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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, 2002

Commission file number 1-9875

STANDARD COMMERCIAL CORPORATION

2201 Miller Road, Wilson, North Carolina 27893

Telephone Number 252-291-5507

On February 4, 2003 the registrant had outstanding 13,492,769 shares of Common Stock ($0.20 par value).

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) has been subject to such filing requirements for the past 90 days.  YES  x  NO  ¨

PART I FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

STANDARD COMMERCIAL CORPORATION

CONSOLIDATED BALANCE SHEET

(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 information; 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 financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K. The interim period financial statements have been prepared by the Company without audit and contain all of the adjustments which are, in the opinion of management, necessary for a fair statement of the 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, 2002. Because of the nature of the Company’s businesses, 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.

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

The Company is engaged in purchasing, processing and selling leaf tobacco and wool. Its activities other than these are minimal. Segment revenue and net income (loss) were as follows:

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings per share has been presented in conformity with Statement of Financial Accounting Standards (SFAS) 128. The diluted earnings per share include the effect of the convertible subordinated debentures which if converted would have increased the weighted average number of shares and net income applicable to common stock. The weighted numbers of shares were further increased by employee stock options. Employee stock options with exercise prices greater than the average market price of common shares were not included in the computation of diluted earnings per share.

On April 1, 2001 the Company adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended by SFAS 137 and SFAS 138. SFAS 133 establishes new accounting and disclosure requirements for most derivative instruments and hedge transactions involving derivatives. SFAS 133 also requires formal documentation procedures for hedging relationships and effectiveness testing when hedge accounting is to be applied.

In accordance with the transition provisions of SFAS 133, in the nine months ended December 31, 2001 the Company recorded a cumulative effect loss adjustment of $2.1 million, net of applicable taxes, in other comprehensive income to recognize the fair value of all derivatives designated as cash flow hedging instruments.

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 133. SFAS 133 requires that changes in fair values of derivatives that qualify as cash flow hedges be recognized in other comprehensive income, while the ineffective portion of change in fair value of derivatives be recognized immediately in earnings. The fair value of the Company’s foreign currency forward contracts at December 31, 2002 was $30.7 million with a notional value of $31.7 million.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141, “Business Combinations”, and SFAS 142 “Goodwill and Other Intangible Assets”. SFAS 141 requires the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 142 requires that upon adoption, amortization of goodwill cease and instead, the carrying value of goodwill be evaluated for impairment on an annual basis. Identifiable intangible assets will continue to be amortized over their useful lives and reviewed for impairment in accordance with SFAS 121, “Accounting for Impairment of Long-Lived Assets and for Long Lived Assets to be Disposed Of”. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS 142 on April 1, 2002.

In accordance with SFAS 142, the Company discontinued the amortization of goodwill effective April 1, 2002. A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization follows:

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued

The carrying amount of goodwill and other intangible assets for the quarter ended December 31, 2002, by operating segments, were as follows:

GOODWILL

Estimated amortization expenses for the next five fiscal years is as follows:

2003 (three months)-$234; 2004-$936; 2005-$936; 2006-$383 and 2007-$106.

In August 2001, the FASB issued SFAS 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. Under SFAS 144 a component of business that is held for sale is reported in discontinued operations if the operations and cash flows will be, or have been eliminated from the on-going operations of the Company and the Company will not have any significant continuing involvement in such operations. The Company adopted the provisions of SFAS 144 in the quarter ended March 31, 2002. During the same period the Company decided to close and dispose of wool units in South Africa, New Zealand and Argentina, and its specialty fibers business in Holland. During the quarter ended December 31, 2002, the Company sold its New Zealand operations. The Argentinean and specialty fibers business have been substantially liquidated and the South African operation is being wound down.

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued

Revenues and the assets and liabilities for these units, other than debt guaranteed by the Company, were as follows:

In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statements 4, 44 and 64, Amendment to FASB Statement 13, and Technical Corrections”. One of the major changes made by this Statement is to change the accounting for the classification of gains and losses from the extinguishment of debt as previously required under SFAS 4. Upon adoption, the Company will follow APB 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, in determining whether any extinguishment of debt may be classified as extraordinary. The provision of this statement related to the rescission of FASB Statement 4 shall be applied in fiscal years beginning after May 15, 2002 with early application encouraged. The Company is currently evaluating the impact of this Statement.

In June 2002, the FASB issued SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities, relocate employees and provide benefits to employees who are involuntarily terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 is effective for exit or disposal activities initiated after December 31, 2002. The impact on the Company’s financial position and results of operations from adopting SFAS 146 has not been determined.

In November 2002, the FASB issued Financial Accounting Standards Board Interpretation (FIN) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements 5, 57, and 107 and Rescission of FASB Interpretation 34.” FIN 45 clarifies the requirements of FASB Statement 5, “Accounting for Contingencies,” relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types guarantees. FIN 45 requires that upon issuance of a guarantee, the entity (i.e., the guarantor) must recognize a liability for the fair value of the obligation it assumes under the guarantee. The disclosure provisions of FIN 45 are effective for

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STANDARD COMMERCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued

financial statements of interim or annual periods that end after December 15, 2002. FIN 45’s provisions for initial recognition and measurement should be applied on a prospective basis to guarantees issued or modified after December 15, 2002, irrespective of the guarantor’s fiscal year-end. The guarantor’s previous accounting for guarantees that were issued before the date of FIN 45’s initial application may not be revised or restated to reflect the effect of the recognition and measurement provisions of FIN 45. The Company will evaluate at quarterly intervals issuance of guarantees and recognize a liability for the fair value of the obligation it assumes under the guarantee on its financial statements.

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an Amendment of FASB Statement 123.” This Statement amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement requires that companies having a year-end after December 15, 2002 follow the prescribed format and provide the additional disclosures in their annual reports.

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, 2002

(In thousands; unaudited)