<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 August 29, 1999
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.
Class Outstanding at August 29, 1999
Class A Common Stock, $25 par value 289,058 shares
Class B Common Stock, $25 par value 426,401 shares
1
<PAGE> 2
HANOVER FOODS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Thirteen Weeks Ended August 29, 1999
<TABLE>
<CAPTION>
Index Page
<S> <C>
Part I -- Financial Information
Item 1 -- Financial Statements:
Condensed Consolidated Balance Sheets
August 29, 1999 (Unaudited) and May 30, 1999........................................ 3
Condensed Consolidated Statements of Operations (Unaudited)
Thirteen Weeks Ended August 29, 1999
and August 30, 1998................................................................. 5
Condensed Consolidated Statements of Stockholders'
Equity, (Unaudited) Periods Ended August 29, 1999
and May 30, 1999.................................................................... 6
Condensed Consolidated Statements of Cash Flows
(Unaudited), Thirteen Weeks Ended August 29, 1999
and August 30, 1998................................................................. 7
Notes to Condensed Consolidated Financial Statements
(Unaudited)......................................................................... 8
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................ 17
Part II -- Other Information................................................................... 21
Item 1-- Legal Proceedings................................................................ 21
Items 2-3 -- None...................................................................... 24
Item 4-- Submission of Matters to a Vote of Security Holders.............................. 24
Item 5-- None............................................................................. 24
Item 6-- Exhibits and Reports on Form 8-K................................................. 24
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 29, 1999 May 30, 1999
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 5,110,000 $ 2,214,000
Accounts and Notes Receivable, Net 22,472,000 26,281,000
Accounts Receivable from Related Parties, Net 0 242,000
Inventories 66,084,000 53,709,000
Prepaid Expenses 2,428,000 1,733,000
Deferred Income Taxes 917,000 917,000
- --------------------------------------------------------------------------------------------------------------
Total Current Assets 97,011,000 85,096,000
- --------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, at Cost:
Land and Buildings 47,107,000 44,006,000
Machinery and Equipment 100,436,000 93,585,000
Leasehold Improvements 395,000 383,000
- --------------------------------------------------------------------------------------------------------------
147,938,000 137,974,000
Less Accumulated Depreciation and
Amortization 80,122,000 78,573,000
- --------------------------------------------------------------------------------------------------------------
67,816,000 59,401,000
Construction in Progress 61,000 6,591,000
- --------------------------------------------------------------------------------------------------------------
Total Property, Plant and Equipment 67,877,000 65,992,000
- --------------------------------------------------------------------------------------------------------------
Other Assets:
Intangible Assets, Net 2,233,000 2,293,000
Other Assets 3,974,000 3,860,000
- --------------------------------------------------------------------------------------------------------------
Total Assets $171,095,000 $157,241,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY August 29, 1999 May 30, 1999
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes Payable - Banks ..................................................... $ 43,293,000 $ 39,629,000
Accounts Payable .......................................................... 29,065,000 22,813,000
Accounts Payable - Related Parties, Net ................................... 45,000 0
Accrued Expenses .......................................................... 9,749,000 7,433,000
Current Maturities of Long-Term Debt ...................................... 1,859,000 1,859,000
Income Taxes Payable ...................................................... 1,706,000 2,103,000
- ---------------------------------------------------------------------------------------------------------------------
Total Current Liabilities ...................................................... 85,717,000 73,837,000
- ---------------------------------------------------------------------------------------------------------------------
Long-Term Debt, Less Current Maturities ........................................ 12,500,000 12,500,000
Other Liabilities .............................................................. 2,278,000 2,119,000
Deferred Income Taxes .......................................................... 4,660,000 4,331,000
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities .............................................................. 105,155,000 92,787,000
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Series A & B 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
Series C cumulative convertible preferred, $25 par value;
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, 289,414 shares at May 30, 1999
and 289,058 shares at August 29, 1999 outstanding ..................... 8,729,000 8,729,000
Common stock, Class B, voting, $25 par value; 880,000 shares authorized,
493,123 shares issued, 426,474 shares at May 30, 1999 and 426,401
shares at August 29, 1999 outstanding ................................. 12,328,000 12,328,000
Capital Paid in Excess of Par Value ....................................... 2,143,000 2,143,000
Retained Earnings ......................................................... 49,240,000 47,767,000
Treasury Stock, at Cost ................................................... (8,096,000) (8,076,000)
Accumulated Other Comprehensive Income .................................... 558,000 525,000
- ---------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity ..................................................... 65,940,000 64,454,000
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity ..................................... $ 171,095,000 $ 157,241,000
- ---------------------------------------------------------------------------------------------------------------------
</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>
THIRTEEN WEEKS ENDED
August 29, 1999 August 30, 1998
<S> <C> <C>
Net Sales $61,621,000 $58,538,000
Cost of Goods Sold 45,751,000 43,925,000
- ----------------------------------------------------------------------------------------------
Gross Profit 15,870,000 14,613,000
Selling Expenses 8,511,000 8,226,000
Administrative Expenses 2,918,000 2,777,000
- ----------------------------------------------------------------------------------------------
Operating Profit 4,441,000 3,610,000
Interest Expense 821,000 764,000
Other Expenses, Net 654,000 77,000
- ----------------------------------------------------------------------------------------------
Earnings Before Income Taxes 2,966,000 2,769,000
Income Taxes 1,206,000 1,133,000
- ----------------------------------------------------------------------------------------------
Net Earnings 1,760,000 1,636,000
Dividends on Preferred Stock 12,000 12,000
- ----------------------------------------------------------------------------------------------
Net Earnings Applicable to
Common Stock 1,748,000 1,624,000
- ----------------------------------------------------------------------------------------------
Earnings Per Share:
Net Earnings Per Common
Share - Basic 2.44 2.26
Net Earnings Per Common
Share - Diluted 2.41 2.23
Dividends per Share, Common 0.275 0.275
Basic Weighted Average Shares 715,565 717,303
Diluted Weighted Average Shares 729,783 732,224
- ----------------------------------------------------------------------------------------------
</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
Series A and B Series C
Total
Stockholders'
Equity Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C>
Balance, May 30, 1999 ...... $ 64,454,000 31,536 $ 788,000 10,000 $ 250,000
Net Earnings for the Period 1,760,000
Cash Dividends Per Share:
Preferred Stock ....... (12,000)
Common Stock .......... (275,000)
Redemption of Common Stock
(Class A 356 Shares and
Class B 73 Shares) ... (20,000)
Other Comprehensive Income . 33,000
- --------------------------------------------------------------------------------------------------------------------
Balance, August 29, 1999 ... $ 65,940,000 31,536 $ 788,000 10,000 $ 250,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Common Stock Common Stock
Class A Class B
Capital Paid
in Excess of Retained
Shares Amount Shares Amount Par Value Earnings
<S> <C> <C> <C> <C> <C> <C>
Balance, May 30, 1999 ...... 349,210 $ 8,729,000 493,123 $ 12,328,000 $ 2,143,000 $ 47,767,000
Net Earnings for the Period 1,760,000
Cash Dividends Per Share:
Preferred Stock ....... (12,000)
Common Stock .......... (275,000)
Redemption of Common Stock
(Class A 356 Shares and
Class B 73 Shares) ...
Other Comprehensive Income .
- -------------------------------------------------------------------------------------------------------------------------------
Balance, August 29, 1999 ... 349,210 $ 8,729,000 493,123 $ 12,328,000 $ 2,143,000 $ 49,240,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock Accumulated
Other
Comprehensive
Shares Amount Income
<S> <C> <C> <C>
Balance, May 30, 1999 ...... 142,937 $ (8,076,000) $ 525,000
Net Earnings for the Period
Cash Dividends Per Share:
Preferred Stock .......
Common Stock ..........
Redemption of Common Stock
(Class A 356 Shares and
Class B 73 Shares) ... 429 (20,000)
Other Comprehensive Income . 33,000
- --------------------------------------------------------------------------------
Balance, August 29, 1999 ... 143,366 $ (8,096,000) $ 558,000
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
August 29, 1999 August 30, 1998
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
Net Earnings $1,760,000 $1,636,000
Adjustments to Reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 1,736,000 1,270,000
Deferred Income Taxes 329,000 (68,000)
Changes in Assets and Liabilities:
Accounts Receivable 4,051,000 2,555,000
Inventories (12,375,000) (12,410,000)
Prepaid Expenses (695,000) (940,000)
Accounts Payable and Accrued Expenses 8,613,000 3,407,000
Income Taxes Payable (397,000) (879,000)
Other Liabilities 159,000 138,000
- --------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities 3,181,000 (5,291,000)
- --------------------------------------------------------------------------------------------------------------
Investing Activities:
Decrease (Increase) in Other Assets (207,000) 834,000
Acquisitions of Property, Plant and Equipment (3,435,000) (3,093,000)
- --------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (3,642,000) (2,259,000)
- --------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase in Notes Payable 3,664,000 8,762,000
Payment of Dividends (287,000) (328,000)
Redemption of Common Stock (20,000) (20,000)
- --------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 3,357,000 8,414,000
- --------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 2,896,000 864,000
Cash and Cash Equivalents, Beginning of Period 2,214,000 2,337,000
- --------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $5,110,000 $3,201,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
August 29, 1999 and August 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements of the Registrant
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 thirteen week periods ended August 29, 1999
and August 30, 1998.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto included in Form 10-K for the Corporation's fiscal year ended
May 30, 1999.
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 the 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 $43,293,000 was borrowed at August
29, 1999. The average cost of funds during the period ended August 29,
1999 was 5.65%.
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>
August 29, 1999 May 30, 1999
<S> <C> <C>
8.74% unsecured senior notes payable
to an insurance company, due
through 2007 $14,285,000 $14,285,000
Installment obligation payable to a related
party, due in equal annual installments
through 2007. Interest at prime rate
(8.50% at August 29, 1999) 74,000 74,000
-----------------------------------------------------------------------------------------------------
14,359,000 14,359,000
Less current maturities 1,859,000 1,859,000
-----------------------------------------------------------------------------------------------------
Net Long-Term Debt $12,500,000 $12,500,000
-----------------------------------------------------------------------------------------------------
</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 as amended or waived as of August 29, 1999.
9
<PAGE> 10
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated 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>
Thirteen Weeks Ended
August 29, 1999 August 30, 1998
<S> <C> <C>
REVENUES:
Park 100 Foods, Inc. .............. $736,000 $930,000
CORPORATE CHARGES:
Snyder's of Hanover, Inc. .... $ 32,000 $ 46,000
EXPENDITURES:
Park 100 Foods, Inc. ......... $ 0 $ 23,000
ARWCO Corporation ............ $ 4,000 $ 4,000
Warehime Enterprises, Inc. ... $ 1,000 $ 12,000
John A. & Patricia M. Warehime $ 18,000 $ 11,000
James G. Sturgill ............ $ 11,000 $ 18,000
Lippy Brothers, Inc. ......... $ 0 $ 1,000
Schaier Travel, Inc. ......... $ 2,000 $ 0
- -----------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The respective August 29, 1999 and May 30, 1999 account balances with related
companies are as follows:
<TABLE>
<CAPTION>
August 29, 1999 May 30, 1999
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Snyder's of Hanover, Inc. $ 16,000 $ 32,000
Park 100 Foods, Inc. .... $159,000 $210,000
ACCOUNTS PAYABLE:
ARWCO Corporation ....... $ 1,000 $ 0
Lippy Brothers .......... $219,000 $ 0
NOTES PAYABLE:
Cyril T. Noel ........... $ 74,000 $ 74,000
- ------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(5) COMPREHENSIVE INCOME
Comprehensive income is determined as follows:
<TABLE>
<CAPTION>
13 Weeks Ended
August 29, 1999 August 30, 1998
<S> <C> <C>
Net Income .......................... $ 1,760,000 $ 1,636,000
Other Comprehensive Income
Unrealized Gain (Loss) on Investments $ 33,000 ($ 71,000)
----------- -----------
Comprehensive Income ................ $ 1,793,000 $ 1,565,000
----------- -----------
</TABLE>
(6) RECONCILIATION OF NUMERATOR AND DENOMINATOR FOR BASIC
AND DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
13 Weeks Ended
August 29, 1999 August 30, 1998
<S> <C> <C>
Numerator for basic earnings per share:
Net earnings applicable to
common stock ..................... $1,748,000 $1,624,000
Preferred stock dividends ............. 12,000 12,000
---------- ----------
Net earnings assuming dilution ........ 1,760,000 1,636,000
---------- ----------
Denominator:
Basic weighted average shares ......... 715,565 717,703
Effect of dilutive securities ......... 14,218 14,521
---------- ----------
Diluted weighted average shares ....... 729,783 732,224
- -------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(7) 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.
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.
The director defendants filed an Answer and New Matter to the Amended
Complaint on March 17, 1999.
13
<PAGE> 14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 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
14
<PAGE> 15
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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. On February 8, 1999, the Superior Court denied the
motion for reargument en banc. On March 10, 1999, John Warehime and the
other directors filed a petition for allowance of appeal with the
Supreme Court of Pennsylvania. On March 29, 1999, Michael Warehime
filed a response to the petition for allowance of appeal and a
cross-petition for allowance of appeal with the Supreme Court of
Pennsylvania. On April 13, 1999, John Warehime and the independent
directors of the Company filed a brief in opposition to the conditional
cross-petition for allowance of appeal filed with Michael Warehime.
On August 13, 1999, Michael Warehime filed a complaint in equity in the
Court of Common Pleas of York County, Pennsylvania, naming as
defendants Arthur S. Schaier, Cyril T. Noel, Clayton J. Rohrbach, Jr.,
John A. Warehime, and the Company. The complaint seeks a court order
declaring that the September 1999 election for the board of
15
<PAGE> 16
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
directors of the Company be conducted in accordance with the Articles
of Incorporation of the Company as they existed prior to June 25, 1997,
an order declaring that the Series C Convertible Preferred Stock cannot
be voted, and an order that the following candidates for the board of
directors of the Company proposed by Michael Warehime. Sally Yelland,
Elizabeth Stick and J. William Warehime be accepted by the Company and
listed on the ballot to be distributed at the annual meeting of
shareholders of the Company to be held on September 16, 1999: Michael
Warehime, Daniel Meckley, Elizabeth Stick, Sonny Bowman, and John
Denton. The basis for the complaint was the December 2, 1998 decision
of the Pennsylvania Superior Court, which is currently on appeal to the
Pennsylvania Supreme Court, which held that John A. Warehime breached
his fiduciary duties in voting for the Amended and Restated Articles as
trustee of the Warehime voting trust. The complaint also requested that
John A. Warehime pay all costs incurred by the Company in response to
the suit as well as award Michael Warehime costs and fees and grant
such other relief as equity and justice require. On September 7, 1999
the Court of Common Pleas of York County denied a request by Michael
Warehime for a temporary restraining order in this case. An appeal from
the denial was taken by Michael Warehime to the Pennsylvania Superior
Court on September 15, 1999; the Pennsylvania Superior Court denied a
motion by Michael Warehime for an expedited appeal.
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.
16
<PAGE> 17
PART I -- FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES
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 Corporation's financial performance and could cause
the Corporation'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 Corporation 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, 1999.
GENERAL
Prices for processed food tend to rise with overall inflation and not in line
with prices of raw farm products. Generally, price surges in farm products due
to supply shocks and crop problems are not passed on to consumers dollar for
dollar. Management believes consumers often switch from one food product that
has risen to another which has not changed in price. As a result, food
processors tend to absorb raw farm product price increases to remain
competitive. However, when raw farm product prices drop, food processors try to
retain some of the savings. The Corporation does not expect the overall number
of pounds of frozen and canned vegetables consumed to significantly increase
over the next several years. Generally, the Corporation expects sales growth by
processors beyond expected inflation rates and population growth will come at
the expense of and loss of market share by another processor. Sales growth can
increase internationally and through promotions to increase consumption through
the introduction of new or improved food products.
RESULTS OF OPERATIONS
NET SALES
Consolidated net sales were $61.6 million for the thirteen week period ended
August 29, 1999. This represents an increase of 5.3% over the thirteen week
period ended August 30, 1998 consolidated net sales of $58.5 million. The
increase of $3.1 million was primarily due to increases in the sales of Bickel's
Potato Chip Co. ("Bickel's) our acquisition during October 1998 and Food Service
and Private Label sales, offset by decreased Frozen Industrial sales.
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
COST OF GOODS SOLD
Cost of goods sold were $45.8 million, or 74.4% of consolidated net sales in the
thirteen week period ended August 29, 1999 and $43.9 million, or 75.0% of
consolidated net sales, for the corresponding period in 1998. The decrease in
cost of goods sold as a percentage of net sales resulted primarily from a
reduction in costs of operations, primarily related to lower plant production
expenditures and lower outside storage expense.
SELLING EXPENSES
Selling expenses were $8.5 million, or 13.8% of consolidated net sales for the
thirteen week period ended August 29, 1999 as compared to $8.2 million or 14.0%
of consolidated net sales for the corresponding period in 1998. The decrease in
selling expenses as a percentage of net sales reflects lower expenses related to
coupon programs, and decreased retail promotional expenses for the period.
ADMINISTRATIVE EXPENSES
Administrative expenses as a percentage of consolidated net sales were 4.7% for
the thirteen week period ended August 29, 1999 and for the corresponding period
of 1998. The increase in amount is attributed to increases in outside
professional consulting services and administrative expenses of Bickel's.
INTEREST EXPENSE
Interest expense was $821,000 for the thirteen week period ended August 29, 1999
as compared to $764,000 for the same period in 1998. The increase in interest in
mainly due to higher average borrowings during the current period.
OTHER EXPENSES
Other expenses were $654,000 for the thirteen week period ended August 29, 1999
as compared to $77,000 for the same period in 1998. The increase in other
expenses is primarily due to increased foreign translation loss of $410,000 as
well as a reduction of $80,000 in the gain on sales of investments as compared
to the prior year period.
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
INCOME TAXES
The provision for corporate federal and state income taxes for the thirteen week
period ended August 29, 1999 was $1.2 million, or 40.7% of pretax earnings, as
compared to $1.1 million, or primarily 40.9% of pre-tax earnings for the same
period in 1998. The decrease in the effective tax rate is due to increased
earnings in lower tax rate foreign jurisdictions in the current year period as
compared to the prior period.
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
Net working capital was $11.3 million at August 29, 1999 and May 30, 1999. The
current ratios were 1.13 and 1.15 on August 29, 1999 and May 30, 1999,
respectively.
Cash provided by operating activities for the thirteen week period ended August
29, 1999 was $3.2 million as compared to cash used by operations of $5.3 million
during the same period of 1998. The combination of decreased accounts
receivable, increased accounts payable and accrued expenses offset by increased
inventory levels, utilized less cash flow. By comparison for the same period in
1998, the combination of increased inventory levels, offset by decreases in
accounts payable and accrued expenses utilized more cash flow.
INVESTING ACTIVITIES
During the thirteen week period ended August 29, 1999, the Corporation spent
approximately $3.4 million for the purchase of land and plant upgrades and
expansions. This compares to $3.1 million spent during the same period last year
for capital projects.
FINANCING ACTIVITIES
The increase in notes payable of approximately $3.7 million during the thirteen
week period ended August 29, 1999 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 $43.3 million was utilized
as of August 29, 1999. Additional borrowings are permitted within parameters in
existing debt agreements.
Management believes these credit facilities provide adequate availability for
seasonal operating requirements.
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
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 fiscal year
2000. 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 $490,000 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 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.
20
<PAGE> 21
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 the Board of Directors and found to be
without merit.
The director defendants filed an Answer and New Matter to the Amended Complaint
on March 17, 1999.
21
<PAGE> 22
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 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,
22
<PAGE> 23
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 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. On February
8, 1999, the Superior Court denied the motion for reargument en banc. On March
10, 1999, John Warehime and the other directors filed a petition for allowance
of appeal with the Supreme Court of Pennsylvania. On March 29, 1999, Michael
Warehime filed a response to the petition for allowance of appeal and a
cross-petition for allowance of appeal with the Supreme Court of Pennsylvania.
On April 13, 1999, John Warehime and the independent directors of the Company
filed a brief in opposition to the conditional cross-petition for allowance of
appeal filed with Michael Warehime.
On August 13, 1999, Michael Warehime filed a complaint in equity in the Court of
Common Pleas of York County, Pennsylvania, naming as defendants Arthur S.
Schaier, Cyril T. Noel, Clayton J. Rohrbach, Jr., John A. Warehime, and the
Company. The complaint seeks a court order declaring that the September 1999
election for the board of directors of the Company be conducted in accordance
with the Articles of Incorporation of the Company as they existed prior to June
25, 1997, an order declaring that the Series C Convertible Preferred Stock
cannot be voted, and an order that the following candidates for the board of
directors of the Company proposed by Michael Warehime. Sally Yelland, Elizabeth
Stick and J. William Warehime be accepted by the Company and listed on the
ballot to be distributed at the annual meeting of shareholders of the Company to
be held on September 16, 1999: Michael Warehime, Daniel Meckley, Elizabeth
Stick, Sonny Bowman, and John Denton. The basis for the complaint was the
December 2, 1998 decision of the Pennsylvania Superior Court, which is currently
on appeal to the Pennsylvania Superior Court, which held that John A. Warehime
had breached his fiduciary duties in voting for the Amended and Restated
Articles as trustee of the Warehime voting trust. The complaint also requested
that John A. Warehime pay all costs incurred by the Company in response to the
suit as well as award Michael Warehime costs and fees and grant such other
relief as equity and justice require. On September 7, 1999 the Court of Common
23
<PAGE> 24
Pleas of York County denied a request by Michael Warehime for a temporary
restraining order in this case. An appeal from the denial was taken by Michael
Warehime to the Pennsylvania Superior Court on September 15, 1999; the
Pennsylvania Superior Court denied a motion by Michael Warehime for an expedited
appeal.
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.
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 16, 1999 to
elect two directors of the Corporation. The following provides information
regarding the total votes cast for each nominee for election as a director.
<TABLE>
<CAPTION>
For Withheld Authority
--- ------------------
<S> <C> <C>
Clayton J. Rohrbach, Jr. 362,676 4,960
James G. Sturgill 362,676 4,960
John E. Denton 239,164 -0-
Michael A. Warehime 239,164 -0-
</TABLE>
Accordingly Clayton J. Rohrbach, Jr. and James G. Sturgill were elected
directors of the Corporation for a term of four years and until their respective
successors are elected and qualified. Directors remaining in office include John
A. Warehime, T. Edward Lippy, Cyril T. Noel, Arthur S. Schaier, and James A.
Washburn.
ITEM 5. OTHER INFORMATION -- None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -- None
<TABLE>
<CAPTION>
(a) Exhibits
S-K Exhibit
Number Description of Exhibit
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended August 29,
1999.
24
<PAGE> 25
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: October 12, 1999 By: /s/ Gary T. Knisely
---------------------------------------
Gary T. Knisely
Executive Vice President
By: /s/ Pietro Giraffa
---------------------------------------
Pietro Giraffa
Controller
25
<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-28-2000
<PERIOD-START> MAY-31-1999
<PERIOD-END> AUG-29-1999
<CASH> 5,110
<SECURITIES> 0
<RECEIVABLES> 22,472
<ALLOWANCES> 0
<INVENTORY> 66,084
<CURRENT-ASSETS> 97,011
<PP&E> 147,938
<DEPRECIATION> 80,122
<TOTAL-ASSETS> 171,095
<CURRENT-LIABILITIES> 85,717
<BONDS> 12,500
0
1,038
<COMMON> 21,057
<OTHER-SE> 43,845
<TOTAL-LIABILITY-AND-EQUITY> 171,095
<SALES> 61,621
<TOTAL-REVENUES> 61,621
<CGS> 45,751
<TOTAL-COSTS> 45,751
<OTHER-EXPENSES> 12,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 821
<INCOME-PRETAX> 2,966
<INCOME-TAX> 1,206
<INCOME-CONTINUING> 1,760
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,760
<EPS-BASIC> 2.44
<EPS-DILUTED> 2.41
</TABLE>
