6-K 1 a2093501z6-k.txt 6-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the nine months ended September 30, 2002 FAGE DAIRY INDUSTRY S.A. (Translation of Registrant's name into English) 35, Hermou Street, 144 52 Metamorfossi, Athens, Greece (Address of principal executive office) [Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.] Form 20-F X Form 40-F --------- --------- [Indicate by check mark whether the Registrant by furnishing the information contained in the Form is also there by furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.] Yes No. X --------- --------- This report (the "Quarterly Report") sets forth certain information regarding the financial condition and results of operations of Fage Dairy Industry S.A., a Greek societe anonyme (the "Company" or "Fage"), for the fiscal quarter ended September 30, 2002. The Quarterly Report encloses a review, in English, of the Company's unaudited financial information and analysis for the third quarter as well as certain other information. The following unaudited financial statements in the opinion of the management, reflect all necessary adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the financial position, the results of operations and cash flows for the periods presented. For a description of accounting policies see Notes to financial statements in Fage's 2001 annual report (FORM 20-F). Fage, commencing January 1, 2002, is preparing its financial statements in Euros. For comparison purposes results of previous periods included in this Report have also been stated in Euros based on the fixed exchange rate of GRD 340.75 to EUR 1.00. II FAGE DAIRY INDUSTRY S.A. FORM 6-K INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

PAGE ---- PART I FINANCIAL INFORMATION ITEM 1 -FINANCIAL STATEMENTS a - Consolidated Balance Sheets as of December 31, 2001 and ~~June~~September 30, 2002 1-2 b - Consolidated Statements of Income for the ~~six~~nine months ended ~~June~~September 30, 2001 and 2002 3 c - Consolidated statements of Income for the three months ended ~~June~~September 30, 2001 and 2002 4 d - Consolidated Statement of Shareholders' Equity for the ~~six~~nine months ended ~~June~~September 30, 2002 5 e - Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2001 and 2002 6 f - Notes to Consolidated Financial Statements 7-16 ITEM 2 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17-19 ITEM 3 -QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 20 ITEM 4 -CONTROLS AND PROCEDURES 20 PART II OTHER INFORMATION ITEM 1 Legal Proceedings 2021 ITEM 2 Changes in Securities and use of proceeds 2021 ITEM 3 Defaults upon Senior Securities 2021 ITEM 4 Submission of Matters to a Vote of Security Holders 2021 ITEM 5 Other Information 2021 ITEM 6 Exhibits and Reports on Form 8-K 2021 SIGNATURES 2122

III PART I ITEM 1.a FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2001 AND SEPTEMBER 30, 2002 (AMOUNTS IN 000'S OF EUROS AND U.S. DOLLARS)

UNAUDITED --------------------------------~~---~~ DECEMBER 31, 2001 ~~JUNE~~SEPTEMBER 30, 2002 ------------------- --------------------------------~~---~~ NOTES EUR EUR U.S.$ -----~~-------~~ ------------~~-------~~ ------------~~---~~ -------------- ASSETS CURRENT ASSETS Cash and cash equivalents 2,831 1110,~~204~~033 119,~~043~~912 Restricted cash 15,298 ~~15,494~~0 ~~15,271~~0 Marketable securities 4 3,251 2,~~929~~902 2,~~886~~866 Accounts receivable 5 71,881 80,~~734~~314 79,~~571~~342 Less: Allowance for doubtful accounts 5 (6,951) (7,~~226~~432) (7,~~121~~342) ------------~~-------~~ ------------~~---~~ -------------- 64,930 7372,~~508~~882 72,~~450~~000 Due from related companies 6 1,755 1,~~735~~820 1,~~710~~798 Inventories 7 23,861 28,~~887~~448 28,~~471~~104 ~~Deferred income taxes 0 0 0~~ ------------~~-------~~ ------------~~---~~ -------------- TOTAL CURRENT ASSETS 111,926 ~~133~~116,~~757~~085 ~~131~~114,~~831~~680 ------------~~-------~~ ------------~~---~~ -------------- INVESTMENTS AND OTHER ASSETS Investments in and advances to affiliates 8 3,624 3,~~352~~236 3,~~304~~197 Other non-current assets 9 806 1,~~053~~162 1,~~038~~148 ------------~~-------~~ ------------~~---~~ -------------- 4,430 4,~~405~~398 4,~~342~~345 ------------~~-------~~ ------------~~---~~ -------------- PROPERTY, PLANT AND EQUIPMENT Cost 138,547 ~~142~~146,~~922~~453 ~~140~~144,~~864~~681 Less: Accumulated depreciation (56,069) (5961,~~890~~725) (5960,~~027~~978) ------------~~-------~~ ------------~~---~~ -------------- 82,478 8384,~~032~~728 8183,~~836~~703 ------------~~-------~~ ------------~~---~~ -------------- DEFERRED CHARGES 2 Cost 3,334 3,334 3,~~285~~294 Less: Accumulated amortization (2,119) (2,~~286~~369) (2,~~253~~341) ------------~~-------~~ ------------~~---~~ -------------- 1,215 ~~1,048~~965 ~~1,032~~953 ------------~~-------~~ ------------~~---~~ -------------- GOODWILL, RESULTING FROM CONSOLIDATED SUBSIDIARIES 10 6,677 6,677 6,~~581~~596 ------------~~-------~~ ------------~~---~~ -------------- TOTAL ASSETS 206,726 ~~228~~212,~~919~~853 ~~225~~210,~~622~~277 ============~~=======~~ ============~~===~~ ==============

Exchange rate used for the convenience translation of the September 30, 2002 euro amounts: U.S.$ 0.9879 to EUR 1.00 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS. 1 PART I ITEM 1.a FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED AS OF DECEMBER 31, 2001 AND SEPTEMBER 30, 2002 (AMOUNTS IN 000'S OF EUROS AND U.S. DOLLARS)

UNAUDITED -------------------------------- DECEMBER 31, 2001 ~~JUNE~~SEPTEMBER 30, 2002 ----------------- -------------------------------- NOTES EUR EUR U.S.$ -----~~------~~ ------------~~-----~~ ------------~~---~~ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings 11 30,896 3411,~~701~~425 3411,~~201~~287 Current portion of long-term debt 12 1,234 ~~617~~0 ~~608~~0 Trade accounts payable 37,020 3843,~~382~~508 3742,~~829~~982 Due to related companies 6 4,580 107,~~417~~988 107,~~267~~891 Income taxes payable 4,019 7,~~893~~687 7,~~780~~594 Deferred income taxes 1,083 4,~~816~~617 4,~~747~~561 Other current liabilities 14 8,328 75,~~963~~181 75,~~848~~118 ------------~~----~~ ------------~~---~~ ------------ TOTAL CURRENT LIABILITIES 87,160 ~~104~~80,~~789~~406 ~~103~~79,~~280~~433 ------------~~----~~ ------------~~---~~ ------------ LONG-TERM LIABILITIES Long-term debt 12, 13 103,522 93,~~107~~592 9192,~~766~~460 Staff retirement indemnities 1,199 1,~~315~~373 1,~~296~~356 Other long-term liabilities 2,560 23,~~560~~079 23,~~523~~041 Deferred income taxes 5,539 7,~~368~~660 7,~~261~~567 ------------~~----~~ ------------~~---~~ ------------ 112,820 ~~104~~105,~~350~~704 ~~102~~104,~~847~~424 ------------~~----~~ ------------~~---~~ ------------ MINORITY INTERESTS 163 ~~190~~172 ~~187~~170 ------------~~----~~ ------------~~---~~ ------------ CONTINGENCIES 15 SHAREHOLDERS' EQUITY Share capital, nominal value EUR 2,93 and EUR 2,94 each at the respective dates (7,010,000 and 9,610,400 shares authorised, issued and outstanding at December 31, 2001 and ~~June~~September 30, 2002) 20,572 2028,~~609~~254 2027,~~312~~912 Reversal of revaluation gains (14,751) (1422,~~751~~396) (1422,~~539~~125) Retained earnings 763 1320,~~732~~713 1320,~~534~~463 ------------~~----~~ ------------~~---~~ ------------ 6,584 1926,~~590~~571 1926,~~308~~250 ------------~~----~~ ------------~~---~~ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 206,726 ~~228~~212,~~919~~853 ~~225~~210,~~622~~277 ============~~====~~ ============~~===~~ ============

Exchange rate used for the convenience translation of the September 30, 2002 euro amounts: U.S.$ 0.9879 to EUR 1.00 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS. 2 PART I ITEM 1.b FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002 (AMOUNTS IN 000'S OF EUROS AND U.S. DOLLARS, EXCEPT PER SHARE DATA) (UNAUDITED)

2002 2001 ----------------------------~~-------~~ NOTES EUR EUR U.S.$ ----------~~------~~ ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Net sales ~~139~~222,~~603~~183 ~~155~~244,~~039~~308 ~~152~~241,~~806~~352 Cost of sales (92146,~~651~~864) (97155,~~976~~788) (96153,~~565~~903) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Gross profit 4675,~~952~~319 5788,~~063~~520 5687,~~241~~449 Selling, general and administrative expenses (3353,~~893~~990) (4162,~~288~~383) (4061,~~693~~628) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Income from operations 1321,~~059~~329 1526,~~775~~137 1525,~~548~~821 Interest expense 2, 11, 12, 13 (58,~~985~~751) (57,~~360~~871) (57,~~283~~776) Foreign exchange gains (losses), net (111,~~082~~983) 12,~~170~~028 11,~~995~~882 Other income (expenses), net ~~346~~566 ~~571~~665 ~~563~~657 ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Income ~~(loss)~~ before income taxes and minority interests (311,~~662)~~161 2330,~~156~~959 2230,~~823~~585 Provision for income taxes 1(2,~~230~~621) (910,~~797~~616) (910,~~656~~488) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Income ~~(loss)~~ before minority interests (28,~~432)~~540 1320,~~359~~343 1320,~~167~~097 Minority interests (~~105~~43) (5430) (5330) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ NET INCOME ~~(LOSS) (2~~8,~~537)~~497 1320,~~305~~313 1320,~~114~~067 ==========~~=====~~ ==========~~=====~~ ==========~~=======~~ INCOME ~~(LOSS)~~ PER SHARE, BASIC AND DILUTED (01.~~36)~~21 12.9058 12.8755 ==========~~=====~~ ==========~~=====~~ ==========~~=======~~ WEIGHTED AVERAGE NUMBER OF SHARES, BASIC AND DILUTED 7,010,000 7,~~010~~876,~~000~~800 7,~~010~~876,~~000~~800 ==========~~=====~~ ==========~~=====~~ ==========~~=======~~

2002 2001 ----------------------------~~-------~~ NOTES EUR EUR U.S.$ ----------~~------~~ ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Net sales 7582,~~327~~580 8589,~~250~~269 8488,~~022~~189 Cost of sales (5054,~~562~~212) (5557,~~345~~812) (5457,~~548~~113) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Gross profit 2428,~~765~~368 2931,~~905~~457 2931,~~474~~076 Selling, general and administrative expenses (1920,~~251~~097) (2321,~~768~~095) (2320,~~426~~839) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Income from operations 58,~~514~~271 610,~~137~~362 610,~~048~~237 Interest expense 2, 11, 12, 13 (32,~~077~~765) (2,~~464~~511) (2,~~428~~481) Foreign exchange gains (losses), net (39,~~520~~099 (142) ~~13,362~~(140) ~~13,170~~ Other income (expenses), net ~~250~~219 ~~327~~94 ~~322~~93 ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Income ~~(loss)~~ before income taxes and minority interests ~~(833)~~14,824 177,~~362~~803 177,~~112~~709 Provision for income taxes ~~173~~ (73,~~832~~851) (~~7,719~~819) (809) ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ Income ~~(loss)~~ before minority interests ~~(660)~~10,973 96,~~530~~984 96,~~393~~900 Minority interests 1261 ~~(48)~~24 ~~(47)~~24 ----------~~-----~~ ----------~~-----~~ ----------~~-------~~ NET INCOME ~~(LOSS)~~11,034 ~~(648) 9~~7,~~482~~008 96,~~346~~924 ==========~~=====~~ ==========~~=====~~ ==========~~=======~~ INCOME ~~(LOSS)~~ PER SHARE, BASIC AND DILUTED (01.~~09)~~57 10.3573 10.3372 ==========~~=====~~ ==========~~=====~~ ==========~~=======~~ WEIGHTED AVERAGE NUMBER OF SHARES, BASIC AND DILUTED 7,010,000 79,~~010~~610,~~000~~400 79,~~010~~610,~~000~~400 ==========~~=====~~ ==========~~=====~~ ==========~~=======~~

Exchange rate used for the convenience translation of the September 30, 2002 euro amounts: U.S.$ 0.9879 to EUR 1.00 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 4 PART I ITEM 1.d FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (AMOUNTS IN 000'S OF EUROS AND U.S. DOLLARS) (UNAUDITED)

RETAINED EARNINGS (DEFICIT) ---------------------------------------- LEGAL, TAX ACCUMULATED REVERSAL OF FREE AND OTHER COMPREHENSIVE SHARE REVALUATION EXTRAORDINARY ACCUMULATED COMPREHENSIVE GRAND INCOME CAPITAL GAINS RESERVES DEFICIT INCOME TOTAL TOTAL ------- --------- ------- ---- --- ------- -- ----- ------- -------~~----~~ BALANCE, DECEMBER 31, 2001 20,572 (14,751) 19,516 (18,497) (256) 763 6,584 ======= ==== === ======= == ===== ======= ======= ======= Increase in share capital through the capitalization of revaluation gains 7,645 (7,645) 0 0 0 0 0 Increase in share capital through cash contribution 37 0 0 0 0 0 37 Net income for the period 1320,~~305~~313 0 0 0 1320,~~305~~313 0 20,313 20,313 Valuation of marketable securities (~~336~~363) 0 0 0 0 (363) (363) (363) -------~~---------~~ Comprehensive income 1219,~~969~~950 =======~~=========~~ ------- ---- --- ------- -- ----- ------- ------- ------- BALANCE, ~~JUNE~~SEPTEMBER 30, 2002 2028,~~609~~254 (1422,~~751~~396) 19,516 (51,~~192)~~816 ~~=========== ============ ============ =========== RETAINED EARNINGS~~ (~~DEFICIT~~619) ~~----------------------------------------- ACCUMULATED OTHER COMPREHENSIVE GRAND INCOME TOTAL TOTAL ------------ ---------- ---------- BALANCE~~20,713 ~~DECEMBER 31~~26,571 ~~2001 (256) 763 6,584~~ ======= ===== == ======== =======~~===~~ Increase in share capital through cash contribution 0 0 37 Net income for the period 0 13,305 13,305 Valuation of marketable securities (336) (336) (336) Comprehensive income ------------ ---------- ---------- BALANCE, JUNE 30, 2002 (592) 13,732 19,590 =======~~=====~~ =======~~===~~ =======~~===~~

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT. 5 PART I ITEM 1.e FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002 (AMOUNTS IN 000'S OF EUROS AND U.S. DOLLARS) (UNAUDITED)

2002 2001 ------------------------------ EUR EUR U.S.$ ------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income ~~(loss) (2~~8,~~537)~~497 1320,~~305~~313 1320,~~114~~067 Adjustments to reconcile to net cash provided by operating activities: Depreciation, ~~amortization~~ and ~~impairment~~amortization ~~allowance 4~~6,~~241~~355 45,~~086~~991 45,~~027~~918 Deferred income taxes (1,~~272)~~107 5,~~561~~654 5,~~481~~586 Provision for personnel retirement cost ~~126~~203 ~~144~~216 ~~142~~213 Provision for doubtful accounts receivable ~~311~~464 ~~275~~482 ~~271~~476 Minority interests ~~105~~43 5430 5330 Gain from sale of property, plant & equipment (~~237~~290) (~~194~~111) (~~191~~110) Unrealised foreign exchange (gains) losses 111,~~163~~866 (1210,~~454~~549) (1210,~~274~~421) Loss on investments ~~239~~288 ~~272~~388 ~~268~~383 (Increase) Decrease in: Accounts receivable (1815,~~152~~441) (8,~~607~~401) (8,~~483~~299) Due from related companies (~~241~~777) 20(65) 19(65) Inventories (5,~~537~~158) (54,~~026~~587) (4,~~953~~531) Increase (Decrease) in: Trade accounts payable 118,~~174~~322 16,~~362~~488 16,~~343~~410 Due to related companies 32,~~862~~535 53,~~837~~408 53,~~753~~366 Income taxes payable ~~111~~(658) 3,~~873~~667 3,~~818~~623 Other current liabilities (~~411~~2,217) (~~365~~2,713) (~~359~~2,680) Payment of staff retirement indemnities (2550) (2842) (2841) (Increase) decrease in other non-current assets (~~255~~245) (~~262~~380) (~~258~~375) Increase (decrease) in other long-term liabilities ~~(269)~~2,290 0519 0513 ------------- ------------ ------------ NET CASH FROM OPERATING ACTIVITIES 27,~~396~~134 720,~~855~~309 720,~~742~~063 ------------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditure for property, plant & equipment (510,~~385~~024) (610,~~201~~048) (69,~~112~~926) Proceeds from sale of fixed assets ~~381~~581 1,~~769~~942 1,~~744~~919 Proceeds from subsidies/grants ~~218~~195 0 0 Investments in and advances to affiliates (4,~~613~~789) 0 0 Net change in restricted cash (~~155~~4,608) ~~(196)~~15,298 ~~(193)~~15,113 Purchase of marketable securities (1,048) (14) (14) ------------- ------------ ------------ NET CASH FROM (USED IN) INVESTING ACTIVITIES (1019,~~602~~693) (47,~~642)~~178 (47,~~575)~~091 ------------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: ~~Proceeds~~Net ~~from~~change in short-term ~~debt~~borrowings 1116,~~030~~670 5(19,~~720~~028) 5(18,~~638~~798) Repayment of long-term debt (~~676~~1,326) (~~616~~1,242) (~~607~~1,227) Increase of share capital 0 37 3637 ------------- ------------ ------------ NET CASH FROM (USED IN) FINANCING ACTIVITIES 1015,~~354~~344 5(20,~~142~~233) 5(19,~~068~~988) ------------- ------------ ------------ EFFECT OF EXCHANGE RATES CHANGES ON CASH ~~139~~134 17(52) 17(51) ------------- ------------ ------------ NET INCREASE ~~(DECREASE)~~ IN CASH AND CASH EQUIVALENTS 2,~~287~~919 87,~~372~~202 87,~~252~~115 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,447 2,831 2,~~791~~797 ------------- ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 56,~~734~~366 1110,~~204~~033 119,~~043~~912 ============= ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION : Cash paid for : - interest, net of amounts capitalized 510,~~521~~541 510,~~485~~071 59,~~406~~949 - income taxes ~~256~~2,173 ~~361~~1,293 ~~356~~1,277

Exchange rate used for the convenience translation of the September 30, 2002 euro amounts: U.S.$ 0.9879 to EUR 1.00 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 6 PART I ITEM 1.f FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (AMOUNTS IN ALL TABLES AND NOTES ARE PRESENTED IN THOUSANDS OF EUROS UNLESS OTHERWISE STATED) (UNAUDITED) BUSINESS INFORMATION: Fage Dairy Industry S.A., a corporation organized under the laws of the Hellenic Republic (also known as Greece), is the successor to a business founded in Athens in 1926 by the family of Mr. Athanassios Filippou, the father of the current shareholders, Messrs. Ioannis and Kyriakos Filippou. References to the "Company" or "Fage" include, unless the context requires otherwise, Fage Dairy Industry S.A. and its consolidated subsidiaries. Fage is engaged in the dairy products business and operates primarily in Greece. The Company's sales are primarily to retailers in Greece and the remainder is exported to Western European countries. No single customer accounted for more than 10% of the consolidated net sales for the three or nine months ended September 30, 2001 and 2002. The accompanying unaudited financial statements, in the opinion of the management, reflect all necessary adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the financial position, the results of operations and cash flows for the periods presented. For a full description of accounting policies see notes to financial statements for the year ended December 31, 2001. 1. RECENTLY ISSUED ACCOUNTING STANDARDS: During 2001, the Financial Accounting Standards Board ("FASB") has issued four SFAS's ,which are summarized as follows : (i) SFAS No. 141, "Business Combinations", relates to financial accounting and reporting for business combinations and is effective for all business combinations initiated after June 30, 2001 and business combinations completed July 1, 2001 and later. It states that all business combinations included within the scope of the statement should be accounted for using the purchase method. The Company has no pending business combinations, which would be affected by the statement, but any future business combinations that are contemplated would need to take account of the requirements of the statement. (ii) SFAS No. 142, "Goodwill and Other Intangible Assets", establishes new standards for accounting for goodwill and other intangible assets. The statement does require that goodwill and indefinite lived intangible assets no longer be amortized, but reviewed annually for impairment and is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company applied SFAS No. 142 as of January 1, 2002 and completed the step 1 of the transitional goodwill impairment test for all its reporting units. The test indicated that the carrying value of goodwill relating to subsidiaries operating in the cheese sector exceeded its fair value. The Company expects to measure the impairment loss by completing step 2 no later than the end of the fiscal year, December 31, 2002. No other impairment indicators have arisen since January 1, 2002. (iii) SFAS No. 143, "Accounting for Asset Retirement Obligations", relates to financial accounting and reporting requirements associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company has not determined the impact, if any, that the adoption of this statement will have on the Company's results of operation or financial position. 7 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED (iv) SFAS No 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The statement requires that those long-lived assets be measured at the lower of carrying amount of fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The statement is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company applied SFAS No 144 in the accompanying financial statements. No adjustments occurred for the nine months ended September 30, 2002. 2. DEFERRED CHARGES: The expenses incurred in connection with the issuance and distribution of the Senior Notes issued on February 11, 1997, (see Note 13), including underwriting commissions, were capitalized as deferred charges and are being amortized on a straight-line basis over the term of the Notes. Amortization for the nine months ended September 30, 2001 and 2002 totaled EURO 250 for each of the above periods and amortization for the three months ended September 30, 2001 and 2002 totaled EURO 83 and Are included in interest expense in the accompanying consolidated statements of income. 3. TRANSLATIONS OF EURO AMOUNTS INTO U.S. DOLLARS: The consolidated financial statements are stated in Euros. The translations of the Euro amounts into U.S. Dollars at the rate of US $ 0.9879 to EURO 1.00 are included solely for the convenience of the reader. This convenience exchange rate is computed based on the noon buying rate in New York City for cable transfers in Euros, as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2002, which was US $ 0.9879 to EURO 1.00. The convenience translations should not be construed as representations that the Euros amounts have been, could have been, or could in the future be, converted into U.S. Dollars at this or any other rate of exchange. Included in foreign exchange gains (losses), net, for the nine months ended September 30, 2001 and 2002 is an amount of EURO (1,848) and EURO 10,095 respectively, relating to unrealized foreign exchangE gains (losses) of the Senior Notes referred to in Note 13. Included in foreign exchange gains (losses), net, for the three months ended September 30, 2001 and 2002 is an amount of EURO 7,586 and EURO (423) respectively, relating to unrealized foreign eXchange gains (losses) of the Senior Notes referred to in Note 13. 4. MARKETABLE SECURITIES: Equity securities at December 31, 2001 and September 30, 2002 include: (a) EURO 1,841 and EURO 1,222, respectively, representing the market value of 139,141 preferred and 210,719 common shares as of December 31, 2001 and 139,831 preferred and 212,849 common shares as of September 30, 2002 of Vis S.A. (a related company - Note 6) representing approximately 7.0% and 7.1% at the respective dates, of the authorized, issued and outstanding shares as of those dates, and b) EURO 1,410 and EURO 1,680 representing the market value of 300,000 as of December 31, 2001 and 420,000 shares as of September 30, 2002, of Hellenic Biscuit Company (a related company) representing approximately 0.9% on both dates of Hellenic Biscuit Company's authorized, issued and outstanding shares traded on the Athens Stock Exchange. The above mentioned investments have been classified as available for sale and are carried at their fair market value with the difference in the market values reflected in shareholders' equity. At December 31, 2001 and September 30, 2002, the cost of these investments in equity securities was EURO 3,507 and EURO 3,521 respectively. There were no sales of equity securities for the nine months ended September 30, 2001 and 2002. The change in net unrealized holding gain (loss) on available for sale equity securities totaled EURO (1,186) and EURO (619) for the nine months ended September 30, 2001 and 2002, respectively. 8 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED 5. ACCOUNTS RECEIVABLE: Accounts receivable are analyzed as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 -------~~-----~~ -------~~---~~ (UNAUDITED) TRADE: - In Euro 57,058 6261,~~418~~171 - In foreign currencies 4,118 910,~~495~~083 --------- ------- 61,176 71,~~913~~254 - Less: allowance for doubtful accounts (3,098) (3,~~237~~362) --------- ------- 58,078 6867,~~676~~892 ~~=========~~------- ~~=======~~------- OTHER: - Value added tax 2,594 1,~~591~~229 - Prepayments 190 ~~222~~633 - Custom brokers 128 54 - Advances from suppliers 227 ~~184~~290 - Various debtors 7,566 6,~~770~~854 --------- ------- 10,705 89,~~821~~060 - Less: allowance for doubtful accounts and various debtors (3,853) (34,~~989~~070) --------- ------- 6,852 4,~~832~~990 --------- ------- 64,930 7372,~~508~~882 ========= =======

The provision for doubtful accounts for the nine months ended September 30, 2001 and 2002 totaled EURO 464 and EURO 482, respectively. The fair value of accounts receivable approximates the above recorded values. At each reporting date, all potentially uncollectable accounts are assessed individually (through consultation with collection counsel) for purposes of determining the appropriate allowance for doubtful accounts. In this respect, the allowance for doubtful accounts at September 30, 2002, includes approximately 100%, 90%, 80%, 70%, 45% and 30% of the delinquent accounts identified above for 1993 through 1997, 1998, 1999, 2000, 2001 and 2002, respectively. It is the Company's policy to attach liens against the property of most of its delinquent customers. Because of the prolonged and complex legal procedures in Greece, it is not unusual for the collection process to take three to five years before a case is finalized. 9 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED 6. DUE FROM (TO) RELATED COMPANIES: Fage purchases goods and services from and makes sales of goods to certain related companies in the ordinary course of business. Such related companies consist of affiliates or companies, which have common ownership and/or management with Fage. The Company believes that in each case the terms of such transactions are comparable to those that would be attainable by the Company in the ordinary course of business from unaffiliated third parties under similar circumstances. Account balances with related companies are as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 -----~~-------~~ -----~~-------~~ (UNAUDITED) Due from: - Ioannis Nikolou ULP 1,254 1,~~368~~450 - Sideris & Co. 367 367 - Bizios S.A. 134 -- - Vis S.A -- 3 -----~~----~~ -----~~-------~~ 1,755 1,~~735~~820 =====~~=======~~ =====~~=======~~ Due to: - Evga S.A. 368 1,~~215~~143 - Mornos S.A. 1,677 3,~~300~~040 - Aspect S.A. 1,309 41,~~239~~730 - Vis S.A. 580 ~~842~~-- - Vihep S.A. 336 ~~433~~445 - Palace S.A. 230 ~~122~~85 - Iofil S.A. 80 -929 - Bizios S.A. -- ~~266~~616 -----~~-------~~ -----~~-------~~ 4,580 107,~~417~~988 =====~~=======~~ =====~~=======~~

Transactions with related companies for the nine months ended September 30, 2001 and 2002 are analyzed as follows:

PURCHASES SALES FROM RELATED PARTIES TO RELATED PARTIES ---------------------------- ---------------------------- ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, 2001 2002 2001 2002 ------~~----~~ ------~~----~~ ------~~----~~ ------~~----~~ (UNAUDITED) Inventories, materials and supplies 1626,~~019~~131 1727,~~932~~398 23,~~809~~806 13,~~924~~190 Advertising and media 911,~~534~~733 79,~~472~~952 -- -- Commercial services 1,~~235~~920 13,~~325~~526 - - -- -------- ------~~----~~ ------~~----~~ ------~~----~~ 2639,~~788~~784 2640,~~729~~876 23,~~809~~806 13,~~924~~190 ======~~====~~ ======~~====~~ ======~~====~~ ======~~====~~

Purchases of inventories, materials and supplies, represent approximately 19% and 20% of Fage's total purchases for the nine months ended September 30, 2001 and 2002, respectively. Advertising and media buying services represent approximately 85% and 71% of Fage's total advertising costs for the nine months ended September 30, 2001 and 2002, respectively. 10 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED 7. INVENTORIES: Inventories are analyzed as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 ------~~------~~ ------~~-----~~ (UNAUDITED) Merchandise 1,311 1,~~583~~857 Finished and semi-finished products 8,879 1410,~~937~~161 Raw materials and supplies 7,342 8,~~403~~977 Advances and payments to suppliers for materials and supplies 6,329 37,~~964~~453 -------- -------- 23,861 28,~~887~~448 ======== ========

8. INVESTMENTS IN AND ADVANCES TO AFFILIATES: The Company's investments are analyzed as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 ------~~------~~ ------~~-----~~ (UNAUDITED) Equity participation: - Tyras S.A. 1,109 1,109 - Bizios S.A. 1,875 1,~~603~~487 - Packaging Hellas Development S.A. 88 88 -----~~-------~~ -----~~------~~ 3,072 2,~~800~~684 Goodwill, net of amortization: - Bizios S.A. 552 552 -----~~-------~~ -----~~------~~ 3,624 3,~~352~~236 =====~~=======~~ =====~~======~~

The Company's investments in Tyras S.A. and Packing Items Development S.A. are accounted for at cost while its investment in Bizios S.A. is accounted for under the equity method. 9. OTHER NON-CURRENT ASSETS: Other non-current assets are analyzed as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 ------~~------~~ ------~~-----~~ (UNAUDITED) Long-term notes receivable 813 1,~~729~~631 Less: current maturities, included in trade accounts receivable (380) (~~1,079~~865) ------- ------- 433 ~~650~~766 Trademarks, net of amortization 87 7779 Utility deposits 236 ~~278~~257 Other 50 4860 ------- ------- 806 1,~~053~~162 ======= =======

The fair value of the long-term notes receivable approximates the above recorded values. 11 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED 10. GOODWILL, RESULTING FROM CONSOLIDATED SUBSIDIARIES: At December 31, 2001 and September 30, 2002, the cost and the accumulated amortization of goodwill were EURO 8,582 and EURO (1,905), respectively at both dates. The Company as of January 1, 2002 applied SFAS No 142, "Goodwill and Other Intangible Assets" and completed the step 1 of the transitional goodwill impairment test for all its reporting units. The test indicated that the carrying value of goodwill relating to subsidiaries operating in the cheese sector exceeded its fair value. The Company expects to measure the impairment loss by completing step 2 no later than the end of the fiscal year, December 31, 2002. No other impairment indicators have arisen since January 1, 2002. The unamortized goodwill reflected in the accompanying consolidated balance sheets is analyzed as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 ------~~------~~ ------~~-----~~ (UNAUDITED) Food Hellas S.A. 1,755 1,755 Pindos S.A. 374 374 Voras S.A. -- -- Xylouris S.A. 754 754 Ellenica S.R.L. 180 180 Tamyna S.A. 1,394 1,394 Agroktima S.A. 134 134 Iliator S.A. 31 31 Zagas S.A. 2,055 2,055 Fage USA Corp. - - -- -----~~-----~~ -----~~------~~ 6,677 6,677 =====~~=======~~ =====~~======~~

FOODS HELLAS S.A.: Foods Hellas is owned 99.38% by Fage and the balance of 0.62% is owned in equal shares by the two shareholders of Fage. Foods Hellas is a distribution company with a network that covers Northern Greece. Fage acquired its participating interest in Foods Hellas in three tranches. The first (46.9%) was acquired in 1990 for a consideration of EURO 1,174 from a third party who had previously acquired the shares from Fage's present shareholders. The second tranche (37.5%) was acquired in 1992 and the third tranche (14.98%) was acquired in 2001 from Fage's present shareholders. Effective January 1, 1998, the distribution network of Foods Hellas has been operated under the name of Fage. PINDOS S.A.: Fage acquired 100% of Pindos S.A. in seven tranches (51% in 1993, 19.6% in 1994, 11.2% in 1997, 12.09% in 1998, 2.22% in 1999, 1.37% in 2001 and 2.52% in 2002) for a total consideration of EURO 8,566. Pindos S.A. is a cheese producer in Ioannina. In September 1999 Foods Hellas S.A. acquired a 3.89% interest in Pindos S.A. for an amount of EURO 440. During 2001, Fage increased its participation in Pindos S.A. by 1.37% through an increase in share capital of Pindos S.A. of EURO 2,641 in which Food Hellas did not participate and as a result, its interest in Pindos S.A. was reduced to 2.52%. Additionally, in September 2002 Fage purchased from Foods Hellas S.A. its participation of 2.52% in Pindos S.A. for a consideration of EURO 207. VORAS S.A.: Fage acquired its participating interest 75.5% in Voras S.A. in three tranches ( 45% in September 1996, 25% in July 1997 and 5.5% in October 1998) for a total consideration of EURO 5,881. Voras S.A. is a milk producer in Amintaio. XYLOURIS S.A.: Fage acquired its participating interest 51% in Xylouris S.A. in three tranches (35% in 1995, 12% in 1996 and 4% in October 1997) for a total consideration of EURO 1,404. Xylouris is a cheese producer in Crete. 12 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED ELLENIKA S.R.L. : Ellenika is a 88.87% owned Italian distribution company. Fage acquired its participating interest in Ellenika in 1993 for a consideration of EURO 457. TAMYNA S.A. : Fage acquired 100% of Tamyna S.A. in five tranches (42.3% in 1996, 4.7% in 1997, 25.49% in 2000, 26.93% in 2001 and 0.58% in 2002) for a total consideration of EURO 4,880. During 2000 Foods Hellas S.A. acquired a 0.58% interest in Tamyna S.A. for an amount of EURO 37. Additionally, in September 2002 Fage purchased from Foods Hellas S.A. its participation of 0.58% in Tamyna S.A. for a consideration of 35. Tamyna is a cheese producer in Aliveri. AGROKTIMA S.A. : Fage acquired its participating interest of 99.33% in Agroktima S.A. in two tranches (33.24% in 1998 and 66.09% in 2000) for a total consideration of EURO 1,573. Additionally in 2000, Foods Hellas S.A. acquired a 0.666% interest in Agroktima S.A. for an amount of EURO 12. Therefore, Fage obtained an additional (indirect) 0.57% interest in Agroktima S.A. and, as of September 30, 2002, holds 99.996% of the company's outstanding shares. Agroktima is an agricultural and farm development company. ILIATOR S.A. : The Company has a participation interest of 97% in Iliator S.A., a construction company. FAGE USA CORP. : During 2000, Fage S.A. established a distribution company in U.S.A. under the name of Fage USA, Corp. Fage S.A. owns 100% of the company, which has been capitalized for an amount of EURO 162 in equity. ZAGAS S.A. : Zagas S.A. is a cheese producer in Agrinio. Fage acquired its participating interest 98% on January 19, 2001, for a consideration of EURO 3,020. Additionally in 2001 Foods Hellas S.A. acquired a 2% interest in Zagas S.A. for an amount of EURO 62. Therefore, Fage obtained an additional (indirect) 1.988% interest in Zagas S.A. and, as of September 30, 2002, holds 99.988% of the company's outstanding shares. The results of this investment have been included in the Company's consolidated results of operations from the date of acquisition. The purchase of Zagas S.A. was accounted for under the purchase method of accounting. In 2000 and 2001, the review by the Company's management of the carrying amounts of the goodwill that arose from investments in subsidiaries in connection with their expected recoverable amount and the estimated undiscounted cash flows from future operations indicated that the carrying amount of goodwill relating to subsidiaries operating in the "Feta" cheese sector exceeded its expected recoverable amount. Accordingly management decided to recognize an impairment loss EURO 1,323 and EURO 3,324 in 2000 and 2001, respectively, based upon a calculation of discounted expected cash flows, which was included in impairment loss in the 2000 and 2001 consolidated statements of income, respectively. The main reason for the impairment is the fact that the packaged cheese market in Greece is not developing in line with management's expectations. One of the main reasons for this is the European Court ruling against the validity of legislation protecting Feta cheese, the main product of the majority of the Company's subsidiaries, which had an adverse impact on the Company's estimates of future turnover of "Feta" cheese. 11. SHORT-TERM BORROWINGS: Short-term borrowings are draw-downs under various lines of credit maintained by the Company with several banks. The aggregate amount of available lines of credit was EURO 49,900 at December 31, 2001 and September 30, 2002, of which approximately EURO 19,004 and EURO 38,475 were unused as of the above dates. Fage held as of December 31, 2001 in a restricted cash account, an amount of EURO 15,298, including interest earned through that date. During July 2002, the above short-term borrowings amounted to EURO 14.3 million were paid and the restricted cash was released. 13 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED Short-term borrowings are denominated in Euros, Japanese Yen and U.S. Dollars and are secured by the corporate guarantee of Fage Dairy Industry S.A. The weighted average interest rates on short-term borrowings as of December 31, 2001 and September 30, 2002, were as follows: DECEMBER 31, SEPTEMBER 30, CURRENCY 2001 2002 ------ ------ (UNAUDITED) Japanese Yen 2.66% 2.12% U.S. Dollar 6.10% - Euro 6.44% - Interest on short-term borrowings for the nine months ended September 30, 2001 and 2002, totaled EURO 1,195 and EURO 848, respectively, and for the three months ended September 30, 2001 and 2002 totaled EURO 425 and EURO 168, respectively, and are included in interest expense in the accompanying consolidated statements of income. 12. LONG-TERM DEBT:

Long-term debt consists of : DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 ------------ ------------ (UNAUDITED) ~~CURRENCY~~(a) ~~Japanese~~Senior ~~Yen~~Notes, 2due 2007 (the "Notes ") issued on February 11, 1997.66 Interest on the Notes is paid semi-annually in February and August, commencing August 1, 1997, at the rate of 9% 2per annum.~~25%~~ UThe Notes are redeemable, in whole or in part, at the option of the Company at any time at premiums that reduce over time (see Note 13) 103,522 93,592 (b) Long-term loan obtained by Voras S.A. in July 1997 (JPY 248 million) due in seven semi-annual installments, commencing July 31, 1999 (two years grace period). The last installment was paid in July 2002. 614 -- (c) Long-term loan obtained by Voras S.A. ~~Dollar~~in 6July 1997 (EURO 1.~~10%~~95 3million changed in JPY 250.~~80%~~2 ~~Euro~~million 6in February 1999) due in seven semi-annual installments, commencing July 31, 1999 (two years grace period).~~44%~~ 5The last installment was paid in July 2002.~~65%~~ 620 -- ----------- ----------- 104,756 93,592 Less: Current portion of Voras S.A.'s long-term debt. (1,234) -- ----------- ----------- 103,522 93,592 =========== ===========

The fair value of the Company's long-term debt approximates the above-recorded values, generally due to their variable market rates. 14 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED Interest expense (excluding Senior Notes interest expense disclosed in Note 13) for the nine months ended September 30, 2001 and 2002, totaled EURO 50 and EURO 13, respectively, and for the three months, ended September 30, 2001 and 2002 totaled EURO 9 and EURO 2, respectively and are included in interest expense in the accompanying consolidated statements of income. 13. SENIOR NOTES DUE 2007: In February 1997, the Company completed the issuance of debt securities (Senior Notes) in the United States. The net proceeds of the offering of U.S.$ 114.6 million were used to repay outstanding obligations and for general working capital. The Senior Notes ("Notes") issued at an aggregate face amount of U.S.$ 120 million, with maturity date on February 1, 2007, bear interest at a rate of 9% per annum, payable semi-annually on each February 1, and August 1, and commenced on August 1, 1997. The Senior Notes are redeemable in whole or in part, at the option of the Company at any time at 104.5% through January 31, 2003; 103.0% thereafter through January 31, 2004; 101.5% thereafter through January 31, 2005 and at par thereafter. During 1999 and 2000, the Company repurchased in privately negotiated transactions Senior Notes with an aggregate face amount of U.S. $ 27.4 million. The repurchased Senior Notes have been canceled. Interest expense (including amortization of deferred charges) for the nine months ended September 30, 2001 and 2002, totaled EURO 7,506 and EURO 7,010, respectively, and for the three months ended September 30, 2001 and 2002 totaled EURO 2,331 and EURO 2,341, respectively, and are included in interest expense in the accompanying consolidated statements of income. The indebtedness evidenced by the Notes constitutes general unsecured senior obligation of Fage Dairy Industry S.A. and will rank PARI PASSU in right of payment with all other senior indebtedness and will rank senior in right of payment to all subordinated indebtedness of Fage Dairy Industry S.A. The Senior Notes Indenture contains certain covenants that, among other things, limit the type and amount of additional indebtedness that may be incurred by Fage and its subsidiaries and imposes certain limitations on investments, loans and advances, sales or transfers of assets, liens, dividends and other payments, the ability of Fage and its subsidiaries to enter into sale-leaseback transactions, certain transactions with affiliates and certain mergers. The Company is in compliance with the terms of the Indenture. 14. OTHER CURRENT LIABILITIES: The amount reflected in the accompanying consolidated balance sheets is analyzed as follows:

DECEMBER 31, ~~JUNE~~SEPTEMBER 30, 2001 2002 -----~~--------~~ -----~~------~~ (UNAUDITED) ~~(a)~~Taxes ~~Senior~~withheld: ~~Notes,~~Payroll ~~due~~381 ~~2007~~282 ~~(the~~Third ~~"Notes~~parties ")248 ~~issued~~438 onMilk ~~February~~producers ~~11,~~49 ~~1997.~~170 ~~Interest~~Other on364 ~~the~~227 ~~Notes is paid semi~~-annually in February and August, commencing August 1, 1997, at the rate of 9% per annum. The Notes are redeemable, in whole or in part, at the option of the Company at any time on or after February 1, 2002 (see Note 13) 103,522 93,107 (b) Long-~~term loan obtained by Voras S.A. in July 1997 (JPY 248 million) due in seven semi~~-~~annual installments, commencing July 31, 1999 (two years grace period), through July 2002 bearing interest at a rate equal to LIBOR plus 2.10% (2.22% at June 30, 2002). 614~~ - ~~(c) Long~~-~~term~~ ~~loan obtained by Voras S.A. in July 1997 (EURO 1.95 million changed in JPY 250.2 million in February 1999) due in seven semi~~-~~annual~~---- ~~installments~~1,042 ~~commencing July 31~~1,117 ~~1999 (two years grace period), through July 2002 bearing interest at a rate equal to LIBOR plus 2.10% (2.22% at June 30, 2002). 620 617~~ ----- -----~~---~~ Advances from customers 313 4 ----- ------ ~~104~~Accrued bank interest 4,~~756~~093 931,~~724~~459 ~~Less:~~Social ~~Current~~security ~~portion~~funds ofpayable ~~Voras~~1,153 ~~S.A.'s~~619 ~~long-term~~Accrued ~~debt.~~and (other liabilities 1,~~234)~~727 ~~(617)~~1,982 ----- -----~~---~~ 6,973 4,060 ----- ------ ~~103~~TOTAL 8,~~522~~328 935,~~107~~181 =====~~========~~ =====~~======~~

15 FAGE DAIRY INDUSTRY S.A. AND SUBSIDIARIES NOTES TO CONSOLIDATED STATEMENTS - CONTINUED 15. CONTINGENCIES: The Company is a party to various lawsuits and arbitration proceedings in the normal course of business in Greece, with claims totaling approximately EURO 2,800. According to the Company's management and its legal advisors, all of the lawsuits will be settled without any material adverse effect on the Company's consolidated financial position or results of operations. Fage S.A. has been appointed as an official sponsor of the Olympic games held in Athens in the year 2004. The future commitment under the sponsorship agreement amounts to approximately EURO 4.6 million. 16. SUBSEQUENT EVENTS In October 2002, Fage acquired an additional participating interest 17% in its consolidated subsidiary Xylouris S.A. for a consideration of EURO 210. As a result, Fage holds as of that date 68% of the company's outstanding shares. 16 PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL In the first nine months of the year 2002, the entire Greek white milk market volume increased by 3%, due to a significant increase of 6% in the refrigerated segment. Out of all the segments, ESL white milk remains the most dynamic, with volume that increased by about 40%. This increase can be largely attributed to the launch of new FAGE added value products under the FARMA brand name. UHT and evaporated milk volume slightly decreased. The Greek yogurt market increased by 3.5% compared to same period of 2001. The segments driving this increase are strained (Greek Style) yogurt and children's yogurt. Fage is the leading company in both segments. Desserts volume increased by 25%, mainly due to Fage's launch of the new family brand GLYKOKOYTALIES (sweet spoonfuls). Packaged cheese kept its increasing trend, with market volume increasing by 11% in the first nine months of 2002. In the first nine months of the year 2002, Fage's sales volume for refrigerated white milk increased by 3.6%, ESL white milk increased by 44%. Fage's yogurt volume sales increased by 2% compared to same period of 2001. Desserts volume increased by 80%. Fage's sales in terms of volume for packaged cheese increased by 8.2%. FAGE's export volume increased by 10.7%, in the first nine months of 2002, primary due to an increase of 13.6% in yogurt's export sales and 2.8% in cheese. In March, Fage increased prices for all segments by 3.5%. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain items in the Company's consolidated income statements expressed as percentages of net sales:

~~DECEMBER~~NINE 31MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, ~~JUNE~~SEPTEMBER 30, ---------------------- ---------------------- 2001 2002 2001 2002 ---------------------- ---------------------- (UNAUDITED) ~~Taxes~~(UNAUDITED) ~~withheld:~~Net ~~Payroll~~sales ~~381~~100% ~~293~~100% ~~Third~~100% ~~parties~~100% ~~248~~Cost ~~398~~of ~~Milk~~sales ~~producers~~66.1 4963.8 ~~210~~65.6 ~~Other~~64.8 ~~364 379~~ ----- -----~~---~~ ----- ------- ~~1,042~~Gross 1profit 33.9 36.2 34.4 35.2 Selling,~~280~~ general and administrative expenses 24.3 25.5 24.4 23.6 ----- -----~~---~~ ----- ------- ~~Advances~~Income from ~~customers~~operations ~~313~~9.6 10.7 10.0 11.6 Interest expense 3.9 3.2 3.3 2.8 Foreign exchange gains (losses), net (1.0) 4.9 11.0 (0.2) Other income (expenses), net 0.3 0.3 0.3 0.1 ----- -----~~---~~ ----- ------- ~~Accrued~~Income ~~bank~~before ~~interest~~income ~~4,093~~taxes ~~3,679~~and ~~Social~~minority ~~security~~interests ~~funds~~5.0 ~~payable~~12.7 ~~1,153~~18.0 ~~645~~8.7 ~~Accrued~~Provision ~~and~~for ~~other~~income ~~liabilities~~taxes (1~~,727~~ .2~~,356~~) (4.4) (4.7) (0.9) ----- -----~~---~~ ----- ------- ~~6,973~~Income ~~6,680~~before minority interests 3.8 8.3 13.3 7.8 Minority interests -- -- 0.1 0.1 ----- ----- ----- ------- ~~TOTAL~~Net income 3.8~~,328~~ 8.3 13.4 7~~,963~~.9 ===== =====~~===~~ ===== =======

In the following discussion, amounts are presented in thousands of Euros, unless otherwise stated, with a convenience translation into U.S. dollars based on the September 30, 2002 noon buying rate of U.S. $ 0.9879 to EURO 1.00. 17 NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2001. NET SALES. Net sales for the nine months ended September 30, 2002 were EURO 244,308 ($241.4 million), an increase of EURO 22,125 ($21.9 million ), or 10.0%, from EURO 222,183 ($219.5 million) for the comparable period of 2001. This growth resulted from both volume and price increases. GROSS PROFIT. Gross profit for the nine months ended September 30, 2002 was EURO 88,520 ($87.4 million), an increase of EURO 13,201 ($13.0 million), or 17.5%, from EURO 75,319 ($74.4 million) for the comparable period of 2001. Gross profit as a percentage of net sales for the nine months ended September 30, 2002 increased to 36.2% from 33.9% for the comparable period of 2001. The increase was primarily the result of continued improvement in operating and purchasing efficiencies. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses (SG&A) for the nine months ended September 30, 2002 were EURO 62,383 ($61.6 million), an increase of EURO 8,393 ($8.3 million), or 15.5%, from EURO 53,990 ($ 53.3 million) for the comparable period of 2001. SG&A as a percentage of net sales increased to 25.5% for the first nine months of 2002 from 24.3 % for the first nine months of 2001. A significant component of the increased SG&A was attributable to promotion and other expenses in connection with Fage's sponsorship up the 2004 Olympics to be held in Athens. Members of the Filippou family have been engaged by Fage in connection with these promotional activities. In addition, Fage has increased the compensation of certain members of the Filippou family employed by the Company. In each case, the Company believes the amounts paid to members of the family are appropriate consideration for the services provided. INCOME FROM OPERATIONS. Income from operations for the nine months ended September 30, 2002 was EURO 26,137 ($25.8 million), an increase of EURO 4,808 ($4.7 million), or 22.5%, from EURO 21,329 ($21.1 million) for the comparable period of 2001. Income from operations as a percentage of net sales for the nine months ended September 30, 2002 increased to 10.7% from 9.6% for the comparable period of 2001. INTEREST EXPENSE. Interest expense for the nine months ended September 30, 2002 was EURO 7,871 ($7.8 million), a decrease of EURO 880 ($0.9 million), or 10.1%, from EURO 8,751 ($8.6 million) for the comparable period of 2001. The decrease in interest expense was mainly due to the devaluation of the US dollar against the Euro and due to the decreased short-term borrowings for the nine months ended September 30, 2002 compared to the comparable period of 2001. FOREIGN EXCHANGE GAINS (LOSSES), NET. Foreign exchange gains for the nine months ended September 30, 2002 were EURO 12,028 ($11.9 million). These gains are mainly the result of the September 30, 2002 remeasurement of the Senior Notes, based on the Euro-US dollar exchange rate, which amounted to EURO 10,114 ($10.0 million). This non-cash gain significantly affected net income. For the comparable period of 2001 there was a foreign exchange loss of EURO 1,983 ($2.0 million). OTHER INCOME (EXPENSES), NET. Other income for the nine months ended September 30, 2002 was EURO 665 ($0.7 million), compared to EURO 566 ($0.6 million) for the comparable period of 2001. PROVISION FOR INCOME TAXES. The provision for income taxes for the nine months ended September 30, 2002 was EURO 10,616 ($10.5 million), an increase of 7,995 ($7.9 million) from EURO 2,621 ($2.6 million) for the comparable period of 2001. This increase was mainly due to the increased income before income taxes and minority interests. NET INCOME. There was a net income of EURO 20,313 ($20.1 million) for the nine months ended September 30, 2002, an increase of EURO 11,816 ($11.7 million) from EURO 8,497 ($8.4 million) for the comparable period of 2001. THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2001. NET SALES. Net sales for the three months ended September 30, 2002 were EURO 89,269 ($88.2 million), an increase of EURO 6,689 ($6.6 million), or 8.1%, from EURO 82,580 ($ 81.6 million) for the comparable period of 2001. This growth resulted from both volume and price increases. GROSS PROFIT. Gross profit for the three months ended September 30, 2002 was EURO 31,457 ($31.1 million), an increase of EURO 3,089 ($3.1 million), or 10.9%, from EURO 28,368 ($28.0 million) for the comparable period of 2001. Gross profit as a percentage of net sales for the three months ended September 30, 2002 increased to 35.2% from 18 34.4% for the comparable period of 2001. The increase was primarily the result of continued improvement in operating and purchasing efficiencies. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses (SG&A) for the three months ended September 30, 2002 were EURO 21,095 ($20.8 million), an increase of EURO 998 ($1.0 million), or 5.0%, from EURO 20,097 ($19.9 million) for the comparable period of 2001. SG&A as a percentage of net sales decreased to 23.6% for the three months ended September 30, 2002 from 24.4% for the comparable period of 2001. A significant component of the increased SG&A was attributable to promotion and other expenses in connection with Fage's sponsorship up the 2004 Olympics to be held in Athens. Members of the Filippou family have been engaged by Fage in connection with these promotional activities. In addition, Fage has increased the compensation of certain members of the Filippou family employed by the Company. In each case, the Company believes the amounts paid to members of the family are appropriate consideration for the services provided. INCOME FROM OPERATIONS. Income from operations for the three months ended September 30, 2002 was EURO 10,362 ($10.2 million), an increase of EURO 2,091 ($2.1 million), or 25.3%, from EURO 8,271 ($8.2 million) for the comparable period of 2001. Income from operations as a percentage of net sales for the three months ended September 30, 2002 increased to 11.6% from 10.0% for the comparable of 2001. INTEREST EXPENSE. Interest expense for the three months ended September 30, 2002 was EURO 2,511 ($2.5 million), a decrease of EURO 254 ($0.3 million), or 9.2%, from EURO 2,765 ($2.7 million) for the comparable period of 2001. The decrease in interest expense was mainly due to the decreased short-term borrowings for the three months ended September 30, 2002 compared to the comparable period of 2001. FOREIGN EXCHANGE GAINS (LOSSES), NET. Foreign exchange losses for the three months ended September 30, 2002 were EURO 142 ($0.1 million). These losses are mainly related to the Senior Notes period end remeasurement of the Senior Notes, based on the Euro-US dollar exchange rate. For the comparable period of 2001 there was a foreign exchange gain of EURO 9,099 ($9.0 million). OTHER INCOME (EXPENSES), NET. Other income for the three months ended September 30, 2002 was EURO 94 ($0.09 million), compared to EURO 219 ($0.2 million) for the comparable period of 2001. PROVISION FOR INCOME TAXES. The provision for income taxes for the three months ended September 30, 2002 was EURO 819 ($0.8 million), a decrease of EURO 3,032 ($3.0 million) from EURO 3,851 ($3.8 million) for the comparable period of 2001. This decrease was mainly due to the decreased income before income taxes. NET INCOME. There was a net income of EURO 7,008 ($6.9 million) for the three months ended September 30, 2002, a decrease of EURO 4,026 ($4.0 million), or 36.5% from EURO 11,034 ($10.9 million) from the comparable period of 2001. The decrease is due to the foreign exchange gains (losses in each period). LIQUIDITY AND CAPITAL RESOURCES OPERATING ACTIVITIES. Net cash from operating activities for the nine months ended September 30, 2002 was EURO 20,308 ($20.1 million), an increase of EURO 13,174 ($13.0 million) from EURO 7,134 ($7.0 million) net cash from operating activities for the comparable period of 2001. INVESTING ACTIVITIES. Net cash from investing activities for the nine months ended September 30, 2002 was EURO 7,178 ($7.1 million), an increase of EURO 26,871 ($26.5 million) from EURO 19,693 ($19.5 million), net cash used in investing activities for the comparable period of 2001. Capital expenditure of EURO 10,048 ($9.9 million) were made in continued investments in the Company's facilities in order to further realize operating efficiencies. Additionally, during July 2002 the restricted cash of EURO 15,298 ($15.1 million) was released following the repayment of the short-term borrowings, see "Note 11 Short-Term Borrowings". FINANCING ACTIVITIES. Net cash used in financing activities for the nine months ended September 30, 2002 was EURO 20,233 ($20.0 million) while net cash from financing activities was EURO 15,344 ($15.2 million) for the comparable period of 2001, a decrease of EURO 35,577 ($35.1 million) mainly due to the decrease of the short-term borrowings. SOURCES OF CAPITAL. The Company funds its operating costs through cash from operations and short-term borrowings under various lines of credit maintained at several banks. At September 30, 2002, approximately EURO 38,475 ($38.0 million) was available, see "Note 11 Short-Term Borrowings". 19 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INFLATION Although the Greek economy has long been subject to both high levels of inflation and the effects of the Greek government's measures to curb inflation such as high real interest rates, the Company does not believe inflation has had a material effect on its results of operations for the periods presented. Greece experienced inflation rates of 3.5% and 3.7% for the year 2001 and for the nine months ended September 30, 2002, respectively. FOREIGN EXCHANGE RATE FLUCTUATION Substantially all of the Company's operations are conducted in Greece and, as a result, the Company's operating results depend on the prevailing economic conditions in Greece. Furthermore, substantially all of the Company's revenues since January 1, 2002 are in euros. The Senior Notes are denominated in dollars and will require the Company to make all principal and interest payments thereon in dollars. As a result, the Company may be subject to significant foreign exchange risks. The Company's functional currency is the euro. At each balance sheet date, all monetary assets and liabilities denominated in other currencies, including the Senior Notes, are adjusted to reflect the then current exchange rate. The resulting decrease or increase is reflected on the Company's income statement as foreign exchange loss or gain. ITEM 4 - CONTROLS AND PROCEDURES Not applicable 20 PART II ITEM 1 - LEGAL PROCEEDINGS No material changes have emerged with respect to the legal proceedings in which the Company is involved and which are incidental to the conduct of its business. The Company does not believe that the outcome of any of these legal proceedings will have a material adverse effect on the business, financial condition or prospects of the Company. 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 None 21 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, in Athens, Greece. FAGE DAIRY INDUSTRY S.A. Date: November 13, 2002 By: /s/ Ioannis Filippou Chairman of the Board Date: November 13, 2002 By: /s/ Kyriakos Filippou Chief Executive Officer and Director Date: November 13, 2002 By: /s/ Christos Koloventzos Chief Financial Officer 22

SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------- 2001 2002 2001 2002 ------------------- ------------------- (UNAUDITED) (UNAUDITED) Net sales ................................... 100% 100% 100% 100% Cost of sales ............................... 66.4 63.2 67.1 64.9 ------------------- ------------------- Gross profit ................................ 33.6 36.8 32.9 35.1 Selling, general and administrative expenses. 24.3 26.6 25.6 27.9 ------------------- ------------------- Income from operations ...................... 9.3 10.2 7.3 7.2 Interest expense ............................ 4.2 3.5 4.1 2.9 Foreign exchange gains (losses), net ........ (7.9) 7.8 (4.7) 15.7 Other income (expenses), net ................ 0.2 0.4 0.4 0.4 ------------------- ------------------- Income (loss) before income taxes and minority interests ........................ (2.6) 14.9 (1.1) 20.4 Provision for income taxes .................. 0.9 (6.3) 0.2 (9.2) ------------------- ------------------- Income (loss) before minority interests ..... (1.7) 8.6 (0.9) 11.2 Minority interests .......................... (0.1) - - (0.1) ------------------- ------------------- Net income (loss) ........................... (1.8) 8.6 (0.9) 11.1 =================== ===================

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