<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 29, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number -- 0-17896
HANOVER FOODS CORPORATION
(Exact name of Registrant as specified in its charter)
Commonwealth of Pennsylvania 23-0670710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1486 York Road, P.O. Box 334, Hanover, PA 17331
(Address of principal executive offices) (Zip Code)
717-632-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing for the past 90
days. Yes [X] No [ ]
Indicate the number of shares outstanding of issuer's classes of common stock as
of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at November 29, 1998
----- --------------------------------
<S> <C>
Class A Common Stock, $25 par value 290,148 shares
Class B Common Stock, $25 par value 426,620 shares
</TABLE>
<PAGE> 2
HANOVER FOODS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Twenty Six Weeks Ended March 29, 1998
Index
Page
Part I -- Financial Information
Item 1 -- Financial Statements:
Condensed Consolidated Balance Sheets
November 29, 1998 (Unaudited) and May 31, 1998.................. 3
Condensed Consolidated Statements of Operations (Unaudited)
Twenty Six Weeks and Thirteen Weeks Ended
November 29, 1998 and November 30, 1997......................... 5
Condensed Consolidated Statements of Stockholders'
Equity (Unaudited), Periods Ended November 29, 1998
and May 31, 1998................................................ 6
Condensed Consolidated Statements of Cash Flows
(Unaudited), Twenty-Six Weeks Ended November 29, 1998
and November 30, 1997........................................... 7
Notes to Condensed Consolidated Financial Statements
(Unaudited)..................................................... 8
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 18
Part II -- Other Information................................................ 23
Item 1 -- Legal Proceedings........................................... 23
Items 2-3 -- None........................................................ 26
Item 4 -- Submission of Matters to a Vote of Security Holders......... 26
Item 5 -- None........................................................ 26
Item 6 -- Exhibits and Reports on Form 8-K........................... 26
<PAGE> 3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
ASSETS November 29, 1998 May 31, 1998
(Unaudited)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 1,537,000 $ 2,337,000
Accounts and Notes Receivable, Net 27,156,000 23,429,000
Accounts Receivable from Related Parties, Net 0 389,000
Inventories 57,743,000 42,962,000
Prepaid Expenses 2,659,000 2,244,000
Deferred Income Taxes 365,000 365,000
- ---------------------------------------------------------------------------------
Total Current Assets 89,460,000 71,726,000
- ---------------------------------------------------------------------------------
Property, Plant and Equipment, at Cost:
Land and Buildings 43,055,000 35,171,000
Machinery and Equipment 92,051,000 86,965,000
Leasehold Improvements 382,000 374,000
- ---------------------------------------------------------------------------------
135,488,000 122,510,000
Less Accumulated Depreciation and
Amortization 75,488,000 72,641,000
- ---------------------------------------------------------------------------------
60,000,000 49,869,000
Construction in Progress 30,000 4,411,000
- ---------------------------------------------------------------------------------
Total Property, Plant and Equipment 60,030,000 54,280,000
- ---------------------------------------------------------------------------------
Other Assets and Deferred Charges:
Intangible Assets, Net 2,338,000 2,323,000
Other Assets 3,160,000 2,678,000
- ---------------------------------------------------------------------------------
Total Assets $154,988,000 $131,007,000
- ---------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
PART I -- FINANCIAL INFORMATION Item 1. Financial Statements
HANOVER FOODS CORPORATION AND SUBSIDIARIES-Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY November 29, 1998 (Unaudited) May 31, 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Notes Payable - Banks $ 33,765,000 $ 19,874,000
Accounts Payable 23,971,000 23,979,000
Accounts Payable-Related Parties, Net 554,000 0
Accrued Expenses 12,820,000 7,717,000
Current Maturities of Long-Term Debt 1,859,000 1,859,000
Income Taxes Payable 1,262,000 1,498,000
- ------------------------------------------------------------------------------------------------------------
Total Current Liabilities 74,231,000 54,927,000
- ------------------------------------------------------------------------------------------------------------
Long-Term Debt, Less Current Maturities 14,359,000 14,359,000
Other Liabilities 1,842,000 1,565,000
Deferred Income Taxes 4,618,000 4,686,000
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 95,050,000 75,537,000
- ------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
8.25% cumulative convertible preferred, $25 par value;
issuable in series, 120,000 shares authorized;
31,536 shares issued, 15,044 shares outstanding 788,000 788,000
4.40% cumulative convertible preferred, $25 par value;
issuable in series, 10,000 shares authorized; 10,000
shares issued and outstanding 250,000 250,000
Common stock, Class A, non-voting, $25 par value;
800,000 shares authorized, 349,210 shares issued,
290,148 shares at November 29, 1998 and 290,860
shares at May 31, 1998 outstanding 8,729,000 8,729,000
Common stock, Class B, voting, $25 par value;
880,000 shares authorized, 493,123 shares issued,
426,620 shares at November 29, 1998 and 426,766
shares at May 31, 1998 outstanding 12,328,000 12,328,000
Capital Paid in Excess of Par Value 2,143,000 2,143,000
Retained Earnings 43,521,000 39,179,000
Treasury Stock, at Cost (8,033,000) (7,993,000)
Other Reserves 212,000 46,000
- ------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 59,938,000 55,470,000
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 154,988,000 $ 131,007,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Twenty-Six Weeks Ended Thirteen Weeks Ended
November 29, November 30, November 29, November 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $139,243,000 $124,002,000 $ 80,705,000 $ 68,110,000
Cost of Goods Sold 104,407,000 93,878,000 60,482,000 51,185,000
- ------------------------------------------------------------------------------------------------------
Gross Profit 34,836,000 30,124,000 20,223,000 16,925,000
Selling Expenses 19,567,000 17,327,000 11,341,000 9,960,000
Administrative Expenses 5,342,000 4,500,000 2,565,000 2,164,000
- ------------------------------------------------------------------------------------------------------
Operating Profit 9,927,000 8,297,000 6,317,000 4,801,000
Interest Expense 1,502,000 1,702,000 738,000 817,000
Other Expenses, Net 242,000 75,000 165,000 (161,000)
- ------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 8,183,000 6,520,000 5,414,000 4,145,000
Income Taxes 3,305,000 2,481,000 2,172,000 1,633,000
- ------------------------------------------------------------------------------------------------------
Net Earnings 4,878,000 4,039,000 3,242,000 2,512,000
Dividends on Preferred Stock 23,000 16,000 11,000 8,000
- ------------------------------------------------------------------------------------------------------
Net Earnings Applicable to
Common Stock 4,855,000 4,023,000 3,231,000 2,504,000
- ------------------------------------------------------------------------------------------------------
Earnings Per Share:
Net Earnings Per Common Share -
Basic $ 6.77 $ 5.60 $ 4.51 $ 3.48
Net Earnings Per Common Share -
Diluted $ 6.66 $ 5.58 $ 4.43 $ 3.47
Dividends Per Share, Common $ 0.550 $ 0.550 $ 0.275 $ 0.275
Basic Weighted Average Shares 717,085 718,688 717,197 719,037
Diluted Weighted Average Shares 732,006 724,474 732,118 724,823
- ------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
Unaudited
<TABLE>
<CAPTION>
Cumulative Cumulative
Convertible Preferred Convertible Preferred
Stock Stock Common Stock
Series A and B Series C Class A
Total
Stockholders'
Equity Shares Amount Shares Amount Shares Amount
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1998 $55,470,000 31,536 $788,000 10,000 $250,000 349,210 $8,729,000
Net Earnings for the Period 4,878,000
Cash Dividends Per Share:
Preferred Stock (23,000)
Common Stock (513,000)
Redemption of Common Stock
(Class A 712 Shares and
Class B 146 Shares) (40,000)
Unrealized Gain on Investments 166,000
- ------------------------------------------------------------------------------------------------------------------
Balance, November 29, 1998 $59,538,000 31,536 $788,000 10,000 $250,000 349,210 $8,729,000
==================================================================================================================
<CAPTION>
Common Stock
Class B Treasury Stock
Capital Paid
in Excess of Retained
Shares Amount Par Value Earnings Shares Amount Other
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1998 493,123 $12,328,000 $2,143,000 $39,179,000 141,199 $(7,993,000) $46,000
Net Earnings for the Period 4,878,000
Cash Dividends Per Share:
Preferred Stock (23,000)
Common Stock (513,000)
Redemption of Common Stock
(Class A 712 Shares and
Class B 146 Shares) 858 (40,000)
Unrealized Gain on Investments 166,000
- ------------------------------------------------------------------------------------------------------------------
Balance, November 29, 1998 493,123 $12,328,000 $2,143,000 $43,521,000 142,057 $(8,033,000) $212,000
==================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Period Ended: November 29, 1998 November 30, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net Earnings $ 4,878,000 $ 4,039,000
Adjustments to Reconcile Net Earnings to Net
Cash Used in Operating Activities:
Depreciation and Amortization 2,956,000 2,805,000
Deferred Income Taxes (68,000) 99,000
Changes in Assets and Liabilities:
Accounts Receivable (3,338,000) (1,433,000)
Inventories (14,781,000) (16,595,000)
Prepaid Expenses (415,000) (135,000)
Accounts Payable and Accrued Expenses 5,649,000 9,761,000
Income Taxes Payable (236,000) 212,000
Other Liabilities 277,000 121,000
- ------------------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities (5,078,000) (1,126,000)
- ------------------------------------------------------------------------------------------------------------
Investing Activities:
Increase in Other Assets (440,000) 420,000
Acquisitions of Property, Plant and Equipment (8,597,000) (2,119,000)
- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (9,037,000) (1,699,000)
- ------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase in Notes Payable 13,891,000 3,375,000
Payments on Long-Term Debt 0 (250,000)
Payment of Dividends (536,000) (411,000)
Redemption of Common Stock (40,000) (45,000)
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 13,315,000 2,669,000
- ------------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (800,000) (156,000)
Cash and Cash Equivalents, Beginning of Period 2,337,000 3,312,000
- ------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $ 1,537,000 $ 3,156,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
November 19, 1998 and November 30, 1997
(Unaudited)
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements of the Corporation
included herein have been prepared, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
Although, certain information normally included in financial statements
prepared in accordance with generally accepted accounting principles
has been omitted, the Registrant believes that the disclosures are
adequate to make the information presented not misleading.
The Corporation's fiscal year ends at the close of operations on the
Sunday nearest to May 31. Accordingly, these financial statements
reflect activity for the twenty-six week periods ended November 29,
1998 and November 30, 1997.
It is suggested that these condensed consolidated financial statements
be read in conjunction with the consolidated financial statements and
the notes thereto included in Form 10-K for the Corporation's fiscal
year ended May 31, 1998.
The condensed consolidated financial statements included herein reflect
all adjustments (consisting only of normal recurring accruals) which,
in the opinion of management, are necessary to present a fair statement
of the results of the interim period.
The results for interim periods are not necessarily indicative of
trends or results to be expected for a full fiscal year.
(2) SHORT-TERM BORROWINGS
The Corporation and its subsidiaries maintain short-term unsecured
lines of credit with various banks providing credit availability
amounting to $65.0 million of which $33,765,000 was borrowed at
November 29, 1998. The average cost of funds during the period ended
November 29, 1998 was 5.75%.
8
<PAGE> 9
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(3) LONG-TERM DEBT
The long-term debt of the Corporation and its subsidiaries consist of:
<TABLE>
<CAPTION>
November 29, 1998 May 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
8.74% unsecured senior notes payable
to an insurance company, due
fiscal years ending 1995-2007 $16,071,000 $16,071,000
Installment obligation payable to a related
party, due in equal annual installments
in fiscal years ending 1996-2000
interest at prime rate (8.50% at
August 30, 1998) 147,000 147,000
- --------------------------------------------------------------------------------
16,218,000 16,218,000
Less current maturities 1,859,000 1,859,000
- --------------------------------------------------------------------------------
Net Long Term Debt $14,359,000 $14,359,000
- --------------------------------------------------------------------------------
</TABLE>
The term loan agreements with the insurance company and the agreements for
seasonal borrowing with financial institutions contain various restrictive
provisions including those relating to mergers and acquisitions, additional
borrowing, guarantees of obligations, lease commitments, limitations on
declaration and payment of dividends, repurchase of the Corporation's stock, and
the maintenance of working capital and certain financial ratios.
The Corporation is in compliance with the restrictive provisions in the
agreements.
9
<PAGE> 10
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(4) RELATED PARTY TRANSACTIONS
The Corporation and its subsidiaries, in the normal course of business,
purchase and sell goods and services to related parties. The
Corporation believes that the cost of such purchases and sales are
competitive with alternative sources of supply and markets.
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended Thirteen Weeks Ended
November 29, November 30, November 29, November 30,
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Park 100 Foods, Inc. $1,747,000 $2,465,000 $ 817,000 $ 718,000
CORPORATE CHANGES:
Snyder's of Hanover, Inc. $ 93,000 $ 88,000 $ 47,000 $ 44,000
EXPENDITURES:
Park 100 Foods Corp. $ 34,000 $ 142,000 $ 11,000 $ 0
ARWCO Corporation $ 8,000 $ 10,000 $ 4,000 $ 6,000
Warehime Enterprises, Inc. $ 13,000 $ 2,000 $ 1,000 $ 1,000
John A. & Patricia M. Warehime $ 30,000 $ 30,000 $ 19,000 $ 14,000
James G. Sturgill $ 36,000 $ 40,000 $ 18,000 $ 16,000
Lippy Brothers, Inc. $ 254,000 $ 69,000 $ 253,000 $ 69,000
- ----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
The respective November 29, 1998 and May 31, 1998 account balances with related
companies are as follows:
<TABLE>
<CAPTION>
November 29, 1998 May 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Snyder's of Hanover, Inc. $ 31,000 $ 48,000
Park 100 Foods, Inc. $130,000 $346,000
Warehime Enterprises $ 0 $ 3,000
ACCOUNTS PAYABLE:
Park 100 Foods, Inc. $ 3,000 $ 0
ARWCO Corporation $ 1,000 $ 1,000
Warehime Enterprises $ 6,000 $ 0
James G. Sturgill $ 3,000 $ 7,000
Lippy Brothers, Inc. $702,000 $ 0
NOTES PAYABLE:
Cyril T. Noel $147,000 $147,000
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PART I -- FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
EARNINGS PER SHARE
(5) The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" effective with the period ended March 1,1998,
and restated all prior earnings per share amounts to conform to the
provisions thereof.
(6) The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" in the first quarter of the
current year. Comprehensive income is determined as follows:
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended Thirteen Weeks Ended
November 29, November 30, November 29, November 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 4,878,000 $ 4,039,000 $ 3,242,000 $ 2,512,000
Other Comprehensive
Income (Loss):
Unrealized Gain (Loss)
On Investments 166,000 (246,000) 237,000 (225,000)
----------- ----------- ----------- -----------
Comprehensive Income $ 5,044,000 $ 3,793,000 $ 3,479,000 $ 2,287,000
=========== =========== =========== ===========
</TABLE>
12
<PAGE> 13
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------
(7) ACQUISITIONS
During the year ended May 31, 1998 the Company purchased assets and
assumed certain liabilities of L.K. Bowman, Inc. and L.K. Bowman
Pacific, Inc. These purchases were not material to the Company's
results of operations for the year ended May 31, 1998. The allocation
of the purchase price is as follows:
<TABLE>
<S> <C>
Accounts receivable $ 1,830,000
Inventory 4,002,000
Prepaid expenses 41,000
Property, plant and equipment 911,000
Intangible assets 300,000
Goodwill 1,435,000
Accounts payable (1,426,000)
Accrued expenses (412,000)
-----------
$ 6,681,000
===========
</TABLE>
During October 1998, the Company purchased certain assets of Bickel's
Potato Chip Co. Inc. This purchase was not material to the Company's
results of operations for the thirteen or twenty-six week periods ended
November 29, 1998.
The allocations of the purchase is as follows:
<TABLE>
<S> <C>
Inventory $ 234,000
Prepaid expenses 13,000
Property, plant and equipment 1,429,000
----------
$1,676,000
==========
</TABLE>
13
<PAGE> 14
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(8) CONTINGENCIES
LEGAL PROCEEDINGS
1995 WAREHIME FAMILY LITIGATION
On February 1, 1995, Michael A. Warehime, J. William Warehime and
Elizabeth W. Stick, three Class B shareholders of the Corporation, filed a
complaint in the Court of Common Pleas of York County, Pennsylvania against the
Corporation and John A. Warehime (Chairman of the Corporation), in his capacity
as voting trustee of two voting trusts entitling him to vote approximately 52%
of the Class B common stock. The Court has dismissed various claims and parties
in the lawsuit and the only remaining parties are Michael A. Warehime as
plaintiff and John A. Warehime as defendant. The only remaining claims are: (i)
a claim for breach of fiduciary duty based on exercise of powers beyond those
granted by certain voting trust agreements, (ii) a claim for breach of fiduciary
duty for use of the voting trusts in a manner harmful to their beneficiaries,
(iii) a count requesting removal of John A. Warehime as the voting trustee of
the voting trusts.
DERIVATIVE ACTION
On September 13, 1996, certain Class A common stockholders filed a
complaint in equity against six of the Corporation's directors and the estate of
a former director in the Court of Common Pleas of York County, Pennsylvania (the
complaint). The suit also names the Corporation as a nominal defendant. The suit
sought various forms of relief including, but not limited to, rescission of the
board's April 28, 1995 approval of John A. Warehime's 1995 Employment Agreement
and the board's February 10, 1995 adjustment of director's fees. (Since the
filing of this lawsuit, John A. Warehime's 1995 Employment Agreement was
amended.) In addition, the plaintiffs sought costs and fees incident to bringing
suit. On November 4, 1996, the complaint was amended to add additional
plaintiffs. On June 24, 1997, the Court dismissed the amended complaint for
failure to make a prior demand. An appeal was filed from the court's June 24,
1997 Order. On December 2, 1998, the Superior Court of Pennsylvania held that
the derivative plaintiffs had made adequate demand.
14
<PAGE> 15
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
On May 12, 1997, a written demand was received by the Corporation from the
attorney for those Class A common stockholders containing similar allegations
and the allegations raised by the Class A common stockholders were investigated
by a special independent committee of the Board of Directors and found to be
without merit.
1997 WAREHIME FAMILY LITIGATION
On February 21, 1997, Michael A. Warehime, a Class B shareholder, and
certain Class A shareholders filed motions for a preliminary injunction against
the Corporation, John A. Warehime, in his capacity as voting trustee, and all
certain directors of the Corporation in the Court of Common Pleas of York
County, Pennsylvania against a Proposal of the Board of Directors to amend and
restate the Corporation's Articles of Incorporation in the manner hereafter
described.
On February 13, 1997, the Board of Directors proposed an amendment and
Restatement of the Corporation's Articles of Incorporation (the "Amended and
Restated Articles") which provides that if all of the following Class B
Shareholders (or their estates upon the death of such stockholders), Michael A.
Warehime, John A. Warehime, Sally W. Yelland, J. William Warehime, and Elizabeth
W. Stick (all members of the Warehime family),do not agree in writing to the
composition of the Board of Directors or other important matters specified below
on or after the 1998 annual shareholders meeting, the trustees of the
Corporation's 401(k) Savings Plan (or a similar employee benefit plan), acting
as fiduciaries for the employees who participate in the Plan, and the Class A
shareholders may become entitled to vote in the manner described in the
document. Pursuant to the Company's Bylaws, nominations for director must be
submitted to the Company in the manner prescribed by the bylaws no later than
June 1 of the year in which the meeting is to occur.
The Amended and Restated Articles create a Series C Convertible
Preferred Stock and also classified the terms of the Board of Directors
commencing with the election at the 1997 annual shareholders meeting and permit
directors to be elected for four year terms as permitted by Pennsylvania law.
The motions for a preliminary injunction were dismissed by the Court on June 24,
1997. The
15
<PAGE> 16
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Class B shareholders on June 25, 1997 approved the Amended and Restated Articles
(John A. Warehime being the sole Class B shareholder voting affirmatively in his
capacity as voting trustee) and the Amended and Restated Articles became
effective June 25, 1997.
In August 1997, the Board of Directors proposed a further amendment
(the "Amendment") to the Amended and Restated Articles to expand the definition
of "disinterested directors" in the manner described below, and to approve
certain performance based compensation for John A. Warehime solely for the
purpose of making the Corporation eligible for a federal income tax deduction
pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. A
special meeting was scheduled for August 14, 1997 (the "Special Meeting") to
vote on these proposals. On August 8, 1997, Michael A. Warehime filed a motion
in the Court of Common Pleas of York County, Pennsylvania to prevent John A.
Warehime, in his capacity as voting trustee from voting on these proposals and
to enjoin the Amendment. This Motion was denied on August 11, 1997. The
Amendment and the proposal under Section 162(m) were approved by Class B
Shareholders (John A. Warehime was the sole Class B shareholder to vote
affirmatively, in his capacity as voting trustee) on August 14, 1997 and the
Amendment became effective on August 14, 1997.
Under the Amendment, the definition of "disinterested directors" means
the person who, in the opinion of counsel for the Corporation, meet any of the
following criteria: (i) disinterested directors as defined in Section 17159(e)
of the Pennsylvania Business Corporations Law of 1988, as amended; (ii) persons
who are not "interested" directors as defined in Section 1.23 of The American
Law Institute "Principles of Corporate Governance: Analysis and Recommendations"
(1994); or (iii) persons who qualify as members of the Audit Committee pursuant
to Section 303.00 of the New York Stock Exchange's Listed Company Manual.
Michael Warehime filed an appeal from the denial of his motion to
enjoin the previously described Amendment to the Company's Amended and Restated
Articles. On December 2, 1998, a majority panel of the Superior Court of
Pennsylvania issued a decision holding that although John Warehime had acted in
good faith in voting for the Amendment to the Amended and Restated Articles as
trustee of the Warehime voting trust, Mr. Warehime breached his fiduciary duty
to the beneficiaries of the Warehime voting trust in voting for the Amendment.
On December 16, 1998, John Warehime filed a motion for reargument en banc with
the Superior
16
<PAGE> 17
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
Court. On December 16, 1998, Michael Warehime filed a motion for clarification
requesting that the Superior Court issue an order invalidating the Amendment to
the Amended and Restated Articles. On December 23, 1998, the Superior Court
denied Michael Warehime's motion for clarification.
The Corporation is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the Corporation's consolidated financial position, results of operations or
liquidity.
17
<PAGE> 18
PART I -- FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "projected," or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including but not
limited to quarterly fluctuations in operating results, competition, state and
federal regulation, environmental considerations, foreign operations and risks
associated with the Year 2000 Issue. Such factors, which are discussed in the
Form 10-Q, could affect the Company's financial performance and could cause the
Company`s actual results for future periods to differ materially from any
opinion or statements expressed herein with respect to future periods. As a
result, the Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made.
The following comments should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in the Corporation's Annual Report on Form 10-K for the fiscal year
ended May 31, 1998.
RESULTS OF OPERATIONS
NET SALES
Consolidated net sales were $139.2 million for the twenty-six week period ended
November 29, 1998. This represents an increase of 12.3% over the twenty-six week
period ended November 30, 1997 consolidated net sales of $124.0 million.
Consolidated net sales were $80.7 million for the thirteen week period ended
November 29, 1998, a 18.5% increase from consolidated net sales of $68.1 million
for the corresponding period in the prior year. This increase was due to
increases in the sales of L.K. Bowman, Sunnyside Fresh Foods, and Bickel's
Potato Chip Co. Inc., new acquisitions during the later part of fiscal 97/98 and
the second quarter of fiscal 98/99 plus increases in retail sales as well as
food service sales offset by decreases in frozen industrial sales.
18
<PAGE> 19
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
COST OF GOODS SOLD
Cost of goods sold were $104.4 million, or 75.0% of consolidated net sales in
the twenty-six week period ended November 29, 1998 and $93.9 million, or 75.7%
of consolidated net sales, for the corresponding period in 1997. Cost of goods
sold was $60.5 million, or 74.9% of consolidated net sales, for the thirteen
week period ended November 29, 1998 as compared to $51.2 million or 75.2% of
consolidated net sales, for the corresponding period in 1997. The decrease in
cost of goods sold as a percentage of net sales resulted primarily from a
reduction in the cost of operations for both the twenty-six week period as well
as the thirteen week period.
SELLING EXPENSES
Selling expenses were $19.6 million, or 14.1% of consolidated net sales, for the
twenty-six week period ended November 29, 1998 as compared to $17.3 million or
14.0% of consolidated net sales, during the corresponding period in 1997.
Selling expenses were $11.3 million or 14.1% of consolidated net sales for the
thirteen week period ended November 29, 1998 compared to $10.0 million, or 14.6%
of consolidated net sales, during the corresponding period in 1997. The increase
in selling expenses reflects higher expenses related to coupon programs.
ADMINISTRATIVE EXPENSES
Administration expenses as a percentage of consolidated net sales were 3.8% for
the twenty-six week period ended November 29, 1998 compared to 3.6% for the
corresponding period of 1997. Administrative expenses as a percentage of
consolidated net sales were 3.2% for the thirteen week period ended November 29,
1998 compared to 3.2% of consolidated net sales during the corresponding period
in 1997. The increase in dollars is attributed to increases in outside
consulting services dealing with the Year 2000 conversion and the administrative
expenses of our acquisitions, L.K. Bowman, Sunnyside Fresh Foods and Bickels
Potato Chip Co.
Since 1995, the Corporation has been involved in litigation with certain members
of the Warehime Family which is described under "Legal Proceedings". The
plaintiffs in these litigation matters did not allege a specific amount of
monetary damages in the complaints filed in connection with these lawsuits. The
litigation did not have a material impact on the financial condition, results
of operations or business of the company, during the 3 and 6 months ended
November 29, 1998.
19
<PAGE> 20
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
INTEREST EXPENSE
Interest expense was $1,502,000 for the twenty-six week period ended November
29, 1998 as compared to $1,702,000 for the same period in 1997. Interest expense
was $0.7 million for the thirteen week period ended November 29, 1998 compared
to $0.8 million for the same period in 1997. The decrease in interest expense is
mainly due to lower borrowing rates.
OTHER EXPENSES, NET
Other expenses, net was $242,000 for the twenty-six week period ended November
29, 1998 as compared to $75,000 for the same period in 1997. Other expenses, net
was $165,000 expense for the thirteen week period ended November 29, 1998 as
compared to income of $161,000 for the same period in 1997. Lower gains on sale
of investments and foreign exchange gain as well as increased goodwill
amortization attributed to the increased expenses during both the twenty-six and
thirteen week periods as compared to the prior year periods.
INCOME TAXES
The provision for federal and state income taxes for the twenty-six week period
ended November 29, 1998 was $3.3 million, or 40.4% of pretax earnings, as
compared to $2.5 million, or 38.1% for the same period in 1997. The increase in
the effective tax rate for both the twenty-six week and thirteen week period is
due to decreased earnings in foreign jurisdictions with lower tax rates in the
current year period as compared to the prior year periods.
20
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
Management's discussion of the Corporation's financial condition should be read
in conjunction with the condensed consolidated statements of cash flows
appearing on page 7 of this report.
OPERATING ACTIVITIES
Cash used by operating activities for the twenty-six week period ended November
29, 1998 was $5.1 million as compared to $1.1 million during the same period of
1997. The combination of increased accounts receivable levels, offset by lower
increases in accounts payable and accrued expenses, utilized more cash flow. The
same period in 1997, consumed less in cash for accounts receivable and provided
more cash from increases in accounts payable and accrued expense levels.
INVESTING ACTIVITIES
During the twenty-six week period ended November 29, 1998 the Corporation spent
approximately $8.6 million for the purchase of land and plant upgrades and
expansions. This compares to $2.1 million spent during the same period last year
for capital projects.
FINANCING ACTIVITIES
The increase in notes payable of approximately $13.9 million during the
twenty-six week period ended November 29, 1998 represents borrowings made
against available seasonal lines of credit from financial institutions for use
in operations and plant upgrades and expansions.
The Corporation has available seasonal lines-of-credit from financial
institutions in the amount of $65.0 million of which $33.8 million was utilized
as of November 29, 1998. Additional borrowings are permitted within parameters
in existing debt agreements.
Management believes these credit facilities provide adequate cash availability
for seasonal operating requirements.
21
<PAGE> 22
PART I -- FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
YEAR 2000
Many existing computer programs, including those utilized by the Corporation,
use only two digits to identify a year in the date field. These programs were
designed and developed without considering the impact of the upcoming change in
the century. If not corrected, any computer applications could fail or create
erroneous results by or at the Year 2000 (the "Year 2000 Issue"). The
Corporation has retained an outside consultant to manage the Corporation's
efforts to bring its computer system into Year 2000 compliance. The Corporation
has contacted its customers, key suppliers and its equipment manufacturers in an
attempt to ensure third party compliance.
In 1997, the Corporation established a management team to assess the
Corporation's Year 2000 issues and to implement the Corporation's Year 2000
compliance program. The management team includes members of the Corporation's
Management Information, Accounting and Finance Departments and certain officers
of the Corporation. The Corporation has completed the majority of its
implementation and testing program and currently anticipates having all of its
information technology systems as well as non-information technology systems
(which include the Corporation's telecommunications systems and food processing
equipment) Year 2000 compliant by the end of the first quarter of 1999. The
Corporation is also in the process of developing a contingency plan in the event
its systems are not Year 2000 compliant on a timely basis. The Corporation
currently estimates the total costs associated with addressing the Year 2000
Issue to be approximately $350,000 and anticipates that such costs will not
materially affect the Corporation's future financial results.
As part of its Year 2000 compliance program, the Corporation is contacting and
surveying vendors and customers with whom which the Corporation does a material
amount of business to determine whether these parties' systems (to the extent
they relate to the Corporation's business) are subject to Year 2000 issues. The
failure of the Corporation's material vendors or customers to convert their
systems on a timely basis may have a material adverse effect on the
Corporation's operations. The Corporation is in the process of developing a
contingency plan in the event these vendors or customers with which the
Corporation does a material amount of business are not Year 2000 compliant on a
timely basis.
22
<PAGE> 23
PART II -- OTHER INFORMATION
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Item 1. LEGAL PROCEEDINGS
1995 WAREHIME FAMILY LITIGATION
On February 1, 1995, Michael A. Warehime, J. William Warehime and
Elizabeth W. Stick, three Class B shareholders of the Corporation, filed a
complaint in the Court of Common Pleas of York County, Pennsylvania against the
Corporation and John A. Warehime (Chairman of the Corporation), in his capacity
as voting trustee of two voting trusts entitling him to vote approximately 52%
of the Class B common stock. The Court has dismissed various claims and parties
in the lawsuit and the only remaining parties are Michael A. Warehime as
plaintiff and John A. Warehime as defendant. The only remaining claims are: (i)
a claim for breach of fiduciary duty based on exercise of powers beyond those
granted by certain voting trust agreements, (ii) a claim for breach of fiduciary
duty for use of the voting trusts in a manner harmful to their beneficiaries,
(iii) a count requesting removal of John A. Warehime as the voting trustee of
the voting trusts.
DERIVATIVE ACTION
On September 13, 1996, certain Class A common stockholders filed a
complaint in equity against six of the Corporation's directors and the estate of
a former director in the Court of Common Pleas of York County, Pennsylvania (the
complaint). The suit also names the Corporation as a nominal defendant. The suit
sought various forms of relief including, but not limited to, rescission of the
board's April 28, 1995 approval of John A. Warehime's 1995 Employment Agreement
and the board's February 10, 1995 adjustment of director's fees. (Since the
filing of this lawsuit, John A. Warehime's 1995 Employment Agreement was
amended.) In addition, the plaintiffs sought costs and fees incident to bringing
suit. On November 4, 1996, the complaint was amended to add additional
plaintiffs. On June 24, 1997, the Court dismissed the amended complaint for
failure to make a prior demand. An appeal was filed from the court's June 24,
1997 Order. On December 2, 1998, the Superior Court of Pennsylvania held that
the derivative plaintiffs had made adequate demand.
On May 12, 1997, a written demand was received by the Corporation from
the attorney for those Class A common stockholders containing similar
allegations and the allegations raised by the Class A common stockholders were
investigated by a special independent committee of
23
<PAGE> 24
PART II -- OTHER INFORMATION
HANOVER FOODS CORPORATION AND SUBSIDIARIES
the Board of Directors and found to be without merit.
1997 WAREHIME FAMILY LITIGATION
On February 21, 1997, Michael A. Warehime, a Class B shareholder, and
certain Class A shareholders filed motions for a preliminary injunction against
the Corporation, John A. Warehime, in his capacity as voting trustee, and all
certain directors of the Corporation in the Court of Common Pleas of York
County, Pennsylvania against a Proposal of the Board of Directors to amend and
restate the Corporation's Articles of Incorporation in the manner hereafter
described.
On February 13, 1997, the Board of Directors proposed an amendment and
Restatement of the Corporation's Articles of Incorporation (the "Amended and
Restated Articles") which provides that if all of the following Class B
Shareholders (or their estates upon the death of such stockholders), Michael A.
Warehime, John A. Warehime, Sally W. Yelland, J. William Warehime, and Elizabeth
W. Stick (all members of the Warehime family),do not agree in writing to the
composition of the Board of Directors or other important matters specified below
on or after the 1998 annual shareholders meeting, the trustees of the
Corporation's 401(k) Savings Plan (or a similar employee benefit plan), acting
as fiduciaries for the employees who participate in the Plan, and the Class A
shareholders may become entitled to vote in the manner described in the
document. Pursuant to the Company's Bylaws, nominations for director must be
submitted to the Company in the manner prescribed by the bylaws no later than
June 1 of the year in which the meeting is to occur.
The Amended and Restated Articles create a Series C Convertible
Preferred Stock and also classified the terms of the Board of Directors
commencing with the election at the 1997 annual shareholders meeting and permit
directors to be elected for four year terms as permitted by Pennsylvania law.
The motions for a preliminary injunction were dismissed by the Court on
June 24, 1997. The Class B shareholders on June 25, 1997 approved the Amended
and Restated Articles (John A. Warehime being the sole Class B shareholder
voting affirmatively in his capacity as voting trustee) and the Amended and
Restated Articles became effective June 25, 1997.
In August 1997, the Board of Directors proposed a further amendment (the
"Amendment") to
24
<PAGE> 25
PART II -- OTHER INFORMATION
HANOVER FOODS CORPORATION AND SUBSIDIARIES
the Amended and Restated Articles to expand the definition of "disinterested
directors" in the manner described below, and to approve certain performance
based compensation for John A. Warehime solely for the purpose of making the
Corporation eligible for a federal income tax deduction pursuant to Section
162(m) of the Internal Revenue Code of 1986, as amended. A special meeting was
scheduled for August 14, 1997 (the "Special Meeting") to vote on these
proposals. On August 8, 1997, Michael A. Warehime filed a motion in the Court of
Common Pleas of York County, Pennsylvania to prevent John A. Warehime, in his
capacity as voting trustee from voting on these proposals and to enjoin the
Amendment. This Motion was denied on August 11, 1997. The Amendment and the
proposal under Section 162(m) were approved by Class B Shareholders (John A.
Warehime was the sole Class B shareholder to vote affirmatively, in his capacity
as voting trustee) on August 14, 1997 and the Amendment became effective on
August 14, 1997.
Under the Amendment, the definition of "disinterested directors" means
the person who, in the opinion of counsel for the Corporation, meet any of the
following criteria: (i) disinterested directors as defined in Section 17159(e)
of the Pennsylvania Business Corporations Law of 1988, as amended; (ii) persons
who are not "interested" directors as defined in Section 1.23 of The American
Law Institute "Principles of Corporate Governance: Analysis and Recommendations"
(1994); or (iii) persons who qualify as members of the Audit Committee pursuant
to Section 303.00 of the New York Stock Exchange's Listed Company Manual.
Michael Warehime filed an appeal from the denial of his motion to
enjoin the previously described Amendment to the Company's Amended and Restated
Articles. On December 2, 1998, a majority panel of the Superior Court of
Pennsylvania issued a decision holding that although John Warehime had acted in
good faith in voting for the Amendment to the Amended and Restated Articles as
trustee of the Warehime voting trust, Mr. Warehime breached his fiduciary duty
to the beneficiaries of the Warehime voting trust in voting for the Amendment.
On December 16, 1998, John Warehime filed a motion for reargument en banc with
the Superior Court. On December 16, 1998, Michael Warehime filed a motion for
clarification requesting that the Superior Court issue an order invalidating the
Amendment to the Amended and Restated Articles. On December 23, 1998, the
Superior Court denied Michael Warehime's motion for clarification.
The Corporation is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these
25
<PAGE> 26
PART II -- OTHER INFORMATION
HANOVER FOODS CORPORATION AND SUBSIDIARIES
matters will not have a material adverse effect on the Corporation's
consolidated financial position, results of operations or liquidity.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - The
Corporation held its Annual Meeting of Shareholders on September
10,1998 to elect one director of the Corporation. The following
provides information regarding the total votes cash for each nominee
for election as a director.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Cyril T. Noel 557,575 5,503 -
G. Steven McKonly 233,752 - -
</TABLE>
Accordingly Cyril T. Noel was elected a director of the Corporation
for a term of four years and until his successor is elected and
qualified. Directors remaining in office include John A. Warehime,
Clayton J. Rohrbach, Jr., T. Edward Lippy, Arthur S. Schaier, James G.
Sturgill and James A. Washburn.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
(a) Exhibits
S-K Exhibit
Number Description of Exhibit
------ ----------------------
11 Computation of Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended November
29, 1998.
26
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HANOVER FOODS CORPORATION
Date: January 13, 1999 By: /s/ Gary T. Knisely
------------------------------ ------------------------------
Gary T. Knisely
Executive Vice President
By: /s/ Pietro Giraffa
------------------------------
Pietro Giraffa
Controller
27
<PAGE> 1
EXHIBIT 11
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended Thirteen Weeks Ended
November 29, November 30, November 29, November 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY
Earnings:
Net Earnings $ 4,878,000 $ 4,039,000 $ 3,242,000 $ 2,512,000
Preferred stock dividends (23,000) (16,000) (11,000) (8,000)
- ------------------------------------------------------------------------------------------
Net earnings applicable to
common stock $ 4,855,000 $ 4,023,000 $ 3,231,000 $ 2,504,000
- ------------------------------------------------------------------------------------------
SHARES
Weighted average number
of shares outstanding
Basic 717,085 718,688 717,197 719,037
- ------------------------------------------------------------------------------------------
SHARES
Weighted average number
of shares outstanding
Diluted 732,006 724,474 732,118 724,823
- ------------------------------------------------------------------------------------------
Net earnings per share
Basic $ 6.77 $ 5.60 $ 4.51 $ 3.48
- ------------------------------------------------------------------------------------------
Net earnings per share
Diluted $ 6.66 $ 5.58 $ 4.43 $ 3.47
- ------------------------------------------------------------------------------------------
</TABLE>
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
QUARTERLY FINANCIAL STATEMENTS OF HANOVER FOODS CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-30-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-29-1998
<CASH> 1,537
<SECURITIES> 0
<RECEIVABLES> 27,156
<ALLOWANCES> 0
<INVENTORY> 57,743
<CURRENT-ASSETS> 89,460
<PP&E> 135,518
<DEPRECIATION> 75,488
<TOTAL-ASSETS> 154,988
<CURRENT-LIABILITIES> 74,231
<BONDS> 14,359
0
1,038
<COMMON> 21,057
<OTHER-SE> 37,843
<TOTAL-LIABILITY-AND-EQUITY> 154,988
<SALES> 139,243
<TOTAL-REVENUES> 139,243
<CGS> 104,407
<TOTAL-COSTS> 104,407
<OTHER-EXPENSES> 25,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,502
<INCOME-PRETAX> 8,183
<INCOME-TAX> 3,305
<INCOME-CONTINUING> 4,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,878
<EPS-PRIMARY> 6.77
<EPS-DILUTED> 6.66
</TABLE>
