEL Properties, Inc.; Russell Yarn, LLC; and Russell Co-Op, LLC (all of which are wholly owned); and (c) on a combined basis, the non-guarantor subsidiaries, which include Alexander City Flying Service, Inc.; Russell Corporation – Delaware; Russell Servicing Co., Inc.; Russell Europe Limited; Russell Mexico, S.A. de C.V.; Jerzees Campeche, S.A. de C.V.; Jerzees Yucatan, S.A. de C.V.; Athletic de Camargo, S.A. de C.V.; Jerzees de Jimenez, S.A. de C.V.; Cross Creek de Honduras, S.A. de C.V.; Russell Corp. Australia Pty Ltd; Russell do Brasil, Ltda.; Russell Corp. Far East, Limited; Russell Japan KK; Spalding Canada Corp.; Jerzees de Honduras, S.A. do C.V.; Jerzees Buena Vista, S.A.; Jerzees Choloma, S.A.; Russell del Caribe, Inc.; Russell France SARL; Russell CZ s.r.o.; Russell Germany GmbH; Russell Spain, S.L.; Russell Italy S.r.l.; Servicios Russell, S.A. de C.V.; Russell Foreign Sales Ltd.; Russell Corp. Bangladesh Limited; Russell Holdings Europe B.V.; Ruservicios, S.A.; Eagle R Holdings Limited; Citygate Textiles Limited; Russell Colombia Ltda; Merendon Textiles, S. de R.L.; Russell Athletic Holdings (Ireland) Limited; SGG Lisco LLC; SGG Patents LLC; and Frontier Yarns, LLC (our 45.3% owned yarn joint venture). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantee by each 100% owned Subsidiary Guarantor is full and unconditional, joint and several, and we believe separate financial statements and other disclosures regarding the Subsidiary Guarantors are not material to investors. Furthermore, there are no significant legal restrictions on the Parent’s ability to obtain funds from its subsidiaries by dividend or loan.

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The Parent is comprised of Alabama manufacturing operations and certain corporate management, information services and finance functions.

Russell Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

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Russell Corporation and Subsidiaries

Condensed Consolidated Statements of Income

Russell Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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Russell Corporation and Subsidiaries

Condensed Consolidated Statement of Cash Flows