10-Q 1 d10q.txt FORM 10-Q 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 April 20, 2003 or [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from ___ to ___ Commission file number: 333-76569 Luigino's, Inc. (Exact name of registrant as specified in its charter) Minnesota 2038 59-3015985 (State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code) Identification No.)

525 Lake Avenue South Duluth, MN 55802 (218) 723-5555 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices.) Check whether the registrant: (1) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ --- Indicate by check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes___ No X --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common 1,000 -------------------------------- -------------------------------------- (Class) (Outstanding at June 2, 2003) LUIGINO'S, INC AND SUBSIDIARY INDEX

2 LUIGINO'S, INC. AND SUBSIDIARY Consolidated Balance Sheets (In Thousands, Except Share and Per Share Data)

The accompanying notes are an integral part of these consolidated financial statements. 3 LUIGINO'S, INC. AND SUBSIDIARY Consolidated Statements of Operations (In Thousands) First 16 Weeks Ended ------------------ ------------------ April 20, 2003 April 21, 2002 ------------------ ------------------ Net Sales ............................... $ 82,109 $ 80,872 Cost of Goods Sold ...................... 59,151 59,791 ------------------ ------------------ Gross profit .......................... 22,958 21,081 ------------------ ------------------ Operating Expenses: Selling and marketing expenses ........ 10,652 8,553 General and administrative expenses ... 10,758 9,985 ------------------ ------------------ Total operating expenses .............. 21,410 18,538 ------------------ ------------------ Operating income ...................... 1,548 2,543 Other Income (Expense): Interest expense ...................... (4,239) (5,300) Interest income ....................... 67 76 Other, net ............................ (51) 194 ------------------ ------------------ Total other expense ................... (4,223) (5,030) ------------------ ------------------ Net Loss ................................ $ (2,675) $ (2,487) ================== ================== The accompanying notes are an integral part of these consolidated financial statements. 4 LUIGINO'S, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows (In Thousands)

The accompanying notes are an integral part of these consolidated financial statements. 5 LUIGINO'S, INC. AND SUBSIDIARY Notes to Financial Statements (Dollars in Thousands) (Unaudited) 1. Operations: Luigino's, Inc. and Subsidiary (the "Company"), a Minnesota corporation, markets food products primarily under the Michelina's and Budget Gourmet name brands. The Michelina's label is manufactured at production facilities located in Minnesota and Ohio. The Budget Gourmet label was sourced through a co-pack agreement with Heinz Frozen Food Company (HFF) until February 2003 and subsequent to this date is produced internally in our Minnesota and Ohio facilities. The Company's products, distributed predominately in the North American market, are sold through independent and chain store retail grocery outlets. 2. Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting solely of normal recurring items considered necessary for a fair presentation have been included. Operating results for the 16 weeks ended April 20, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending January 4, 2004. Certain amounts in the financial statements for the prior quarter have been reclassified to conform with the current period's presentation. Those reclassifications had no effect on stockholders' equity or net income (loss). For further information, refer to the audited financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended December 29, 2002, filed on March 25, 2003 with the Securities and Exchange Commission. 3. Recent Accounting Pronouncements: In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 require the Company to record the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets. The Company also records a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company adopted SFAS No. 143 effective first quarter 2003. The adoption of SFAS No. 143 did not have an impact on the Company's financial condition or results of operations. In July 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." The statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for costs associated with an exit or disposal activity be recognized when a liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS 146 did not have a material impact on our consolidated financial statements. In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. The Statement is 6 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. We do not anticipate that this Standard will have an impact on our consolidated financial statements. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, and interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34." This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and did not have a material impact on the Company's consolidated financial statements. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This Interpretation requires a company to consider variable interest entities ("VIE") if the entity is a primary beneficiary (holds a majority of the variable interest) of the VIE and the VIE possesses specific characteristics. It also requires additional disclosure for parties involved with VIEs. The provisions of the Interpretation became effective for the Company in the first quarter of 2003 and did not have a material effect on our consolidated financial statements. 4. Goodwill and Intangible Assets Carrying amounts for other intangible assets and goodwill, net of accumulated amortization, as of April 20, 2003 and December 29, 2002, respectively, are $63,030 and $63,414. Intangible assets as of April 20, 2003 consisted of the following: Gross Carrying Accumulated (In thousands) Amount Amortization -------------------------------------------------------------------------- Amortized intangible assets: Restricted Convenant $ 10,000 $ 10,000 Transitional Agreement 150 150 ------------------------- 10,150 10,150 ========================= Unamortized intangible assets: Trademarks 22,893 Patent Sublicense 489 ---------- 23,382 ========== Amortization of intangibles for the 16 weeks ended April 20, 2003 $ 386 ========== Those intangible assets that were being amortized are fully amortized as of April 20, 2003 and therefore future amortization expense will be $0. 5. Fiscal Year: The Company has elected a 52/53 week fiscal year which ends on the Sunday closest to December 31. The Company's fiscal year includes a 16-week first fiscal quarter, 12-week second and third fiscal quarters and a 12- or 13-week fourth fiscal quarter. 6. Inventories: Inventories are stated at the lower of first-in, first-out cost or market and consisted of the following: April 20, 2003 December 29, 2002 --------------------- --------------------- Raw materials............ $ 8,737 $ 7,509 Finished goods........... 10,762 12,348 Packaging supplies....... 3,685 2,612 --------------------- --------------------- $ 23,184 $ 22,469 ===================== ===================== 7 7. Debt: On September 27, 2002, the Company entered into a new $75,000 credit facility to replace the $100,000 credit facility used to fund the Company's acquisition of The All American Gourmet Company from Heinz Frozen Foods Company and to fund the Company's revolving credit. The new credit facility includes (a) a $42,500 term loan with maturities for each of the five years subsequent to December 31, 2001 of $5,000, $10,000, $12,500, $11,250, and $3,750, and (b) a $32,500 revolving credit facility maturing on January 4, 2006, subject to certain borrowing base limitations. At April 20, 2003, the Company had outstanding balances of $14,200, on the revolving line of credit. On February 4, 1999, the Company issued $100,000 of 10% Senior Subordinated Notes due February 1, 2006, pursuant to an Indenture between the Company and U.S. Bank Trust National Association as Trustee. The Senior Subordinated Notes are due February 1, 2006 and may be redeemed by the Company for a premium after March 1, 2003. The Company entered into two fixed interest rate swaps in February 2002 totaling $30,000. One is a $20,000 swap at an interest rate of 3.49%, plus the current margin spread of 2.00% maturing on December 31, 2003 and the other is a $10,000 swap at an interest rate of 3.07%, plus the current margin spread of 2.00% of which $2,500 matured on December 31, 2002 and March 31, 2003, respectively and $2,500 will mature on June 30, 2003 and September 30, 2003, respectively. The swap agreements were entered into to fix the rate of interest on the floating rate senior credit facility. The swaps are accounted for as cash flow hedges and their total fair market value as of April 20, 2003 is a liability of $392 which is reflected on our Consolidated Balance Sheets as accumulated other comprehensive loss. Based on a total leverage ratio calculated on a quarterly basis, borrowings under the term loan and revolving credit facility bear interest either at 1.75% to 2.25% over the rate offered to major banks in the London Interbank Eurodollar market ("Eurodollar Rate"), or at 0% to 0.5% over Alternative Base Rate, which is the larger of the Prime Rate or the Federal Funds Rate plus 0.5%. Advances through October 6, 2002 bore interest at the Eurodollar Rate plus 2.00% and Prime Rate plus 0.25% with a weighted-average interest rate of 3.49% at April 20, 2003. The Company also pays a fee of 0.25% to 0.50% on the unused daily balance of the revolver based on a leverage ratio calculated on a quarterly basis. The credit facility and Indenture contain various restrictive covenants. The Credit Agreement among other matters, requires the Company to maintain a minimum debt service coverage ratio, a maximum total leverage ratio, a maximum senior leverage ratio and a minimum tangible net worth, all as defined in the credit agreement. The credit agreement also limits additional indebtedness, capital expenditures and cash dividends. At April 20, 2003, the Company was in compliance with all covenants in the credit agreement and Indenture. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following discussion of the financial condition and results of operations of Luigino's, Inc. and Subsidiary (the "Company" or "Luigino's") should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto. Results of Operations The following table sets forth, for the periods indicated, the major components of Luigino's statements of operations expressed as a percentage of net sales:

First Fiscal Quarter 2003 compared to First Fiscal Quarter 2002 Net Sales. The following table sets forth the Company's net sales by product line and the percentage change from the prior period: First Fiscal Quarter Ended Percentage ------------------------------------- April 20, 2003 April 21, 2002 Change ---------------- ---------------- -------------- (Dollars in thousands) Popular ........ $ 43,111 $ 48,177 (10.5)% Economy ........ 20,854 23,272 (10.4) Signature ...... 4,695 5,936 (20.9) Snacks ......... 3,796 3,065 23.8 Bowls .......... 7,780 422 1743.6 Co-Pack ........ 1,873 -- -- ---------------- ---------------- -------------- $ 82,109 $ 80,872 1.5 % ================ ================ ============== 9 Total Company net sales for the first fiscal quarter ended April 20, 2003 increased $1.2 million or 1.5% to $82.1 million from $80.9 million for the comparable quarter in 2002. Unit volume decreased 3.3%, while trade promotional spending decreased $6.9 million over the comparable period last year due to timing of incurring slotting expenses (promotional costs incurred to introduce new products) and the overall shift of spending from trade promotions to TV advertising. Net sales in the Popular and Economy product lines were down $5.1 million and $2.4 million respectively due to the continued shift of retailers to a one-value-brand strategy. Signature net sales were down $1.2 million due to declining distribution. Snack net sales increased $0.7 million, led by the introduction of the 12" baked pizza. Net sales in the Bowls product line increased $7.4 million as slotting spending on this 2002 new product introduction, which is a reduction from net sales, was down $6.4 million from the comparable quarter last year. The Company had $1.9 million in Co-pack product sales to an affiliate in the first quarter of fiscal 2003. Canadian net sales contributed 19.1% or $15.7 million of net sales for the first quarter of 2003 compared to 18.1% or $14.6 million for the first quarter 2002. This increase is the combined result of the growth of the frozen entree market in Canada and the volume impact from the continued use of advertising. Gross Profit. Gross profit in the first fiscal quarter of 2003 increased $1.9 million or 8.9% to $23.0 million from $21.1 million in the comparable quarter last year. The gross margin increased to 28.0% of net sales from 26.1%. The gross profit and margin improvement is due to lower trade promotion spending. Selling and Marketing Expenses. Selling and marketing expenses for the first quarter of 2003 increased $2.1 million to $10.7 million due primarily to increased TV advertising. General and Administrative Expenses. General and administrative expenses were $10.8 million in the first quarter of 2003, as compared to $10.0 million for the first quarter 2002. This increase is due primarily to a write-off of Fleming's trade receivables as a result of the Company filing for bankruptcy protection. Operating Income. Operating income for the first fiscal quarter ended April 20, 2003 was $1.5 million as compared to $2.5 million for the comparable period last year. This reduction in operating income is primarily the result of increase in advertising expense and bad debt expense, offset partially by the gross profit improvement. Interest Expense. Interest expense for the first fiscal quarter ended April 20, 2003 decreased $1.1 million to $4.2 million. The reduction is the result of the combination of lower interest rates, a lower debt level and lower amortization of deferred financing costs as the result of the Company refinancing its senior bank debt on September 27, 2002. Interest Income. Interest income was $0.1 million for the first fiscal quarter for both 2003 and 2002. Other, Net. The first quarter 2003 had expense of $0.1 million, as compared to other income of $0.2 million in the first quarter 2002. Net Loss. For the reasons stated above, the net loss for the first quarter ended April 20, 2003 was $2.7 million as compared to a net loss of $2.5 million for the first quarter 2002. Liquidity and Capital Resources At April 20, 2003, the Company had $14.2 million outstanding on a $32.5 million line of senior revolving credit with LaSalle Bank, N.A. The cash and cash equivalent balance as of April 20, 2003 was $2.0 million as compared to $1.3 million as of April 21, 2002. As of April 20, 2003, the Company was in compliance with all covenants of its senior credit agreement with LaSalle Bank. Operating activities provided $4.9 million of cash in the first 16 weeks of 2003 as compared to $3.3 million for the first 16 weeks of 2002. This $1.6 million improvement in cash provided by operating activities is the result of $1.7 million decrease in working capital requirements and a $0.5 million increase in deferred income taxes, offset by a $0.2 million decrease in net income, a $0.4 million decrease in depreciation and amortization. 10 Investing activities used $3.4 million of cash for the 16 weeks of 2003, as compared to $4.4 million for the comparable period in 2002. The reduction of $1 million is primarily attributed to decreased capital spending. Financing activities used $2.3 million of cash in the first 16 weeks ended April 20, 2003 as compared to $0.9 million used in the first 16 weeks of 2002. The Company paid $4.8 million in distribution to stockholders in the first 16 weeks of 2003 to cover their tax liability related to 2002 operating results. As a part of the Company's strategic growth plan, the Company incurred approximately $4.5 million for slotting expenses for the first 16 weeks of 2003. The Company plans to spend an additional $7.3 million in slotting expenses in 2003 to introduce new products and increase product penetration. The Company incurred $4.5 million in TV advertising in the first fiscal quarter 2003, and plans to spend an additional $1.5 million for the balance of 2003. The Company also plans on spending approximately $12.0 million on plant and equipment purchases in 2003, primarily to increase the production capacity at its Jackson, Ohio plant. The Company anticipates continuing to elect Subchapter S treatment under the U.S. Internal Revenue Code. Consequently, the Company will continue to make quarterly distributions to the stockholders based upon their estimated tax liabilities. The Company's subsidiary, AAG, is a C-Corporation. As such, AAG will be responsible for all tax liabilities including deferred taxes. Of the $157.6 million of total indebtedness on April 20, 2003, $100.0 million consisted of 10% senior subordinated notes issued pursuant to an Indenture dated February 4, 1999 between the Company and U.S. Bank Trust National Association as trustee. Interest on the senior subordinated notes is payable semi-annually in arrears on February 1 and August 1 of each year. The senior subordinated notes are due February 1, 2006, but may be redeemed by the Company for a premium after March 1, 2003. Based upon the current level of operations, the Company believes that cash flow from operations and available cash, together with available borrowings under the credit agreement, will be adequate to meet the future liquidity needs, including payment requirements on the senior subordinated notes, for at least the next several years. The Company may, however, need to refinance all or a portion of the principal of the senior subordinated notes on or before maturity. There can be no assurance that the business will generate sufficient cash flow from operations, or that future borrowings will be available under the credit agreement in an amount sufficient to enable the Company to service indebtedness or to fund other liquidity needs. In addition, there can be no assurance that the Company will be able to obtain any such refinancing on commercially reasonable terms or at all. The Company's ability to make scheduled payments of principal of, or to pay the interest or premiums, if any, on, or to refinance its indebtedness or to fund planned capital expenditures will depend on future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company's control. The Company believes that the relatively moderate rate of inflation over the past few years has not had a significant impact on sales or profitability. New Accounting Pronouncements In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 require the Company to record the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the assets. The Company also records a corresponding asset that is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company adopted SFAS No. 143 effective first quarter 2003. The adoption of SFAS No. 143 did not have an impact on the Company's financial condition or results of operations. In July 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities." The statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for costs associated with an exit or disposal activity be recognized when a 11 liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS 146 did not have a material impact on our consolidated financial statements. In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. 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. We do not anticipate that this Standard will have an impact on our consolidated financial statements. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, and interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34." This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and did not have a material impact on the Company's consolidated financial statements. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation requires a company to consider variable interest entities ("VIE") if the entity is a primary beneficiary (holds a majority of the variable interest) of the VIE and the VIE possesses specific characteristics. It also requires additional disclosure for parties involved with VIEs. The provisions of the Interpretation became effective for the Company in the first quarter of 2003 and did not have a material effect on our consolidated financial statements. Cautionary Statement This Form 10-Q contains forward-looking statements within the meaning of federal securities laws. These statements include statements regarding continued adequate cash flow, introduction of new products, investment in new capacity, and expectations of increased product penetration, as well as other indications of intent, belief or current expectations of the Company and its management. These forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause the Company's actual results to differ materially from the results discussed in these statements. The Company's forward-looking statements are subject to risks, uncertainties and assumptions including, among other things: general economic and business conditions; the Company's expectations and estimates concerning future financial performance, financing plans and the impact of competition; anticipated trends in the Company's industry; and other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission, including Exhibit 99.1 to this Form 10-Q. Item 3. Quantitative and Qualitative Disclosures About Market Risk Market Risk Considerations Credit Risk. Financial instruments which potentially subject Luigino's to significant concentrations of credit risk consist primarily of cash and trade accounts receivable. The Company maintains cash and cash equivalents and other financial instruments with various financial institutions. The Company's policy is to limit exposure to any one institution. When the Company formulates its investment strategy, it considers periodic evaluations of the relative credit standing of these financial institutions. The Company's concentrations of credit risk for trade accounts receivable are limited due to the large number of entities comprising the customer base. The Company has an exclusive distribution agreement with 12 J.M. Schneider Corporation in Canada, which accounted for 19.1% of net sales for the 16 weeks ended April 20, 2003. The Company does not currently foresee a credit risk with this distributor. Interest Rate Risk. The Company uses financial instruments, including fixed and variable rate debt, as well as interest rate swaps, to finance operations and to hedge interest rate expenses. The swap contracts are entered into for periods consistent with relative underlying exposures, and do not constitute position independent of those exposures. The Company does not enter into contract for speculative purposes. There has been no material change in the Company's market risks associated with debt and interest rate swap obligations during its first fiscal quarter ended April 20, 2003. The Company entered into two fixed interest rate swaps in February 2002 totaling $30,000. A $20,000 swap at an interest rate of 3.49%, plus the current margin spread of 2.0% maturing on December 31, 2003 and a $10,000 swap at an interest rate of 3.07%, plus the current margin spread of 2.0% of which $2,500 matured on December 31, 2002 and March 31, 2003, respectively, and $2,500 will mature on June 30, 2003 and September 30, 2003, respectively. The swap agreements were entered into to fix the rate of interest on the floating rate senior credit facility. The swaps were accounted for as cash flow hedges and their fair values are reflected in the financial statements under the Stockholders' Equity section of the Consolidated Balance Sheet. Other Market Risks. The Company has no history of, and does not anticipate in the future, investing in derivative commodity instruments or other such financial instruments. Transactions with international customers are entered into in U.S. dollars, precluding the need for foreign currency hedges. As a result, the exposure to market risk is not material. Item 4. Controls and Procedures The Company's Chief Executive Officer and Chief Financial Officer (collectively, the "Certifying Officers") are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have concluded (based upon their evaluation of these controls and procedures as of a date within 90 days of the filing of this report) that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in this report is accumulated and communicated to the Company's management, including its principal executive officers as appropriate, to allow timely decisions regarding required disclosure. The Certifying Officers also have indicated that there were no significant changes in the Company's internal controls or other factors that could significantly affect such controls subsequent to the date of the evaluation, and there were no corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information In connection with the "safe harbor" provisions of the Private Securities Litigation and Reform Act of 1995, the Company is hereby filing cautionary statements identifying important factors that could cause actual results to differ materially from those projected in forward-looking statements of the Company made by, or on behalf of the Company. See Exhibit 99.1 to this report. 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Number Description 99.1 Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) 99.3 Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer) (b) Reports on Form 8-K None. 14 SIGNATURES 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. LUIGINO'S, INC. Date: June 2, 2003 By: /s/ Thomas W. Knuesel ---------------------------------------- Thomas W. Knuesel Chief Financial Officer (principal financial and accounting officer) 15 SARBANES-OXLEY SECTION 302 CERTIFICATION I, Ronald O. Bubar, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Luigino's, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 2, 2003 By /s/ Ronald O. Bubar -------------------------------------- Ronald O. Bubar Chief Executive Officer 16 SARBANES-OXLEY SECTION 302 CERTIFICATION I, Thomas W. Knuesel, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Luigino's, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 2, 2003 By /s/ Thomas W. Knuesel -------------------------------------- Thomas W. Knuesel Chief Financial Officer 17 EXHIBIT INDEX Number Description 99.1 Cautionary Statements for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) 99.3 Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer) 18

LUIGINOS INC 10-Q