~~Index~~UNITED ~~Page~~STATES SECURITIES ~~Part~~AND IEXCHANGE ~~-- Financial Information Item 1 -- Financial Statements: Condensed Consolidated Balance Sheets March 2~~COMMISSION WASHINGTON, ~~2003 (Unaudited) and June 2, 2002~~D.C.~~.............................................3~~ Condensed Consolidated Statements of Operations (Unaudited) Thirty-Nine Weeks Ended and Thirteen Weeks Ended March 2, 2003 and March 3, 2002........................................................................5 Condensed Consolidated Statements of Stockholders' Equity, (Unaudited) Thirty-Nine Weeks Ended March 2, 2003................................6 Condensed Consolidated Statements of Cash Flows (Unaudited), Thirty-Nine Weeks Ended March 2, 2003 and March 3, 2002........................................................................7 Notes to Condensed Consolidated Financial Statements (Unaudited)..............................................................................8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................19 Item 3 - Quantitative and Qualitative Disclosure About Market Risk............................24 Item 4 - Controls and Procedures..............................................................25 Part II - Other Information...................................................................26 Item 1-- Legal Proceedings....................................................................26 Item 2-- Changes in Securities and Use of Proceeds............................................26 Item 3-- Defaults upon Senior Securities......................................................26 Item 4-- Submission of Matters to a Vote of Security Holders..................................26 Item 5-- Other Information....................................................................26 Item 6-- Exhibits and Reports on Form 8-K.....................................................2620549

~~----------------------------------------------------------------------------------------------------------------------~~FORM ~~March 2, 2003 June 2, 2002 ASSETS~~ 10---------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and Cash Equivalents $4,079,000 $ 2,816,000 Accounts and Notes Receivable, Net 26,319,000 26,917,000 Accounts Receivable from Related Parties, Net 120,000 167,000 Inventories Finished Goods 46,211,000 44,933,000 Raw Materials and Supplies 17,556,000 16,622,000 Prepaid Expenses 1,875,000 2,361,000 Prepaid Income Taxes 157,000 0 Deferred Income Taxes 917,000 276,000 ---------------------------------------------------------------------------------------------------------------------- Total Current Assets 97,234,000 94,092,000 ---------------------------------------------------------------------------------------------------------------------- Property, Plant and Equipment, at Cost: Land and Buildings 53,963,000 52,966,000 Machinery and Equipment 127,864,000 124,048,000 Leasehold Improvements 544,000 544,000 ---------------------------------------------------------------------------------------------------------------------- 182,371,000 177,558,000 Less Accumulated Depreciation and Amortization 108,943,000 101,749,000 ---------------------------------------------------------------------------------------------------------------------- 73,428,000 75,809,000 Construction in Progress 197,000 830,000 ---------------------------------------------------------------------------------------------------------------------- Total Property, Plant and Equipment 73,625,000 76,639,000 ---------------------------------------------------------------------------------------------------------------------- Other Assets: Intangible Assets, Net 3,382,000 3,549,000 Other Assets 5,032,000 4,736,000 --------------------------------------------------------------------------------------------------------------------- Total Assets $179,273,000 $179,016,000 ----------------------------------------------------------------------------------------------------------------------Q

~~---------------------------------------------------------------------------------------------------------------------~~QUARTERLY ~~LIABILITIES~~REPORT ~~AND~~PURSUANT ~~STOCKHOLDERS'~~TO ~~EQUITY~~SECTION March 2, 2003 June 2, 2002 --------------------------------------------------------------------------------------------------------------------- Current Liabilities: Notes Payable - Banks $14,741,000 $ 18,987,000 Accounts Payable 19,296,000 19,890,000 Accounts Payable to Related Parties - Net 12,000 0 Accrued Expenses 11,777,000 13~~,189,000~~ ~~Current~~OR Maturities of Long-Term Debt 4,288,000 4,297,000 Income Taxes Payable 1,282,000 1,182,000 --------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 51,396,000 57,545,000 --------------------------------------------------------------------------------------------------------------------- Long-Term Debt, Less Current Maturities 27,143,000 29,643,000 Other Liabilities 4,937,000 4,060,000 Deferred Income Taxes 4,462,000 3,777,000 --------------------------------------------------------------------------------------------------------------------- Total Liabilities 87,938,000 95,025,000 --------------------------------------------------------------------------------------------------------------------- Stockholders' Equity: Series A & B 8 1/4% cumulative convertible preferred, $25 Par Value, 120,000 shares authorized; 31,056 shares issued at March 2, 2003 and June 2, 2002 14,564 shares outstanding at March 2, 2003 and June 2, 2002 776,000 776,000 Series C cumulative convertible preferred, $25 Par Value, 10,000 shares authorized, issued and outstanding At March 2, 2003 and June 2, 2002 250,000 250,000 Common stock, Class A, non-voting, $25 Par Value; 800,000 shares authorized, 349,329 shares issued at March 2, 2003 and June 2, 2002; 288,084 shares outstanding at March 2, 2003 and 288,284 shares outstanding at June 2, 2002 8,733,000 8,733,000 Common stock, Class B, voting, $25 Par Value; 880,000 shares authorized; 649,072 shares issued at March 2, 2003 and 635,572 shares issued at June 2, 2002; 435,268 shares outstanding at March 2, 2003 and 430,507 shares outstanding at June 2, 2002 16,227,000 15~~,889,000 Capital Paid in Excess of Par Value 16,373,000 15,238,000 Retained Earnings 74,651,000 67,560,000 Treasury Stock, at Cost~~ (~~8,170,000~~D) ~~(8,148,000)~~OF ~~Value~~THE ofSECURITIES ~~Shares~~EXCHANGE ~~held~~ACT inOF Employee Benefit Trust - 146,930 shares at March 2, 2003 and 138,191 shares at June 2, 2002 (17,096,000) (16,168,000) Accumulated Other Comprehensive Loss (409,000) (139,000) --------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 91,335,000 83,991,000 --------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $179,273,000 $179,016,000 ---------------------------------------------------------------------------------------------------------------------1934

~~------------------------------------------------------------------------------------------------------------------~~For ~~Thirty-Nine~~the ~~Weeks~~Quarterly ~~Ended~~Period ~~Thirteen Weeks~~ Ended November ~~March 2~~30, ~~March 3, 2002 March 2,~~ 2003 March 3, 2003 2002 ------------------------------------------------------------------------------------------------------------------ Net Sales $218,111,000 $216,326,000 $71,641,000 $71,705,000 Cost of Goods Sold 174,275,000 173,960,000 58,183,000 59,088,000 ------------------------------------------------------------------------------------------------------------------ Gross Profit 43,836,000 42,366,000 13,458,000 12,617,000 Selling Expenses 17,934,000 18,613,000 4,539,000 4,894,000 Administrative Expenses 11,277,000 10,810,000 4,365,000 4,603,000 ------------------------------------------------------------------------------------------------------------------ Operating Profit 14,625,000 12,943,000 4,554,000 3,120,000 Interest Expense 2,218,000 2,899,000 708,000 1,025,000 Other Expenses, Net 230,000 123,000 75,000 4,000 ------------------------------------------------------------------------------------------------------------------ Earnings Before Income Taxes 12,177,000 9,921,000 3,771,000 2,091,000 Income Taxes 4,338,000 3,185,000 1,407,000 654,000 ------------------------------------------------------------------------------------------------------------------ Net Earnings 7,839,000 6,736,000 2,364,000 1,437,000 Dividends on Preferred Stock 31,000 31,000 10,000 10,000 ------------------------------------------------------------------------------------------------------------------ Net Earnings Applicable to Common Stock $7,808,000 $6,705,000 $2,354,000 $1,427,000 ------------------------------------------------------------------------------------------------------------------ Earnings Per Share: Net Earnings Per Common Share - Basic $10.85 $9.37 $3.26 $1.99 Net Earnings Per Common Share - Diluted $10.70 $9.24 $3.22 $1.97 Dividends per Share, Common $0.825 $0.825 $0.275 $0.275 Basic Weighted Average Shares 719,822 715,463 721,883 717,397 Diluted Weighted Average Shares 732,888 728,886 734,949 730,820 ------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------- Cumulative Cumulative Convertible Convertible Total Preferred Stock Preferred Stock Common Stock Common Stock Stockholders' Series A & B Series C Class A Class B Equity Shares Amount Shares Amount Shares Amount Shares Amount ----------------------------------------------------------------------------------------------------------------------------------- Balance, June 2, 2002 $83,991,000 31,056 $776,000 10,000 $250,000 349,329 $8,733,000 635,572 $15,889,000 Net Earnings for the Period 7,839,000 Cash Dividends Per Share: Preferred - $2.0625 annually (31,000) Common - $1.10 annually (717,000) Issuance of Common stock to Employee Stock Trust Class B 13,500 Shares 0 13,500 338,000 Issuance of Common Stock to ESOP - Class B 4,761 shares 545,000 Redemption of common stock Class A 200 Shares (22,000) Other Comprehensive Loss (270,000) ----------------------------------------------------------------------------------------------------------------------------------- Balance, March 2, 2003 $91,335,000 31,056 $776,000 10,000 $250,000 349,329 $8,733,000 649,072 $16,227,000 -----------------------------------------------------------------------------------------------------------------------------------OR

~~------------------------------------------------------------------------------------------------------------------------~~TRANSITION ~~Capital~~REPORT ~~Paid~~PURSUANT InTO ~~Accumulated~~SECTION ~~Excess~~13 ~~Treasury~~OR Stock Employee Stock Trust Other Of Par Retained Comprehensive Value Earnings Shares Amount Shares Amount Loss ------------------------------------------------------------------------------------------------------------------------- Balance, June 2, 2002 $15~~,238,000 $67,560,000 144,411~~ (~~$8,148,000~~d) ~~138,191~~OF ~~($16,168,000)~~THE ~~($139,000)~~SECURITIES ~~Net~~EXCHANGE ~~Earnings~~ACT ~~for~~OF the Period 7,839,000 Cash Dividends Per Share: Preferred - $2.0625 annually (31,000) Common - $1.10 annually (717,000) Issuance of Common stock to Employee Stock Trust Class B 13,500 Shares 1,147,000 13,500 (1,485,000) Issuance of Common Stock to ESOP - Class B 4,761 shares (12,000) (4,761) 557,000 Redemption of common stock Class A 200 Shares 200 (22,000) Other Comprehensive Loss (270,000) ------------------------------------------------------------------------------------------------------------------------- Balance, March 2, 2003 $16,373,000 $74,651,000 144,611 ($8,170,000) 146,930 ($17,096,000) ($409,000) --------------------------------------------------------------------------------------------------------------------------1934

~~----------------------------------------------------------------------------------------------------------------~~Commission ~~Period~~File ~~Period~~Number ~~March~~– 2, March 3, 2003 2002 ---------------------------------------------------------------------------------------------------------------- Cash Flows From: Operating Activities: Net Earnings $7,839,000 $6,736,000 Adjustments to Reconcile Net Earnings: To Net Cash Provided by Operating Activities: Depreciation and Amortization 7,361,000 6,752,000 Non Cash Charge (ESOP Contribution) 545,000 481,000 Deferred Income Taxes 44,000 (360,000) Changes in Assets and Liabilities: Accounts Receivable 645,000 (3,150,000) Inventories (14,503,000) (12,375,000) Inventories (2,212,000) (12,770,000) Prepaid Expenses 329,000 (1,098,000) Accounts Payable and Accrued Expenses (1,994,000) 5,824,000 Income Taxes Payable 100,000 271,000 Other Liabilities 877,000 438,000 ---------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 13,534,000 3,124,000 ---------------------------------------------------------------------------------------------------------------- Investing Activities: Increase in Other Assets (566,000) (600,000) Acquisitions of Property, Plant and Equipment (4,180,000) (5,516,000) ---------------------------------------------------------------------------------------------------------------- Net Cash Used In Investing Activities (4,746,000) (6,116,000) ---------------------------------------------------------------------------------------------------------------- Financing Activities: Payments on Notes Payable (4,246,000) (18,896,000) Proceeds from Issuance of Long-Term Debt 0 ~~25,000,000 Payments on Long~~-Term Debt (2,509,000) (12,000) Payment of Dividends (748,000) (738,000) Redemption of Common Stock (22,000) 0 ---------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used In) Financing Activities (7,525,000) 5,354,000 ---------------------------------------------------------------------------------------------------------------- Net Increase in Cash and Cash Equivalents 1,263,000 2,362,000 Cash and Cash Equivalents, Beginning of Period 2,816,000 1,824,000 ---------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents, End of Period $4,079,000 $4,186,000 ----------------------------------------------------------------------------------------------------------------17896

~~March~~HANOVER 2,FOODS ~~2003~~CORPORATION (Exact ~~June~~name 2,of ~~2002~~Registrant ~~----------------------------------------------------------------------------------------------------------------------~~as ~~8.74%~~specified ~~unsecured~~in ~~senior~~its notes payable to an insurance company, due through 2007 $8,929,000 $8,929,000 7.01% unsecured senior notes payable to an insurance company, due through 2011 22,500,000 25,000,000 Other 2,000 11,000 ---------------------------------------------------------------------------------------------------------------------- Total Long-Term Debt 31,431,000 33,940,000 Less current maturities 4,288,000 4,297,000 ---------------------------------------------------------------------------------------------------------------------- Net Long-Term Debt $27,143,000 $29,643,000 ----------------------------------------------------------------------------------------------------------------------charter)

Thirty-Nine Weeks Ended Thirteen Weeks Ended March 2, 2003 March 3, 2002 March 2, 2003 March 3, 2002 ----------------------------------------------------------------------------------------------------------------- Revenues: Park 100 Foods, Inc. $1,643,000 $1,236,000 $393,000 $443,000 Expenditures: Park 100 Foods, Corp. 12,000 9,000 2,000 1,000 Warehime Enterprises, Inc. 3,000 80,000 1,000 1,000 John A. & Patricia M. Warehime 48,000 42,000 15,000 16,000 Lippy Brothers, Inc. 1,146,000 1,158,000 704,000 0 Schaier Travel, Inc. 3,000 4,000 0 0 -----------------------------------------------------------------------------------------------------------------

Commonwealth of Pennsylvania		23-0670710
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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)

~~March~~ Indicate 2,by ~~2003~~check ~~June~~mark 2,whether ~~2002~~the ~~----------------------------------------------------------------------------------------------------------~~registrant Accounts Receivable: Park 100 Foods, Inc. $ 120,000 $164,000 Lippy Brothers, Inc. 0 3,000 ---------------------------------------------------------------------------------------------------------- Accounts Payable: James G. Sturgill (1~~,000~~) 0has ~~John~~filed &all ~~Patricia~~reports ~~Warehime~~required ~~4,000~~to 0be T.filed ~~Edward~~by ~~Lippy~~Section ~~1,000~~13 0or ~~Clayton~~15(d) G.of ~~Rohrbach,~~the ~~Jr.~~Securities ~~1,000~~Exchange 0Act ~~Cyril~~of T.1934 ~~Noel~~during ~~1,000~~the 0preceding T.12 ~~Michael Haugh 1~~months,~~000~~ 0and ~~James~~(2) A.has ~~Washburn~~been ~~1,000~~subject 0to ~~Jennifer~~such ~~W.Carter~~filing ~~1,000~~for 0the ~~Arthur~~past S.90 ~~Schaier 1,000 0~~days. Yes No

39 ~~Weeks~~Indicate by ~~Ended~~check 13mark ~~Weeks~~whether ~~Ended~~the ~~March~~registrant 2,is ~~2003~~an ~~March~~accelerated 3,filer 2002 March 2, 2003 March 3, 2002 --------------------------------------------------------------------------------------------------------------------------- Net Income $7,839,000 $6,736,000 $2,364,000 $1,437,000 Other Comprehensive Income (~~Loss)~~as -defined in ~~Unrealized~~Rule ~~Loss on Investments (270,000) (143,000) (183,000) (103,000)~~ 12b-~~--------- ---------- ---------- ---------- Comprehensive Income $7,569,000 $6,593,000 $~~2~~,181,000~~ of ~~$1,334,000~~the ~~========== ========== ========== ==========~~Act) Yes No

39Indicate ~~Weeks~~the ~~Ended~~number 13of ~~Weeks~~shares ~~Ended~~outstanding ~~March~~of 2,issuer’s ~~2003~~classes ~~March~~of ~~3, 2002 March 2, 2003 March 3, 2002 ========================================================================================================================= Net earnings applicable to~~ common stock ~~$7,808,000~~as $6,705,000 $2,354,000 $1,427,000 Preferred stock dividends 31,000 31,000 10,000 10,000 ---------- ---------- ---------- ---------- Net earnings assuming dilution 7,839,000 6,736,000 2,364,000 1,437,000 ========== ========== ========== ========== Denominator: Basic weighted average shares 719,822 715,463 721,883 717,397 Effect of ~~dilutive~~the ~~securities~~latest ~~13,066~~practicable ~~13,423 13,066 13,423 ---------- ---------- ---------- ---------- Diluted weighted average shares 732,888 728,886 734,949 730,820 ========== ========== ========== ==========~~date.

Payment Due by Period ------------------------------------------------------------------ Contractual Obligation After Total 1 Year 2-3 Years 4-5 Years 5 Years ----- ------ --------- --------- ------- Short-Term Notes Payables $14,741,000 $14,741,000 $-0- $-0- $-0- Long-Term Debt 31,431,000 4,288,000 8,572,000 8,572,000 9,999,000 Operating Leases 978,000 475,000 394,000 109,000 -0- ----------- ----------- ---------- ---------- ---------- Total contractual obligations $47,150,000 $19,504,000 $8,966,000 $8,681,000 $9,999,000 =========== =========== ========== ========== ==========

Class		Outstanding at November 30, 2003
Class A Common Stock, $25 par value		288,062 shares

Class B Common Stock, $25 par value		781,648 shares

HANOVER FOODS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Twenty-Six Weeks Ended November 30, 2003

Index		Page

Part I – Financial Information

Item 1 –	Financial Statements:

	Condensed Consolidated Balance Sheets November 30, 2003 (Unaudited) and June 1, 2003	3

	Condensed Consolidated Statements of Operations (Unaudited) Twenty-Six Weeks Ended and Thirteen Weeks Ended November 30, 2003 and December 1, 2002	5

	Condensed Consolidated Statements of Stockholders’ Equity, (Unaudited) Twenty-Six Weeks Ended November 30, 2003	6

	Condensed Consolidated Statements of Cash Flows (Unaudited), Twenty-Six Weeks Ended November 30, 2003 and December 1, 2002	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3 –	Quantitative and Qualitative Disclosure About Market Risk	26

Item 4 –	Controls and Procedures	26

	Part II – Other Information	27

Item 1 –	Legal Proceedings	27

Item 2 –	Changes in Securities and Use of Proceeds	27

Item 3 –	Defaults upon Senior Securities	27

Item 4 –	Submission of Matters to a Vote of Security Holders	27

Item 5 –	Other Information	27

Item 6 –	Exhibits and Reports on Form 8-K	27

	Exhibit Index

Exhibit 10.1	2003 Stock Option Plan

Exhibit 10.2	PNC Bank Line of Credit Personal

Exhibit 10.3	Citizen’s Bank Line of Credit Personal

Exhibit 31.1	Section 302 Certification – Chief Executive Officer

Exhibit 31.2	Section 302 Certification – Chief Financial Officer

Exhibit 32.1	Certification by John A. Warehime, Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit

Exhibit 32.2	Certification by Gary T. Knisely, Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Back to Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

				November 30, 2003
				(Unaudited)		June 1, 2003

ASSETS
Current Assets:
	Cash and Cash Equivalents		$	2,805,000	$	4,128,000
	Accounts and Notes Receivable, Net			30,633,000		25,099,000
	Accounts Receivable from Related Parties, Net			0		163,000
	Inventories
		Finished Goods		53,853,000		40,746,000
		Raw Materials and Supplies		18,619,000		17,562,000
	Prepaid Expenses			891,000		2,216,000
	Prepaid Income Taxes			140,000		0
	Deferred Income Taxes			917,000		917,000

		Total Current Assets		107,858,000		90,831,000

Property, Plant and Equipment, at Cost:
	Land and Buildings			55,006,000		53,972,000
	Machinery and Equipment			130,438,000		128,422,000
	Leasehold Improvements			544,000		544,000

				185,988,000		182,938,000
	Less Accumulated Depreciation and Amortization			115,887,000		111,255,000

				70,101,000		71,683,000
	Construction in Progress			3,113,000		951,000

Total Property, Plant and Equipment				73,214,000		72,634,000

Other Assets:
	Goodwill & Intangible Assets – Less Accumulated Amortization of $3,175,000			3,539,000		3,539,000
	Other Assets			5,705,000		4,429,000

		Total Assets	$	190,316,000	$	171,433,000

See accompanying notes to condensed consolidated financial statements.

Back to Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements, Continued

HANOVER FOODS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


			November 30, 2003
			(Unaudited)			June 1, 2003

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Notes Payable – Banks		$	16,879,000		$	7,634,000
	Accounts Payable			23,045,000			19,745,000
	Accounts Payable to Related Parties – Net			500,000			7,000
	Accrued Expenses			13,307,000			10,921,000
	Current Maturities of Long-Term Debt			4,286,000			4,286,000
	Income Taxes Payable			957,000			1,211,000

Total Current Liabilities				58,974,000			43,804,000

Long-Term Debt, Less Current Maturities				22,857,000			25,357,000
Other Liabilities				6,621,000			5,916,000
Deferred Income Taxes				2,900,000			3,139,000

Total Liabilities				91,352,000			78,216,000

Stockholders’ Equity:
	Series A & B 8 1/4% cumulative convertible preferred, $25 Par Value, 120,000 shares authorized;
		31,056 shares issued at June 1, 2003 and November 30, 2003; 14,564 shares outstanding at June 1, 2003 and November 30, 2003		776,000			776,000
	Series C cumulative convertible preferred, $25 Par Value,
		10,000 shares authorized, issued and outstanding		250,000			250,000
	Common stock, Class A, non-voting, $25 Par Value;
		800,000 shares authorized, 349,353 shares issued at June 1, 2003 and November 30, 2003; 288,062 shares outstanding at June 1, 2003 and November 30, 2003		8,733,000			8,733,000
	Common stock, Class B, voting, $25 Par Value;
		880,000 shares authorized, 649,072 shares issued at June 1, 2003 and 848,522 issued at November 30, 2003, 582,198 shares outstanding June 1, 2003 and 781,648 outstanding at November 30, 2003		21,213,250			16,227,000
	Capital Paid in Excess of Par Value			34,920,850			16,372,000
	Retained Earnings			82,409,000			76,746,000
	Treasury Stock, at Cost			(8,172,000	)		(8,172,000	)
	Value of Shares held in Employee Benefit Trust – 146,930 shares at June 1, 2003 and 346,380 at November 30, 2003			(40,631,100	)		(17,096,000	)
	Accumulated Other Comprehensive Loss			(535,000	)		(619,000	)

Total Stockholders’ Equity				98,964,000			93,217,000

Total Liabilities and Stockholders’ Equity			$	190,316,000		$	171,433,000


See accompanying notes to condensed consolidated financial statements.

Back to Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements, Continued

HANOVER FOODS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations – Unaudited

			Twenty-Six Weeks Ended					Thirteen Weeks Ended

			November 30,			December 1,		November 30,		December 1,
			2003			2002		2003		2002

Net Sales		$	151,123,000		$	143,324,000	$	84,223,000	$	79,897,000
Cost of Goods Sold			127,916,000			120,214,000		70,655,000		67,127,000

Gross Profit			23,207,000			23,110,000		13,568,000		12,770,000

Selling Expenses			5,819,000			6,126,000		2,913,000		3,198,000
Administrative Expenses			7,078,000			6,913,000		3,346,000		3,181,000

Operating Profit			10,310,000			10,071,000		7,309,000		6,391,000

Interest Expense			1,200,000			1,510,000		606,000		766,000

Other (Income) Expenses, Net			(212,000	)		155,000		11,000		(21,000	)

Earnings Before Income Taxes			9,322,000			8,406,000		6,692,000		5,646,000

Income Taxes			3,204,000			2,931,000		2,386,000		1,953,000

Net Earnings			6,118,000			5,475,000		4,306,000		3,693,000
Dividends on Preferred Stock			21,000			21,000		11,000		11,000

Net Earnings Applicable to Common Stock		$	6,097,000		$	5,454,000	$	4,295,000	$	3,682,000
Earnings Per Share:
	Net Earnings Per Common Share – Basic	$	6.63		$	7.59	$	4.43	$	5.12
	Net Earnings Per Common Share – Diluted	$	6.56		$	7.48	$	4.39	$	5.05
Dividends per Share, Common		$	0.550		$	0.550	$	0.275	$	0.275
Basic Weighted Average Shares			919,575			718,791		968,889		718,791
Diluted Weighted Average Shares			932,641			731,857		981,955		731,857

See accompanying notes to condensed consolidated financial statements.

Back to Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements, Continued

HANOVER FOODS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

		Total Stock- holder's Equity		Cumu-lative Conver-tible Pref- erred Stock Series A & B Shares		Amount	Cumu-lative Conver-tible Pref- erred Stock Series C Shares		Amount	Com-mon Stock Class A Shares		Amount	Com- mon Stock Class B Shares		Amount		Capital Paid In Excess Of Par Value		Retained Earnings		Trea- sury Stock Shares		Amount		Empl- oyee Stock Trust Shares		Amount			Accumu- lated Other Compre- hensive Income

Balance, June 1, 2003	$	93,217,000		31,056	$	776,000	10,000	$	250,000	349,353	$	8,733,000	649,072	$	16,227,000	$	16,372,000	$	76,746,000		144,657	$	(8,172,000	)	146,930	$	(17,096,000	)	$	(619,000	)

Net Earnings for the Period	$	6,118,000																$	6,118,000
Cash Dividends Per Share:
Preferred – $2.0625 annually	$	(21,000	)															$	(21,000	)
Common – $1.10 annually	$	(434,000	)															$	(434,000	)
Issuance of common stock to
Employee Stock Trust
Class B 199,450 shares	$	0											199,450		4,986,250		18,548,850								199,450		(23,535,100	)
Redemption of Common Stock
Class A
Class B	$	0
Stock Conversions	$	0
Other Comprehensive Income	$	84,000																											$	84,000

Balance November 30, 2003	$	98,964,000		31,056	$	776,000	10,000	$	250,000	349,353	$	8,733,000	848,522	$	21,213,250	$	34,920,850	$	82,409,000		144,657	$	(8,172,000)		346,380	$	(40,631,100	)	$	(535,000	)


See accompanying notes to condensed consolidated financial statements.

Back to Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)

	Twenty-Six Weeks Ended

		Nov. 30, 2003			Dec. 1, 2002

Cash Flows From:
Operating Activities:
Net Earnings	$	6,118,000		$	5,475,000
Adjustments to Reconcile Net Earnings:
To Net Cash Provided by (Used In) Operating Activities:
Depreciation and Amortization		4,632,000			4,898,000
Deferred Income Taxes		(239,000	)		164,000
Changes in Assets and Liabilities:
Accounts Receivable		(5,371,000	)		(1,800,000	)
Inventories		(14,164,000	)		(9,405,000	)
Prepaid Expenses		1,185,000			1,071,000
Accounts Payable and Accrued Expenses		6,179,000			3,547,000
Income Taxes Payable		(254,000	)		432,000
Other Liabilities		705,000			585,000

Net Cash Provided by (Used In) Operating Activities		(1,209,000	)		4,967,000

Investing Activities:
Decrease (Increase) in Other Assets		(1,192,000	)		(371,000	)
Acquisitions of Property, Plant and Equipment		(5,212,000	)		(3,325,000	)

Net Cash Provided by (Used In) Investing Activities		(6,404,000	)		(3,696,000	)

Financing Activities:
Increase in Notes Payable		9,245,000			2,197,000
Payments on Long-Term Debt		(2,500,000	)		(2,505,000	)
Payment of Dividends		(455,000	)		(499,000	)

Net Cash Provided by (Used In) Financing Activities		6,290,000			(807,000	)

Net Increase (Decrease) in Cash and Cash Equivalents		(1,323,000	)		464,000
Cash and Cash Equivalents, Beginning of Period		4,128,000			2,816,000

Cash and Cash Equivalents, End of Period	$	2,805,000		$	3,280,000

See accompanying notes to condensed consolidated financial statements.

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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements November 30, 2003 (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^st. Accordingly, these financial statements reflect activity for the thirteen and twenty-six week periods ended November 30, 2003 and December 1, 2002.

It is suggested that these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Form 10-K/A for the Corporation’s fiscal year ended June 1, 2003.

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.

Certain reclassifications were made to the prior period financial statements to be consistent with the current period reporting presentation.

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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements November 30, 2003 (Unaudited)

(2)	SHORT-TERM BORROWINGS

The Corporation and its subsidiaries maintain short-term unsecured lines of credit with various banks providing credit availability amounting to $50,000,000 of which $16,879,000 was borrowed at November 30, 2003. The average cost of funds during twenty-six week period ended November 30, 2003 was 1.93% compared to 2.50% for the twenty-six week period ended December 1, 2002.

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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:

		November 30, 2003		June 1, 2003

8.74% unsecured senior notes payable to an insurance company, due through 2007	$	7,143,000	$	7,143,000
7.01% unsecured senior notes payable to an insurance company, due through 2011		20,000,000		22,500,000

Total Long-Term Debt		27,143,000		29,643,000
Less current maturities		4,286,000		4,286,000

Net Long-Term Debt	$	22,857,000	$	25,357,000

The senior note agreements 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 of November 30, 2003.

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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.

		Twenty-Six Weeks Ended				Thirteen Weeks Ended

			Nov. 30, 2003		Dec. 1, 2002		Nov. 30, 2003		Dec. 1, 2002

Revenues:
	Park 100 Foods, Inc.	$	573,000	$	793,000	$	235,000	$	501,000

Expenditures:
	Park 100 Foods, Inc.	$	11,000	$	10,000	$	0	$	7,000
	Warehime Enterprises, Inc.		2,000		2,000		1,000		1,000
	John A. & Patricia M. Warehime		18,000		33,000		9,000		16,000
	Lippy Brothers, Inc.		1,094,000		442,000		939,000		200,000
	Schaier Travel		0		3,000		0		0

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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The respective June 1, 2003 and November 30, 2003 account balances with related parties are as follows:

		November 30, 2003		June 1, 2003

Accounts Receivable:
	Park 100 Foods, Inc	$	228,000	$	163,000

Accounts Payable:
	Park 100 Foods, Inc		0		7,000
	Lippy Brothers, Inc.		723,000		0
	Warehime Enterprises, Inc.		1,000		0
	John & Patricia Warehime		4,000		0

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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:

	26 Weeks Ended					13 Weeks Ended

	Nov 30, 2003		Dec 1, 2002			Nov 30, 2003		Dec 1, 2002

Net Income	$	6,118,000	$	5,475,000		$	4,306,000	$	3,693,000
Other Comprehensive Income (Loss) – Unrealized Gain (Loss) on Investments		84,000		(87,000	)		50,000		56,000

Comprehensive Income	$	6,202,000	$	5,388,000		$	4,356,000	$	3,749,000


(6)	RECONCILIATION OF NUMERATOR AND DENOMINATOR FOR BASIC AND DILUTED EARNINGS PER SHARE

Numerator for basis earnings per share:

	26 Weeks Ended				13 Weeks Ended

		Nov 30, 2003		Dec 1, 2002		Nov 30, 2003		Dec 1, 2002

Net earnings applicable to common stock	$	6,097,000	$	5,454,000	$	4,295,000	$	3,682,000
Preferred stock dividends		21,000		21,000		11,000		11,000

Net earnings assuming dilution	$	6,118,000	$	5,475,000	$	4,306,000	$	3,693,000

Denominator:
Basic weighted average shares		919,575		718,791		968,889		718,791
Effect of dilutive securities		13,066		13,066		13,066		13,066

Diluted weighted average shares		932,641		731,857		981,955		731,857

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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(7)	STOCK OPTION PLAN

On June 20, 2002, the Corporation’s Board of Directors adopted the Hanover Foods Corporation 2002 Stock Option Plan (the “Stock Option Plan”). All officers and key employees of the Corporation and of any present or future parent or subsidiary of the Corporation are eligible to receive options under the Stock Option Plan, excluding John A. Warehime. No individual may receive options under the Stock Option Plan for more than 15% of the total number of shares of the Corporation’s Class B common stock authorized for issuance under the Stock Option Plan. 34,600 shares of the Corporation’s Class B common stock, par value $25.00 per share, are authorized for issuance under the Stock Option Plan, and options to purchase 13,500 shares were granted on June 20, 2002. Concurrent with the stock option grant on June 20, 2002, the Corporation contributed an additional 13,500 shares of Hanover Class B common stock to the Employee Stock Trust for the purpose of funding obligations under the Stock Option Plan.

On October 17, 2003, the Corporation’s Board of Directors adopted the Hanover Foods Corporation 2003 Stock Option Plan (the “2003 Option Plan”). All full-time employees (excluding employees represented by a collective bargaining agent) of the Corporation and of any present or future parent or subsidiary of the Corporation who have been employed for at least one year, excluding John A. Warehime, are eligible to receive options under the 2003 Option Plan. No individual may receive options under the 2003 Option Plan for more than 5% of the total number of shares of the Corporation’s Class B common stock authorized for issuance under the 2003 Option Plan. 200,000 shares of the Corporation’s Class B common stock, par value $25.00 per share, are authorized for issuance under the 2003 Option Plan. On October 17, 2003, the Board of Directors of the Corporation voted to make a grant to all full-time, non-union employees of the Corporation who have been employed by the Corporation for at least one year, other than John A. Warehime except that if an individual is in the employ of the Corporation or any of its subsidiaries as of October 17, 2003, but has not been employed for at least one year as of October 17, 2003, once the one year employment requirement has been satisfied, the employee will receive stock options, with an option price equal to the appraised fair market value at the time of the option grant. The Board of Directors granted options for 199,450 shares of Class B common stock.

Under the Plans, the exercise price of stock options is equal to the fair market value of the common stock on the grant date. The maximum term of stock options is 10 years. Stock options are accounted for under Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Accordingly, no compensation expense is recorded for stock option grants.

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Had compensation expense for all stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the method prescribed under SFAS No. 123, “Accounting for Stock-Based Compensation” as amended, net (loss) income and (loss) earnings per share would have been adjusted to the pro forma amounts as follows:

	26 Weeks Ended						13 Weeks Ended

	Nov. 30, 2003			Dec. 1, 2002			Nov. 30, 2003			Dec. 1, 2003

Net earnings applicable to common stockholders, as reported	$	6,097,000		$	5,454,000		$	4,295,000		$	3,682,000
Deduct: Total stock based employee compensation expense determined under the fair value base method for all awards, net of related tax effects		(40,000	)		(40,000	)		(20,000	)		(20,000	)

Pro forma net income applicable to common stock	$	6,057,000		$	5,414,000		$	4,275,000		$	3,662,000

Earnings per share:
Basic – as reported	$	6.63		$	7.59		$	4.43		$	5.12
Basic – pro-forma	$	6.59		$	7.53		$	4.41		$	5.09
Diluted – as reported	$	6.56		$	7.48		$	4.39		$	5.05
Diluted – pro forma	$	6.52		$	7.43		$	4.36		$	5.02


(8)	NEW ACCOUNTING STANDARDS

In May 2003, the FASB issued SFAS No. 150 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The statement establishes standards for how an issuer classifies and measure certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer to classify a financial instrument within its scope as a liability (or an asset in some circumstances). The statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of the Statement did not have any impact on our consolidated financial statements.

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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements, Continued
HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(9)	LEGAL MATTERS

Derivative Action

On September 13, 1996, certain Class A shareholders 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 on 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 shareholders 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. On September 5, 2001, director defendants filed a Motion to Dismiss the Derivative Action. On September 20, 2001, plaintiffs filed an answer to director defendants’ Motion to Dismiss. On May 17, 2002, the court entered an order denying defendants’ Motion to Dismiss.

On May 14, 2002, Albert Blakey, Esquire, counsel for certain of the derivative plaintiffs filed a Petition for Fees seeking an award of $1,585,716 in attorney’s fees. Defendants filed a response in opposition to the request for fees.

On January 29, 2003, Albert Blakey, Esquire, counsel for certain derivative plaintiffs filed a Motion for Reconsideration of the Court’s December 31, 2002 denial of the Petition for Fees. A Response in Opposition to the Motion for Reconsideration of Plantiffs’ Petition for Fees was filed with the Court on February 12, 2003.

Warehime Family Litigation

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 shareholders), 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), who qualify as disinterested directors 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.

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The Amended and Restated Articles created a Series C Convertible Preferred Stock , which, in case of a dispute among the above mentioned members of the Warehime family on Board of Directors composition or other important matters, would be entitled to 35 votes per shares (a total of 350,000 votes based on 10,000 shares of Series C Convertible Preferred Stock issued to and held by the trustees of the Corporation’s 401(k) Savings Plan); if Series C Convertible Preferred Stock were entitled to vote because of such dispute, each share of Class A Common Stock would be entitled to 1/10^th of a vote per share.

The Amended and Restated Articles also classified the terms of the Board of Directors commencing with the election at the 1997 annual shareholders’ meeting and permitted directors to be elected for four-year term as permitted by Pennsylvania law. Pursuant to the Corporation’s Bylaws, as then in effect, nominations for directors must be submitted to the Corporation in the manner prescribed by the Bylaws no later than June 1 of the year in which the meeting is to occur.

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 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 described herein.

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 by the Court 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 a person who, in the opinion of counsel for the Corporation, meets any of the following criteria: (i) disinterested directors as defined in Section 1715(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.

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Michael A. Warehime filed an appeal from the denial of his motion to enjoin the previously described Amendment to the Corporation’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 A. Warehime had acted in good faith in voting for the Amendment to the Amended and Restated Articles as trustee of the Warehime voting trust, he had breached his fiduciary duty to the beneficiaries of the Warehime voting trust in voting for the Amendment. On November 29, 1999, the Supreme Court of Pennsylvania granted a petition for allowance of appeal, filed by John A. Warehime, and granted a cross-petition for appeal filed by Michael A. Warehime.

On August 13, 1999, Michael A. 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 Corporation. The complaint sought a court order declaring that the September 1999 election for the Board of Directors of the Corporation be conducted in accordance with the Articles of Incorporation of the Corporation 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 Corporation proposed by Michael A. Warehime, Sally Yelland, Elizabeth Stick and J. William Warehime be accepted by the Corporation and listed on the ballot to be distributed at the annual meeting of shareholders of the Corporation to be held on September 16, 1999: Michael A. Warehime, Daniel Meckley, Elizabeth Stick, Sonny Bowman, and John Denton. The basis for the complaint was the December 2, 1998 decision of the Superior Court of Pennsylvania 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 requested relief was denied by the Court of Common Pleas of York County and Michael Warehime appealed to the Superior Court of Pennsylvania.

On September 12, 2000, the Superior Court of Pennsylvania stated, in a Memorandum decision, that the June 25, 1997 shareholder vote, which adopted the Amended and Restated Articles of the Corporation should be set aside, and remanded the case to the Court of Common Pleas of York County to determine what further relief would be appropriate. On remand, the Court of Common Pleas of York County entered an Order on October 10, 2000 declaring that the Amended and Restated Articles of Incorporation were set aside and that an election should be held without the Amended or Restated Articles. On October 11, 2000, the Supreme Court of Pennsylvania entered an Order staying the Order of the Court of Common Pleas of York County.

On November 27, 2000, the Supreme Court of Pennsylvania reversed and remanded the Order of the Superior Court issued on December 2, 1998 and, in effect, the Order of the Superior Court issued September 12, 2000. In reversing the Superior Court’s Order, the Supreme Court of Pennsylvania held that John A. Warehime, the trustee of the voting trust, did not breach his fiduciary duties in voting the trust shares in favor of the Amended and Restated Articles of Incorporation. The Supreme Court remanded the case to the Superior Court of Pennsylvania to consider other issues raised by Michael A. Warehime. On September 17, 2002, the Supreme Court of Pennsylvania granted defendant’s Petition for Allowance of Appeal.

On May 4, 2001, the Superior Court of Pennsylvania, on remand from the Supreme Court of Pennsylvania to decide several remaining issues, held that the 1997 amendments to the Corporation’s Amended and Restated Articles of Incorporation “violated principles of corporate democracy” and should be invalidated even though the Superior Court found the directors acted in good faith and their actions in approving the amendments did not result in a breach of their fiduciary duties. A petition for allocatur was filed with the Supreme Court of Pennsylvania requesting that the Supreme Court of Pennsylvania review the Superior Court’s May 4, 2001 ruling. On September 17, 2002, the Supreme Court of Pennsylvania granted the petition for allocatur and oral argument was heard in the matter on May 13, 2003.

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On September 17, 2002, the Supreme Court of Pennsylvania granted the petition for allocatur and oral argument was heard in the matter on May 13, 2003.

On December 12, 2002, Michael Warehime filed a Motion for Relief under the Warehime v. Schaier caption in the York County Court of Common Pleas. Michael Warehime’s motion requested, inter alia, that Hanover Foods Corporation’s December 23, 2002 election be conducted according to the Articles of Incorporation as they existed prior to June 25, 1997. Following a hearing on December 20, 2002, the York County Court of Common Pleas denied Michael Warehime’s Motion for Relief. On January 17, 2003 Michael Warehime appealed the Court’s denial of his Motion for Relief to the Superior Court of Pennsylvania.

On December 12, 2002, Michael Warehime filed an Emergency Application for Expedited Relief with the Pennsylvania Supreme Court in the Warehime v. Warehime appeal concerning the election of directors noticed for December 23, 2002. The Pennsylvania Supreme Court denied Michael Warehime’s emergency application on December 20, 2002.

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.

(10)	SUBSEQUENT EVENT

In December 2003, the Corporation completed the acquisition of substantially all of the assets of a snack food company located in Pennsylvania. The purchase price of approximately $4,000,000 was paid in cash. The operations of the acquired company will be included in the consolidated financial statements of Hanover Foods Corporation from the date of acquisition.

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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 Annual Report, 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, and foreign operations. Such factors, which are discussed in the Form 10-Q, could affect the Company’s financial performance and could cause the Company’s actual result 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/A for the fiscal year ended June 1, 2003.

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 material supply reductions 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 product 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.

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PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES

RESULTS OF OPERATIONS

NET SALES

Consolidated net sales were $151.1 million for the twenty-six week period ended November 30, 2003. This represents an increase of 5.4% over the twenty-six week period ended December 1, 2002 consolidated net sales of $143.3 million. Consolidated net sales were $84.2 million for the thirteen week period ended November 30, 2003, a 5.4% increase from the consolidated net sales of $79.9 million for the corresponding period in the prior years. The increase in consolidated net sales for the twenty-six week period was due to increased refrigerated and fresh food sales as well as increases in our snacks, private label and branded retail sales. These increases were partially offset by decreases in food service, industrial and canned mushroom sales. The increase in consolidated net sales for the thirteen week period was due to increases in refrigerated and fresh food sales as well as increases in our snacks, private label and food service sales. These increases were partially offset by decreases in branded retail, industrial and canned mushroom sales.

COST OF GOODS SOLD

Cost of goods sold were $127.9 million, or 84.6% of consolidated net sales in the twenty-six week period ended November 30, 2003 and $120.2 million, or 83.9% of consolidated net sales for the corresponding period in 2002. Cost of goods sold were $70.7 million, or 84.0% of consolidated net sales for the thirteen week period ended November 30, 2003 as compared to $67.1 million, or 84.0% of consolidated net sales for the corresponding period in 2002. The increase in cost of goods sold as a percentage of net sales resulted primarily from the increases in refrigerated food sales and private label snack sales at a higher cost of sales percentage as compared to other sales of the company as well as higher energy and health care costs without a corresponding increase in prices due to competition pressures. The cost of sales as a percentage of net sales for the thirteen-week period was consistent with last fiscal year due to lower operating expenses in our frozen division off-set by higher cost of sales percentage in our refrigerated food sales and private label snack sales which has increased for the quarter.

GROSS MARGIN

Gross margins were $23.2 million, or 15.3% of consolidated net sales in the twenty-six week period ended November 30, 2003 and $23.1 million, or 16.1% of consolidated net sales for the corresponding period in 2002. Gross margins were $13.6 million, or 16.1% of consolidated net sales for the thirteen week period ended November 30, 2003 as compared to $12.8 million, or 16.0% of consolidated net sales for the corresponding period in 2002. The decrease in gross margins as a percentage of net sales resulted primarily from the increases in refrigerated food sales and private label snack sales at lower gross margins as compared to other sales of the Company as well as higher energy and health care costs without a corresponding increase in prices due to competition pressures. The gross margin as a percentage of net sales for the thirteen-week period was consistent with last fiscal year due to lower operating expenses in our frozen division off-set by lower margin percentage in our refrigerated food sales and private label snack sales which has increased for the quarter.

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PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES

SELLING EXPENSES

Selling expenses were $5.8 million, or 3.9% of consolidated net sales for the twenty-six week period ended November 30, 2003 as compared to $6.1 million or 4.2% of consolidated net sales for the corresponding period in 2002. Selling expenses were $2.9 million or 3.4% of consolidated net sales for the thirteen week period ended November 30, 2003 as compared to $3.2 million, or 4.0% of consolidated net sales during the corresponding period in 2002. The decrease in selling expenses for both periods reflects lower customer advertising dollars as well as lower customer fees on promotion charges due to faster processing of the data.

ADMINISTRATIVE EXPENSES

Administrative expenses were $7.1 million, or 4.7% of consolidated net sales for the twenty-six week period ended November 30, 2003 as compared to $6.9 million, or 4.8% of consolidated net sales for the corresponding period in 2002. Administrative expenses were $3.3 million, or 3.9% of consolidated net sales for the thirteen week period ended November 30, 2003 as compared to $3.2 million, or 4.0% of consolidated net sales for the corresponding period in 2002. The increase in administrative expenses for both the twenty-six and thirteen week period reflects increases in the provision for the supplemental pension benefits off-set by decreases in the workmen’s compensation insurance reserves at Hanover Insurance Company Limited, a wholly-owned subsidiary of Hanover Foods Corporation.

INTEREST EXPENSE

Interest expense was $1.2 million for the twenty-six week period ended November 30, 2003 as compared to $1.5 million for the same period in 2002. Interest expense was $.6 million for the thirteen week period ended November 30, 2003 as compared to $.8 million for the same period in 2002. The decreases in both periods reflects lower average borrowings as well as lower average borrowing rate for the periods compared to 2002.

The average seasonal borrowings were $12.6 million for the twenty-six week period ended November 30, 2003 a decrease of $8.2 million compared to the corresponding period in 2002. The average seasonal borrowing rate was 1.93% for the twenty-six week period ended November 30, 2003 a decrease of .57% compared to the corresponding period in 2002. The average seasonal borrowings was $16.9 million for the thirteen week period ended November 30, 2003 a decrease of $7.2 million compared to the corresponding period in 2002. The average seasonal borrowing rate was 1.93% for the thirteen week period ended November 30, 2003 a decrease of .51% compared to the corresponding period in 2002.

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PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES

OTHER (INCOME) EXPENSES

Other income was $.2 million for the twenty-six week period ended November 30, 2003 as compared to other expense of $.2 million for the same period in 2002. Other expense, net was $11,000 for the thirteen week period ended November 30, 2003 as compared to other income, net of $21,000 for the same period in 2002. The decrease in other expenses for the twenty-six week period is due from income generated from the sales of investments. The increase in other expenses for the thirteen week period is due to an increase in the foreign translation loss for the current period compared to the prior year.

INCOME TAXES

The provision for corporate federal and state income taxes for the twenty-six week period ended November 30, 2003 was $3.2 million, or 34.4% of pretax earnings, as compared to $2.9 million, or 34.5% of pre-tax earnings for the same period in 2002. The provisions for corporate federal and state income taxes for the thirteen week period ended November 30, 2003 was $2.4 million, or 35.8% of pre-tax earnings as compared to $2.0 million, or 35.7% of pre-tax earnings for the same period in 2002. The decrease in the effective tax rate for the twenty-six week period is primarily due to increased earnings in jurisdiction with lower effective tax for the current period as compared to the prior period. The increase in the effective tax rate for the thirteen week period is primarily due to increased earnings in jurisdiction with higher effective tax rates in the current period as compared to the prior period.

LIQUIDITY AND CAPITAL RESOURCES

The discussion and analysis of the Corporation’s liquidity and capital resources should be read in conjunction with the Consolidated Statements of Cash Flows, contained elsewhere herein.

OPERATING ACTIVITIES

Net working capital was $48.9 million at November 30, 2003 and $47.0 million at June 1, 2003. The current ratios were 1.83 on November 30, 2003 and 2.07 on June 1, 2003.

Cash used in operating activities for the twenty-six week period ended November 30, 2003 was $1.2 million as compared to cash provided from operating activities of $5.0 million during the same period of 2002. The uses of cash during the twenty-six week period consisted primarily of an increase in finished goods inventory and an increase in accounts and notes receivable partially offset by sources of cash attributed to earnings and a decrease in prepaid expenses and increases in accounts payable and accrued expenses.

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PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES

INVESTING ACTIVITIES

During the twenty-six week period ended November 30, 2003, the Corporation spent approximately $5.2 million for the purchase of plant upgrades and expansions. This compares to $3.3 million spent during the same period last year for capital projects. During the twenty-six week period the market value of investments increased $.8 million compared to the same period last fiscal year.

FINANCING ACTIVITIES

The increase in notes payable of approximately $9.2 million during the twenty-six week period ended November 30, 2003 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 $50.0 million, of which $16.9 million was utilized as of November 30, 2003. Additional borrowing is permitted within prescribed parameters in existing debt agreements, which contain certain performance covenants.

The Company believes that it has sufficient working capital and availability from seasonal lines of credit to meet its cash flow needs.

The following table summarizes the Corporation’s contractual obligations and other commitments as of November 30, 2003:

	Payment Due by Period

Contractual Obligations		Total		1 Year		2-3 Years		4-5 Years		After 5 Years

Short-Term Notes Payable	$	16,879,000	$	16,879,000	$	-0-	$	-0-	$	-0-
Long-Term Debt		27,143,000		4,286,000		8,572,000		6,785,000		7,500,000
Operating Leases		1,121,000		433,000		470,000		218,000		-0-

Total contractual obligations	$	45,143,000	$	21,598,000	$	9,042,000	$	7,003,000	$	7,500,000

Currently, the Company is obligated to purchase 6,000,000 pounds of tomato paste from California Tomato Products, Colusa, California in each of the fiscal years from 2003 through 2006, at a price based on annual cost of production. The current market price of tomato paste is 28¢/lb. FOB California.

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PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
HANOVER FOODS CORPORATION AND SUBSIDIARIES

The Company’s sources of liquidity are primarily funds from operations and available amounts under three (3) seasonal lines of credit. One line expires on October 29, 2004, the second line expires on October 31, 2004 and the third line expires on January 28, 2005. They are expected to be renewed in the ordinary course of business.

NEW ACCOUNTING STANDARDS

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires the Corporation to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Many of the estimates and assumptions require significant judgment. Future actual results could differ from those estimates and assumptions and could have a significant impact on our consolidated results of operations, financial position and cash flows.

The following accounting policies, estimates and assumptions are particularly sensitive because of their significance on the preparation of the Corporation’s consolidated financial statements:

	•	The allowance for potentially uncollectible receivables and pending deductions requires management to make significant judgments in estimating future amounts to be received. Our judgments are based upon historical experience and current market conditions. Changes in estimates could be impacted as a result of events, such as a deterioration of the credit status of customers or material reductions in product and sales volumes.

	•	Determination of liabilities for pension and post-retirement benefits includes significant assumptions and estimates relating to compensation and health care cost trends, discount rates and rate of return on plan assets. The assumptions are based upon current market and health care trends.

	•	Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows estimated to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. However, determining fair value is subject to estimates of both cash flows and interest rates and different estimates could yield different results. There are no events or changes in circumstances of which management is aware indicating that the carrying value of the Corporation’s long-lived assets may not be recoverable.

	•	Effective June 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). In accordance with SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. As required by SFAS 142, management performed transitional impairment testing during the third quarter and annual impairment testing of goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2003. These tests confirmed that the fair value of the Corporation’s reporting units exceeds their carrying values, and that no impairment loss needed to be recognized for goodwill upon the adoption of SFAS 142.

		The annual evaluation of goodwill and other indefinite-lived intangible assets requires the use of estimates about future operating results for each reporting unit to determine their estimated fair value. Changes in forecasted operations can materially affect these estimates. Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the fair value of goodwill and other indefinite-lived intangible assets could change and, therefore, impact the assessments of impairment in the future.

The footnotes to the consolidated financial statements provide additional information on accounting policies and assumptions used by the Corporation.

PART I – FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
HANOVER FOODS CORPORATION AND SUBSIDIARIES

There are no material changes to the disclosures on this matter provided in the Company’s Annual Report on Form 10-K for the fiscal year ended June 1, 2003, and the Company’s Report on Form 10-Q for the Quarterly Period ended August 31, 2003.

PART I – FINANCIAL INFORMATION
Item 4. Controls and Procedures
HANOVER FOODS CORPORATION AND SUBSIDIARIES

As of November 30, 2003, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective in timely alerting them to material information required to be disclosed by the Company in the reports that it files with the SEC under the Securities Exchange Act of 1934, as amended, during the period that the report is being prepared. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation. As a result, no corrective actions were taken.

PART II – OTHER INFORMATION
HANOVER FOODS CORPORATION AND SUBSIDIARIES

ITEM 1. LEGAL PROCEEDINGS

See note 9 of the Notes of Condensed Consolidated Financial Statements in this form 10-Q for information regarding the 1995 Warehime Family Litigation and the Derivative Action

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS – None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES – None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS – None

ITEM 5. OTHER INFORMATION – None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

EXHIBITS

Exhibit 10.1 2003 Stock Option Plan

Exhibit 31.1 Section 302 Certification – Chief Executive Officer

Exhibit 31.2 Section 302 Certification – Chief Financial Officer

Exhibit 32.1 Certification by John A. Warehime, Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit

Exhibit 32.2 Certification by Gary T. Knisely, Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)	REPORTS ON FORM 8-K – None

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SIGNATURE

Pursuant to the requirements of the Securities 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 14, 2004	By:	/s/ Pietro Giraffa

		Pietro Giraffa
		Vice President & Controller
		Chief Accounting Officer
		(Principal Accounting Officer)

	By:	/s/ Gary T. Knisely

		Gary T. Knisely
		Executive Vice President
		Chief Financial Officer

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EXHIBIT INDEX

Item S-K Exhibit Number	Descritption

Exhibit 10.1	2003 Stock Option Plan

Exhibit 10.2	PNC Bank Line of Credit Personal

Exhibit 10.3	Citizen’s Bank Line of Credit Personal

Exhibit 31.1	Section 302 Certification – Chief Executive Officer

Exhibit 31.2	Section 302 Certification – Chief Financial Officer

Exhibit 32.1	Certification by John A. Warehime, Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit

Exhibit 32.2	Certification by Gary T. Knisely, Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filing Compare · HANOVER FOODS CORP /PA/