STOKELY USA INC, 424B4, 1994-11-18

STOKELY USA INC
424B4, 1994-11-18
CANNED, FRUITS, VEG, PRESERVES, JAMS & JELLIES

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<PAGE> 1

PROSPECTUS
3,000,000 SHARES

STOKELY USA, INC.

COMMON STOCK

All of the shares of Common Stock offered hereby are being sold by Stokely
USA, Inc. ("Stokely" or the "Company"). The Company's Common Stock is traded in
the over-the-counter market and quoted on the Nasdaq National Market under the
symbol "STKY." On November 17, 1994, the closing sale price of the Common Stock
as reported by Nasdaq was $10.25 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK OFFERED
HEREBY.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $9.00 $0.495 $8.505
Total(3)................................. $27,000,000 $1,485,000 $25,515,000
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $425,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 450,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If all such shares are
purchased, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $31,050,000, $1,707,750 and $29,342,250, respectively.

The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by them and subject to their right to
reject orders in whole or in part. It is expected that delivery of the
certificates for the shares of Common Stock will be made on or about November
25, 1994.

WILLIAM BLAIR & COMPANY DAIN BOSWORTH
INCORPORATED

THE DATE OF THIS PROSPECTUS IS NOVEMBER 17, 1994

<PAGE> 2

[PICTURES]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as otherwise indicated, the information contained in
this Prospectus assumes the Underwriters' over-allotment option is not
exercised. See "Underwriting."

THE COMPANY

Stokely USA, Inc. is a leading domestic producer of canned and frozen
vegetables. The Company processes, markets and sells a broad range of vegetables
under customer private labels and under the Stokely's Finest(R) label, Stokely's
Gold(TM) label and other brand labels through the retail, foodservice and
industrial channels of distribution. The Company believes it is the largest
processor of private label canned vegetables in the United States, selling to
most major supermarket chains, including Winn Dixie, Kroger, A&P, Aldi and
Safeway, and to major food wholesalers, including Super Valu and Fleming
Companies, Inc. The Company is also a leading United States exporter of canned
vegetables to Europe and Asia. The Company believes the breadth and mix of its
product lines, including both basic and specialty vegetables, enhance its
competitive position by allowing it to market its products to many different
distribution channels and consumer markets. In 1993, the processed vegetable
industry represented approximately $3.0 billion in annual sales of canned
vegetables and approximately $2.1 billion in annual sales of frozen vegetables.

During fiscal 1993, the Company began to implement a new business strategy
designed to enhance its leadership position in certain markets and products, and
to facilitate the Company's ability to achieve a higher and more consistent
level of earnings. The key elements of the strategy are as follows:

- FOCUS ON CORE PRODUCT LINES. The Company has narrowed its product focus
to product lines in which it has significant market share -- corn, green
beans, peas and root crops -- and has eliminated several unprofitable
non-core lines. This focus has allowed the Company to significantly reduce
its fixed manufacturing and administrative expenses and to reduce its
variable cost per unit in an industry generally characterized by a high
ratio of variable to fixed costs.

- EMPHASIZE THE PRIVATE LABEL CHANNEL OF DISTRIBUTION. Since fiscal 1993,
the Company has placed significant emphasis on expanding its presence in
the private label channel of distribution. This channel accounts for
approximately 35% of the canned vegetable industry's total retail sales
and is currently experiencing market share growth. In addition, the
Company's operating margins in private label are higher than margins
achieved in its brand products business because of lower selling and
support expenses. Currently, the Company believes its three largest
competitors in the vegetable processing industry focus primarily on brand
products.

- MAINTAIN THE COMPANY'S BRAND MARKET SHARE WHILE PURSUING CHANGES IN
PRODUCT MIX. The Stokely's Finest(R) brand is one of the major brands in
its primary brand geographic area of distribution, the southeastern United
States. The Company has maintained its brand position while rationalizing
its brand product line, including a 25% reduction in the number of SKUs
over the last two years. In addition, the Company seeks to enhance
consumer recognition of its brand names and selectively expand its brand
product line by developing new brand specialty products, such as its
specialty line of premium products sold under the Stokely's Gold(TM)
label. Sales volume of the Stokely's Gold(TM) label product line has
doubled from fiscal 1992 to fiscal 1994.

3
<PAGE> 4

- IMPROVE EFFECTIVENESS AND EFFICIENCY OF FROZEN VEGETABLE BUSINESS. In
order to increase its profit margins in the frozen vegetable business, the
Company has downsized its frozen vegetable operations following a period
of rapid expansion and redirected most of its sales to industrial
customers. The Company generally has been able to generate higher margins
on its industrial sales due to decreased packaging and promotional
expenses associated with sales of frozen products in bulk. The Company
plans to continue to increase its presence in this channel through the
addition of new customers, and to increase its leading position in certain
higher margin specialty products, while remaining one of the major players
in frozen corn production, the leading category item in the frozen
vegetable market.

Prior to fiscal 1993, the Company's principal business strategy had been to
increase its revenues by expanding sales of its brand products and by
developing, through acquisitions, a significant frozen vegetable business. At
the time, the Company believed that the brand vegetable market and frozen
vegetable market tended to have higher margins than the Company's private label
canned business and would help smooth out the price fluctuations inherent in the
vegetable processing industry. This strategy, however, significantly increased
the Company's operating expenses and as a result its operating margins began to
deteriorate in fiscal 1991. Furthermore, the Company's acquisitions and capital
expenditures were funded primarily by debt, which increased the Company's
leverage and interest expense. This strategy, together with unfavorable market
conditions in the vegetable processing industry, culminated in net losses
(after-tax) for fiscal 1992 and 1993 of $9.9 million and $31.1 million
(including a restructuring charge of $14.7 million), respectively.

Commencing in June of 1992, the Company made significant management changes
and adopted a major restructuring program allowing it to implement its new
strategy. The primary elements of the restructuring program implemented in
fiscal 1993 and 1994 were as follows: ELIMINATION OF UNPROFITABLE PRODUCTS - the
Company eliminated or greatly reduced its capacity for several low margin or
unprofitable products, including the elimination of frozen broccoli, frozen
okra, frozen cauliflower, tomato products, various fruit products and other
items; PLANT CLOSINGS - to increase manufacturing efficiencies, lower operating
costs and reduce working capital needs, the Company closed six plants, four of
which have been sold, and downsized two other facilities. Fixed manufacturing
overhead has been reduced by $12.8 million, or 24.7%, for fiscal 1994 compared
to fiscal 1992; REDUCTION OF FIXED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- - with an increased focus on core products, the Company has been able to operate
with a lower cost structure. Fixed selling, general and administrative expenses
have been reduced by $5.7 million, or 37.5%, for fiscal 1994 compared to fiscal
1992; and DEBT REDUCTION - by focusing on its core business and liquidating
non-essential assets, the Company has reduced total debt by $29.5 million, or
22.4%, since fiscal 1992 to $102.3 million at the end of fiscal 1994.
Principally as a result of these restructuring efforts, the Company has achieved
net profits in each of its last five fiscal quarters.

THE OFFERING

<TABLE>
<S> <C>
Shares Offered by the Company....................... 3,000,000
Shares Outstanding Immediately After the
Offering(1)....................................... 11,324,645
Use of Proceeds to the Company...................... Reduce indebtedness
Nasdaq National Market Symbol....................... STKY
</TABLE>

- -------------------------

(1) Excludes 223,300 shares of Common Stock reserved for issuance pursuant to
currently outstanding options, 400,000 shares of Common Stock reserved for
issuance pursuant to options available for grant under an existing option
plan and 90,000 shares of Common Stock reserved for issuance pursuant to
currently outstanding warrants.

4
<PAGE> 5
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- ------------------
1990 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $271,963 $257,520 $280,368 $281,382 $256,145 $127,505 $97,131
Other revenue...................... (436) 1,090 676 2,145 4,691 4,600 99
-------- -------- -------- -------- -------- -------- -------
Total revenues................. 271,527 258,610 281,044 283,527 260,836 132,105 97,230
Cost of products sold.............. 193,454 204,922 238,804 249,982 216,392 113,592 74,148
Selling, general and administrative
expenses......................... 44,461 40,902 48,481 42,139 36,476 18,016 13,464
Nonrecurring charge(1)............. -- -- -- 21,145 -- -- --
-------- -------- -------- -------- -------- -------- -------
Operating earnings (loss).......... 33,612 12,786 (6,241) (29,739) 7,968 497 9,618
Interest expense................... 4,721 7,082 8,592 12,721 12,710 6,482 4,914
-------- -------- -------- -------- -------- -------- -------
Earnings (loss) before income taxes
and cumulative effect of change
in accounting principle.......... 28,891 5,704 (14,833) (42,460) (4,742) (5,985) 4,704
Income taxes (credit).............. 11,156 1,888 (4,931) (12,983) (2,527) (718) 946
-------- -------- -------- -------- -------- -------- -------
Earnings (loss) before cumulative
effect of change in accounting
principle........................ 17,735 3,816 (9,902) (29,477) (2,215) (5,267) 3,758
Cumulative effect of change in
accounting principle(2).......... -- -- -- (1,650) -- -- --
-------- -------- -------- -------- -------- -------- -------
Net earnings (loss)................ $ 17,735 $ 3,816 $ (9,902) $(31,127) $ (2,215) $ (5,267) $ 3,758
========= ========= ========= ========= ========= ========= ========
Net earnings (loss) per share(2)... $2.15 $0.46 $(1.19) $(3.75) $(0.27) $(0.63) $0.45
Pro forma earnings (loss) per
share(3)......................... $(0.11) $0.41
Weighted average shares
outstanding...................... 8,260 8,287 8,288 8,302 8,320 8,316 8,325
Dividends per share................ $0.26 $0.20 $0.20 -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
--------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................. $ 46,057 $ 54,147
Total assets................................................................ 232,780 232,780
Total debt.................................................................. 118,204 93,114
Shareholders' equity........................................................ 36,398 61,488
</TABLE>

-------------------------------

(1) In connection with the Company's restructuring plan, the Company sold,
closed or downsized certain processing facilities, resulting in a
nonrecurring charge during the fiscal year ended March 31, 1993 from
the write-down of such processing facilities, equipment and
inventories to their estimated net realizable value and from
provisions for severance, consolidation costs and plant closing costs.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(2) On April 1, 1992, the Company adopted Statement of Financial
Accounting Standard No. 106 ("SFAS No. 106"), "Employers' Accounting
for Postretirement Benefits Other than Pensions." The Company
recognized as expense in fiscal 1993 the accumulated postretirement
benefit obligation aggregating $1.7 million, after taxes of $850,000.
The net loss per share for the fiscal year ended March 31, 1993
includes a $0.20 per share loss due to the adoption of SFAS No. 106.

(3) The pro forma earnings (loss) per share data assumes that the Offering
had occurred at the beginning of each period presented and gives
effect to the reduction in interest expense resulting from the
application of the net proceeds therefrom to reduce indebtedness. As
Adjusted reflects the sale of 3,000,000 shares of Common Stock offered
by the Company hereby, and the application of the estimated net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."

- --------------------------------------------------------------------------------

The Company was incorporated in Wisconsin in 1920 under the name
"Oconomowoc Canning and Products Company" and has been engaged in the food
processing business since that time. The Company changed its name to "Stokely
USA, Inc." in January 1985. The Company's most significant wholly-owned
subsidiary is Oconomowoc Canning Company, Inc., a Wisconsin corporation. Unless
otherwise indicated, all references in this Prospectus to the "Company" or
"Stokely" refer to Stokely USA, Inc. and its subsidiaries. Stokely's principal
executive offices are located at 1055 Corporate Center Drive, Oconomowoc,
Wisconsin 53066-0248. The Company's telephone number is (414) 569-1800.

5
<PAGE> 6

STOKELY RESTRUCTURING PROGRAM

Prior to fiscal 1993, the Company's principal business strategy had been to
increase revenues by expanding sales of its brand products and by developing,
through acquisitions, a significant frozen vegetable business. At the time, the
Company believed that the brand vegetable market and frozen vegetable market
tended to have higher margins than the Company's private label business and
would help smooth out the price fluctuations inherent in the vegetable
processing industry. This strategy, however, significantly increased the
Company's operating expenses and as a result its operating margins began to
deteriorate in fiscal 1991. Furthermore, the Company's acquisitions and capital
expenditures were funded primarily by debt, which increased the Company's
leverage and interest expense. In the early 1990s, average selling prices in the
processed vegetable industry declined dramatically. The Company experienced a
7.8% selling price decline in fiscal 1991, an 8.5% decline in fiscal 1992 and a
5.9% decline in fiscal 1993. Stokely's strategy at that time, together with
unfavorable market conditions, resulted in net losses (after-tax) for fiscal
1992 and 1993 of $9.9 million and $31.1 million (including a restructuring
charge of $14.7 million), respectively. Commencing in June of 1992, the Board of
Directors of the Company made significant management changes and adopted a new
strategy designed to return the Company to profitability. The new management
team determined that in order to implement the new strategy and return the
Company to profitability, restructuring was necessary.

Under the direction of the new management team, the Company undertook a
number of restructuring measures, including consolidating production at larger,
more efficient facilities, eliminating certain low margin or unprofitable
product lines, reducing operating overhead and lowering interest expense through
debt reduction. As part of such restructuring, the Company recorded in fiscal
1993 a non-recurring restructuring charge of $14.7 million ($21.1 million
pre-tax) relating to the write-down of the eight processing plants to be sold,
closed or downsized and the costs associated therewith, including provisions for
severance, consolidation costs and plant closing costs, and the write-down of
inventory of discontinued product lines. In particular, the Company redefined
its core products as corn, green beans, peas and root crops produced in the
Midwest and Northwest, and exited the canned tomato and fruit product lines and
southern frozen vegetable lines, including frozen broccoli, okra and
cauliflower. Stokely also eliminated certain marginally contributing channels of
distribution and facilities in its frozen vegetable business. Finally, the
Company's general and administrative workforce was reduced by 25% between the
end of fiscal 1992 and the end of fiscal 1994. During fiscal 1994, the Company
completed the major portion of its restructuring plan by (i) selling two canning
plants and two freezing plants; (ii) closing and consolidating the operations of
an additional canning plant with an existing plant; (iii) closing a freezing
plant that focused on retail products; and (iv) downsizing two other plants. The
Company intends to sell its two remaining closed plants.

As a result of these restructuring initiatives, fixed manufacturing
overhead was reduced 24.7%, from $51.9 million for fiscal 1992 to $39.1 million
for fiscal 1994, while direct manufacturing costs on a per unit basis were
reduced by 1.8% during this same two-year period. In addition, the Company's
fixed selling, general and administrative expenses were reduced 37.5%, from
$15.2 million for fiscal 1992 to $9.5 million for fiscal 1994. From the
beginning of fiscal 1992 to October 1994, the Company's full-time employee
workforce has been reduced by approximately 250 employees, primarily due to the
restructuring initiatives, and the Company's seasonal workforce has been reduced
by approximately 1,000 employees due to the closing or downsizing of processing
plants affected by the restructuring initiatives.

The net proceeds from the sale of plants and liquidation of discontinued
inventories were used to pay down outstanding debt. The Company's total debt was
reduced $29.5 million, from $131.8 million at March 31, 1992 to $102.3 million
at March 31, 1994. The Company intends to further reduce its debt with the
proceeds from this Offering. See "Use of Proceeds."

At September 30, 1994, the Company had remaining restructure reserves
aggregating $6.1 million for the disposal of plant facilities and related
inventories. Based on the Company's current review and evaluation, these
reserves are considered adequate to complete the restructuring plan in fiscal
1995. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

6
<PAGE> 7

RISK FACTORS

INDUSTRY CONDITIONS AND PRICE AND VOLUME FLUCTUATIONS

The Company's financial performance and growth are related to conditions in
the vegetable processing industry. The United States vegetable processing
industry is a mature industry, with a relatively modest 1.8% compounded annual
growth rate from 1988 to 1993. The Company's net sales are a function of product
availability and market pricing. In the vegetable processing industry, product
availability and market prices tend to have an inverse relationship: market
prices tend to decrease as more product is available, whereas if less product is
available, market prices tend to increase. Product availability is a direct
result of plantings, growing conditions, crop yields and inventories, all of
which vary from year to year. In addition, price can be affected by the
planting, inventory level and individual pricing decisions of the three or four
largest processors in the industry. Generally, the market prices in the
vegetable processing industry tend to adjust more quickly to variations in
product availability than an individual processor can adjust its cost structure;
thus, in an over-supply situation, a processor's margins likely will weaken, as
suppliers generally are not able to adjust their cost structure as rapidly as
market prices adjust for the over-supply. The Company typically has experienced
lower margins during times of industry over-supply. There can be no assurance
the Company's margins will improve in response to favorable market conditions or
that the Company will be able to operate profitably during depressed market
conditions.

RECENT OPERATING LOSSES; IMPLEMENTATION OF RESTRUCTURING PROGRAM; LEVERAGE
CONSIDERATIONS

The Company reported net losses (after-tax) of $9.9 million, $31.1 million
(which includes the effect of a restructuring charge of $14.7 million) and $2.2
million for the fiscal years ended March 31, 1992, 1993 and 1994, respectively.
In fiscal 1993, the Company's business faced continuing depressed vegetable
market conditions caused primarily by over-supply and excess capacity. In
response to these net losses and market conditions, the Company implemented
restructuring measures designed to return the Company to profitability. See
"Stokely Restructuring Program." Although the Company believes the restructuring
program has contributed to the Company's ability to achieve favorable operating
results during the last five fiscal quarters, there can be no assurance the
Company will be able to sustain such results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business --
Business Strategy."

The terms and conditions of the Company's multi-year credit facility with
various lenders and the other indebtedness of the Company currently impose
restrictions that affect, among other things, the ability of the Company to
incur debt, pay dividends, make acquisitions, create liens and make capital
expenditures. Terms of the Company's indebtedness also require it to satisfy
certain financial covenants on a monthly basis. The ability of the Company to
make cash payments to satisfy its indebtedness and to comply with such financial
or similar covenants that may be contained in future agreements will depend upon
its future operating performance, which is subject to prevailing economic
conditions, and to financial, business and other factors beyond the Company's
control. In addition, the Company's debt service obligations and related
financial and operating covenants could limit its ability to withstand
competitive pressures or a downturn in its business or in the economy. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company's operations are affected by the growing cycle of the
vegetables it processes. Most of the Company's production occurs during the
second quarter of each fiscal year (due to the timing of crop production and
climate conditions) and a majority of sales occurs during the third and fourth
quarter of each fiscal year (due to seasonal consumption patterns for its
products). Accordingly, inventory levels are highest during the second and third
quarters, and accounts receivable levels are highest during the fourth quarter.
Net sales generated during the third and fourth quarter of each fiscal year have
a significant impact on the Company's results of operations. Because of seasonal
fluctuations, there can be no assurance that the results of any particular
quarter will be indicative of results for the full year or for future years. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

7
<PAGE> 8

COMPETITION

All of the Company's products compete with those of other national, major
and smaller regional food processing companies under highly competitive
conditions. Three of the Company's major competitors, Del Monte, Green Giant and
Dean Foods, are larger and have greater financial and marketing resources than
the Company. In addition, many of the Company's major competitors in the
international export market are larger and have greater financial and marketing
resources than the Company. Continued industry consolidation also may increase
the market strength of the Company's larger competitors. See "Business --
Competition."

As a result of recent plant reduction and consolidation in the vegetable
processing industry, many of the Company's principal national competitors have
narrowed their business focus to specific product lines and channels of
distribution. To date, the Company believes its major competitors have not
placed significant emphasis on the private label channel of distribution. Del
Monte has focused on brand label canned products, with a limited emphasis on the
private label canned business. Both Green Giant and Dean Foods have significant
frozen vegetable operations. However, should such competitors in the future
increase their emphasis on the private label channel of distribution, the
Company's results of operations may be adversely affected.

DEPENDENCE ON KEY PERSONNEL

In connection with the Company's restructuring program, the Company's
management team was substantially changed. The Company's success is dependent to
a great extent on its current management team and other key personnel, the loss
of one or more of whom could have a material adverse effect on the Company. The
Company does not maintain key man life insurance policies on any of its
executive officers. See "Management."

EXPORT SALES

The Company derived 8.1%, 8.6% and 7.4% of its net sales for the fiscal
years ended March 31, 1992, 1993 and 1994, respectively, from export sales. The
Company intends to increase its emphasis on export sales. International sales
are subject to various risks, including exposure to currency fluctuations,
political and economic instability, the greater difficulty of administering
business abroad and the need to comply with a wide variety of international and
domestic export laws and regulatory requirements. There can be no assurance the
Company will be able to successfully expand its export sales, or that the
Company's export sales will be profitable. See "Business."

REGULATION

United States and foreign governmental laws, regulations and policies
directly affect the agricultural industry and the vegetable processing industry.
The Company is subject to regulation by the Food and Drug Administration, the
United States Department of Agriculture, the Federal Trade Commission, the
Environmental Protection Agency and various state agencies with respect to the
production, packaging, labeling and distribution of its food products. In
addition, the disposal of solid and liquid vegetable waste material resulting
from the preparation and processing of foods is subject to various federal,
state and local laws and regulations relating to the protection of the
environment. In some international markets, there are regulations and policies
designed to discourage the importation of agricultural commodities. The
application or modification of existing, or the adoption of new, laws,
regulations or policies could have an adverse effect on the Company's business
and results of operations. See "Business-Regulations."

POSSIBLE VOLATILITY OF STOCK PRICE

The stock market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. General business, economic and other external factors, as
well as period-to-period fluctuations in Stokely's financial results or changes
in earnings estimates by analysts, may have a significant impact on the market
price of the shares of Common Stock.

8
<PAGE> 9

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Articles of Incorporation and By-Laws
and certain statutes and regulations assist the Company in maintaining its
status as an independent publicly-owned corporation, and could have the effect
of preventing or delaying a person from acquiring or seeking to acquire a
substantial equity interest in, or control of, the Company. These provisions
provide for, among other things, staggered board of directors' terms, a fair
price requirement for certain business combinations and shareholder repurchase
rights in certain circumstances. See "Description of Capital Stock."

DILUTION

Purchasers of shares of Common Stock in the Offering will experience
immediate and substantial dilution in the net tangible book value of the shares
of Common Stock of $3.79 per share, and current shareholders will receive an
increase in the book value of their shares of Common Stock of $1.13 per share.
Additional dilution to purchasers of shares of Common Stock will occur upon the
exercise of outstanding options and warrants. See "Dilution."

NO DIVIDENDS

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of shares of Common Stock by existing shareholders pursuant to
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"),
could adversely affect the price of the shares of Common Stock of the Company.
Upon completion of the Offering, approximately 11,324,645 shares of Common Stock
will be outstanding. All of these shares of Common Stock will be freely
transferable without restriction under the Securities Act, unless held by an
affiliate of the Company. The Company's executive officers and directors
beneficially own 594,833 shares of Common Stock. See "Principal Shareholders."
Each of the Company and the executive officers and directors of the Company have
agreed, for a period of 90 days after the date of this Prospectus, not to sell
or otherwise dispose of any shares of Common Stock, or any rights or warrants to
acquire shares of Common Stock, without the prior written consent of the
Underwriters. Holders of warrants of the Company (entitling the holders to
purchase an aggregate of 90,000 shares of Common Stock, subject to certain
adjustments) were granted rights entitling them, under specified circumstances,
to include shares of Common Stock received by them pursuant to the exercise of
the warrants in any registered public offering of shares of Common Stock. See
"Certain Transactions." No prediction can be made as to the effect, if any, that
future sales of shares of Common Stock or the availability of shares of Common
Stock for future sale will have on the market price of the shares of Common
Stock prevailing from time to time. Sales of substantial amounts of shares of
Common Stock in the public market following the Offering, or the perception that
such sales could occur, may adversely affect prevailing market prices of the
shares of Common Stock.

9
<PAGE> 10

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
being sold by the Company are estimated to be approximately $25.1 million
(approximately $28.9 million if the over-allotment option is exercised in full),
after deducting the underwriting discount and estimated offering expenses. The
Company intends to use all of the net proceeds to repay a portion of the
borrowings under its revolving credit agreement. The Company has a multi-year
revolving credit facility with various lenders (the "Revolver"), providing for
maximum borrowings of $100.0 million, of which $52.9 million was outstanding at
September 30, 1994. Borrowings under the Revolver bear interest at 2.25% over a
bank's specified reference rate on the first $40.0 million of borrowings and
1.25% over the reference rate on borrowings in excess of $40.0 million. The
Revolver expires May 31, 1995. The Company has received proposals from various
lenders to provide funds under a new credit agreement (the "New Credit
Agreement"), which it intends to enter into during fiscal 1995. Due to the
decreased working capital needs of the Company at the present time, the Company
anticipates that the New Credit Agreement will provide a smaller working capital
facility, and will have a lower interest rate and less restrictive financial and
operating covenants than the existing Revolver. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "STKY." The following table sets forth the range of high and low sale
prices per share for the Common Stock for the periods indicated, as reported on
the Nasdaq National Market.

<TABLE>
<CAPTION>
PRICE RANGE
-------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1993:
First Quarter............................................... $ 9 $ 5 1/4
Second Quarter.............................................. 7 1/2 6 1/8
Third Quarter............................................... 8 3/4 5 5/8
Fourth Quarter.............................................. 11 3/8 6 5/8
FISCAL YEAR ENDED MARCH 31, 1994:
First Quarter............................................... $ 10 1/8 $ 5 3/4
Second Quarter.............................................. 9 3/4 7 3/4
Third Quarter............................................... 9 5/8 7 3/4
Fourth Quarter.............................................. 8 3/4 6 7/8
FISCAL YEAR ENDING MARCH 31, 1995:
First Quarter............................................... $ 10 1/2 $ 7 7/8
Second Quarter.............................................. 12 1/4 9 1/4
Third Quarter (through November 17, 1994)................... 10 1/4 8 5/8
</TABLE>

On November 17, 1994, the last reported sale price of the Company's Common
Stock, as reported by the Nasdaq National Market, was $10.25 per share. As of
November 17, 1994, there were 1,062 holders of record of the Common Stock.

10
<PAGE> 11

DIVIDEND POLICY

The Company discontinued the payment of quarterly dividends during the
first quarter of the fiscal year ended March 31, 1993. Since that time, the
Company has not declared or paid any cash dividends on its shares of Common
Stock, and does not anticipate paying such dividends in the foreseeable future.
Earnings and other cash resources of the Company will be retained by the
Company. The Revolver restricts the payment of dividends without lender
permission. Any future determination to pay cash dividends will be at the
discretion of the Company's Board of Directors and will be dependent upon the
Company's results of operations, financial condition, contractual restrictions
and other factors deemed relevant by the Board of Directors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

DILUTION

The net tangible book value of Stokely at September 30, 1994 was $33.9
million or $4.08 per share of Common Stock. "Net tangible book value" per share
represents the amount of total tangible assets of the Company reduced by the
amount of its total liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the estimated net proceeds from the sale of
3,000,000 shares of Common Stock offered by the Company, the pro forma net
tangible book value of the Company at September 30, 1994 would have been
approximately $59.0 million, or $5.21 per share of Common Stock. This represents
an immediate increase in net tangible book value of $1.13 per share to existing
shareholders and an immediate dilution of $3.79 per share to new investors. The
following table illustrates the per share dilution in net tangible book value to
new investors at September 30, 1994:

<TABLE>
<S> <C> <C>
Public offering price per share............................................... $9.00
Net tangible book value per share before Offering........................... $4.08
Increase per share attributable to new investors............................ $1.13
-----
Pro forma net tangible book value per share after Offering.................... $5.21
-----
Dilution per share to new investors........................................... $3.79
=====
</TABLE>

The above table excludes an aggregate of 223,300 shares of Common Stock
reserved for issuance pursuant to currently outstanding options, 400,000 shares
of Common Stock reserved for issuance pursuant to options available for grant
under the Executive Stock Option Plan, and 90,000 shares of Common Stock
reserved for issuance pursuant to currently outstanding warrants. To the extent
that outstanding options and warrants are exercised, there may be further
dilution to new investors.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company at September 30, 1994, and as adjusted to reflect the sale of
3,000,000 shares of Common Stock offered by the Company hereby and the
application of the net proceeds as described under "Use of Proceeds."

<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt(1):
Notes payable........................................................ $ 35,875 $ 27,785
Current maturities of long-term debt................................. 2,458 2,458
-------- -----------
Total short-term debt............................................. $ 38,333 $ 30,243
======== =========
Long-term debt, net of current portion(1):
Senior notes......................................................... $ 35,852 $ 35,852
Revolving credit notes............................................... 17,000 --
Industrial revenue bonds............................................. 27,019 27,019
-------- -----------
Total long-term liabilities....................................... 79,871 62,871
-------- -----------
Shareholders' equity(2):
Preferred stock, par value $0.10 per share, authorized 1,000,000
shares, none issued............................................... -- --
Common stock, par value $0.05 per share; authorized 20,000,000
shares; outstanding 8,324,645 (outstanding as adjusted,
11,324,645)....................................................... 422 572
Additional paid-in capital........................................... 18,665 43,605
Retained earnings.................................................... 17,939 17,939
Treasury stock (at cost)............................................. (628) (628)
-------- -----------
Total shareholders' equity........................................ 36,398 61,488
-------- -----------
Total capitalization............................................ $116,269 $ 124,359
======== =========
</TABLE>

- -------------------------
(1) See Note F of Notes to Consolidated Financial Statements.

(2) Excludes 223,300 shares of Common Stock issuable pursuant to stock options
outstanding at September 30, 1994 (all of which options were then
exercisable at a weighted average exercise price of $8.42 per share), 90,000
shares of Common Stock issuable pursuant to warrants outstanding at
September 30, 1994 (all of which warrants were then exercisable at a
weighted average exercise price of $7.88 per share), and 400,000 shares of
Common Stock reserved for issuance under the Executive Stock Option Plan.
See "Management -- Stock Option Plans."

12
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The following sets forth selected consolidated financial data for the
Company at and for each of the five years in the period ended March 31, 1994.
The statement of operations data in the table for the three years ended March
31, 1994, and the balance sheet data as of March 31, 1993 and 1994, have been
derived from the Company's consolidated financial statements appearing elsewhere
herein, which have been audited by Deloitte & Touche LLP, independent auditors,
and should be read in conjunction with the consolidated financial statements and
the notes thereto. The statement of operations data in the table for the two
years ended March 31, 1991, and the balance sheet data as of March 31, 1990,
1991 and 1992, have been derived from the Company's audited consolidated
financial statements which are not included herein. The selected consolidated
financial data presented at and for the six months ended September 30, 1993 and
1994 have been derived from the Company's unaudited consolidated financial
statements. In the opinion of management, the unaudited consolidated financial
statements for such periods include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the consolidated
financial position and results of operations for these periods. For interim
reporting purposes, certain expenses are based on estimates rather than expenses
actually incurred. The results of operations for the six months ended September
30, 1994 should not be regarded as indicative of the results that may be
expected for the full year. The following data should be read in conjunction
with the Company's consolidated financial statements, the related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED SEPTEMBER 30,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $271,963 $257,520 $280,368 $281,382 $256,145 $127,505 $ 97,131
Other revenue......................... (436) 1,090 676 2,145 4,691 4,600 99
-------- -------- -------- -------- -------- -------- --------
Total revenue....................... 271,527 258,610 281,044 283,527 260,836 132,105 97,230
Cost of products sold................. 193,454 204,922 238,804 249,982 216,392 113,592 74,148
Selling, general and administrative
expenses............................ 44,461 40,902 48,481 42,139 36,476 18,016 13,464
Nonrecurring charge(1)................ -- -- -- 21,145 -- -- --
Interest expense...................... 4,721 7,082 8,592 12,721 12,710 6,482 4,914
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income taxes
and cumulative effect of change in
accounting principle................ 28,891 5,704 (14,833) (42,460) (4,742) (5,985) 4,704
Income taxes (credit)................. 11,156 1,888 (4,931) (12,983) (2,527) (718) 946
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before cumulative
effect of change in accounting
principle........................... 17,735 3,816 (9,902) (29,477) (2,215) (5,267) 3,758
Cumulative effect of change in
accounting principle(2)............. -- -- -- (1,650) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)................... $ 17,735 $ 3,816 $ (9,902) $(31,127) $ (2,215) $ (5,267) $ 3,758
========= ========= ========= ========= ========= ========= =========
Net earnings (loss) per share(2)...... $ 2.15 $ 0.46 $ (1.19) $ (3.75) $ (0.27) $ (0.63) $ 0.45
========= ========= ========= ========= ========= ========= =========
Weighted average shares outstanding... 8,260 8,287 8,288 8,302 8,320 8,316 8,325
Dividends per share................... $ 0.26 $ 0.20 $ 0.20 -- -- -- --
BALANCE SHEET DATA (AT PERIOD END):
Working capital....................... $ 70,631 $ 84,584 $ 80,064 $ 40,626 $ 42,071 $ 34,310 $ 46,057
Total assets.......................... 169,892 213,067 233,737 232,843 158,535 226,203 232,780
Total debt............................ 54,563 104,216 131,826 142,566 102,298 132,158 118,204
Shareholders' equity.................. 75,100 77,266 65,761 34,777 32,640 29,516 36,398
OTHER DATA:
Capital expenditures.................. $ 15,927 $ 18,033 $ 21,666 $ 10,367 $ 4,736 $ 3,957 $ 4,292
Depreciation.......................... 5,099 6,835 8,461 9,286 7,230 4,947 3,754
</TABLE>

- -------------------------
(1) In connection with the Company's restructuring plan, the Company sold,
closed or downsized certain processing facilities, resulting in a
nonrecurring charge during the fiscal year ended March 31, 1993 from the
write-down of such processing facilities, equipment and inventories to their
estimated net realizable value and from provisions for severance,
consolidation costs and plant closing costs. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

(2) On April 1, 1992, the Company adopted Statement of Financial Accounting
Standard No. 106 ("SFAS No. 106"), "Employers' Accounting for Postretirement
Benefits Other than Pensions." The Company recognized as expense in fiscal
1993 the accumulated postretirement benefit obligation aggregating $1.7
million, after taxes of $850,000. The net loss per share for the fiscal year
ended March 31, 1993 includes a $0.20 per share loss due to the adoption of
SFAS No. 106.

13
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company's financial performance and growth are directly related to
certain characteristics and trends in the vegetable processing industry. The
United States vegetable processing industry is a mature industry, with a
relatively modest 1.8% compounded annual growth rate from 1988 to 1993.
Therefore, any significant sales growth that may be experienced by the Company
likely would come at the expense of the loss of market share by another
processor, but also may occur through efforts designed to promote increased
consumption, such as through the introduction of new or improved products, or
through increased sales internationally, where the processed vegetable market is
currently growing.

The Company's net sales are affected by product availability and market
pricing. In the vegetable processing industry, product availability and market
prices tend to have an inverse relationship: market prices tend to decrease as
more product is available, whereas if less product is available, market prices
tend to increase. Product availability is a direct result of plantings, growing
conditions, crop yields and inventories, all of which may vary from year to
year. In addition, price can be affected by the planting, inventory level and
individual pricing decisions of the three or four largest processors in the
industry.

Increased plantings and improved growing conditions caused over-supply in
the processed vegetable market during fiscal 1992 and 1993, forcing industry
prices and profit margins down. During the latter part of fiscal 1994, market
prices rebounded because of an undersupply of products due to reduced plantings,
poor growing conditions and reduced carryover inventory. These favorable market
price conditions continued during the first quarter of fiscal 1995, but industry
prices have declined since that time due to increased plantings and improved
growing conditions.

In addition to the effects of vegetable processing industry conditions and
trends, the Company's restructuring initiatives commenced in fiscal 1993 have
impacted its financial performance in fiscal 1993 and fiscal 1994. The
restructuring initiatives included consolidating production at larger, more
efficient facilities, eliminating marginally profitable and unprofitable product
lines, reducing operating overhead and lowering interest expense through debt
reduction. Primarily as a result of the restructuring program, the Company's
cost of products sold and fixed selling, general and administrative expenses
have declined from levels experienced in fiscal 1992. In addition, from the
beginning of fiscal 1992 to October 1994, the Company's full-time employee
workforce has been reduced by approximately 250 employees, primarily due to the
restructuring initiatives, and the Company's seasonal workforce has been reduced
by approximately 1,000 employees due to the closing or downsizing of processing
plants affected by the restructuring initiatives. See "Stokely Restructuring
Program." As a result, the Company recorded in fiscal 1993 a non-recurring
restructuring charge of $14.7 million ($21.1 million pre-tax) relating to the
write-down of the eight processing plants to be sold, closed or downsized and
the costs associated therewith, including provisions for severance,
consolidation costs and plant closing costs, and the write-down of inventory of
discontinued product lines.

The table below sets forth the balances, on a pre-tax basis, of the major
categories of the restructure reserves provided in fiscal 1993 to September 30,
1994. The reserve amounts for property, plant and equipment and inventory are
non-cash write-offs of recorded assets. The amounts for other reserves are for
future cash outflows for costs and expenses related to consolidation of
facilities and plant carrying costs.

<TABLE>
<CAPTION>
RESTRUCTURE RESERVES
-------------------------------------------
PROPERTY,
PLANT &
EQUIPMENT INVENTORY OTHER TOTAL
--------- --------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Originally provided..................................... $12,700 $ 2,600 $5,800 $21,100
Balance at March 31, 1993............................... 12,700 2,600 5,400 20,700
Balance at March 31, 1994............................... 3,900 3,000 300 7,200
Balance at September 30, 1994........................... 3,900 2,000 200 6,100
</TABLE>

During fiscal 1994, the Company completed the sale of four of the eight
processing plants identified in the restructuring initiatives. Generally, the
net proceeds from these plant sales exceeded original estimates;

14
<PAGE> 15

however, the proceeds from the sale of related discontinued products inventory
were over-estimated, due primarily to the sale of certain frozen southern
vegetable products at less than anticipated prices. Accordingly, a portion of
the property, plant and equipment restructure reserve was reclassified for use
in the liquidation of inventory. Based on the Company's current review and
evaluation, the remaining reserves are considered adequate to complete the
restructuring plan in fiscal 1995.

The cost savings associated with these restructuring initiatives were
largely realized by the end of fiscal 1994. The Company anticipates its fixed
manufacturing expenses will increase during fiscal 1995 due primarily to an
anticipated increase in production volume; however, fixed manufacturing expense
per unit is expected to decline. The Company also expects that its fixed
selling, general and administrative expenses will increase during fiscal 1995,
primarily due to the reinstatement of certain employee wage increases and
related benefits. The Company expects that its interest expense will decrease
during fiscal 1995, primarily due to a lower level of borrowings.

In fiscal 1992, 1993 and 1994, the effective tax rates used for calculating
tax credits for the Company were 33.2%, 30.6%, and 53.3%, respectively, and
differed from statutory rates due primarily to allowable tax benefits from net
operating losses and tax credit carryforwards and adjustments of prior year tax
accruals. At March 31, 1994, the Company had net operating loss carryforwards of
$23.3 million and tax credit carryforwards of $2.9 million, which are expected
to continue to reduce and/or offset tax liabilities in future years.

During the fourth quarter of fiscal 1994, the Company changed its method of
valuing its inventories from the last-in, first-out method to the average cost
method. Management believes that the average cost method provides a more
meaningful presentation of the Company's financial position and related
financial ratios. In accordance with generally accepted accounting principles,
the prior years' financial statements have been retroactively adjusted to
reflect this change. The effect of this restatement was to increase the net loss
in fiscal 1993 by $784,000 or $0.09 per share and reduce the net loss in fiscal
1992 by $842,000 or $0.11 per share. In addition, the effect of the restatement
was to increase retained earnings at April 1, 1991 by $5.3 million.

In fiscal 1993, the Company adopted Statement of Financial Accounting
Standard No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement established accounting standards for employers'
accounting for postretirement benefits other than pensions, particularly
postretirement health care benefits. The Company elected to recognize as expense
during fiscal 1993 the entire accumulated postretirement benefit obligation
(transition obligation) aggregating $1.7 million, net of related tax benefits as
of April 1, 1992 of $850,000.

Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
This statement requires the recognition of the tax consequences in future years
of events which have been recognized in the financial statements. There was no
material cumulative effect of adoption of SFAS No. 109 on the financial position
or results of operations of the Company.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112 ("SFAS No. 112"), "Employers' Accounting for
Postemployment Benefits." This statement requires the accrual for postemployment
benefits during the years an employee provides services. SFAS No. 112 must be
adopted during the fiscal year ending March 31, 1995. The impact of adoption of
SFAS No. 112 is not material.

15
<PAGE> 16

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
from the Company's consolidated statements of operations, each expressed as a
percentage of net sales.

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
----------------------------------------------
SIX MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30,
------------------------- ---------------
1992 1993 1994 1993 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales(1)....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold.............................. 85.2 88.8 84.5 89.1 76.3
----- ----- ----- ----- -----
Gross profit....................................... 14.8 11.2 15.5 10.9 23.7
Selling, general and administrative expenses....... 17.3 15.0 14.2 14.1 13.9
Nonrecurring charge................................ -- 7.5 -- -- --
Other revenue...................................... (0.2) (0.7) (1.8) (3.6) (0.1)
Interest expense(2)................................ 3.0 4.5 5.0 5.1 5.1
----- ----- ----- ----- -----
Earnings (loss) before income taxes and cumulative
effect of change in accounting principle......... (5.3) (15.1) (1.9) (4.7) 4.8
Income taxes....................................... (1.8) (4.6) (1.0) (0.6) 0.9
----- ----- ----- ----- -----
Earnings (loss) before cumulative effect of change
in accounting principle.......................... (3.5) (10.5) (0.9) (4.1) 3.9
Cumulative effect of change in accounting
principle........................................ -- (0.6) -- -- --
----- ----- ----- ----- -----
Net earnings (loss)................................ (3.5)% (11.1)% (0.9)% (4.1)% 3.9%
===== ===== ===== ===== =====
</TABLE>

- -------------------------
(1) Net sales does not include other revenue.

(2) Lower net sales for the fiscal year ended March 31, 1994 and for the six
months ended September 30, 1994 caused percentage rate increases in
interest expense, although the actual expense amount declined from
comparative prior periods.

SIX MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1993

NET SALES. Net sales decreased $30.4 million, or 23.8%, to $97.1 million
for the six months ended September 30, 1994 compared to $127.5 million for the
six months ended September 30, 1993. The reduction in sales was primarily the
result of lower available canned inventories at the beginning of fiscal 1995
caused by a poor growing season during fiscal 1994 and the elimination of
certain low margin or unprofitable products in both the canned and frozen
divisions.

Total canned vegetable sales decreased $19.7 million, or 22.1%, to $69.5
million for the six months ended September 30, 1994 compared to $89.2 million
for the six months ended September 30, 1993. The decline in total canned
vegetable sales was the result of a $29.2 million reduction in sales volume
partially offset by a $9.5 million increase in sales due to improved pricing. Of
the net decrease in sales of $19.7 million, $5.9 million was due to a reduction
in sales of discontinued canned products and $13.8 million was due to a decrease
in sales of continued products due to lower available inventories. Sales of
private label canned products declined $13.0 million, or 20.8%, to $49.6 million
for the six months ended September 30, 1994, compared to $62.6 million for the
six months ended September 30, 1993. The decline in private label canned sales
was the result of an approximate $21.7 million reduction in sales volume,
partially offset by an approximate $8.7 million increase in sales due to
improved pricing. Sales of brand label canned products declined $6.7 million, or
25.3%, to $19.9 million compared to $26.6 million for the six months ended
September 30, 1993. Substantially all the decline in brand label sales was due
to lower sales volume primarily due to lower available canned inventories.

Total frozen sales declined $10.7 million, or 27.9%, to $27.6 million for
the six months ended September 30, 1994 compared to $38.3 million for the six
months ended September 30, 1993. This reduction in sales was due primarily to
the elimination of certain low margin or unprofitable frozen products. Sales of
discontinued frozen products decreased $8.7 million, or 76.3%, to $2.7 million
for the six months ended September 30, 1994 compared to $11.4 million for the
six months ended September 30, 1993.

16
<PAGE> 17

COST OF PRODUCTS SOLD. Cost of products sold decreased $39.5 million, or
34.8%, to $74.1 million for the six months ended September 30, 1994 from $113.6
million for the six months ended September 30, 1993. The decrease in cost of
products sold was due primarily to lower sales volume in both the canned and
frozen divisions. Cost of products sold as a percentage of net sales decreased
to 76.3% for the six months ended September 30, 1994 compared to 89.1% for the
six months ended September 30, 1993. Of this 12.8% decrease, 6.3% was due to
non-restructuring-related cost reduction efforts, 4.9% was due to higher selling
prices, 1.3% was due to cost reductions from the Company's restructuring
efforts, and 0.3% was due to the elimination of certain low margin or
unprofitable products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses declined by $4.5 million, or 25.0%, to $13.5 million for
the six months ended September 30, 1994 from $18.0 million for the six months
ended September 30, 1993. This reduction was primarily the result of lower
variable selling expenses associated with lower brand label sales volume.
Selling, general and administrative expenses as a percentage of net sales
declined to 13.9% for the six months ended September 30, 1994 from 14.1% for the
six months ended September 30, 1993 due to lower variable selling expenses.

INTEREST EXPENSE. Interest expense decreased $1.6 million, or 24.6%, to
$4.9 million for the six months ended September 30, 1994 compared to $6.5
million for the six months ended September 30, 1993. This reduction was
primarily the result of lower short-term borrowings resulting from lower working
capital requirements and the payment of long-term debt from the proceeds of
sales of closed plants, partially offset by increases in short-term interest
rates and higher financing expenses associated with the June 1993 amendment of
the Revolver.

INCOME TAXES. The effective income tax rate for the six months ended
September 30, 1994 was 20% compared to the 12% used for calculating tax credits
for the six months ended September 30, 1993. Each of the effective tax rates
differ from the statutory rates due to recognition of allowable tax benefits
from net operating loss carryforwards.

NET EARNINGS (LOSS). Net earnings for the six months ended September 30,
1994 were $3.8 million compared to the net loss of $5.3 million for the six
months ended September 30, 1993.

FISCAL YEAR ENDED MARCH 31, 1994 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1993

NET SALES. Net sales in fiscal 1994 decreased $25.3 million, or 9.0%, to
$256.1 million from $281.4 million in fiscal 1993. Limited supplies of available
canned finished goods inventory caused by a poor growing season was the primary
reason for the decline. This volume shortfall was only partially offset by a
modest improvement in pricing.

Total canned vegetable sales decreased $22.7 million, or 11.4%, to $175.7
million in fiscal 1994 from $198.4 million in fiscal 1993. The decline in sales
in fiscal 1994 was substantially due to lower available inventory of canned
vegetables caused by a poor growing season in fiscal 1994, partially offset by a
3.3% improvement in canned division pricing. In fiscal 1994, sales of
discontinued canned vegetables totaled $8.8 million. Sales of private label
canned products declined $10.6 million, or 7.7%, to $126.5 million in fiscal
1994 compared to $137.1 million in fiscal 1993. The decline in private label
sales was a result of an $18.8 million, or 13.7%, reduction in sales due to
lower sales volume, partially offset by an $8.2 million, or 6.0%, increase in
sales due to improved pricing experienced in the second half of fiscal 1994.
Sales of brand label canned products declined by $12.1 million, or 19.7%, to
$49.2 million in fiscal 1994 compared to $61.3 million in fiscal 1993. The
decline in brand label sales was a result of an $11.0 million, or 17.9%,
reduction in sales due to lower sales volume, and a $1.1 million, or 1.8%,
decrease in sales due to lower prices.

Total frozen sales declined $2.6 million, or 3.1%, to $80.4 million in
fiscal 1994 compared to $83.0 million in fiscal 1993. This reduction in frozen
sales was primarily the result of a 3.7% decrease in pricing related to
elimination of higher priced but marginally unprofitable products and the sale
of related inventories. In fiscal 1994, sales of discontinued frozen vegetables
totaled $17.8 million.

17
<PAGE> 18

OTHER REVENUE. Other revenue of $4.7 million in fiscal 1994 included
revenues of $4.1 million resulting from insurance claim proceeds related to
reconstruction costs at the Company's fire damaged Hoopeston, Illinois facility.
See Note K of Notes to Consolidated Financial Statements.

COST OF PRODUCTS SOLD. Cost of products sold decreased $33.6 million, or
13.4%, to $216.4 million in fiscal 1994 from $250.0 million in fiscal 1993. The
decrease in cost of products sold was due primarily to lower sales volume. Cost
of products sold as a percentage of net sales declined to 84.5% in fiscal 1994
compared to 88.8% in fiscal 1993. This decline resulted primarily from the
elimination of low margin product lines. Average variable manufacturing costs
remained relatively flat in fiscal 1994 compared to fiscal 1993 despite adverse
weather-related production conditions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Total selling, general and
administrative expenses decreased $7.7 million, or 18.3%, to $34.4 million,
excluding a charge of $2.1 million relating to the settlement of a product
liability claim in fiscal 1994, from $42.1 million in fiscal 1993. This decrease
was in part due to a $4.1 million decrease in sales promotions related primarily
to lower canned brand label sales in fiscal 1994. Other administrative expenses
decreased $3.6 million in fiscal 1994 due to cost reduction and other expense
control programs instituted by the Company. Selling, general and administrative
expenses as a percentage of net sales declined to 14.2% in fiscal 1994 compared
to 15.0% in fiscal 1993 primarily due to restructuring initiatives which lowered
fixed general and administrative expenses. The product liability claim in fiscal
1994 relates to an acquired business and predates the Company's acquisition of
such business. Had the $2.1 million product liability charge not occurred,
selling, general and administrative expenses as a percentage of net sales in
fiscal 1994 would have been 13.4% rather than 14.2%.

INTEREST EXPENSE. Interest expense totalled $12.7 million in fiscal 1994
and $12.7 million in fiscal 1993. Interest expense remained flat in fiscal 1994
despite a reduction in average short-term debt because of an increase in
short-term interest rates and higher financing expenses resulting from a June
1993 amendment to the Revolver.

INCOME TAXES. The effective income tax rates for calculating tax credits
were 53.3% for fiscal 1994 and 30.6% for fiscal 1993. The effective tax rate
differs from the statutory rates due to recognition of allowable tax benefits
from net operating loss carrybacks and adjustment to prior year accruals
relating primarily to tax refunds received in excess of amounts accrued in the
prior fiscal year. See Note G of Notes to Consolidated Financial Statements.

NET EARNINGS (LOSS). The net loss for fiscal 1994 was $2.2 million compared
to a net loss of $31.1 million in fiscal 1993. The fiscal 1993 loss included a
non-recurring restructuring charge of $14.7 million ($21.1 million pre-tax) and
the cumulative effect of adoption of SFAS No. 106 on postretirement benefits of
$1.7 million ($2.5 million pre-tax).

FISCAL YEAR ENDED MARCH 31, 1993 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1992

NET SALES. Net sales increased $1.0 million, or 0.4%, to $281.4 million in
fiscal 1993 from $280.4 million in fiscal 1992. The Company experienced an
increase in sales volume of $17.5 million, or 6.2%, in fiscal 1993 primarily in
the private label canned and frozen businesses. These volume increases were
partially offset by a decline in sales of $16.5 million, or 5.9%, due to a
decline in prices.

Total canned vegetable sales decreased $12.0 million, or 5.7%, to $198.4
million in fiscal 1993 compared to $210.4 million in fiscal 1992. Lower prices
caused a decline in sales of $16.1 million, or 7.7%, in fiscal 1993 compared to
fiscal 1992, partially offset by volume increases accounting for $4.1 million or
a 1.9% increase in sales. Excess production of canned vegetables in fiscal 1993
combined with a large fiscal 1992 carryover inventory created downward pressure
on the Company's pricing of all canned vegetable products. Per unit pricing also
was adversely affected by a lower proportion of brand label sales to total
canned sales.

Sales of private label canned products increased $3.2 million, or 2.4%, to
$137.1 million in fiscal 1993 compared to $133.9 million in fiscal 1992,
reflecting an increased emphasis on private label business. The increase in
private label sales included an $8.0 million or 6.0% increase in sales due to
higher volume, offset by a $4.8 million or 3.6% decrease in sales due to lower
pricing. Sales of brand label canned products declined by $15.2 million, or
19.9%, to $61.3 million in fiscal 1993 compared to $76.5 million in fiscal 1992.
The decline in brand label sales was a result of a $7.2 million or 9.4%
reduction in sales due to lower volume and an $8.0 million or 10.5% decrease in
sales due to lower prices.

18
<PAGE> 19

Total frozen sales increased $13.0 million, or 18.6%, to $83.0 million in
fiscal 1993 compared to $70.0 million in fiscal 1992 as a result of the emphasis
on increased sales volume and higher unit priced repackaged goods. This increase
in frozen sales included $10.5 million, or 15.1%, due to volume increases and
$2.5 million, or 3.5%, due to price increases. The price increase for frozen
products was due primarily to an increase in sales of higher unit-priced
repackaged products in relation to total frozen sales.

OTHER REVENUE. Other revenue of $2.1 million in fiscal 1993 included
revenue of $1.6 million resulting from insurance claim proceeds for business
interruption due to a fire at the Company's Hoopeston, Illinois facility. That
revenue represented recovery of lost profit margin due to a shortage of finished
goods normally produced at that plant and recovery of costs incurred as a result
of the fire. Other revenue of $676,000 in fiscal 1992 primarily consisted of a
gain on the disposal of an investment and a gain on sale of assets, partially
offset by a write-down of obsolete equipment.

COST OF PRODUCTS SOLD. Cost of products sold increased $11.2 million, or
4.7%, to $250.0 million in fiscal 1993 from $238.8 million in fiscal 1992,
primarily due to an increase of 15.1% in frozen product sales volume. Cost of
products sold as a percentage of net sales was 88.8% in fiscal 1993 and 85.2% in
fiscal 1992. The increase in cost of products sold as a percentage of net sales
in fiscal 1993 as compared to fiscal 1992 was due primarily to lower selling
prices and an increase in frozen product sales, which carry a lower margin, as a
percentage of total net sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Total selling, general and
administrative expenses decreased $6.4 million, or 13.2%, to $42.1 million in
fiscal 1993 from $48.5 million in fiscal 1992. This decrease was primarily due
to a $4.3 million decrease in variable selling expenses related to lower brand
label canned sales in fiscal 1993. Administrative expenses were reduced $2.1
million due to cost reduction initiatives implemented during fiscal 1993.
Selling, general and administrative expenses as a percentage of net sales
decreased to 15.0% in fiscal 1993 from 17.3% in fiscal 1992, due primarily to
reduced canned sales promotion expenses and lower fixed general and
administrative expenses resulting primarily from the restructuring initiatives.

NONRECURRING CHARGE. In fiscal 1993, the Company recorded a one-time,
non-cash charge of $14.7 million ($21.1 million pre-tax) relating to the
write-down of eight plants to be sold, closed or downsized and the costs
associated with disposing of them.

INTEREST EXPENSE. Interest expense increased $4.1 million, or 47.7%, to
$12.7 million in fiscal 1993 from $8.6 million in fiscal 1992. The increase in
interest expense in fiscal 1993 was the result of higher interest rates and
higher borrowing levels. In fiscal 1993, the Revolver carried interest rates
which were higher than a bank's reference rate. In fiscal 1992, the Company was
able to borrow at or below a bank's reference rate via revolving debt and
commercial paper. Average total borrowings were higher in fiscal 1993 due to
higher inventory levels and reduced profitability.

INCOME TAXES. The effective tax rates for calculating tax credits were
30.6% for fiscal 1993 and 33.2% for fiscal 1992. The lower effective tax rate in
fiscal 1993 reflected a reduction in the amount of tax benefit that was
recognized because the alternative minimum tax limited the amount of currently
refundable taxes available from net operating loss carrybacks.

NET EARNINGS (LOSS). The net loss for fiscal 1993 was $31.1 million,
compared to a net loss of $9.9 million in fiscal 1992. The fiscal 1993 loss
included a non-recurring restructuring charge of $14.7 million ($21.1 million
pre-tax) and the cumulative effect of adoption of SFAS No. 106 on postretirement
benefits of $1.7 million ($2.5 million pre-tax).

19
<PAGE> 20
SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth certain unaudited quarterly results of
operations for fiscal 1993 and 1994 and for the first two quarters of fiscal
1995. In management's opinion, this unaudited consolidated condensed information
has been prepared on the same basis as the annual financial statements and
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information for the quarters presented,
when read in conjunction with the consolidated financial statements and notes
thereto included elsewhere in this Prospectus. The operating results for any
previous quarter are not necessarily indicative of results for any future
period.

<TABLE>
<CAPTION>
QUARTER
QUARTER ENDED QUARTER ENDED ENDED
------------------------------------------------ --------------------------------------------------- --------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1992 1992 1992 1993(1) 1993 1993 1993 1994 1994(2)
-------- ------------- ------------ --------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales(3).... $ 59,188 $62,798 $ 78,910 $ 80,486 $ 56,357 $71,148 $ 71,983 $56,657 $ 38,818
Gross
profit(4)..... 9,128 8,833 12,494 945 5,205 8,708 12,166 13,674 8,575
Net earnings
(loss)........ (3,959) (2,370) (707) (24,091) (5,385) 118 226 2,826 407

QUARTER ENDED
SEPTEMBER 30,
1994(2)
-------------

<S> <C>
Net sales(3).... $58,313
Gross
profit(4)..... 14,408
Net earnings
(loss)........ 3,351
</TABLE>

- -------------------------
(1) During the fourth quarter of 1993, the Company recorded a one-time, noncash
charge of $14.7 million ($21.1 million pre-tax), which related to the
write-down of eight plants to be sold, closed or downsized and the costs
associated with disposing of them. See "Stokely Restructuring Program."

(2) For interim reporting purposes, certain expenses are based on estimates
rather than expenses actually incurred.

(3) Net sales does not include other revenue.

(4) Gross profit is defined as net sales less cost of products sold.

The Company's operations are seasonally affected by the growing cycle of
the vegetables it processes. Most of the Company's production occurs during the
second quarter of each fiscal year (due to the timing of crop production and
climate conditions) and a majority of sales occurs during the third and fourth
quarter of each fiscal year (due to seasonal consumption patterns for its
products). Accordingly, inventory levels are highest during the second and third
quarters, and accounts receivable levels are highest during the fourth quarter.
Net sales generated during the third and fourth quarter of each fiscal year have
a significant impact on the Company's results of operations. However, the
Company's quarterly operating results for fiscal 1993 and 1994 shown above do
not fully reflect this seasonality, due primarily to the impact of the Company's
restructuring program as well as the effects of industry market conditions (in
terms of price and supply).

The Company's cost and expense reduction programs began to have a greater
impact as fiscal 1994 progressed. The sale or closing of various plants
identified in the restructuring plan reduced fixed manufacturing expenses while
staff reductions affecting most other areas of the Company reduced general and
administrative expenses. The increasing impact of cost reduction programs and
the upward trend in selling prices is evident in the improvement in the
Company's gross margin (sales less cost of products sold) by quarter. Gross
margin increased from 9.2% in the first quarter of fiscal 1994 to 12.2% in the
second, 16.9% in the third and 24.1% in the fourth and gross margin was 22.1% in
the first quarter of fiscal 1995 and 24.7% in the second.

20
<PAGE> 21

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

Due to the seasonal production nature of the canned and frozen vegetable
processing business, the Company must maintain substantial inventories of
processed vegetables throughout the year. The working capital requirements
associated with producing and maintaining such inventories are financed
primarily through short-term borrowings and deferred payment terms with major
raw product and container suppliers. The Company's Revolver provides for
borrowings up to $100.0 million as revolving credit loans. The Revolver matures
on May 31, 1995. The Company believes that the Revolver is adequate to meet the
Company's seasonal borrowing needs. Borrowings under the Revolver were $52.9
million at September 30, 1994 and are projected to peak at less than $60.0
million during fiscal 1995. The maximum amount borrowed in fiscal 1994 was $68.9
million under the Revolver compared to $97.5 million in fiscal 1993 under the
Revolver and $88.0 million in fiscal 1992 under various short-term credit
facilities. The decrease of $28.6 million in maximum borrowings from fiscal 1993
to fiscal 1994 was due primarily to the Company's restructuring initiatives
resulting in lower inventory levels and operating costs.

From fiscal 1988 to fiscal 1992, the Company funded its acquisitions and
capital expenditures primarily through debt. In addition, during fiscal 1991 and
1992, high production levels led to inventory accumulation which also was
primarily funded through short-term borrowings. As part of the restructuring
plan, the Company reduced its outstanding debt by $29.5 million, from $131.8
million at March 31, 1992 to $102.3 million at March 31, 1994, and intends to
further reduce its outstanding debt with the proceeds from this Offering. For
fiscal 1991 and 1992, the Company's average interest rates paid on its
short-term credit facilities were 8.8% and 5.8%, respectively, and the Company
was able to utilize short-term commercial paper borrowings to fund a portion of
its working capital needs. However, during fiscal 1993, the expanded working
capital requirements and the Company's inability to obtain commercial paper
financing caused the Company to enter into the Revolver, which bears interest at
2.25% over a specified bank's reference rate on the first $40.0 million and
1.25% over a specified bank's reference rate on borrowings in excess of $40.0
million. As a result, for fiscal 1993 and 1994, the Company's average interest
rate on short-term debt (including commercial paper in fiscal 1993 and a portion
of the Revolver) was 7.3% and 8.4%, respectively. The Company has received
proposals from various lenders to provide funds under a New Credit Agreement,
which it intends to enter into in fiscal 1995. Due to the decreased working
capital needs of the Company at the present time, the Company anticipates that
the New Credit Agreement will provide a smaller working capital facility, and
also will have a lower interest rate and less restrictive financial and
operating covenants than the existing Revolver.

In addition to the Revolver, the Company has various long-term debt
obligations, which aggregated $79.9 million at September 30, 1994, excluding
current maturities of $2.5 million. Included in the long-term debt obligations
at September 30, 1994 were two senior notes totaling $35.9 million, various
Industrial Development Revenue Bonds totaling $27.0 million, and $17.0 million
of revolving credit notes classified as long-term. The two senior notes had
long-term principal amounts of $21.0 million and $14.9 million at September 30,
1994, respectively, bear interest at fixed rates of 9.37% and 9.74%,
respectively, and mature in the years 2000 and 2001, respectively. At September
30, 1994, the majority of the Industrial Development Revenue Bonds were fixed
rate bonds with aggregate long-term principal amounts of $24.2 million,
excluding current maturities. These fixed rate bonds have scheduled maturities
through the year 2005 and bear interest at fixed interest rates ranging from
7.38% to 8.88%. The remainder of the Industrial Development Revenue Bonds
consist of variable rate bonds which totaled $2.8 million at September 30, 1994,
exclusive of current maturities, have scheduled maturities through the year 2011
and bear interest at rates which ranged from 3.88% to 6.82% at September 30,
1994. The $17.0 million principal amount long-term notes payable at September
30, 1994 consist of that portion of the Revolver which is not expected to be
repaid currently. See Note F of Notes to Consolidated Financial Statements.

During fiscal 1993, certain long-term Industrial Development Revenue Bond
issues were classified as current liabilities because the Company was in
technical default of certain financial ratio covenants. During fiscal 1994,
financial covenants in all affected issues, except a $1.4 million Paulding, Ohio
bond, were amended by the bondholders, such that the Company was again in
compliance. Accordingly, the amended bonds were again classified as long-term
debt at March 31, 1994. The Paulding, Ohio facility was sold in fiscal 1994 and
the proceeds were used to repay the bonds in July 1994. At September 30, 1994,
the Company was in compliance with all material debt and financial ratio
covenants set forth in all of its debt agreements.

21
<PAGE> 22

CASH FLOWS FROM OPERATING ACTIVITIES

Cash used in operations during the six months ended September 30, 1994
totaled $13.5 million. Of the total cash used, changes in operating assets and
liabilities used cash of $22.2 million primarily due to an increase in inventory
of $74.7 million and an increase in accounts receivable of $4.5 million,
partially offset by an increase of $52.8 million in accounts payable.

During fiscal 1994, the Company realized significant improvements in cash
flow from operating activities and applied such cash flow primarily to reduce
short-term debt and accounts payable. Net cash provided by operations improved
$36.7 million to $38.1 million in fiscal 1994 from $1.4 million in fiscal 1993.
The increase in cash provided by operations is partially attributable to reduced
net losses (net of a nonrecurring restructuring charge in fiscal 1993) in fiscal
1994 compared to fiscal 1993. Additionally, cash provided by changes in
operating assets and liabilities increased $23.3 million primarily from the
benefits of inventory and accounts receivable reductions of $45.3 million and
$21.0 million, respectively, offset in part by a reduction in accounts payable
of $25.3 million. The Company's aggressive inventory reduction programs in the
first quarter of fiscal 1994, combined with the elimination of certain product
lines and the adverse growing and harvesting conditions during fiscal 1994, were
the primary reasons for the Company's reduced inventories.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash provided by (used in) investing activities during the six months
ended September 30, 1994 and during fiscal 1994, 1993 and 1992 were ($4.1
million), $3.8 million, ($7.3 million) and ($33.5 million), respectively.
Purchase of property, plant and equipment was $4.3 million, $5.2 million, $12.9
million and $21.7 million during the six months ended September 30, 1994, and
during fiscal 1994, 1993 and 1992, respectively.

Capital expenditures during the six months ended September 30, 1994 were
primarily related to the capacity consolidation at the Waunakee, Wisconsin
facility and investment in product quality control equipment at several
processing plants. Capital expenditures in fiscal 1994 were focused on improved
plant efficiency and ongoing compliance with environmental regulations.
Expenditures in fiscal 1994 included capacity consolidation and operation
efficiency projects at the Pickett, Wisconsin, and Waunakee, Wisconsin,
facilities, and improvements to a wastewater disposal system in Walla Walla,
Washington. These capital expenditures were financed through cash flow from
operations. There were also capital expenditures to complete the reconstruction
of the Company's Hoopeston, Illinois, facility damaged by fire in fiscal 1993,
which were financed with insurance proceeds.

In fiscal 1994, the Company generated $9.1 million in additional cash flow
from the sale of four processing facilities and other miscellaneous assets as
part of the Company's restructuring program. Proceeds from the plant sales were
used primarily to pay down long-term debt.

Capital expenditures for fiscal 1993 and 1994 were below the amount of
depreciation. In these years, the Company intentionally limited its level of
capital expenditures to short-term pay back and necessary quality and
environmental projects, but plans to increase capital expenditures to the level
of annual depreciation in future years. Capital expenditures budgeted for fiscal
1995 total $4.0 million, primarily for product quality improvements and the
initial phase of a new management information system.

Capital expenditures in fiscal 1993 included expansion of corn capacity at
the Wells, Minnesota, facility, installation of wastewater disposal systems at
the Paulding, Ohio, and Scottville, Michigan, facilities and completion of the
corporate offices in Oconomowoc, Wisconsin. The capital expenditures were
financed through short-term debt. Capital expenditures also were made to begin
rebuilding the Company's Hoopeston, Illinois, facility that was damaged by fire.
These expenditures were financed by insurance proceeds. In fiscal 1992, the
Company acquired the assets of Americana Packing and Distribution of McAllen,
Texas, a frozen vegetable processing company, for $9.3 million.

22
<PAGE> 23

CASH FLOWS FROM FINANCING ACTIVITIES

During the six months ended September 30, 1994, the Company increased its
borrowings under the Revolver by $17.9 million to $52.9 million. This increase
was due primarily to the use of cash to fund expected seasonal increases in
inventory levels.

At March 31, 1994, the Company had $35.0 million of borrowings under the
Revolver, of which $17.0 million was classified as long-term and $18.0 million
was classified as short-term. At March 31, 1993, the Company had $66.3 million
of borrowings under the Revolver, of which $35.0 million was classified as long-
term and $31.3 million was classified as short-term. During fiscal 1994, the
Company decreased its borrowings under the Revolver by $31.3 million through
planned cash flow improvements from the reduction in accounts receivable and
inventories.

In fiscal 1992, the Company issued new long-term debt consisting of a $20.0
million private placement and a $3.0 million Industrial Development Revenue
Bond. In fiscal 1992, $20.0 million of commercial paper borrowings were
classified as long-term debt.

IMPACT OF INFLATION

Current financial statements are prepared in accordance with generally
accepted accounting principles and report operating results in terms of
historical costs. They provide a reasonable, objective, quantifiable statement
of financial results but do not evaluate the impact of inflation. Competitive
conditions permitting, the Company modifies its selling prices to recognize cost
changes as incurred. Management believes the impact of inflation does not
distort the Company's financial statements since prices are determined by supply
and demand.

23
<PAGE> 24

BUSINESS

GENERAL

THE VEGETABLE PROCESSING INDUSTRY

The processed canned and frozen vegetable industry in the United States
currently accounts for an estimated $5.1 billion in sales per year and is
estimated to be growing at a rate of 1.8% per year. In addition, an estimated
98% of households in the United States purchased canned vegetables in 1989. The
canned vegetable market, the Company's primary market, represented an estimated
$3.0 billion in annual sales in 1993. Of the canned vegetable market, the
private label channel of distribution accounts for approximately 35% of the
canned vegetable industry's total retail sales, and is currently experiencing
market share growth.

The vegetable processing industry is characterized by several large
producers, but also includes a number of smaller independently owned producers.
In general, the canned and frozen processed vegetable industry is mature and
capital intensive, and, as such, there have been few entrants into the market in
recent years. Over the past ten years, the Company believes the industry has
been characterized by plant reduction and consolidation.

The pricing structure in the canned and frozen vegetable processing
industry is dependent upon the supply of agricultural products and is subject to
the variable nature of agricultural production. Selling prices of canned and
frozen products are a direct result of industry product supply, which correlate
to plantings, growing conditions and inventories. A year of high supply
generally results from two critical factors. First, inventory carryover levels
provide processors with an indication of which markets might be short on product
and, therefore, might hold the best promise for favorable price trends.
Declining carryovers typically encourage processors to expand acreage devoted to
a particular crop in anticipation of higher prices. Second, weather impacts
total production through its influence on yield per acre. Favorable growing
conditions typically boost yield per acre and, therefore, total production.
Unfavorable growing conditions have the opposite effect. Weather impacts not
only crop size, but also crop quality.

Increased plantings and improved growing conditions caused over-supply in
the vegetable market during fiscal 1992 and 1993, forcing industry prices and
margins downward. During the latter part of fiscal 1993 and continuing into
fiscal 1994, market prices improved due to reduced plantings, unfavorable
growing conditions and the consequential effects on supply and pricing. These
favorable market price conditions continued during the first quarter of fiscal
1995, but industry prices declined during the second quarter of fiscal 1995 due
to increased plantings and improved growing conditions.

24
<PAGE> 25

BUSINESS STRATEGY

In fiscal 1993, the Company began to implement a new business strategy
designed to enhance its leadership position in certain markets and products and
to facilitate the Company's ability to achieve a higher level and consistency of
earnings over time. The key elements of the strategy are as follows:

- FOCUS ON CORE PRODUCT LINES. The Company has narrowed its product focus
to product lines in which it has significant market share -- corn, green beans,
peas and root crops -- and eliminated several unprofitable non-core lines,
including the canned tomato and fruit product lines and southern frozen
vegetables. This focus has allowed the Company to significantly reduce its fixed
manufacturing and administrative expenses and its variable costs per unit in an
industry generally characterized by a high ratio of variable to fixed costs.
Fixed manufacturing expenses for the canned portion of the business were reduced
24.7% for fiscal 1994 compared to fiscal 1992. During the same period, fixed
selling, general and administrative expenses were reduced 37.5%.

- EMPHASIZE THE PRIVATE LABEL CHANNEL OF DISTRIBUTION. Since fiscal 1992,
the Company has placed significant emphasis on its presence in the private label
channel of distribution. Private label has been the Company's primary
distribution channel since it was established in 1920, and the Company currently
holds a leading market share in this channel. Customers include major national
supermarket chains such as Winn Dixie, Kroger, A&P, Aldi and Safeway. In
addition, the Company does not believe the three largest industry suppliers
currently are emphasizing the private label channel of distribution. The
Company's operating margins in private label are generally higher than the
margins realized in its brand products business because of lower selling and
support expenses. Other advantages of increasing its share position in the
private label market in addition to sales growth include greater operating
efficiency, supplier leverage, channel influence and cross-selling
opportunities.

The Company believes that opportunities exist to achieve share growth in
this channel on an internal basis and through selective mergers or acquisitions.
The Company's competitive advantages in this channel include: (1) the Company's
74 years of experience as a private label processor/marketer has enabled the
Company to develop substantial expertise in agriculture operations, plant
operations, distribution, marketing, sales and customer service; (2) the Company
is the largest producer of corn, the leading category item, for the private
label channel of distribution which the Company believes gives it supplier
leverage and channel influence; (3) the Company is a large producer of root and
specialty crops, relatively stable margin items for the Company which are
demanded by the private label channel of distribution and are not produced on a
full-line basis by many of Stokely's competitors; (4) the Company can leverage
its brand marketing expertise and private label market share to participate in
the emerging upscale private label market; (5) the Company has the ability to
combine brand and private label shipments to a single destination, thereby
reducing costs for its customers; and (6) the Company believes it has a
recognized level of service responsiveness and innovation.

The Company believes that opportunities exist to enhance consumer
recognition of its brand names and to selectively expand its brand product lines
by developing new brand specialty products. For example, the Company has
introduced a line of value-added specialty products sold under the Stokely's
Gold(TM) label which utilizes specialty varieties and upscale packaging. The
Company believes these products have not only provided the Company with a
competitive advantage, but also have improved profit margins in Stokely's brand
business. Sales volume of the Stokely's Gold(TM) label product line has doubled
from fiscal 1992 to fiscal 1994, and the Company sees additional growth
potential for this line. In fiscal 1994, the Stokely's Gold(TM) label products
consisted of 14 different products, and accounted for 7% of the Company's brand
sales. Because of their uniqueness, sales of these products do not overly
cannibalize the Stokely's Finest(R) brand.

25
<PAGE> 26

- PURSUE GROWTH OPPORTUNITIES IN FOREIGN MARKETS. Exports of processed
vegetables represent a growing channel of distribution in the processed
vegetable industry. For the past five years, the volume of total canned corn
exported by U.S. processors, the major component of U.S. exported processed
vegetables, has grown at a compound annual rate of 15%. The Company believes
that its strengths as a leading U.S. canned corn producer and a major exporter
create opportunities for the Company to expand its export sales. The Company has
achieved a significant market share in exports to Germany and Scandinavia and
intends to increase its emphasis on expanding export sales to Eastern Europe,
Asia, Canada and Mexico. The Company's marketing approach to the export markets
varies from its North American competition. The Company prefers to establish
direct selling relationships with customers rather than the conventional
practice of dealing through export traders and brokers, and thereby attempt to
reduce its variable selling expenses.

- IMPROVE EFFECTIVENESS AND EFFICIENCY OF FROZEN VEGETABLE BUSINESS. In
order to increase its profit margins in the frozen vegetable business, the
Company has downsized its frozen vegetable operations following a period of
rapid expansion and redirected its sales to industrial customers. The Company
generally has been able to generate higher margins on its industrial sales due
to decreased packaging and promotional expenses associated with sales of frozen
products in bulk. The Company plans to continue to increase its presence in this
channel through the addition of new customers, and to increase its leading
position in certain higher margin specialty products, while remaining one of the
major players in frozen corn production, the leading category item in the frozen
vegetable market.

PRODUCTS

GENERAL

The Company cans, freezes and sells a variety of vegetables. Its principal
products are corn, green beans, peas and root crops, including carrots, beets,
mixed vegetables and potatoes. Other products processed and marketed by the
Company include sauerkraut, processed dry beans and pumpkin, supplemented by
purchased items such as asparagus, which is packed for Stokely by others under
contractual co-pack arrangements. The following table shows, for each of the
last three fiscal years, the amount and percentage of net sales for each of the
Company's principal raw product groups.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------------------------------
1992 1993 1994
------------------- ------------------- -------------------
NET NET NET
SALES PERCENT SALES PERCENT SALES PERCENT
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CANNED VEGETABLES:
Corn................................. $ 70,200 25.0% $ 78,400 27.8% $ 67,400 26.3%
Green beans.......................... 40,200 14.4 35,800 12.7 41,500 16.2
Peas................................. 23,000 8.2 23,100 8.2 20,100 7.9
Root crops........................... 15,200 5.4 13,900 5.0 14,700 5.7
Other................................ 61,800 22.0 47,200 16.8 32,000 12.5
-------- ------- -------- ------- -------- -------
Total canned vegetables........... 210,400 75.0 198,400 70.5 175,700 68.6
-------- ------- -------- ------- -------- -------
FROZEN VEGETABLES:
Corn................................. 18,000 6.4 19,600 7.0 24,700 9.7
Peas................................. 19,000 6.8 8,100 2.9 13,400 5.2
Other................................ 33,000 11.8 55,300 19.6 42,300 16.5
-------- ------- -------- ------- -------- -------
Total frozen vegetables........... 70,000 25.0 83,000 29.5 80,400 31.4
-------- ------- -------- ------- -------- -------
Total canned and frozen
vegetables................... $280,400 100.0% $281,400 100.0% $256,100 100.0%
======== ===== ======== ===== ======== =====
</TABLE>

26
<PAGE> 27

CANNED VEGETABLES

The Company produces ten different canned vegetable products, each in
numerous varieties, styles and quality grades, and utilizes seven different can
sizes and three different glass jar sizes. Each vegetable product is produced
and sold in three to seven quality grades, which are mainly defined by maturity
of the raw product. The highest grades typically are used for premium private
label products and Stokely's Gold(TM) brand label products. The lower grades
typically are used by customers who emphasize price value. The Company uses a
white-lined can for most of its brand products, which the Company believes
favorably impacts quality perceptions among consumers.

By supplying all major can sizes in all major Midwest-type vegetables in a
variety of styles, mixtures and features, as well as supplying certain other
vegetables purchased for resale as accommodation items, the Company is a
"full-line" or "turn" supplier to its customers. "Turn" business refers to
supplying a broad line of products to a retailer on a regular basis principally
in single shipments, to support that retailer's everyday needs. "Turn" business
typically is sold at higher prices than "promotion" business, which usually
consists of a large quantity of various items.

The Company's product development efforts are designed to respond to
customer needs and emerging markets and to create more demand for its vegetable
products by focusing on new varieties, styles and mixtures. The Company produces
to order for certain customers based on their product specification demands. In
addition, in recent years, the Company has developed and now offers no-salt
versions of many of its vegetable products. The Company also has introduced new
mixtures and varieties.

Corn. Corn is the Company's leading product, as measured by both sales
dollars and volume. Based on industry data, in 1993, the Company was one of the
largest producers of canned corn products in the United States, producing
approximately 13% of all canned corn sold by United States processors. The
Company's canned corn consists of various varieties (super sweet, Gold'n White,
Shoepeg White Corn and traditional) and styles (whole kernel, cream style,
mixtures and no-salt versions). During fiscal 1994, approximately 61% of the
Company's canned corn was sold to the private label industry, 22% was sold under
the Company's brand label, with an emphasis on special varieties for the
Stokely's Gold(TM) label, and 17% was sold to the foodservice industry. Recent
canned corn product introductions include Stokely's Gold Fiesta Corn(TM),
Stokely's Gold'n White Corn and Stokely's Crisp'n Sweet Corn(TM). The Company's
corn for canned products is grown primarily in Wisconsin, Minnesota, Illinois
and Iowa.

Green Beans. Green beans are the Company's second highest volume product.
Based on industry data, in 1993, the Company was one of the larger producers of
canned green bean products in the United States, producing approximately 10% of
all canned green beans sold by United States processors. The Company's canned
green beans consist of various varieties (Italian flat pod beans and European
slender whole green beans) and styles (cut, french style and whole). During
fiscal 1994, approximately 42% of the Company's canned green beans were sold to
the private label industry, 30% were sold to the foodservice industry and 28%
were sold under the Company's brand labels. Recent canned green bean product
introductions include Stokely's Gold European Whole Green Beans and Stokely's
Gold Italian Flat Green Beans. The Company's green beans are grown primarily in
Wisconsin and Michigan.

Peas. Based on industry data, in 1993, the Company was one of the larger
producers of canned peas in the United States, producing approximately 15% of
all canned peas sold by United States processors. The Company's canned peas
consist of various varieties (early maturing, small berry, large berry and
various mixtures) and styles, including no-salt versions. During fiscal 1994,
approximately 65% of the Company's canned peas were sold to the private label
industry, 20% were sold under the Company's brand labels and 15% were sold to
the foodservice industry. Recent canned pea product introductions include
varieties such as Stokely's Gold Tiny Party Peas & Petite & Sweet Baby Carrots.
The Company's peas are grown primarily in Wisconsin and Minnesota.

27
<PAGE> 28

Root Crop Vegetables. The Company's root crop vegetables consist of
carrots, beets, mixed vegetables and potatoes, all of which are grown primarily
in Wisconsin. The Company occasionally will source root crop vegetables from
various Southern states, to assure the Company has a continuous supply. Based on
industry data, in 1993, the Company sold approximately 10% of all canned root
crop vegetables sold by United States processors. The Company's root crop
vegetable products consist of various varieties (based on count and mix) and
styles (whole, sliced, crinkled slices and waffle slices). During fiscal 1994,
approximately 47% of the Company's canned root crop vegetables were sold to the
private label industry, 31% were sold to the foodservice industry and 22% were
sold under the Company's brand labels. Recent canned root crop vegetable product
introductions include Petite & Sweet Baby Carrots.

Other Vegetables. The Company also cans and sells various other vegetables,
including pumpkin, processed dry beans (pinto, kidney, pork'n beans and garbanzo
beans) and sauerkraut. During fiscal 1994, approximately 60% of the Company's
other vegetables were sold to the foodservice industry, 31% were sold to the
private label industry and 9% were sold under the Company's brand labels. The
Company has a major share of private label pumpkin sales in both retail and
foodservice markets. The Company's sauerkraut business utilizes brands, private
label retail and foodservice to create an efficient manufacturing base. In
addition to the Stokely's Finest(R) brand, its Meeter's Sauerkraut(R) has a
strong presence in various markets. The Stokely's Finest(R) brand was the first
to introduce Bavarian Sauerkraut(R), now a major category item. In fiscal 1992,
Stokely's Finest Sweet & Sour Kraut(R) was introduced in regional markets.
Processed dry beans, such as canned kidney beans, pork'n beans, pinto beans and
garbanzo beans, are processed year-round, and have a consumption pattern
counter-seasonal to traditional Midwest items.

FROZEN VEGETABLES

Most of the Company's frozen vegetable products are sold through the
industrial channel of distribution in bulk quantities. The Company also sells a
small amount of its frozen vegetable products to the private label industry, the
foodservice industry and as exports. Because of the Company's emphasis on the
industrial channel of distribution for its frozen vegetable products, new
product development is not actively pursued.

Each frozen vegetable is produced, frozen and sold in three to eight
quality grades, which are mainly defined by maturity of the raw product. The
frozen vegetable products sold through the industrial channel of distribution
are sold primarily in bulk size quantities, while sales to the private label,
foodservice and export markets are packaged in bulk and in individual boxes and
bags. The Company's vegetables for its frozen products are grown primarily in
Washington.

Corn. The Company's frozen corn consists of various varieties (super sweet,
jubilee and white) and styles (cob corn, cut corn and blends). During fiscal
1994, approximately 74% of the Company's frozen corn was sold through the
industrial channel of distribution, 16% was sold to the private label industry
and 10% was sold to the foodservice industry.

Peas. The Company's frozen peas consist of various varieties (regular size
and petite) and styles. During fiscal 1994, approximately 79% of the Company's
frozen peas were sold through the industrial channel of distribution, 13% were
sold to the private label industry and 8% were sold to the foodservice industry.

Other Vegetables. The Company also freezes and sells various other
vegetables, including sugar snap peas, carrots, pearl onions and lima beans. The
Company is a leading United States producer of frozen sugar snap peas. These
other vegetables are sold in different varieties and styles. During fiscal 1994,
approximately 67% of the Company's sales of other frozen vegetables were sold
through the industrial channel of distribution, 18% were sold to the private
label industry and 15% were sold to the foodservice industry.

28
<PAGE> 29

CUSTOMERS, MARKETING AND SALES

GENERAL

The Company markets and sells its canned and frozen vegetable products
under private labels and its brand labels for home use, and also to the
foodservice industry, including restaurants, fast food chains, hospitals,
schools and the military, and to industrial accounts. The Company is a leading
processor of private label canned vegetables in the United States, and sells to
many major supermarket chains and other food distributors who market the
products under their own label. The Company also processes and markets its
vegetable products under the Stokely's Finest(R), Stokely's Gold(TM) and other
brand labels to grocery wholesalers and grocery chain stores. The Company's
foodservice sales involve sales, generally in large containers, directly to or
through foodservice distributors, to purchasers of food products such as the
United States government, fast food chains, restaurants and hospitals. The
Company also sells its vegetable products to industrial customers who either
blend, repack or use the Company's vegetable products as an ingredient.

The following table shows the net sales and percentage of total net sales
contributed by the Company's brand label, private label, foodservice and frozen
sales accounts for each of the last three fiscal years.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------------------
1992 1993 1994
------------------ ------------------ -------------------
NET NET NET
SALES PERCENT SALES PERCENT SALES PERCENT
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Private label(1)...................... $ 91,700 32.7% $ 89,400 31.8% $ 82,700 32.3%
Brand label(2)........................ 76,500 27.3 61,100 21.7 49,100 19.2
Foodservice(3)........................ 42,200 15.0 47,900 17.0 43,900 17.1
Frozen (industrial and other)(4)...... 70,000 25.0 83,000 29.5 80,400 31.4
-------- ------- -------- ------- -------- -------
Total............................... $280,400 100.0% $281,400 100.0% $256,100 100.0%
======== ===== ======== ===== ======== =====
</TABLE>

- -------------------------
(1) Of the Company's total private label sales shown above, export sales
totalled $17.0 million, $16.5 million and $13.6 million for fiscal 1992,
1993 and 1994, respectively.

(2) Of the Company's total brand label sales shown above, export sales totalled
$2.3 million, $2.2 million and $1.0 million and U.S. government sales
(including sales through military commissaries) totalled $9.5 million, $6.9
million and $6.1 million for fiscal 1992, 1993 and 1994, respectively.

(3) Of the Company's total foodservice sales shown above, U.S. government sales
totalled $12.8 million and $9.7 million for fiscal 1993 and 1994,
respectively.

(4) Sales to industrial accounts accounted for $58.0 million and $57.0 million
of total frozen sales shown for fiscal 1993 and 1994.

For the fiscal year ended March 31, 1994, no single customer accounted for
more than 10% of the Company's total sales.

PRIVATE LABEL SALES

The Company's private label sales involve sales to major supermarket chains
and other food distributors who market the products under their own labels.
Major private label customers of the Company include Kroger, Winn Dixie, A&P,
Meijer, Aldi, HEB, Associated Grocers, Roundy's, Shaws, Supermarkets General,
Grand Union and Super Valu. Most of the Company's private label sales are canned
vegetable products, although the Company also sells a limited amount of frozen
private label products. The Company is the leading supplier of Midwest-type
canned vegetables (such as corn, green beans, peas and root crops) to the
grocery private label industry, with significant private label canned corn
sales.

Private label sales are made through the Company's wholly-owned subsidiary,
Oconomowoc Canning Company, Inc. Approximately 80% of private label sales are
made through commissioned brokerage representatives, while the remaining 20% are
made direct to the customer. The Company's private label division's primary
responsibilities include selling private label products, ensuring customer
satisfaction, managing inventories and gaining new customers and distribution.
The division includes four sales managers and a national sales manager who is
the Vice President of Oconomowoc Canning Company, Inc.

29
<PAGE> 30

Customers include most major grocery wholesalers and chains. Customer and
market development efforts focus primarily on helping customers lower costs of
buying, receiving and merchandising canned vegetables through a combined
"partnering" approach which involves the Company's sales force meeting with key
customer representatives from various divisions within the customer's
organization to develop a joint logistic plan. Development efforts also include
increasing profitability by targeting higher price/quality-seeking customers in
an attempt to benefit from the emerging upscale private label market. The
Company's implementation of and experience with the Stokely's Gold(TM) brand
label products provide an opportunity to increase private label sales through
the development of customer labels for premium private label lines. For example,
the Company is promoting private label sales of flat pod green beans and slender
whole green beans, two canned items recently introduced under the Stokely's
Gold(TM) program.

BRAND LABEL SALES

The Company's brand label division sells brand canned vegetables to grocery
wholesalers and chains. Major customers include Kroger, Food Lion, HEB, Grocers
Supply, Bi-Lo, Marsh, Piggly Wiggly, Super Valu, Roundy's, Fleming Companies,
Inc. and Walmart. The products primarily include a complete line of Midwest-type
vegetables sold under the Stokely's Finest(R) brand name, and also include
products sold under the premium Stokely's Gold(TM) brand and other regional
labels. Products sold under Stokely's brand labels are marketed through
independent food brokers who sell on a commission basis and provide local
marketing and service support to their distributors. The Company's sales of
brand label products have declined from $76.5 million, or 27.3%, of total sales
during fiscal 1992 to $49.1 million, or 19.2%, of total sales during fiscal
1994. The decline was due primarily to the discontinuance of certain low margin
or unprofitable product lines as part of the Company's restructuring program.

The Stokely's Finest(R) brand label sales accounted for approximately 10%
of total industry brand canned sales in the Midwest and Southeast United States
in 1993, the Company's primary brand geographic area of distribution. Sales
volume under the Stokely's Gold(TM) program, a premium line of unique vegetable
varieties such as Crisp'n Sweet Corn, European Slender Whole Green Beans, and
two new items (Fiesta Corn and Tiny Party Peas & Petite & Sweet Baby Carrots),
has doubled from fiscal 1992 to fiscal 1994.

The Company sells its brand label products through a broker network under
the direction of Stokely's regional sales manager. Approximately 40 independent
food brokers operate in Stokely's major metropolitan markets. This broker
network focuses upon gaining display, advertising and other retailer support, in
addition to ensuring customer satisfaction and developing the customer base.
Marketing efforts include television advertising and print media-delivered
promotions in major markets. Initiatives that help customers increase their
category profitability include the Stokely's Gold(TM) program (with the
principal advantage of higher margins for both the Company and its customers)
and joint brand-private label shipping options (with the competitive selling
point of higher inventory turns and lower average inventories for the customer).
These initiatives are instrumental in maintaining shelf presence and customer
support.

FOODSERVICE SALES

Foodservice sales are made, generally in larger containers, directly to or
through foodservice distributors, to purchasers of food products such as the
United States government, fast food chains, restaurants and hospitals. Most
foodservice sales are made through commissioned brokerage organizations. Sales
efforts are managed by a Director of Foodservice Sales who is supported by three
sales managers for the commercial market. The Company's largest single customer
in foodservice sales is the U.S. government.

Approximately 75% of the Company's canned foodservice sales are private
label, primarily to large corporate distributors (such as Sysco, US Foodservice,
Rykoff Sexton, Gordon's Foodservice) and large buying groups (such as Pocahontas
and PYA/Monarch). Foodservice distributors then sell to restaurants, schools and
hospitals. Contact with foodservice distributors also cultivates relationships
with national chain restaurant accounts, a growing part of the Company's
foodservice business. The Company's sales to national chain restaurants include
Chi Chi's, Grandy's and Golden Corral. The Company has a strong position in corn
(accounting for foodservice sales of $11.1 million in fiscal 1994, which would
have been approximately 13% of estimated total industry foodservice sales in
1993), a growing position in canned pumpkin, and a growing position as a
supplier to national chain restaurant accounts.

30
<PAGE> 31

FROZEN SALES

The Company's frozen sales principally involve sales to industrial
customers that either blend, repack or use the vegetable products as an
ingredient. National restaurant chains are another large customer in frozen
sales. The frozen sales division of the Company has been restructured and
downsized to emphasize profitable products and channels. Frozen product sales
are managed by the Director of Frozen Sales. The frozen product sales team
focuses on industrial and national chain foodservice business, with a smaller
presence in export sales and retail sales that can be efficiently serviced from
the Company's Northwest operations. The sales group emphasizes direct sales,
without broker commissions, to large corporate bulk customers, such as Con Agra,
Campbells, and Simplot, and national chain restaurants, such as Denny's, Chi
Chi's and Morrisons Cafeterias.

EXPORT SALES

Exports of processed vegetables represent a growing channel of
distribution. From 1988 to 1993, total canned corn exports, the major component
of exported processed vegetables, have grown at a compound annual rate of 15%.
The Company's export sales principally involve sales of private label canned
vegetables. The Company believes it is the leading exporter of canned corn to
Germany and Scandinavia. The Company's export sales accounted for 8.1%, 8.6% and
7.4% of total canned sales for fiscal 1992, 1993 and 1994, respectively. The
decline in fiscal 1994 was primarily due to the low yield of the corn crop that
year and thus the reduced availability of corn products to export. The Company
intends to continue to emphasize export sales in future years. The Company's
international sales organization is based in Oconomowoc, Wisconsin and sells
through agents, commissioned brokers and direct sales. In fiscal 1994, export
sales accounted for 20% of the Company's total canned corn sales. The Company
sees additional opportunities to increase exports to Eastern Europe, Asia,
Canada and Mexico primarily because these markets are becoming more open to
United States exports generally, and because canned vegetables are perceived as
a specialty and convenience item in these areas.

ADVERTISING, PROMOTION AND CUSTOMER SERVICE

The Company's marketing effort is led by a marketing group that also is
responsible for new product development, new label and package initiatives and
other customer focused innovation projects in all sales divisions. The customer
service and inventory management team also support sales by ensuring customer
orders are filled smoothly and inventory at various distribution centers remain
at adequate levels.

The Company emphasizes responsiveness to customer needs, and the Company
has invested in technology to support its Efficient Customer Response
initiatives. In addition, the Company has developed modular pallets that allow
customers to avoid storage costs by "cross-docking" the pallet directly to the
retail outlet, allowing customers to avoid set-up labor costs when the product
arrives at the retail location. The marketing team supports all marketing
requirements for brand label products, and also assists other sales groups in
supporting customer driven innovation in services.

The Company supports its brand marketing efforts with regional media
advertising programs, including radio and television commercials, coupon
circulation and newspaper advertisements, in addition to strong emphasis on
in-store point-of-sale promotions. Media advertising is employed to support the
Company's brand sales and is focused in the Midwest and Southeast United States
geographic markets. Private label, foodservice and industrial sales are not
supported by Company media advertising because the Company produces and labels
the product for direct end-user marketing by the customer.

SOURCES OF SUPPLY

The Company acquires its raw agricultural products for processing from
independent growers who operate under annual contracts with the Company. Most
raw agricultural production is contracted before the growing season with farmers
who agree to plant and cultivate the crops. This method of securing raw product
has been satisfactory to the Company and its growers, and the Company has not
experienced difficulty in contracting for raw agricultural products. Contracts
are negotiated in late winter for the upcoming processing season. Contracts
specify, among other things, the type and quantity of raw product to be supplied
as well as the price. The Company has an established base of experienced growers
and has experienced only modest turnover from year to year.

31
<PAGE> 32

The Company attempts to reduce the agricultural risk of unfavorable growing
conditions by utilizing greater geographic diversity and a higher proportion of
irrigated acreage than its competitors. The Company currently contracts
approximately 110,000 acres in Wisconsin, Minnesota, Iowa, Illinois, Michigan
and Washington, with irrigated acres accounting for approximately 40% of the
total. Contracted acreage is in close proximity to producing plants due to the
perishable nature of the raw product. Processing generally is performed within
several hours of harvest to assure the best possible product quality.

Stokely field personnel are involved in all phases of crop production. The
Company works closely with major seed companies in the testing of improved
varieties. Desirable traits include superior flavor and color retention, pest
and disease resistance, yield improvement and drought resistance. Field
personnel provide the proper seed variety to the grower and instruct them on the
precise time to plant. This is important to assure harvest schedules that result
in sufficient supplies of raw product to capture operating efficiencies
associated with maximum plant output. The Company conducts periodic inspections
of crops during the growing cycle and generally performs the actual harvesting
for the growers.

The Company utilizes integrated pest management techniques to assure
maximum control of damaging insects while minimizing the use of chemical control
methods. Such techniques include field location selection for specific crops,
rotation patterns, census activity during the growing season and chemical
control only when necessary based on census data. This results in minimizing
insect related damage problems while keeping chemical control usage well below
allowable levels.

Stokely agricultural personnel monitor crop maturation rates utilizing
sophisticated harvest management practices. Maturity is a primary determinant of
product quality and the maturity "window" to meet a required specification is
very narrow. To assure that product is harvested within this window, the Company
directs all harvesting operations utilizing its own equipment and personnel. In
this manner, the Company maintains proper supplies of raw product entering the
processing facilities at the desired maturity level while minimizing unharvested
acreage.

Cans are a major component in the final product cost for the Company's
canned business, representing approximately one-third of total direct
manufacturing cost. Cans are sourced principally from Ball Corporation, American
National Can and Crown Cork & Seal under contract supply agreements. The Company
has excellent working relationships with its can vendors and has not experienced
difficulty in obtaining adequate supplies of cans for production. The Company's
size allows it to source cans at a competitive price, which is a significant
factor given the importance of the container cost component to the overall cost
structure.

PRODUCTION AND DISTRIBUTION

The Company operates twelve processing plants, nine of which are dedicated
to canned vegetables and three of which are dedicated to frozen vegetables. Most
of the Company's raw products must be processed within hours of harvesting to
maintain desired product quality, so plants are located in close proximity to
the Company's principal growing areas. Following harvesting, raw products are
transported to the processing facility where they are sorted, sized, cut or
trimmed, washed, inspected and then canned and cooked or individually quick
frozen. In addition to visual inspection, the Company increasingly relies on
electronic inspection machinery that recognizes and rejects any off-color or
blemished product. The Company's high emphasis on quality assurance during the
production process also includes the grading and inspection of raw products,
inspection of incoming cans, sampling and laboratory testing of products during
production and inspection of finished goods on a sample basis prior to shipment.
Monitoring systems continuously record cooking times and temperatures as well as
freezing temperatures so that each product is processed according to the precise
method proven to yield consistent quality results and ensure maximum retention
of flavor and texture. The Company employs quality control inspectors at each
facility and four food technologists supervised by the Director of Quality
Management, whose primary responsibilities include quality assurance and
compliance. Technologists also run tests to ensure that all standards for food
safety are met or exceeded.

32
<PAGE> 33

The Company recognizes that consistent product quality is crucial to the
success of its business and has a formal program in place utilizing Total
Quality Management ("TQM") techniques. These techniques employ statistical
analysis that enable employees to identify problems, gather and prioritize data,
evaluate solutions and implement them. An essential part of the TQM process
relating to production is attribute grading, which is a statistical product
evaluation technique utilized at all of the Company's plants. From thousands of
non-destructive samples taken, quality assurance personnel are able to observe
potentially troublesome trends developing. Supervisors are alerted who then
trace problems to sources such as seed varieties, growing conditions, bird or
insect damage, harvesting or handling.

Finished products are carefully monitored throughout the handling and
storage process. Frozen vegetables are stored in 1,500 pound bulk containers and
held in temperature controlled warehouses. Packaging of frozen product into
other size containers takes place as orders are received. Finished canned goods
for the Stokely brand are labeled prior to storage. Private label retail and
foodservice finished goods are stored unlabeled until orders are received. The
appropriate customer label is affixed at that time and the order shipped. The
Company maintains a large inventory of customer-owned can labels to assure rapid
order fulfillment.

In addition to producing quality products, careful storage and efficient
distribution are vital to success. The Company distributes its products through
its two state-of-the-art distribution centers in Wisconsin and through a network
of rented forward warehouses, the largest of which are in Chattanooga,
Tennessee; Indianapolis, Indiana; Orange County, California; and Tampa, Florida.
The Company also ships full loads directly from its processing facilities. The
Company's transportation personnel are responsible for routing goods from
production plants to regional and consolidating warehouses and finally to
customers. Depending on quantities and distance, finished goods are shipped by
rail or truck, whichever is most cost-effective. The Company's transportation
personnel have negotiated special rail rates for shipments of canned products to
forward distribution centers. As a result, the Company is able to compete
effectively in the large Southern California markets with processors based in
the Northwest region of the United States.

MANAGEMENT INFORMATION SYSTEMS

The Company depends upon the accuracy, quality and proper utilization of
its management information systems to effectively manage its business. The
Company has installed both customized and purchased management information
systems operating on an IBM AS/400 computer that allow for centralized data
collection and management of key functions such as inventory control, accounts
receivable, order processing, production control, sales and distribution, and
general accounting. These systems provide concise and timely information
critical to business operations and are adequate to support current operations.
Currently approximately 80% of the Company's sales are ordered through
electronic means.

The Company is seeking to use service innovation as a point of competitive
differentiation. As it develops increasingly sophisticated programs to bring
value to its customers, new demands will be placed on its information systems.
In order to prepare for this, the Company recently completed an extensive
evaluation of its current systems and business processes and has targeted phased
implementation of new core processing systems beginning in fiscal 1996. The new
systems will be more flexible and are intended to yield greater fact based
analysis and decision making throughout all levels of the Company. This added
analytical capability and flexibility will assist the Company in meeting the
increasingly complex and rapidly evolving needs of its customers. These needs
include vendor managed inventory programs, Executive Information Systems,
improved customer and market region sales management, and additional Electronic
Data Interchange services. Customer service, order entry and distribution system
improvements are the priority for the initial implementation phase of the new
systems.

COMPETITION

All of the Company's products compete with those of other national, major
and smaller regional food processing companies under highly competitive
conditions. The principal factors of competition in the brand and private label
canned vegetable business are price and product quality, availability of a broad
line of products, timely delivery, and customer service and satisfaction. An
additional competitive factor for the Company's brand canned products is
consumer demand as developed through expenditures on advertising, sales
promotion and maintenance of retail shelf space. The principal factors of
competition in the Company's frozen vegetable business, which primarily involves
sales to industrial customers, are price, product quality differentiation and
customer service.

33
<PAGE> 34

Three of the Company's major competitors on the national level, Del Monte,
Green Giant and Dean Foods, have greater financial and marketing resources than
the Company. The Company believes it can compete effectively in the canned
vegetable business by focusing on private label retail sales and core brand
products, delivering consistent product quality, meeting customer service
expectations, continuing to improve the Company's cost structure and focusing
capital expenditures on quality and service innovations.

As a result of recent plant reduction and consolidation in the vegetable
processing industry, many of the Company's principal national competitors have
narrowed their business focus to specific product categories and channels of
distribution. Del Monte has focused on brand label canned products, with a
limited emphasis on the private label canned business. Both Green Giant and Dean
Foods (through the Birdseye and Freshlike brands) have placed emphasis on the
frozen vegetable market. The Company's principal competitors in the private
label canned business are major and smaller regional companies, including Friday
Canning Co., owned by Chiquita Brands. The Company's major competitors in the
international export market are Friday Canning Co., Green Giant and Dean Foods,
most of whom are larger and have greater resources than the Company.

PROPERTIES

Stokely's principal facilities are described below:

<TABLE>
<CAPTION>
PLANT AND
LOCATION WAREHOUSE SIZE PRINCIPAL PRODUCTS
- ------------------------------ -------------- --------------------------------------
(SQ. FT.)
<S> <C> <C>
CANNED VEGETABLE PRODUCTION
AND DISTRIBUTION:
Ackley, Iowa.................. 199,000 Whole kernel corn; canned dry pack
beans
Cobb, Wisconsin............... 65,000 Warehouse
DeForest, Wisconsin........... 538,000 Warehouse and distribution center;
field department office
Hoopeston, Illinois........... 240,000 Golden whole kernel corn; pumpkin
Merrill, Wisconsin............ 56,000 Green, wax and romano beans
Pickett, Wisconsin............ 145,000 Peas; whole kernel corn
Poynette, Wisconsin........... 345,000 Green and wax beans; sauerkraut;
warehouse and distribution center
Scottville, Michigan.......... 238,000 Green, shellie and romano beans
Sun Prairie, Wisconsin........ 108,000 Peas; peas and carrots; golden and
white whole kernel corn; mixed
vegetables; beets; carrots
Waunakee, Wisconsin........... 181,000 Peas; peas and carrots; whole kernel
corn; beets; carrots; potatoes; mixed
vegetables
Wells, Minnesota.............. 103,000 Peas and cream style corn

FROZEN VEGETABLE PRODUCTION:
Grandview, Washington......... 86,000 Sugar snap peas; corn
Green Bay, Wisconsin.......... 76,000 Peas; whole kernel corn; green beans;
carrots
Walla Walla, Washington....... 199,000 Peas; green zucchini; carrots; lima
beans; onions; squash

CORPORATE HEADQUARTERS:
Oconomowoc, Wisconsin......... 52,000 General offices

CLOSED FACILITIES(1):
Appleton, Wisconsin........... 121,000 Peas; canned and glass-packed beets;
potatoes; carrots
Jefferson, Wisconsin.......... 28,000 Frozen vegetable repackaging
---------
Total.................... 2,780,000
=========
</TABLE>

- -------------------------
(1) These facilities were closed during fiscal 1994 as part of the Company's
restructuring plan and are being held for sale.

34
<PAGE> 35

All of the facilities and related real estate are owned by the Company,
subject to mortgage and collateral assignments under loan agreements with
Stokely's lenders. See Note F of Notes to Consolidated Financial Statements.
Stokely's facilities operate at or near capacity during the processing season.
Except for Poynette's sauerkraut operation and the Ackley plant, which run
year-round, the Company utilizes its production facilities principally from June
through November, as is customary in the vegetable processing industry. Certain
distribution and repackaging facilities also operate year-round. The Company
believes all of its plants are in good condition and adequate for current
processing needs and will be able to meet presently anticipated future needs
with these facilities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

TRADEMARKS

In the course of its business, the Company uses various trademarks, trade
names and service marks in the packaging and advertising of its products.
"Stokely's Finest(R)" is a registered United States trademark and is significant
to the Company. Stokely's ability to compete in the brand product vegetable
market depends in part upon having a nationally recognized trademark. Some of
the Company's other registered United States trademarks include "School
Days(R)," "Chef's Best(R)," "Hart(R)," "Our Favorite(R)," "Shellie(R)," "Sweet &
Sour Kraut(TM)" and "Meeter's Sauerkraut(R)." "Stokely's Crisp'n Sweet Corn(TM)"
and "Stokely's Gold(TM)" are registered United States trademarks on an
intent-to-use basis, and Stokely has common law rights to "Bavarian Style(R)."
While important, none of these other trademarks are as significant to the
Company's business as "Stokely's Finest(R)."

REGULATIONS

The Company is subject to regulation by the Food and Drug Administration,
the United States Department of Agriculture, the Federal Trade Commission, the
Environmental Protection Agency and various state agencies with respect to the
production, packaging, labeling and distribution of its food products, and
believes it is in material compliance with all applicable rules and regulations
of such federal and state agencies. The principal federal laws that regulate the
Company with respect to the production, packaging, labeling and distribution of
its food products include: (i) the Food, Drug and Cosmetic Act of 1938, which
ensures that foods are produced under sanitary conditions and are properly
labeled; (ii) the Federal Insecticide, Fungicide and Rodenticide Act, which
ensures that pesticides used on food are registered with and approved by the
Environmental Protection Agency; (iii) the Fair Packaging and Labeling Act,
which regulates trade practices and requires that consumers receive accurate
information regarding the quality and value of products; (iv) the National Label
Education Act, which regulates information which must be included in food
labels; and (v) the Federal Trade Commission Act, which regulates methods of
competition, advertising and trade practices.

The disposal of solid and liquid vegetable waste material resulting from
the preparation and processing of foods is subject to various federal, state and
local laws and regulations relating to the protection of the environment. While
the Company cannot predict with certainty the effect of any proposed or future
environmental legislation or regulations on its processing operations, Stokely
believes the waste disposal systems which are now in operation or which are
being constructed and designed for Stokely are sufficient to comply with all
currently applicable environmental laws and regulations. Expenditures for
facilities related to protection of the environment are made pursuant to the
Company's capital budget and have not had, nor are they expected to have, a
material effect on the earnings of the Company.

35
<PAGE> 36

EMPLOYEES

At peak employment periods during the processing season, the Company
employs approximately 4,060 employees, of which approximately 3,100 are seasonal
and part-time production personnel, 850 are full-time, year-round production
personnel, and 110 are management, sales and administration personnel.
Approximately 1,670 regular hourly and seasonal employees belong to labor
unions. Stokely's eight union contracts are generally three years in length and
provide for average wage increases of 4.0% during fiscal 1995. During fiscal
1995, three union contracts will expire: a labor union contract covering some of
the employees at Stokely's Waunakee and Poynette, Wisconsin facilities will
expire on December 31, 1994; a labor union contract covering some of the
employees at Stokely's Walla Walla, Washington facility will expire on January
1, 1995; and a labor union contract covering some of the employees at Stokely's
Deforest, Wisconsin facility will expire on March 31, 1995. Stokely anticipates
entering into new union contracts covering these employees on or before the
expiration date of the existing union contracts. Stokely recruits migrant
workers for seasonal employment at its seasonal plants and maintains migrant
housing facilities in Sun Prairie, Wisconsin, Pickett, Wisconsin and Hoopeston,
Illinois to accommodate those employees. The Company believes that relationships
with its employees are good.

LEGAL PROCEEDINGS

The Company is not a party to any material litigation and is not aware of
any threatened litigation that would be expected to have a material adverse
effect on its business.

36
<PAGE> 37

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ----------------------------------- --- ----------------------------------------------
<S> <C> <C>
Frank J. Pelisek(1)(3)(4).......... 64 Chairman of the Board and Director
Vernon L. Wiersma(1)(4)............ 44 President, Chief Executive Officer and
Director
Stephen W. Theobald(1)............. 48 Vice Chairman, Treasurer and Director
Russell J. Trunk................... 54 Senior Vice President, Operations
Leslie J. Wilson................... 50 Vice President, Finance and Chief Financial
and Accounting Officer
Robert M. Brill.................... 46 Vice President, General Counsel and Secretary
Robert Cook........................ 44 Vice President, Operations
Eddie W. Foster.................... 56 Vice President, National Sales Manager
Kenneth C. Murray.................. 36 Vice President, Canned Sales and Marketing
Michael A. Wilkes.................. 39 Vice President, Human Resources
Orren J. Bradley(2)................ 69 Director
Russell W. Britt(1)(2)(4).......... 68 Director
Charles J. Carey(3)................ 69 Director
James H. DeWees(2)................. 65 Director
Ody J. Fish(1)(3)(4)............... 69 Director
Carol Ward Knox(3)................. 43 Director
Thomas W. Mount(1)................. 63 Director
Joseph B. Weix..................... 67 Director
</TABLE>

- -------------------------
(1) Member of the Executive Committee of the Board of Directors.

(2) Member of the Audit Committee of the Board of Directors.

(3) Member of the Compensation Committee of the Board of Directors.

(4) Member of the Nominating Committee of the Board of Directors.

Frank J. Pelisek has been Chairman of the Board of the Company since June
1992, and has been a member of the Board of Directors of the Company since 1983.
Mr. Pelisek served as Chief Executive Officer of the Company from June 1992 to
August 1993. Mr. Pelisek has been a partner with Michael Best & Friedrich (legal
counsel to the Company) since 1965, and serves as a member of the Board of
Directors of various privately held corporations.

Vernon L. Wiersma has been Chief Executive Officer of the Company since
August 1993 and President since June 1992. He has been a member of the Board of
Directors of the Company since 1982. Mr. Wiersma was Executive Vice President of
Operations of the Company from 1985 to 1992, Vice President of Operations from
1983 to 1985 and Controller from 1975 to 1983. Mr. Wiersma joined the Company in
1973.

Stephen W. Theobald has been Vice Chairman and Treasurer of the Company
since June 1992. He previously was Vice President, Administration since joining
the Company in 1985. Mr. Theobald has been a member of the Board of Directors of
the Company since 1980. From 1972 to 1985, Mr. Theobald held various financial
and managerial positions at Morgan Stanley & Co. Incorporated, an investment
banking firm, and Harris Trust and Savings Bank, a commercial bank.

37
<PAGE> 38

Russell J. Trunk has been Senior Vice President, Operations of the Company
since August 1992. He also was the General Manager of the Company's Texas/Mexico
operations from 1991 to 1992. Mr. Trunk joined the Company in 1991. From 1964 to
1991, Mr. Trunk held various financial and operational positions with Green
Giant Company.

Leslie J. Wilson has been Vice President, Finance and Chief Financial and
Accounting Officer since June 1992, when he joined the Company. Mr. Wilson
previously served as Vice President and General Manager of Packaging
Specialties, Inc., a wholesale distributor of shrink wrap equipment and film,
from 1990 to 1992, and was Vice President of Finance and Administration of
Duetz-Allis Credit, an agricultural equipment finance company, from 1976 to
1990.

Robert M. Brill has been Vice President and General Counsel of the Company
since joining the Company in 1989, and has been Secretary since 1990. Mr. Brill
was a Senior Partner at Brill and Eustice, S.C. from 1986 to 1989. He also
serves as a member of the Board of Directors of a privately held corporation.

Robert Cook has been Director of Operations of the Company since 1989 and
Vice President, Operations since 1990. Mr. Cook joined the Company in 1985 and
served as plant manager until 1990. From 1977 to 1985, Mr. Cook held various
supervisory operations and management positions at Green Giant Company.

Eddie W. Foster has been Vice President, National Sales Manager of the
Company since 1991. Mr. Foster was President of Merchandise Warehouse, Inc., a
general warehousing company, from 1990 to 1991, and was President of LVS Food
Distributors from 1989 to 1990. Mr. Foster previously served as Vice President
of Brand Marketing and Sales of the Company from 1985 to 1989.

Kenneth C. Murray has been Vice President, Canned Sales and Marketing of
the Company since December 1992. Mr. Murray joined the Company in 1990 as the
Director of Marketing and Business Development. Prior to joining the Company,
Mr. Murray held various sales and marketing management positions at S.C. Johnson
Wax & Son, Inc., a manufacturer of cleaners, insecticides and personal care
products, from 1981 to 1990.

Michael A. Wilkes has been Vice President, Human Resources of the Company
since August 1993. He was Director of Total Quality Management for the Company
from 1991 to 1993. Mr. Wilkes previously served as Manager, Management and
Organization Development at Northrop Corporation, an aerospace and military
aircraft design and manufacturing company, from 1983 to 1991.

Orren J. Bradley has been a member of the Board of Directors of the Company
since 1985. Mr. Bradley has been Senior Vice President of the Laub Group, Inc.,
an insurance operations company, since 1985. He also served as Chairman, Boston
Store Division of Federated Department Stores, Inc., from 1967 to 1985. Mr.
Bradley is a director of various Northwestern Mutual Life Insurance Investment
Funds and Oshkosh B'Gosh, Inc., an apparel manufacturer.

Russell W. Britt has been a member of the Board of Directors of the Company
since 1985. Mr. Britt served as President, Chief Operating Officer and Director
of Wisconsin Energy Corp., a utility service company, from 1987 to 1991, and
Vice President from 1981 to 1987. He also served as an executive officer and a
director of Wisconsin Electric Power Co. and Wisconsin Natural Gas Co.,
subsidiaries of Wisconsin Energy Corp., from 1982 to 1991. Mr. Britt is a
director of Bank One Wisconsin Trust Company, N.A.

Charles J. Carey has been a member of the Board of Directors of the Company
since 1989. He has been an independent consultant since 1989. Mr. Carey served
as President and Chief Executive Officer of National Food Processors
Association, a trade association, from 1972 to 1989.

James H. DeWees has been a member of the Board of Directors of the Company
since August 1994. Mr. DeWees served as President and Chief Executive Officer of
Godfrey Company, a division of Fleming Companies, Inc., a wholesale food
distributor, from 1984 to 1994, and also as Vice President of Fleming Companies,
Inc. from 1987 to 1994.

38
<PAGE> 39

Ody J. Fish has been a member of the Board of Directors of the Company
since 1985. He served as President of Pal-O-Pak Insulation Co., Inc., an
insulation manufacturing company, from 1951 to 1986. Mr. Fish is a director of
all of the funds included in the Marshall Family of Mutual Funds.

Carol Ward Knox has been a member of the Board of Directors of the Company
since 1993. She has been a principal at Morgan & Myers, Inc., a public relations
consulting company, since 1982.

Thomas W. Mount has been a member of the Board of Directors of the Company
since 1966. Mr. Mount served as Chairman of the Board of the Company from 1992
to 1993, and President and Chief Operating Officer of the Company from 1975 to
1992. He is a director of the Fiduciary Capital Growth Fund, Inc. and the
Fiduciary Total Return Fund, Inc.

Joseph B. Weix has been a member of the Board of Directors of the Company
since 1963. Mr. Weix served as Chairman of the Board and Chief Executive Officer
of the Company from 1975 to 1992.

With the exception of Messrs. Mount and Weix who are cousins, there are no
family relationships among the executive officers and directors, and there are
no arrangements or understandings pursuant to which any of them were elected as
executive officers and/or directors. However Mr. Wilson has an employment
agreement with the Company. See "-- Employment Agreements."

BOARD TERMS AND COMMITTEES

The directors of the Company are divided into three classes, with directors
holding office for staggered terms of three years, in each case until their
successors are elected and qualified. The members of the Board of Directors
whose terms of office expire in 1995 are Messrs. Britt, Fish, Theobald and
Wiersma. The members whose terms of office expire in 1996 are Messrs. Carey,
Pelisek and Weix. The members whose terms expire in 1997 are Messrs. Bradley,
DeWees and Mount, and Ms. Knox.

The Board of Directors of the Company has standing Executive, Audit,
Compensation and Nominating Committees. The Executive Committee has the
authority during intervals between Board meetings to exercise the powers of the
Board, except for certain powers reserved exclusively for the Board. The
Executive Committee consists of Messrs. Pelisek (Chairman), Britt, Fish, Mount,
Theobald and Wiersma. The Audit Committee reviews the scope and timing of the
audit of the Company's financial statements by the Company's independent public
accountants and reviews with the independent public accountants the Company's
management policies and procedures with respect to auditing and accounting
controls. The Audit Committee also reviews and evaluates the independence of the
Company's accountants, approves services rendered by such accountants and
recommends to the Board the engagement, continuation or discharge of the
Company's accountants. Deloitte & Touche LLP has served as the Company's
independent auditors for the past 15 years. The Audit Committee consists of
Messrs. Britt (Chairman), Bradley and DeWees. The Compensation Committee is
responsible for overseeing the management of human resources activities of the
Company, including compensation for directors and executive officers, and the
establishment and operation of employee pension investment plans. The
Compensation Committee also is responsible for determining the recipients and
terms of stock options granted under the Incentive Stock Option Plan and the
Executive Stock Option Plan. The Compensation Committee consists of Messrs. Fish
(Chairman), Carey and Pelisek, and Ms. Knox. The Nominating Committee selects
nominees for directors to stand for election at the Company's annual meetings,
and consists of Messrs. Pelisek (Chairman), Britt, Fish and Wiersma.

DIRECTOR COMPENSATION

Non-employee directors receive compensation of $6,000 per year of service
on the Board plus $500 for each Board or Committee meeting attended. Directors
may defer all or any portion of such compensation under a Directors' Deferred
Compensation Plan adopted in 1985. Deferred compensation is credited to the
account of a participating director in the form of "phantom stock" of the
Company based on the market price at the time of each quarterly credit. Shares
credited to the accounts of directors electing to participate in the Directors'
Deferred Compensation Plan during the fiscal year ended March 31, 1994, were as
follows: Mr. Bradley, 1,816 shares; Mr. Britt, 7,471 shares; Mr. Carey, 2,407
shares; and Mr. Fish, 7,512 shares. Directors who have served two full terms
(six years) and are Board members upon attaining the age of 65 become eligible
for retirement compensation of $500 per month upon completion of service.

39
<PAGE> 40

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Frank J. Pelisek served as Chief Executive Officer of the Company from June
1992 to August 1993, and currently serves as a member of the Compensation
Committee of the Board of Directors of the Company. Mr. Pelisek is a partner
with Michael Best & Friedrich, legal counsel to the Company.

EXECUTIVE COMPENSATION

The following table summarizes the total compensation earned by the
Company's Chief Executive Officer and the next four highest compensated
executive officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) ------------
------------------------------ NUMBER OF
FISCAL OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(2) COMPENSATION(3)
- --------------------------------------- ------ -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Vernon L. Wiersma...................... 1994 $162,167 $70,000 -- $ 7,496
President and Chief Executive Officer 1993 136,500 -- -- 15,556
1992 136,500 -- -- --

Stephen W. Theobald.................... 1994 $128,333 $56,000 -- $ 9,891
Vice Chairman and Treasurer 1993 105,000 -- -- 13,653
1992 105,000 -- -- --

Kenneth C. Murray...................... 1994 $100,000 $20,000 -- $ 926
Vice President, Canned Sales and 1993 94,333(4) -- 6,000 4,681
Marketing 1992 88,200 -- 5,000 --

Russell J. Trunk....................... 1994 $100,000 $20,000 -- $16,963
Senior Vice President, Operations 1993 104,667 -- -- 22,626
1992 99,744 -- 4,000 --

Leslie J. Wilson....................... 1994 $100,000 $20,000 -- $ 9,864
Vice President, Finance and Chief 1993 78,889(4) -- 10,000 14,072
Financial and Accounting Officer
</TABLE>

- -------------------------
(1) Perquisites provided to the named executive officers by the Company did not
exceed 10% of each named executive officer's total annual salary and bonus
during fiscal 1992, 1993 and 1994.

(2) Amounts shown represent the total number of options awarded under the 1985
Incentive Stock Option Plan during the fiscal year indicated.

(3) Amounts shown in this column represent contributions by the Company for the
benefit of the named individuals pursuant to the Stokely USA, Inc.
Retirement Savings Profit Sharing Plan and the Split Dollar Life Insurance
Plan (the "Split Dollar Plan") in the form of premium payments on behalf of
the named executive officers during the fiscal year indicated.

(4) Each of Mr. Murray's and Mr. Wilson's annualized compensation during fiscal
1993 was $100,000. Mr. Murray received an increase to that level in December
1992 when he was promoted to his present position. Mr. Wilson joined the
Company in June 1992.

40
<PAGE> 41

EMPLOYMENT AGREEMENTS

In 1992, the Company entered into Change of Control Contingent Employment
Agreements with Messrs. Wiersma, Theobald, Murray, Trunk and Wilson
(collectively, the "Contingent Employment Agreements"). Under the Contingent
Employment Agreements, if a change of control occurs, the Company will continue
to employ Messrs. Wiersma and Theobald for three years, Mr. Wilson for two years
and Messrs. Murray and Trunk for one year, following the date of the change of
control. "Change of Control," as defined in the Contingent Employment
Agreements, includes the acquisition of 20% or more of the Company's Common
Stock, a merger, consolidation or reorganization, the sale of substantially all
of the Company's assets or a significant change in the composition of the Board
of Directors of the Company. In the event of a Change of Control, the employee
shall be employed by the Company for the applicable number of years and shall
receive a salary equal to his salary on the date of the Change of Control,
subject to annual upward adjustments commensurate with increases awarded to
other officers and employees. If, after a Change of Control, the Company
terminates the employee for any reason other than for cause or if the employee
elects to terminate his employment, he shall continue to be paid monthly an
amount equal to his then current monthly base salary plus a certain amount of
incentive payments and shall continue to be entitled to receive all other
employee benefits and perquisites made available to other employees of
comparable status until the end of his employment term. If the Company
terminates the employee for "cause" (as defined in the Contingent Employment
Agreements), the employee is entitled to receive only his compensation through
the date of termination. For purposes of the Contingent Employment Agreements,
the current base salary for Mr. Wiersma is $205,000, Mr. Theobald is $160,400,
Messrs. Murray and Trunk is $118,000, and Mr. Wilson is $114,500. The amount of
the base salary and any incentive payments are reviewed regularly by the
Compensation Committee of the Board of Directors. The Company also has entered
into similar Contingent Employment Agreements with other key officers of the
Company.

In June 1992, the Company entered into an employment agreement (the
"Employment Agreement") with Mr. Wilson for a two-year term which automatically
is extended for a period of one year on each anniversary date unless the Company
or Mr. Wilson provides notice of nonrenewal within 30 days prior to the date
thereof. For purposes of the Employment Agreement, the current base salary for
Mr. Wilson is $114,500. In addition to base salary, the Employment Agreement
provides for payments from other Company incentive compensation plans, and
provides for other benefits, including participation in any group health, life,
disability or similar insurance program and in any pension, profit-sharing,
deferred compensation, 401(k) or other retirement plans maintained by the
Company. The Employment Agreement also provides for participation in any
stock-based incentive programs made available to executive officers of the
Company. The Employment Agreement will terminate in the event the Company ceases
operations and may be terminated by the Company in the event of Mr. Wilson's
disability or retirement, or for "cause" (as defined in the Employment
Agreement) at any time.

DEFERRED COMPENSATION AGREEMENTS

In 1990, the Company entered into deferred compensation agreements (the
"Deferred Compensation Agreements") with Messrs. Thomas W. Mount, former
President and Chairman of the Board of Directors of the Company, and Joseph B.
Weix, former Chairman of the Board of Directors of the Company. Under the
Deferred Compensation Agreements, the Company is obligated to pay Messrs. Mount
and Weix deferred compensation in monthly installments of $7,500 each for a
period of 120 consecutive months (or at their election in one lump sum based
upon a present value calculation outlined in the Deferred Compensation
Agreements) following their death, disability or retirement. In the event of the
death of Messrs. Mount or Weix, their designated beneficiaries shall receive the
deferred compensation payments over the stated period, or at the Company's
election, such payments may be paid in one lump sum based upon a present value
calculation outlined in the Deferred Compensation Agreements. The Deferred
Compensation Agreements are non-tax qualified, unfunded deferred compensation
plans. Mr. Mount retired in April 1993, and Mr. Weix retired in June 1992, and
the Company commenced the monthly installment payments at these times.

41
<PAGE> 42

ANNUAL INCENTIVE PLAN AND STOCK OWNERSHIP REQUIREMENTS

The Company's Annual Incentive Plan (the "Incentive Plan") was developed to
recognize and reward performance and provide a total annual cash bonus
consistent with the Company's executive compensation strategy. Under the
Incentive Plan, executives earn incentive compensation if the Company achieves
various targets set for profits (defined as income before taxes and before
profit-sharing expense) as a percent of sales. Incentive compensation earned is
established as a percentage of each officer's base salary, and the applicable
percentage is dependent upon the individual's base salary amount. If the
financial performance of the Company falls below the threshold level, no awards
will be earned. If threshold levels of the performance indicators are achieved,
the Incentive Plan provides for payment of incentive compensation in amounts
ranging from 10% to 25% of an individual's base salary. If target levels are
achieved by the Company, the Incentive Plan provides for payment of incentive
compensation in amounts ranging from 20% to 50% of an individual's base salary.
Incentive compensation may exceed 50% of an individual's base salary if the
Company surpasses target levels, but may not exceed 75% of an individual's base
salary. Prior to payment of incentive compensation after completion of the
Company's financial audit, the Compensation Committee certifies that the
performance objectives of the Incentive Plan have been met.

The Compensation Committee believes that aligning the financial interests
of management more closely with those of the shareholders influences the
creation of shareholder value. Therefore, the Compensation Committee has
required certain executive stock ownership levels for certain of its executive
officers. For Messrs. Wiersma and Theobald, the requirement is stock ownership
representing a value at least two times their annual salary, and for Messrs.
Murray, Trunk and Wilson, the stock ownership requirement is value representing
at least one times their annual salary. Executives are required to use a portion
of any annual cash bonus received to purchase shares of Common Stock until the
ownership requirement is met.

BENEFITS

SPLIT DOLLAR PLAN

The Company established the Split Dollar Life Insurance Plan, effective
February 1, 1990 (the "Split Dollar Plan"), in which Messrs. Wiersma, Theobald,
Murray, Trunk and Wilson participate. The life insurance benefit is equal to
four times the executive's salary. The executive pays the economic value of the
insurance and the Company pays the balance of the premium. Upon the executive's
death or the retirement of the executive, the Company will receive all premiums
paid by it on behalf of the executive and the executive will receive the
remainder of the death benefit or the cash surrender value.

RETIREMENT SAVINGS PLAN

The Company maintains a retirement savings plan, the Stokely USA, Inc.
Retirement Savings Profit Sharing Plan (the "Retirement Savings Plan"), covering
all of its eligible employees. Employees are eligible to participate after
completing a twelve-month period of 1,000 or more hours of employment. The
Retirement Savings Plan involves a Company Profit Sharing Contribution account,
a Voluntary Contribution account and a 401(k) Salary Deferral account. Subject
to the Company's operating results, the Company may make contributions up to 8%
of pre-tax profits to the Profit Sharing Contribution account which would be
allocated to participants pro rata based upon their eligible compensation.
Participants become 20% vested in the profit sharing contributions credited to
their accounts and the earnings thereon after three years of credited service,
and 20% per year thereafter until 100% vested after seven years. Participants
also become 100% vested upon death, disability and attainment of age 62. The
Voluntary Contribution account permits participants to make voluntary after-tax
savings contributions in amounts between 2% and 10% of their annual
compensation. Participants in the Voluntary Contribution account are 100% vested
in their contributions and the earnings thereon. Under the Retirement Savings
Plan, through the 401(k) Salary Deferral account, participants are permitted,
subject to the limitations imposed by Section 401(k) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), to make voluntary
tax-deferred contributions in amounts between 1% and 10% of their annual
compensation. The Company may make a matching contribution to the 401(k) Salary
Deferral account in an amount up to 25% of the first 6% of compensation deferred
by the participant for participants who meet all eligibility and participant
requirements. Participants in the 401(k) Salary Deferral account are 100% vested
in their contributions, the Company's matching contribution and the earnings
thereon. Under the Retirement Savings Plan, a separate account is maintained for
each type of account and each participating employee. Participating employees
direct the Retirement Savings Plan trustee with respect to the investment of
assets held in their accounts among up to six investment options made available
by the trustee.

42
<PAGE> 43

STOCK OPTION PLANS

INCENTIVE STOCK OPTION PLAN

The Company established the 1985 Incentive Stock Option Plan (the
"Incentive Stock Option Plan") in which key employees of the Company and its
subsidiaries, as determined by the Compensation Committee, are eligible to
participate. The Incentive Stock Option Plan authorizes the grant of options to
purchase shares of Common Stock intended to qualify as incentive stock options
under Section 422A of the Internal Revenue Code. The Compensation Committee of
the Board administers the Incentive Stock Option Plan. As of September 30, 1994,
options to purchase 175,800 shares of Common Stock were outstanding under the
Incentive Stock Option Plan and a total of 49,750 shares of Common Stock were
available for granting under the Incentive Stock Option Plan. However, in August
1994 the Board of Directors of the Company decided not to grant any additional
options under the Incentive Stock Option Plan. There were no individual grants
of stock options under the Incentive Stock Option Plan to any of the named
executive officers in the Summary Compensation Table during fiscal 1994.

No options issued under the Incentive Stock Option Plan were exercised by
any of the named executive officers in the Summary Compensation Table during
fiscal 1994. The number and total value of unexercised in-the-money options at
March 31, 1994 are shown in the following table:

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Vernon L. Wiersma......... 0 $0 30,000 0 $55,250 $ 0
Stephen W. Theobald....... 0 0 15,000 0 21,630 0
Kenneth L. Murray......... 0 0 8,000 3,000 0 0
Russell J. Trunk.......... 0 0 4,000 0 0 0
Leslie J. Wilson.......... 0 0 10,000 0 16,250 0
</TABLE>

- -------------------------
(1) The value of unexercised in-the-money options is based upon the difference
between the fair market value of the securities underlying the options of
$8.00 at March 31, 1994 and the exercise price of the options as follows:
$5.83 for Mr. Wiersma, $6.56 for Mr. Theobald, $10.72 for Mr. Murray,
$10.00 for Mr. Trunk, and $6.38 for Mr. Wilson.

EXECUTIVE STOCK OPTION PLAN

On June 3, 1994, the Board of Directors of the Company adopted the Stokely
USA, Inc. 1994 Executive Stock Option Plan (the "Executive Stock Option Plan").
The Executive Stock Option Plan was ratified by the shareholders of the Company
at the Annual Meeting of Shareholders held on August 26, 1994. All key full-time
employees of the Company and its subsidiaries are eligible to participate in the
Executive Stock Option Plan. The Executive Stock Option Plan provides for the
granting of (i) incentive stock options ("ISOs"), (ii) non-qualified stock
options ("NSOs"), and (iii) stock appreciation rights ("SARs"). Options for a
total of 400,000 shares of Common Stock are available for granting to eligible
participants under the Executive Stock Option Plan. Under the Executive Stock
Option Plan, the maximum number of shares for which grants may be made to any
eligible employee may not exceed 50,000 shares. As of the date hereof, no option
grants have been made under the Executive Stock Option Plan.

43
<PAGE> 44

The Compensation Committee of the Board, or such other committee appointed
by the Board (the "Committee") will administer the Executive Stock Option Plan.
The Committee will consist of at least three members of the Board, and a
majority of the Committee shall be "disinterested persons," as defined under
applicable federal law, at the time any ISOs, NSOs, or SARs are granted under
the Executive Stock Option Plan. The Committee also will have the power, subject
to the express provisions of the Executive Stock Option Plan, to: (i) determine
the recipients and the terms of options granted; (ii) construe and interpret the
Executive Stock Option Plan and options granted thereunder; and (iii) establish,
amend, and revoke rules and regulations for Executive Stock Option Plan
administration as necessary or expedient to make the Executive Stock Option Plan
fully effective and in the best interests of the Company. The Committee will
determine the maximum number of options which may be exercisable in any year.

CERTAIN TRANSACTIONS

WARRANTS TO PURCHASE SHARES OF COMMON STOCK

In June 1993, the Company requested amendments to certain provisions of the
agreements pursuant to which the Company previously had issued senior notes in
the aggregate principal amount of $45.0 million to Nationwide Life Insurance
Company ("NLIC"), Employers Life Insurance Company of Wisconsin ("ELIC"), West
Coast Life Insurance Company ("WCLIC") and the State of Wisconsin Investment
Board ("SWIB") (collectively, the "Warrant Holders"). In connection with such
amendments, the Company issued Warrants to Purchase Shares of Common Stock (the
"Warrants") to NLIC, ELIC, WCLIC and SWIB, evidencing the right to purchase
41,000, 6,000, 3,000 and 40,000 shares of Common Stock, respectively, at an
exercise price of $7.88 per share (subject to adjustments to protect the Warrant
Holders against dilution in certain circumstances). The Warrant Holders have the
option to pay the exercise price in cash or by surrendering for cancellation all
or a portion of the senior notes held by them, designating the appropriate
unpaid principal amount thereof representing the exercise price. All of the
Warrants are immediately exercisable. The Warrants issued to NLIC, ELIC and
WCLIC expire on January 15, 2000, and the Warrant issued to SWIB expires on
December 15, 2001. Pursuant to the provisions of the Warrants, whenever the
Company proposes to register its securities under the Securities Act, the
Warrant Holders may require the Company, subject to certain limitations, to
include in such registration all or a part of the shares issued upon exercise of
the Warrants. None of the Warrant Holders have decided to include all or a part
of the shares of Common Stock issuable upon exercise of the Warrants in this
Offering.

44
<PAGE> 45

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1994, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, (i)
by each person who is known to the Company to own beneficially more than 5% of
the shares of Common Stock, (ii) by each of the executive officers of the
Company, (iii) by each director of the Company, and (iv) by all directors and
executive officers as a group.

<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NUMBER OF SHARES OF SHARES OF
SHARES OF COMMON STOCK COMMON STOCK
COMMON STOCK BENEFICIALLY OWNED BENEFICIALLY OWNED
NAME BENEFICIALLY OWNED(1) PRIOR TO OFFERING(2) AFTER OFFERING(2)
- ------------------------------------------ --------------------- -------------------- ------------------
<S> <C> <C> <C>
Winogene Kile(3)(4)....................... 741,000 8.7% 6.4%
Vernon L. Wiersma(5)...................... 33,000 * *
Stephen W. Theobald(6).................... 266,297 3.1 2.3
Russell J. Trunk(7)....................... 4,000 * *
Leslie J. Wilson(8)....................... 10,000 * *
Robert M. Brill(9)........................ 10,000 * *
Robert Cook(10)........................... 4,500 * *
Eddie W. Foster(11)....................... 5,000 * *
Kenneth C. Murray(12)..................... 8,000 * *
Michael A. Wilkes......................... 0 -- --
Frank J. Pelisek.......................... 1,400 * *
Orren J. Bradley.......................... 500 * *
Russell W. Britt.......................... 200 * *
Charles J. Carey.......................... 200 * *
James H. DeWees........................... 0 -- --
Ody J. Fish............................... 1,000 * *
Carol Ward Knox........................... 1,000 * *
Thomas W. Mount........................... 179,256 2.1 1.6
Joseph B. Weix(13)........................ 70,480 * *
All directors and executive officers as a
group (18 persons)...................... 594,833 7.0% 5.2%
</TABLE>

- -------------------------
* Amount represents less than 1% of the total shares of Common Stock
outstanding.

(1) Unless otherwise indicated, includes shares of Common Stock held directly
by the individuals as well as by members of such individual's immediate
family who share the same household, shares held in trust and other
indirect forms of ownership over which shares the individuals exercise sole
or shared voting and/or dispositive power.

(2) The number of shares of Common Stock deemed outstanding prior to the
Offering consists of (i) 8,324,645 shares of Common Stock outstanding as of
September 30, 1994, (ii) 90,000 shares of Common Stock issuable pursuant to
the exercise of warrants, and (iii) 86,500 shares of Common Stock issuable
pursuant to options held by the respective person or group which may be
exercised within 60 days after September 30, 1994 ("presently exercisable
stock options"), as set forth below. The number of shares of Common Stock
deemed outstanding after the Offering includes an additional 3,000,000
shares of Common Stock which are being offered for sale by the Company in
the Offering.

(3) Winogene Kile's address is P. O. Box 592, Oconomowoc, Wisconsin 53066.

(4) Includes 50,000 shares of Common Stock held indirectly by Mrs. Kile's
husband, as trustee, and 40,000 shares of Common Stock held by Mrs. Kile's
husband and a son of Mr. Weix as co-trustees, as to which she disclaims any
beneficial ownership.

(5) Includes 30,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(6) Includes 162,191 shares of Common Stock held by Mr. Theobald as co-trustee
for which he has shared dispositive and voting power with The First
National Bank of Chicago, 88,106 shares of Common Stock held by Mr.
Theobald as co-trustee for which he has shared dispositive and voting power
with Bank One Wisconsin Trust Company, N.A., and as to which he disclaims
any beneficial interest, and 15,000 shares of Common Stock issuable
pursuant to presently exercisable stock options.

45
<PAGE> 46

(7) Includes 4,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(8) Includes 10,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(9) Includes 10,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(10) Includes 4,500 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(11) Includes 5,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(12) Includes 8,000 shares of Common Stock issuable pursuant to presently
exercisable stock options.

(13) Includes 50,000 shares of Common Stock held by Mr. Weix as co-trustee for
which he has shared dispositive and voting power, and as to which he
disclaims any beneficial interest.

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue twenty million (20,000,000) shares of
common stock having a par value of $0.05 per share (the "Common Stock") and one
million (1,000,000) shares of Preferred Stock having a par value of $0.10 per
share (the "Preferred Stock"). The Company currently has 8,324,645 shares of
Common Stock issued and outstanding, and will have 11,324,645 shares of Common
Stock (11,774,645 shares assuming the Underwriters' over-allotment option is
exercised in full) issued and outstanding following completion of the Offering.
No shares of Preferred Stock are issued and outstanding.

COMMON STOCK

Subject to Section 180.1150(2) of the Wisconsin Business Corporation Law
(the "WBCL")(described below under "-- Restrictions on Acquisition of the
Company"), holders of Common Stock are entitled to one vote for each share of
Common Stock held by them on all matters properly presented to shareholders.
Subject to the prior rights of the holders of any shares of Preferred Stock that
are outstanding, the Board of Directors of the Company may in its discretion
declare and pay dividends on the Common Stock out of earnings or assets of the
Company legally available for the payment thereof. Subject to the prior rights
of the holders of any shares of Preferred Stock that are outstanding, in the
event the Company is liquidated, any amounts remaining after the discharge of
outstanding indebtedness will be paid pro rata to the holders of the Company's
Common Stock. The outstanding shares of Common Stock are, and the Common Stock
to be issued in this Offering will be, legally issued, fully paid and
nonassessable, except for certain statutory liabilities which may be imposed by
Section 180.0622 of the WBCL for unpaid employee wages. Holders of shares of
Common Stock have no statutory preemptive, subscription or conversion rights.

PREFERRED STOCK

None of the 1,000,000 shares of authorized Preferred Stock will be issued
in the Offering. The Company's Board of Directors is authorized to issue from
time to time, without shareholder authorization, in one or more designated
series, shares of Preferred Stock with such dividend, redemption, conversion and
exchange provisions as are provided in the particular series. No dividends or
other distributions are payable on the Common Stock unless dividends are paid in
full on the Preferred Stock and all sinking fund obligations for the Preferred
Stock, if any, are fully funded. In the event of a liquidation or dissolution of
the Company, the outstanding shares of Preferred Stock would have priority over
the Common Stock to receive the amount specified in each particular series out
of the remaining assets of the Company.

RESTRICTIONS ON ACQUISITION OF THE COMPANY

Acquisitions of control of the Company are subject to various state
statutory restrictions. In addition to these restrictions, there are various
provisions in the Company's Articles of Incorporation and By-laws which may be
deemed to restrict the ability of a person, firm or entity to acquire the
Company. These provisions provide for, among other things, staggered terms of
office for members of the Board of Directors and limits on the calling of
special meetings of shareholders. Such provisions will render the replacement of
the current Board of Directors more difficult. The issuance of Preferred Stock
by the Company also may have the effect of delaying or preventing a change of
control of the Company. All of these provisions may have the effect of

46
<PAGE> 47

discouraging a future takeover attempt which is not approved by the Board of
Directors but which shareholders of the Company may deem to be in their best
interests or in which shareholders may receive a substantial premium for their
shares over the then-current market price. As a result, shareholders who might
desire to participate in such a transaction might not have the opportunity to do
so. These provisions also could decrease the likelihood of temporary increases
in the price of the Common Stock, which frequently result from non-negotiated
takeover attempts, and may tend to perpetuate existing management. The
description of these provisions is necessarily general and reference should be
made to the actual law and to the Articles of Incorporation and By-laws of the
Company. See "Additional Information."

CERTAIN STATUTORY PROVISIONS

Section 180.1150(2) of the WBCL provides that the voting power of shares of
an "issuing public corporation," such as the Company, which are held by any
persons holding in excess of 20% of the voting power of the issuing public
corporation's shares, shall be limited to such 20% of the voting power plus 10%
of the voting power of such excess shares. This statute is a "scaled voting
rights/control share acquisition" statute and is designed to protect
corporations against uninvited take-over bids. This statutory voting restriction
is not applicable to shares of Common Stock acquired prior to April 22, 1986,
shares acquired directly from the Company and shares acquired in certain other
circumstances more fully described in Section 180.1150(3) of the WBCL.

Sections 180.1130 to 180.1134 of the WBCL provide that certain business
combinations not meeting specified adequacy-of-price standards set forth in the
statute must be approved by the vote of at least (i) 80% of the votes entitled
to be cast by shareholders, and (ii) two-thirds of the votes entitled to be cast
by holders of voting shares other than voting shares beneficially owned by a
"significant shareholder" or an affiliate or associate thereof who is a party to
the transaction. The term "business combination" is defined to include, subject
to certain exceptions, a merger or consolidation of an issuing public
corporation (or any subsidiary thereof), such as the Company, with, or the sale
or other disposition of substantially all assets of an issuing public
corporation to, any significant shareholder or affiliate thereof. "Significant
shareholder" is defined generally to include a person that is the beneficial
owner of 10% or more of the voting power of the shares of the issuing public
corporation.

Sections 180.1140 to 180.1145 of the WBCL provide that a "resident domestic
corporation," such as the Company, may not engaged in a "business combination"
with an "interested stockholder" (a person beneficially owning 10% or more of
the aggregate voting power of the stock of such corporation) for three years
after the date (the "stock acquisition date") the interested stockholder
acquired his or her 10% or greater interest, unless the business combination (or
the acquisition of the 10% or greater interest) was approved before the stock
acquisition date by such corporation's board of directors. After the three-year
period, a business combination that was not so approved may be consummated only
if it is approved by a majority of the outstanding voting shares not held by the
interested stockholder or is made at a specified formula price intended to
provide a fair price for the shares held by disinterested shareholders.

These statutory restrictions may have the effect of discouraging or making
it more difficult for a person to acquire a substantial equity interest in the
Company and may otherwise restrict the market for the purchase or sale of a
significant number of shares of Common Stock.

CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company's Articles of Incorporation provide that if any person or
entity (the "Acquiring Person") who is the beneficial owner of 50% or more of
the outstanding shares of Common Stock of the Company and if any of such shares
of Common Stock were acquired pursuant to a tender offer not recommended by the
Board of Directors, then all holders of Common Stock (and holders of rights,
options, warrants and securities then exercisable or convertible into Common
Stock), with the exception of the Acquiring Person, shall have the right to have
their shares of Common Stock redeemed by the Company for cash ("Repurchase
Rights"). The Company is required to provide shareholders with notice of their
Repurchase Rights (the "Repurchase Notice") within 30 days of the date the
Company first receives notice that any person or entity has become an

47
<PAGE> 48

Acquiring Person. The repurchase price shall be the highest of: (i) the highest
price per share, including any commissions paid to brokers or dealers, at which
shares held by an Acquiring Person were acquired at any time pursuant to a
tender offer or in any market purchase within the 18-month period prior to the
date shareholders received a Repurchase Notice from the Company; (ii) the
highest sales price per share of Common Stock for any trading day during the
18-month period prior to the date shareholders received a Repurchase Notice from
the Company; or (iii) shareholders' equity per share of Common Stock as
reflected in any report published by the Company as of the fiscal quarter prior
to the date shareholders received a Repurchase Notice from the Company.

The Company's By-laws provide procedures by which shareholders may raise
matters at annual meetings and may call special meetings. These provisions also
establish the procedure for fixing a record date for special meetings called by
shareholders. The affirmative vote of either (i) holders of a majority of the
voting power of shares entitled to vote in the election of directors, or (ii) a
majority of the directors then in office, is required to amend, repeal or adopt
any provision inconsistent with the foregoing By-law provisions.

Under the Articles of Incorporation, the Board of Directors is divided into
three classes. One class is elected each year for a three-year term. In
addition, a director may be removed from office only by affirmative vote of at
least 80% of the outstanding shares entitled to vote for the election of such
director, and any vacancy so created may be filled by the affirmative vote of at
least 80% of such shares. The staggered board provisions and the provision
regarding the 80% vote required for removal of a director may only be amended by
the affirmative vote of shareholders possessing at least 80% of the outstanding
shares entitled to vote.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Bank One,
Indianapolis, N.A., Indianapolis, Indiana.

48
<PAGE> 49

UNDERWRITING

William Blair & Company and Dain Bosworth Incorporated (the "Underwriters")
have severally agreed, subject to the terms and conditions set forth in the
underwriting agreement between the Company and the Underwriters (the
"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the Underwriters, the respective number of shares of Common
Stock (excluding the over-allotment shares) set forth opposite each
Underwriter's name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------------------------------------------------------------- ---------
<S> <C>
William Blair & Company............................................ 1,500,000
Dain Bosworth Incorporated......................................... 1,500,000
---------
Total......................................................... 3,000,000
========
</TABLE>

The nature of the Underwriters' obligations under the Underwriting
Agreement is such that all shares of Common Stock being offered must be
purchased if any are purchased. In the event of a default by any Underwriter,
the Underwriting Agreement provides that, in certain circumstances, the purchase
commitments of the non-defaulting Underwriters under the Underwriting Agreement
may be increased or such Underwriting Agreement may be terminated.

The Underwriters have advised the Company that the Underwriters propose to
offer the shares of Common Stock directly to the public initially at the public
offering price set forth on the cover page of this Prospectus, and to selected
dealers at such price less a concession of not more than $0.27 per share.
Additionally, the Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
public offering of the Common Stock, the public offering price and other selling
terms may be changed by the Underwriters.

The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 450,000
shares of Common Stock at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any of such additional shares pursuant to this option, each Underwriter will be
committed to purchase such additional shares in approximately the same
proportion as set forth in the table above. The Underwriters may exercise the
option only for the purpose of covering over-allotments, if any, made in
connection with the distribution of the Common Stock offered hereby.

The Company and all executive officers and directors of the Company have
agreed not to offer, sell, contract to sell or otherwise dispose of any shares
of Common Stock or any interest therein for a period of 90 days after the
effective date of the Registration Statement of which this Prospectus is a part
without the prior written consent of the Underwriters.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

In connection with this Offering, the Underwriters may engage in passive
market-making transactions in the Common Stock on Nasdaq immediately prior to
the commencement of the sale of shares in this Offering, in accordance with Rule
10b-6A under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Passive market-making consists of displaying bids on Nasdaq limited by
the bid prices of market-makers not connected with this Offering and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market-maker on each day are limited in amount to a specified
percentage of the passive market-marker's average daily trading volume in the
Common Stock during a specified period prior to the filing with the Commission
of the Registration Statement of which this Prospectus is a part and must be
discontinued when such limit is reached. Passive market-making may stabilize the
market price of the Common Stock at a level above that which might otherwise
prevail and, if commenced, may be discontinued at any time.

49
<PAGE> 50

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Michael Best & Friedrich, Milwaukee, Wisconsin. Frank J.
Pelisek, a partner of Michael Best & Friedrich, is Chairman of the Board and a
director of the Company. Certain legal matters in connection with this Offering
will be passed upon for the Underwriters by Sidley & Austin, Chicago, Illinois.

EXPERTS

The consolidated financial statements as of March 31, 1993 and 1994, and
for each of the three years in the period ended March 31, 1994, included in this
Prospectus, the related consolidated financial statement schedules included
elsewhere in the Registration Statement, and the consolidated financial
statements from which the Selected Consolidated Financial Data as of March 31,
1993 and 1994 and for the three years then ended included in this Prospectus
have been derived, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
Registration Statement, which reports express an unqualified opinion and include
explanatory paragraphs referring to the changes in the methods of valuing
inventories, accounting for postretirement benefits other than pensions and
accounting for income taxes. Such consolidated financial statements,
consolidated financial statement schedules, and Selected Consolidated Financial
Data have been included herein and elsewhere in the Registration Statement in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission
("Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain of which have been
omitted in accordance with the rules and regulations of the Commission. The
omitted information may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C., and copies of such materials may be obtained from the public
reference section of the Commission, Washington, D.C. 20549, at prescribed
rates. For further information with respect to the Company and the shares of
Common Stock, reference is hereby made to such Registration Statement, exhibits
and schedules. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Copies of such reports, proxy statements and
other information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at 75 Park Place, New York, New York 10007 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

50
<PAGE> 51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

STOKELY USA, INC.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets at March 31, 1993 and 1994 and
September 30, 1994 (unaudited)...................................................... F-3
Consolidated Statements of Operations for the Years Ended
March 31, 1992, 1993 and 1994 and for the Six Months
Ended September 30, 1993 and 1994 (unaudited)....................................... F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1992, 1993 and 1994 and for the
Six Months Ended September 30, 1994 (unaudited)..................................... F-6
Consolidated Statements of Cash Flows for the Years
Ended March 31, 1992, 1993 and 1994 and for the
Six Months Ended September 30, 1993 and 1994 (unaudited)............................ F-7
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE> 52

INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors of
Stokely USA, Inc.:

We have audited the accompanying consolidated balance sheets of Stokely
USA, Inc. and subsidiaries as of March 31, 1993 and 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies as of March 31,
1993 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1994, in conformity with
generally accepted accounting principles.

As discussed in Note C to the consolidated financial statements, the
Company changed its method of valuing inventories from the last-in, first-out
method to the average cost method in 1994 and, retroactively, restated the 1993
and 1992 consolidated financial statements for the change.

As discussed in Notes E and G to the consolidated financial statements, the
Company changed its methods of accounting for postretirement benefits other than
pensions effective April 1, 1992 and accounting for income taxes effective April
1, 1993 to conform with Statement of Financial Accounting Standards No. 106 and
No. 109, respectively.

DELOITTE & TOUCHE LLP

Milwaukee, Wisconsin
June 17, 1994

F-2
<PAGE> 53

STOKELY USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS -- NOTE F

<TABLE>
<CAPTION>
MARCH 31,
-------------------- SEPTEMBER 30,
1993 1994 1994
-------- -------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents -- Note A....................... $ 1,251 $ 2,898 $ 1,178
Accounts receivable, less allowance for losses ($670, $385
and $372, respectively)................................ 41,515 20,817 25,369
Refundable income taxes -- Note G......................... 3,869 1,979 --
Inventories -- Notes A and C.............................. 100,591 55,256 129,927
Prepaid expenses.......................................... 1,555 1,983 1,354
-------- -------- ---------
TOTAL CURRENT ASSETS................................. 148,781 82,933 157,828
OTHER ASSETS:
Property held for disposition (net) -- Note B............. 9,419 3,541 2,986
Trademarks -- Note A...................................... 918 838 799
Other -- Note A........................................... 5,306 3,867 3,273
-------- -------- ---------
TOTAL OTHER ASSETS................................... 15,643 8,246 7,058
PROPERTY, PLANT AND EQUIPMENT, at cost -- Note A:
Land and land improvements................................ 2,932 3,184 3,202
Buildings................................................. 24,370 27,386 27,526
Machinery and equipment................................... 62,961 66,296 70,992
Construction in progress.................................. 1,637 562 --
-------- -------- ---------
91,900 97,428 101,720
Less accumulated depreciation............................. 23,481 30,072 33,826
-------- -------- ---------
68,419 67,356 67,894
-------- -------- ---------
TOTAL ASSETS......................................... $232,843 $158,535 $ 232,780
======== ======== =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-3
<PAGE> 54

STOKELY USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
MARCH 31,
------------------- SEPTEMBER 30,
1993 1994 1994
-------- -------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Notes payable -- Note F..................................... $ 31,258 $ 17,992 $ 35,875
Accounts payable............................................ 39,159 13,867 66,701
Accrued compensation and withholdings....................... 3,462 3,065 3,878
Other accrued liabilities................................... 5,291 1,840 1,978
Income taxes -- Note G...................................... 531 230 881
Current maturities on long-term debt........................ 2,259 3,868 2,458
-------- -------- -------------
81,960 40,862 111,771
Additional long-term debt classified as a current liability
-- Note F................................................ 26,195 -- --
-------- -------- -------------
TOTAL CURRENT LIABILITIES.............................. 108,155 40,862 111,771
LONG-TERM DEBT -- Less current maturities -- Note F........... 82,854 80,438 79,871
OTHER LIABILITIES -- Note D................................... 7,057 4,595 4,740
STOCKHOLDERS' EQUITY -- Notes F and H:
Preferred stock -- $0.10 par value, authorized 1,000,000
shares, none issued...................................... -- -- --
Common stock -- $0.05 par value, authorized 20,000,000
shares, issued 8,435,195 shares.......................... 422 422 422
Additional paid-in capital.................................. 18,636 18,661 18,665
Retained earnings........................................... 16,396 14,181 17,939
-------- -------- -------------
35,454 33,264 37,026
Less treasury stock at cost (119,500, 110,550 and 110,550
shares, respectively).................................... (677) (624) (628)
-------- -------- -------------
TOTAL.................................................. 34,777 32,640 36,398
COMMITMENTS AND CONTINGENCIES -- Note I....................... -- -- --
-------- -------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $232,843 $158,535 $ 232,780
======== ======== ==========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-4
<PAGE> 55

STOKELY USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------- ---------------------
1992 1993 1994 1993 1994
--------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net sales................................ $280,368 $281,382 $256,145 $127,505 $97,131
Other -- Note K.......................... 676 2,145 4,691 4,600 99
------- ------- ------- ------- ------
TOTAL REVENUES...................... 281,044 283,527 260,836 132,105 97,230
COSTS AND EXPENSES:
Cost of products sold.................... 238,804 249,982 216,392 113,592 74,148
Selling, general and administrative
expenses -- Note I.................... 48,481 42,139 36,476 18,016 13,464
Nonrecurring charge -- Note B............ -- 21,145 -- -- --
Interest................................. 8,592 12,721 12,710 6,482 4,914
------- ------- ------- ------- ------
TOTAL COSTS AND EXPENSES............ 295,877 325,987 265,578 138,090 92,526
EARNINGS (LOSS) BEFORE INCOME TAXES
(CREDIT) AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE.................. (14,833) (42,460) (4,742) (5,985) 4,704
INCOME TAXES (CREDIT) -- Note G............ (4,931) (12,983) (2,527) (718) 946
------- ------- ------- ------- ------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE........... (9,902) (29,477) (2,215) (5,267) 3,758
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
ACCOUNTING FOR POSTRETIREMENT BENEFITS --
Note E (net of income tax benefit of
$850).................................... -- (1,650) -- -- --
------- ------- ------- ------- ------
NET EARNINGS (LOSS)........................ $ (9,902) $(31,127) $ (2,215) $ (5,267) $ 3,758
======= ======== ======= ======== =======
PER SHARE AMOUNTS:
Earnings (loss) per common share before
cumulative effect of a change in
accounting method..................... $ (1.19) $ (3.55) $ (0.27) $ (0.63) $ 0.45
Cumulative effect of a change in method
of accounting for postretirement
benefits -- Note E.................... -- $ (0.20) -- -- --
------- ------- ------- ------- ------
NET EARNINGS (LOSS) PER SHARE OF COMMON
STOCK.................................... $ (1.19) $ (3.75) $ (0.27) $ (0.63) $ 0.45
======= ======== ======== ======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING........ 8,288,255 8,301,591 8,319,649 8,315,839 8,324,645
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE> 56

STOKELY USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
--------------------- PAID-IN RETAINED -------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
--------- -------- ---------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balances, April 1, 1991, as
previously reported............. 8,435,195 $422 $ 18,628 $ 53,742 152,700 $ (867)
Restatement for change in method
of valuing inventories -- Note
C............................... -- -- -- 5,341 -- --
--------- ------ -------- -------- ------- -------
Balances, as restated April 1,
1991............................ 8,435,195 422 18,628 59,083 152,700 (867)
Net loss.......................... -- -- -- (9,902) -- --
Cash dividends declared $0.20 a
share........................... -- -- -- (1,658) -- --
Exercise of stock options......... -- -- 6 -- (8,500) 49
--------- ------ -------- -------- ------- -------
Balances, March 31, 1992.......... 8,435,195 422 18,634 47,523 144,200 (818)
Net loss.......................... -- -- -- (31,127) -- --
Exercise of stock options......... -- -- 2 -- (24,700) 141
--------- ------ -------- -------- ------- -------
Balances, March 31, 1993.......... 8,435,195 422 18,636 16,396 119,500 (677)
Net loss.......................... -- -- -- (2,215) -- --
Stock warrants issued............. -- -- 23 -- -- --
Exercise of stock options......... -- -- 2 -- (8,950) 53
--------- ------ -------- -------- ------- -------
Balances, March 31, 1994.......... 8,435,195 422 18,661 14,181 110,550 (624)
Net earnings...................... -- -- -- 3,758 -- --
Reclassification.................. -- -- 4 -- -- (4)
--------- ------ -------- -------- ------- -------
Balances, September 30, 1994
(unaudited)..................... 8,435,195 $422 $ 18,665 $ 17,939 110,550 $ (628)
========= ====== ======== ======== ======= =======
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-6
<PAGE> 57

STOKELY USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------ -------------------
1992 1993 1994 1993 1994
-------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)................................ $ (9,902) $(31,127) $ (2,215) $ (5,267) $ 3,758
Adjustments to net earnings (loss):
Depreciation..................................... 8,461 9,286 7,230 4,947 3,754
Nonrecurring charge.............................. -- 21,145 -- -- --
Deferred compensation and postretirement
benefits...................................... 62 2,713 (36) 59 145
Deferred income taxes............................ 734 (9,833) -- -- --
Amortization of trademarks....................... 96 82 80 41 39
Amortization of deferred debt issuance costs..... 131 887 1,637 688 960
Provision for equipment writedown................ 350 -- -- -- --
Provision for bad debts.......................... (70) 270 (285) (139) (13)
Gains on disposal of property, plant and
equipment..................................... (117) (693) (361) (363) --
-------- -------- -------- -------- --------
(255) (7,270) 6,050 5,233 4,885
Changes in operating assets and liabilities:
Accounts receivable.............................. 1,378 (14,824) 20,983 16,122 (4,539)
Refundable income taxes.......................... (3,765) 1,831 1,890 2,917 1,979
Inventories...................................... (5,587) (2,526) 45,335 (12,052) (74,671)
Prepaid expenses................................. 725 769 (428) 75 629
Accounts payable................................. 2,914 23,739 (25,292) 9,317 52,834
Accrued compensation and withholdings............ 1,069 307 (397) 1,586 813
Profit sharing contribution...................... (522) -- -- -- --
Income taxes..................................... (79) (135) (301) (89) 651
Other -- net..................................... 393 (448) (9,773) (7,945) 138
-------- -------- -------- -------- --------
(3,474) 8,713 32,017 9,931 (22,166)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities....................................... (3,729) 1,443 38,067 9,897 (13,523)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment......... (21,713) (12,871) (5,174) (3,957) (4,292)
(Increase) decrease in construction funds held by
trustee.......................................... (560) 1,362 -- -- --
Proceeds from sales of property, plant and
equipment........................................ 164 3,197 9,143 4,846 555
Acquisition of business............................ (9,260) -- -- -- --
Other -- net....................................... (2,162) 1,034 (176) (224) (366)
-------- -------- -------- -------- --------
Net cash provided by (used in) investing
activities....................................... (33,531) (7,278) 3,793 665 (4,103)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (net).................... 6,609 13,036 (31,266) (7,273) 17,883
Proceeds from long-term debt....................... 23,000 -- -- -- --
Payments of long-term debt......................... (1,999) (2,296) (9,002) (3,135) (1,977)
Payments of cash dividends......................... (1,658) (415) -- -- --
Payments of deferred debt issuance costs........... (248) (3,436) -- -- --
Exercise of stock options.......................... 55 143 55 8 --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities....................................... 25,759 7,032 (40,213) (10,400) 15,906
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents........................................ (11,501) 1,197 1,647 162 (1,720)
Cash and cash equivalents at beginning of year....... 11,555 54 1,251 1,251 2,898
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR............... $ 54 $ 1,251 $ 2,898 $ 1,413 $ 1,178
======== ======== ======== ======== ========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-7
<PAGE> 58

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1992, 1993 AND 1994

(INFORMATION PERTAINING TO THE SIX MONTHS ENDED SEPTEMBER 30, 1993 AND 1994 IS
UNAUDITED.)

NOTE A -- DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Stokely USA, Inc. and its subsidiaries (the "Company") are engaged
primarily in the processing, marketing and distribution of both branded and
private label canned and frozen vegetables, which management considers to be a
single segment.

Unaudited Six Month Periods -- Detailed footnote information for the six
month periods is not presented. In the opinion of management, the unaudited
interim financial information reflects all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation thereof. The
results of operations for the six months ended September 30, 1994 are not
necessarily indicative of results expected for the year ending March 31, 1995.

Consolidation -- The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Cash Equivalents -- The Company considers all highly liquid investments
with purchased maturities of three months or less to be cash equivalents.

Inventories -- Inventories are stated at the lower of cost or market. Cost
has been determined using the average cost method (see Note C).

Deferred Debt Issuance Costs -- Included in Other Assets in the
consolidated balance sheets are unamortized deferred debt issuance costs of
$3,268,000 and $2,435,000 at March 31, 1993 and 1994, respectively. The debt
issuance costs are being amortized by the straight-line or interest method over
the life of the related debt issue. The accumulated amortization was $1,290,000
and $2,927,000, respectively, at March 31, 1993 and 1994.

Depreciation -- Depreciation of plant and equipment is provided over the
estimated useful lives of the respective assets on the straight-line method.

Trademarks -- Trademarks are being amortized on a straight-line basis
primarily over 20 years. Accumulated amortization was $691,000 and $771,000,
respectively, at March 31, 1993 and 1994.

NOTE B -- NONRECURRING CHARGE

During the fourth quarter of fiscal 1993, the Company recorded a
nonrecurring charge aggregating $21,145,000 related to its decision to sell,
close or downsize certain processing facilities. The nonrecurring charge
included the write-down of such processing facilities and related equipment to
their estimated net realizable or salvage value. Also included in the
nonrecurring charge are provisions for severance, consolidation costs, plant
carrying costs and the write-down of certain discontinued inventories to their
estimated net realizable value. At March 31, 1994, the property held for
disposition consists of three processing facilities and related equipment.

NOTE C -- INVENTORIES

Inventories (in thousands) consisted of the following:

<TABLE>
<CAPTION>
FINISHED MANUFACTURING
GOODS SUPPLIES TOTAL
-------- ------------- --------
<S> <C> <C> <C>
March 31, 1993.............................................. $ 93,656 $ 6,935 $100,591
March 31, 1994.............................................. 50,256 5,000 55,256
</TABLE>

F-8
<PAGE> 59

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE C -- INVENTORIES (CONTINUED)

During the fourth quarter of 1994, the Company changed its method of
valuing its inventories from the last-in, first-out ("LIFO") method to the
average cost method. Management believes that the average cost method provides a
more meaningful presentation of the Company's financial position and related
financial ratios. In accordance with generally accepted accounting principles,
the prior years' financial statements have been retroactively adjusted to
reflect this change. The effect of this restatement was to reduce the net loss
in 1992 by $842,000 or $0.11 per share and increase the net loss in 1993 by
$784,000 or $.09 per share. In addition, the effect of the restatement was to
increase retained earnings at April 1, 1991 by $5,341,000.

NOTE D -- OTHER LIABILITIES

Other liabilities (in thousands) consisted of the following:

<TABLE>
<CAPTION>
MARCH 31,
----------------
1993 1994
------ ------
<S> <C> <C>
Postretirement benefits..................................................... $2,719 $2,769
Accrued disposition costs................................................... 2,426 --
Deferred compensation....................................................... 1,912 1,826
------ ------
$7,057 $4,595
====== ======
</TABLE>

NOTE E -- EMPLOYEES' RETIREMENT PLAN AND OTHER BENEFIT PLANS

The Company provides certain postretirement health care benefits and life
insurance benefits to retired employees. The benefits and eligibility
requirements vary by location and various union agreements.

Generally, eligibility is attained at age 55 or 62 with minimum service
requirements. Employees hired currently by the Company are not entitled to
postretirement health care benefits. The medical benefits generally are subject
to lifetime maximum benefits of $750,000 and after age 65 are coordinated with
Medicare. During the year ended March 31, 1993, the Company adopted, effective
April 1, 1992, Statement of Financial Accounting Standard No. 106 ("SFAS No.
106"), "Employers' Accounting for Postretirement Benefits Other than Pensions."
The Company previously had provided for postretirement health care benefits on a
pay-as-you-go basis. In connection with the adoption of SFAS No. 106, the
Company elected to recognize as expense during 1993 the entire accumulated
postretirement benefit obligation (transition obligation) aggregating $2,500,000
as of April 1, 1992, rather than amortizing such amount to expense over a
20-year period. The Company continues to fund benefit costs on a pay-as-you-go
basis.

F-9
<PAGE> 60

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E -- EMPLOYEES' RETIREMENT PLAN AND OTHER BENEFIT PLANS (CONTINUED)

The following table sets forth the plan's status reconciled with amounts
recognized in the balance sheet:

<TABLE>
<CAPTION>
MARCH 31,
----------------
1993 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................................. $1,371 $1,377
Fully eligible active plan participants................................... 227 234
Other active plan participants............................................ 1,121 1,174
------ ------
2,719 2,785
Unrecognized net loss....................................................... -- 16
------ ------
Accrued postretirement benefit cost......................................... $2,719 $2,769
====== ======

<CAPTION>
YEAR ENDED
MARCH 31,
--------------
1993 1994
---- ----
<S> <C> <C>
Net periodic postretirement benefit cost included the following components:
Service cost -- benefits attributed to service during period.............. $122 $131
Interest cost on accumulated postretirement benefit obligation............ 193 206
Curtailment gain.......................................................... -- (71)
---- ----
Net periodic postretirement benefit cost.................................... $315 $266
==== ====
</TABLE>

The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 14% in 1994, gradually declining to 6% in
2001.

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% in 1993 and 7.5% in 1994.

If the health care cost trend assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of March 31, 1994, would
increase by $230,000. The effect of this change on the aggregate of the service
cost and interest cost would be an additional charge to expense of approximately
$35,000 for the year ended March 31, 1994.

During 1994, the Company had a curtailment gain which represented the
accumulated postretirement benefit obligation of employees at operations
divested of during the year.

The Company has a profit sharing plan which covers substantially all
full-time employees who have completed one year (minimum of 1,000 hours) of
service and provides for Company contributions to a separate trust based upon 8%
of the profit sharing income base as defined in the plan. No profit sharing
contributions were required during the three years ended March 31, 1994.

In addition, the Company also has salary deferral profit sharing plans
(401(k) plans) and other defined contribution plans. Contributions under these
plans were $661,000, $670,000, and $337,000 in 1992, 1993 and 1994,
respectively.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits." This statement requires the accrual of postemployment benefits during
the years an employee provides services. The Statement must be adopted during
the year ending March 31, 1995. The impact of adoption of this Statement will
not be material.

F-10
<PAGE> 61

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE F -- NOTES PAYABLE AND LONG-TERM DEBT

<TABLE>
<CAPTION>
MARCH 31,
-------------------
1993 1994
-------- -------
(IN THOUSANDS)
<S> <C> <C>
9.37% senior notes due January 2000...................................... $ 25,000 $21,186
9.74% senior notes due December 2001..................................... 19,500 16,071
Revolving credit notes................................................... 35,000 17,000
Industrial Development Revenue Bonds:
7.00% to 8.88%......................................................... 27,748 26,569
5.28% (floating at 88% of prime)....................................... 850 600
4.32% (floating at 72% of prime)....................................... 360 180
4.05% Variable......................................................... 2,850 2,700
-------- -------
111,308 84,306
Less:
Current maturities on long-term debt................................... (2,259) (3,868)
Additional long-term debt classified as current liability.............. (26,195) --
-------- -------
$ 82,854 $80,438
======== =======
</TABLE>

On August 20, 1992, the Company entered into a loan and security agreement
with a commercial lender and various banks which provides for borrowings under
revolving credit loans and matures on May 31, 1995. The agreement, which was
amended on June 15, 1993, provides for maximum borrowings under revolving credit
loans of $100,000,000. Borrowings under the revolving credit loans bear interest
at 2.25% over a specified bank's reference rate on the first $40,000,000 of
loans and 1.25% over the reference rate on any borrowings in excess of
$40,000,000. The amended agreement generally restricts borrowings to an amount
equal to 85% of eligible accounts receivable plus 65% of eligible inventory
subject to an inventory sub-limit, as defined in the agreement, reduced by the
amount of any outstanding letters of credit and $8,140,000.

The amended agreement requires an agent's fee of .25% per annum times the
average daily used portion of the commitment, including outstanding letters of
credit. The amended agreement required the Company to pay a restructuring fee of
$600,000 in installments and provides for a fee equal to .25% per annum of the
unused portion of the commitment.

Covenants contained in the amended agreement require the Company to
maintain minimum levels of adjusted tangible net worth, net cash flow and
interest coverage. Other covenants place limitations on liens, capital
expenditures, leases, disposition of assets, dividends and the ability to incur
additional debt.

In addition to the covenants under the amended loan and security agreement,
the Company also has similar covenants under its various other agreements. At
March 31, 1994, all of the retained earnings are restricted as to the payment of
future cash dividends.

On June 15, 1993, the Company issued warrants to the holders of the 9.37%
and 9.74% senior notes in consideration for amending the applicable loan
agreement. The warrants entitle the holders to purchase an aggregate of 90,000
shares of common stock at a price of $7.88 per share through January 15, 2000.
The estimated fair market value of the warrants at June 15, 1993, aggregating
$22,500, has been credited to additional paid-in capital.

F-11
<PAGE> 62

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE F -- NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

During 1993 certain Industrial Revenue Development Bond issues were
classified as current liabilities because the Company was in technical default
of certain financial ratio covenants. During 1994, all of the Industrial Revenue
Development Bond issues, with the exception of one issue aggregating $1,400,000,
were amended by the bondholders such that the Company was in compliance with the
related debt covenants and, accordingly, such amounts have been classified as
long-term debt at March 31, 1994. On June 13, 1994, the trustee of the
$1,400,000 Paulding, Ohio, bond issue declared these bonds immediately payable
due to events of default under the Indenture of Trust. Therefore, the bonds are
included in current maturities of long-term debt at March 31, 1994. The facility
related to the Paulding bond issue was sold during 1994, and proceeds from the
sale, aggregating $1,400,000, were placed in a segregated cash account in
anticipation of the acceleration notice from the Trustee.

The amended loan and security agreement and the senior note agreements
contain cross-default provisions. Such cross-default provisions specify that a
default on any other debt agreement is also an event of default under the
agreement containing the cross-default provision. In addition, the amended loan
and security agreement and the senior note agreements contain acceleration
clauses which give the holders the right to accelerate the maturity date of the
obligation if any other obligation owed by the Company is accelerated or payment
is demanded other than in accordance with the stated maturity dates. The Company
has obtained waivers from the holders of the revolving credit notes and the
senior notes with respect to the cross-default provision and acceleration
clauses relating to the Paulding issue.

Substantially all of the assets of the Company are pledged as collateral
under the various loan agreements.

At March 31, 1994, $17,992,000 of revolving credit loans payable were
classified as short-term, reflecting the Company's intent to repay these
borrowings during 1995. The interest rate on the outstanding revolving credit
loans (including the amounts classified as long-term) at March 31, 1994, was
8.5%.

The stated aggregate amounts of scheduled maturities on long-term debt each
year for the five years subsequent to March 31, 1994, are as follows: 1995 --
$3,868,000; 1996 -- $19,536,000; 1997 -- $2,150,000; 1998 -- $2,650,000; and
1999 -- $7,215,000.

Revolving credit loans payable at March 31, 1994, under the Company's
amended loan and security agreement approximate estimated fair value as the
interest rate remained unchanged under the amended agreement on June 15, 1993.
The 9.37% and 9.74% senior notes are estimated to have an approximate fair value
of $22,296,217 and $16,695,826, respectively, at March 31, 1994, based on quoted
prices for similar issues for debt of the same maturities. Management of the
Company has estimated the fair value of the Industrial Development Revenue Bond
issues to be approximately $29,148,000.

NOTE G -- INCOME TAXES

Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 ("SFAS No. 109"). This statement requires that
deferred income taxes be calculated using an asset and liability method, which
generally requires the recognition of the tax consequences on future years of
events which have been recognized in financial statements. In addition, a
valuation allowance is to be recognized if it is more likely than not that some
or all of a deferred tax asset will not be realized. Due to the recent history
of operating losses, a valuation allowance has been established which reduces
the deferred tax assets to zero after giving effect to deferred tax liabilities.
There was no material cumulative effect of adoption of SFAS No. 109 on the
financial position or results of operations of the Company for the year ended
March 31, 1994.

F-12
<PAGE> 63

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE G -- INCOME TAXES (CONTINUED)

Income taxes consisted of the following:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1992 1993 1994
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable (refundable):
Federal....................................................... $(5,765) $ (4,050) $(2,577)
State......................................................... 100 50 50
Deferred -- federal............................................. 734 (8,983) --
------- -------- -------
$(4,931) $(12,983) $(2,527)
======= ======== =======
</TABLE>

Total incomes tax credits differ from the amounts computed by applying the
federal income tax rate to loss before income taxes. The following table
provides a reconciliation between the United States statutory rate to the
effective tax rate reported:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
U.S. statutory rate............................................ 34.0% 34.0% 34.0%
State income taxes net of federal income tax benefits.......... (0.6) (0.1) (1.1)
Effect of net operating loss carryback......................... -- (4.0) 3.6
Tax rate differential on carryback of product liability
claim........................................................ -- -- 5.2
Adjustment of prior years accrual.............................. -- -- 11.6
Other items -- net............................................. (0.2) 0.5 --
----- ----- -----
Effective tax rate............................................. 33.2% 30.6% 53.3%
===== ===== =====
</TABLE>

Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b) net
operating loss and tax credit carryforwards. Significant components of the
Company's net deferred tax liability as of March 31, 1994, are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Reserves not currently deductible............................................ $ 1,325
Provision for nonrecurring charge............................................ 2,451
Postretirement benefits...................................................... 942
Tax credit carryforwards..................................................... 2,921
Net operating loss carryforwards............................................. 7,922
Valuation allowance.......................................................... (4,520)
---------
Total deferred tax assets...................................................... 11,041
---------
Deferred tax liabilities:
Change in method of inventory valuation...................................... 1,530
Deferred casualty gain....................................................... 1,408
Tax over book depreciation................................................... 7,816
Other........................................................................ 287
---------
Total deferred tax liabilities................................................. 11,041
---------
Net deferred tax liability..................................................... $ 0
=========
</TABLE>

F-13
<PAGE> 64

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE G -- INCOME TAXES (CONTINUED)

Deferred income taxes for 1992 and 1993 resulted principally from
depreciation, provision for nonrecurring charges and inventory valuations. At
March 31, 1994, the Company had an alternative minimum tax credit carry-forward
of approximately $1,916,000, which may be carried forward indefinitely, and the
Company also had a general business credit carryforward of approximately
$1,005,000 which expires in various years through 2003 to 2008. At March 31,
1994, the Company had net operating loss carryforwards of approximately
$23,300,000 which expire in the year 2009.

NOTE H -- CAPITAL STOCK

In June 1989, the Company amended its Articles of Incorporation to grant,
in the event any person ("Acquiring Person") becomes the beneficial owner, as
defined, of 50% or more of the Company's common stock, any of which was acquired
pursuant to a tender offer, such holder of common stock other than the Acquiring
Person the right to have their shares repurchased for cash by the Company. The
repurchase price will be the highest of (i) the highest price paid by Acquiring
Person for those shares acquired within the prior 18 months, (ii) the highest
price on any trading day in the prior 18 months, or (iii) the per common share
amount of stockholders' equity as reflected in the previously completed quarter.

In 1985, the stockholders approved a 1985 Incentive Stock Option Plan
pursuant to which 320,000 shares of the Company's common stock were reserved for
the grant of options to executive officers and other key employees. Under the
Plan, stock grants may be made over a ten-year period at not less than 100% of
fair market value at the date of grant. One year after date of grant, 50% of the
options become exercisable with the remaining options exercisable after the
second year. No option granted under the Plan may be exercised more than ten
years after the date of grant. Changes in shares as to options are as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK
------------------------------------
OUTSTANDING
RESERVED OPTIONS AVAILABLE
-------- ----------- ---------
<S> <C> <C> <C>
Balances at April 1, 1991 ($5.125 to $16.25)................... 266,700 159,500 107,200
Granted ($10.50)............................................... -- 53,500 (53,500)
Expired ($16.25)............................................... -- (4,000) 4,000
Exercised ($5.125 to $6.875)................................... (8,500) (8,500) --
-------- --------- ---------
Balances at March 31, 1992 ($5.125 to $15.875)................. 258,200 200,500 57,700
Granted ($6.25 to $10.625)..................................... -- 19,600 (19,600)
Expired ($5.125 to $16.25)..................................... -- (36,200) 36,200
Exercised ($5.125 to $10.50)................................... (24,700) (24,700) --
-------- --------- ---------
Balances at March 31, 1993 ($5.125 to $15.875)................. 233,500 159,200 74,300
Granted ($6.125 to $8.625)..................................... -- 6,500 (6,500)
Expired ($6.25 to $15.125)..................................... -- (14,750) 14,750
Exercised ($5.125 to $6.875)................................... (8,950) (8,950) --
-------- --------- ---------
Balances at March 31, 1994..................................... 224,550 142,000 82,550
======= ========= =======
</TABLE>

At March 31, 1994, a total of 133,950 options were exercisable at $5.125 to
$15.875 per share.

In addition, during 1990 the Company granted options to purchase 17,500
shares of Common Stock at $10.00 per share to certain employees. These options
have substantially the same terms as the Incentive Stock Option Plan. During
1993, options for 15,000 of these shares expired.

F-14
<PAGE> 65

STOKELY USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE I -- COMMITMENTS AND CONTINGENCIES

The Company has operating leases covering primarily equipment and land. The
majority of the equipment leases are for terms of one year or less. The Company
does, however, in the normal course of business continue to lease the equipment
after the minimum lease period. Certain leases require payment of insurance and
maintenance costs.

Aggregate minimum rental commitments at March 31, 1994 under noncancellable
leases with terms of more than one year are immaterial.

Total rent expense aggregated approximately $3,268,000, $2,850,000 and
$1,900,000, respectively, during the years 1992, 1993 and 1994.

During fiscal 1994, the Company settled a product liability claim resulting
in a charge of $2,050,000. The product liability claim relates to an acquired
business and predates the acquisition of such business.

The Company is involved in various legal actions and claims primarily
arising in the normal course of its business. In the opinion of management of
the Company, the liability, if any, would not have a material effect on the
Company's financial condition or results of operations.

NOTE J -- SUPPLEMENTAL CASH FLOW DISCLOSURES

Cash payments for (refunds of) interest and income taxes were as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1992 1993 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest......................................................... $ 7,246 $11,607 $11,854
Income taxes -- net.............................................. (1,821) (5,695) (4,118)
</TABLE>

NOTE K -- INSURANCE CLAIM

During fiscal 1993, the Company had a boiler explosion and ensuing fire at
its Hoopeston, Illinois, processing facility. An initial claim was filed with
the insurance carrier relating to the property and equipment destroyed and the
estimated business interruption losses incurred. As of March 31, 1993, advances
had aggregated $5,000,000, of which $1,250,000 was received in cash and
$3,750,000 was included in accounts receivable. This advance was recorded to
write off $2,500,000 of property and equipment destroyed in the fire and to
record a gain of $2,500,000 relating to recovery of expenses incurred and lost
margin resulting from the fire.

During fiscal 1994, the Company received additional insurance proceeds from
the final settlement of this claim, resulting in a gain included in other
revenues of $4,118,000.

F-15
<PAGE> 66

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY STOKELY OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Stokely Restructuring Program......... 6
Risk Factors.......................... 7
Use of Proceeds....................... 10
Price Range of Common Stock........... 10
Dividend Policy....................... 11
Dilution.............................. 11
Capitalization........................ 12
Selected Consolidated Financial
Data................................ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 24
Management............................ 37
Certain Transactions.................. 44
Principal Shareholders................ 45
Description of Capital Stock.......... 46
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 50
Additional Information................ 50
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

3,000,000 SHARES

STOKELY USA, INC.

COMMON STOCK

------------------------

PROSPECTUS

NOVEMBER 17, 1994

------------------------

WILLIAM BLAIR & COMPANY

DAIN BOSWORTH
INCORPORATED
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 67

APPENDIX TO FINAL PROSPECTUS

STOKELY USA, INC.

In accordance with Item 304(a) of Regulation S-T, the following is a
description of all graphic and image information contained in the Final
Prospectus:

INSIDE FRONT COVER PAGE: Color pictures depicting a collage of Stokely's
private label canned vegetable products and Stokely's industrial bulk
containers of vegetable products.

INSIDE BACK COVER PAGE: Color pictures depicting a collage of Stokely's
brand label canned vegetable products, including Stokely's Finest(R) items
and Stokely's Gold(TM) label items.