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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED DECEMBER 31, 2003

COMMISSION FILE NUMBER 1-9875

STANDARD COMMERCIAL CORPORATION

2201 MILLER ROAD, WILSON, NORTH CAROLINA 27893

Telephone Number 252-291-5507

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 and (2) had 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 ¨

On February 2, 2004, the registrant had outstanding 13,642,063 shares of common stock ($0.20 par value per share).

PART I FINANCIAL INFORMATION

STANDARD COMMERCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

The accompanying notes are an integral part of these consolidated financial statements.

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STANDARD COMMERCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(In thousands, except per share data; unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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STANDARD COMMERCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The interim statements presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K. The interim period consolidated financial statements have been prepared by the Company without audit and contain all of the adjustments which are, in the opinion of the management, necessary for a fair statement of the financial condition and results of operations. All such adjustments are of normal, recurring nature and there were no material changes in accounting policies during the period ended December 31, 2003. Because of the nature of the Company’s business, fluctuations in results for interim periods are not necessarily indicative of business trends or results to be expected for other interim periods or a full year.

During the last quarter of fiscal 2002, the Company decided to close and dispose of wool units in South Africa, New Zealand, Argentina and the specialty fibers business in Holland. By December 31, 2003, the sales of the companies in South Africa and New Zealand, the trade assets of Argentina and the specialty fibers business in Holland had been completed.

Despite the decision in fiscal 2002 to shrink our wool division and focus on its core markets while also reducing divisional overheads, trading conditions remained difficult, resulting in continual losses. This is particularly true in the initial processing stages for the apparel industry. Given the continuing uncertainty of an adequate turnaround leading to acceptable returns for our shareholders, during the second quarter of the current fiscal we made the strategic decision to focus on our core tobacco operations. Accordingly, we decided to exit all of our remaining wool operations. These operations are in Australia, UK, Chile, France and Germany. We are currently in discussions with various prospective purchasers for these operations and have identified these assets as held for sale. The wool operating units are available for immediate sale and the expectation is that the exit plan will be completed without significant changes. We expect to complete the process of selling/liquidating these units by September 30, 2004.

These wool units are expected to incur additional operating losses until final disposition. Once disposed, we will not retain a financial interest and we have not identified any significant contingent liabilities that would delay or significantly alter the plan of disposition. The Company will continue to guarantee the debt of the wool units until disposition, at which time we do not expect to provide any guarantees for the obligations or commitments of the wool units.

We have accounted for the sale of the wool units as discontinued operations, in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The results for all periods presented are included in the consolidated financial statements as discontinued operations. As noted above, since the existing debt of the wool units is guaranteed by the Company, we have not included any such debt in liabilities of discontinued operations.

The wool trading loss for the quarter and nine months, excluding the loss to discontinue the operations, was $2.8 and $7.0 million, respectively, versus $1.3 and $4.6 million in the prior year periods. The estimated loss on disposition recorded in the nine months to discontinue the wool operation was $26.6 million. The basic loss per share for the discontinued operations for the quarter and nine months was $0.20 and $2.47, respectively, versus a loss of $0.10 and $0.34 in the prior year periods.

The estimated loss to discontinue the wool operations of $26.6 million has been recorded in the nine months ended December 31, 2003, as the carrying amount of the net assets of the wool units exceeded the fair value less estimated disposal costs. The fair value was determined based on current negotiations with prospective purchasers and comparisons with other industry transactions.

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenues and the assets and liabilities for these units were as follows:

Wool debt guaranteed by the Company not included in discontinued operations was as follows:

The components of comprehensive income (loss) were as follows:

Earnings per share has been presented in conformity with SFAS No. 128. The diluted earnings per share for the quarter ended December 31, 2002 and for the nine months ended December 31, 2003 and 2002 include the effect of the convertible subordinated debentures, which if converted would have increased the weighted number of shares and net income applicable to common stock. For the quarter ended December 31, 2003, the incremental shares from assumed conversion of convertible subordinated debentures are not included in computing the diluted per share amount because the calculation includes adjustments which are antidilutive. The weighted number of shares were further

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

increased by shares subject to employee stock options. Employee stock options with exercise prices greater than the average market price of common shares were not included in computation of diluted earnings per share.

The Company’s derivative usage is principally foreign currency forwards. These contracts typically have maturities of less than one year. As a matter of policy, the Company does not use derivative instruments unless there is an underlying exposure. The Company’s foreign currency forwards have been designated and qualify as cash flow hedges under the criteria of SFAS No. 133. SFAS No. 133 requires that the effective portion of the changes in fair value of derivatives that qualify as cash flow hedges be recognized in other comprehensive income, while the ineffective portion be recognized immediately in earnings. The fair value of the Company’s foreign currency forward contracts at December 31, 2003 was $3.1 million with a notional value of $3.2 million.

The Company has adopted SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123. As permitted under SFAS No. 123, Accounting for Stock-Based Compensation, the Company accounts for stock options under the intrinsic value method of recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees. No stock-based employee compensation cost is reflected in net income (loss) because all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. As required by SFAS No. 148, the following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148, to stock-based employee compensation:

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires the use of the purchase method of accounting for business combinations initiated after June 30, 2001 and broadens the criteria for recording intangible assets separate from goodwill. SFAS No. 142 uses a non-amortization approach to account for purchased goodwill and certain intangible assets with indefinite useful lives and also requires at least an annual assessment for impairment by applying a fair-value-based test. Intangible assets with finite useful lives will continue to be amortized over their useful lives.

In accordance with SFAS No. 142, goodwill was tested for impairment as of the beginning of the year in which the statement was adopted in its entirety. SFAS No. 142 allowed six months from the date the statement was initially applied to complete the first step of the transitional goodwill impairment test. During the second quarter of fiscal 2003, the Company completed the process of performing the first step of the transitional goodwill impairment test as of April 1, 2002, and as a result of the test performed, management believes that goodwill was not impaired as of April 1, 2002. SFAS No. 142 also requires that goodwill be tested for impairment annually at the same time each year and on an interim basis when events or circumstances change. The Company elected to perform its annual goodwill impairment test as of September 30, and any subsequent impairment losses, if any, will be reflected in operating income in the statements of income. The Company completed its impairment test and there was no impairment identified at September 30, 2003 nor any events or changes in circumstances which would indicate an impairment as of December 31, 2003.

In January 2003, the FASB issued FASB Interpretation (“FIN”) 46, Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. This interpretation provides guidance related to identifying variable interest entities (previously known as special purpose entities or SPEs) and determining whether such entities should be consolidated. Certain disclosures are required if it is reasonably possible that a company will consolidate or disclose information about a variable interest entity when it initially applies FIN 46. This interpretation will be effective for the Company’s quarter ending March 31, 2004. The Company currently has no investment in or contractual relationship or other business relationship with a variable interest entity and therefore the adoption of FIN 46 is not expected to have any impact on the Company’s consolidated financial position or results of operations. However, if the Company enters into any such arrangement with a variable interest entity in the future (or an entity with which we currently have a relationship is reconsidered based on guidance in FIN 46 to be a variable interest entity), the Company’s consolidated financial position or results of operations will be impacted.

In December 2003, the FASB issued a revision of FIN 46 (“FIN 46R”) to clarify certain provisions of the standard. FIN 46R requires that FIN 46 be applied to those entities that are considered to be special-purpose entities, no later than the end of the first interim or annual period ending after December 15, 2003. The application of FIN 46 to special-purpose entities as of December 31, 2003 had no impact on the Company’s consolidated financial position or results of operations. FIN 46R is effective for all variable-interest entities no later than the end of the first interim or annual period ending after March 15, 2004. The Company is currently evaluating the impact of adopting FIN 46R on its consolidated financial position and results of operations.

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, to provide clarification on the meaning of an underlying, the characteristics of a derivative that contains financing components and the meaning of an initial investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. This statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. In addition, except as stated below, all provisions of this statement should be applied prospectively. The provisions of this statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. The adoption of this statement did not have a material impact on the Company’s financial condition or results of operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Some of the provisions of this Statement are consistent with the current definition of liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Accordingly the Company adopted the provisions of SFAS No. 150 on July 1, 2003. The adoption of this statement did not have a material impact on the Company’s financial position or results of operations.

On February 26, 2001, we were served with a Third Amended Complaint, naming us and other leaf merchants as defendants in Deloach, et al. V. Philip Morris Inc., et al., a suit originally filed against U.S. cigarette manufacturers in the United States District Court for the District of Columbia and now pending in the United States District Court for the Middle District of North Carolina, Greensboro Division (Case No. 00-CV-1235). The Deloach suit is a class action claim brought on behalf of U.S. tobacco growers and quota holders alleging that defendants violated antitrust laws by bid-rigging at tobacco auctions and by conspiring to undermine the tobacco quota and price support program administered by the federal government. In May 2003, we along with several other domestic cigarette manufacturers and tobacco-leaf dealers, entered into a settlement agreement with the plaintiffs. Under the agreement, we agreed to pay $7 million for distribution of the class. The total amount paid by all the settling defendants, to the class is approximately $212.0 million, plus commitments by the three settling cigarette manufacturers (1) to purchase certain volumes of domestic flue-cured and burley tobacco for at least 10 years and (2) to pay the fees of plaintiffs’ counsel. The court approved the settlement agreement in October 2003, and we made our agreed payment on October 16, 2003.

In October 2001, the Director General - Competition of the European Commission, or DG Comp, began conducting an administrative investigation of certain selling and buying practices alleged to have occurred within the leaf tobacco industry in some countries within the European Union, including Spain, Italy and Greece. We, through our local subsidiaries, are cooperating fully with the investigation and have discovered and voluntarily disclosed information which tends to establish that a number of leaf dealers, including our subsidiaries, have jointly agreed with respect to green tobacco prices and purchase quantities. In respect of the Spanish investigation, on December 15, 2003, the DG Comp served on twenty entities within the Spanish leaf tobacco industry, including Standard

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commercial Corporation (the “Company”) and three of its subsidiaries, a Statement of Objections (the “Statement”) alleging certain infringements of the antitrust laws of the European Union. We are in the process of responding to the Statement and will continue to cooperate in the investigation. Through the Statement, DG Comp intends to impose, where appropriate and probably late in 2004, administrative penalties on the entities it determines have infringed the EC anticompetition laws. The Company expects that those penalties could be material to the Company’s earnings. DG Comp has, however, indicated that there may be mitigating circumstances resulting from the regulation of the Spanish tobacco market. The Company is currently unable to assess the amount of such penalties, but expects that the mitigating factors in the market, along with its cooperation with the DG Comp, could result in a reduction in any penalties imposed.

Except for the above, neither we nor any of our subsidiaries are currently involved in any litigation that we believe would, individually or in the aggregate, have a material adverse effect on our consolidated financial position, consolidated results of operations, or liquidity nor, to our knowledge, is any such litigation currently threatened against us or our subsidiaries.

The 8 7/8 % Senior Notes due 2005 were issued by Standard Commercial Tobacco Co., Inc. (the “Issuer”), a wholly owned subsidiary of the Company. The Company and Standard Wool, Inc., a wholly owned subsidiary of the Company (the “Guarantors”), jointly and severally, guarantee on a senior basis, the full and prompt performance of the Issuer’s obligations under the terms of the indenture. Management has determined that full financial statements of the Guarantors would not be material to investors and such financial statements are not provided. The following supplemental combining financial statements present Information regarding the Issuer and the Guarantors.

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STANDARD COMMERCIAL CORPORATION

SUPPLEMENTAL COMBINING BALANCE SHEET

December 31, 2003

(In thousands; unaudited)