UNITED ~~STATES SECURITIES~~STATESSECURITIES AND EXCHANGE ~~COMMISSION WASHINGTON~~COMMISSIONWASHINGTON, D.C. ~~20549~~20549FORM 10-Q

~~FORM~~QUARTERLY ~~10-Q~~REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended February 29, 2004 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended November 30, 2003

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number – 0-17896

HANOVER FOODS CORPORATION (Exact name of Registrant as specified in its charter)

Commonwealth of Pennsylvania	~~23-0670710~~	23-0670710
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)
1486 York Road, P.O. Box 334, Hanover, PA	~~17331~~	17331
(Address of principal executive offices)	~~(Zip Code)~~	(Zip Code)
717-632-6000 (Registrant’s telephone number, including area code)

717-632-6000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing for the past 90 days. Yes No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes No

Indicate the number of shares outstanding of issuer’s classes of common stock as of the latest practicable date.

Class	Outstanding at February 29, 2004	~~Outstanding at November 30, 2003~~
Class A Common Stock, $25 par value	288,018 shares	~~288,062 shares~~
Class B Common Stock, $25 par value	781,648 shares	~~781,648 shares~~

~~HANOVER FOODS CORPORATION AND SUBSIDIARIES FORM 10-Q For the Twenty-Six Weeks Ended November 30, 2003~~1

Index		Page
Part I – Financial Information
Item 1 –	Financial Statements:
	Condensed Consolidated Balance Sheets November 30, 2003 (Unaudited) and June 1, 2003	3
	Condensed Consolidated Statements of Operations (Unaudited) Twenty-Six Weeks Ended and Thirteen Weeks Ended November 30, 2003 and December 1, 2002	5
	Condensed Consolidated Statements of Stockholders’ Equity, (Unaudited) Twenty-Six Weeks Ended November 30, 2003	6
	Condensed Consolidated Statements of Cash Flows (Unaudited), Twenty-Six Weeks Ended November 30, 2003 and December 1, 2002	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2 –	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3 –	Quantitative and Qualitative Disclosure About Market Risk	26
Item 4 –	Controls and Procedures	26
	Part II – Other Information	27
Item 1 –	Legal Proceedings	27
Item 2 –	Changes in Securities and Use of Proceeds	27
Item 3 –	Defaults upon Senior Securities	27
Item 4 –	Submission of Matters to a Vote of Security Holders	27
Item 5 –	Other Information	27
Item 6 –	Exhibits and Reports on Form 8-K	27
	Exhibit Index
Exhibit 10.1	2003 Stock Option Plan
Exhibit 10.2	PNC Bank Line of Credit Personal
Exhibit 10.3	Citizen’s Bank Line of Credit Personal
Exhibit 31.1	Section 302 Certification – Chief Executive Officer
Exhibit 31.2	Section 302 Certification – Chief Financial Officer
Exhibit 32.1	Certification by John A. Warehime, Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit
Exhibit 32.2	Certification by Gary T. Knisely, Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Back to Contents

HANOVER FOODS CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Thirty-Nine Weeks Ended February 29, 2004

Index			Page
Part I – Financial Information

	Item 1 – Financial Statements:

		Condensed Consolidated Balance Sheets February 29, 2004 (Unaudited) and June 1, 2003	3

		Condensed Consolidated Statements of Operations (Unaudited) Thirty-Nine Weeks Ended and Thirteen Weeks Ended February 29, 2004 and March 2, 2003	5

		Condensed Consolidated Statements of Stockholders’ Equity, (Unaudited) Thirty-Nine Weeks Ended February 29, 2004	6

		Condensed Consolidated Statements of Cash Flows (Unaudited), Thirty-Nine Weeks Ended February 29, 2004 and March 2, 2003	7

		Notes to Condensed Consolidated Financial Statements (Unaudited)	8

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

	Item 3 – Quantitative and Qualitative Disclosure About Market Risk		26

	Item 4 – Controls and Procedures		26

	Part II – Other Information		27

	Item 1	– Legal Proceedings	27
	Item 2	– Changes in Securities and Use of Proceeds	27
	Item 3	– Defaults upon Senior Securities	27
	Item 4	– Submission of Matters to a Vote of Security Holders	27
	Item 5	– Other Information	27
	Item 6	– Exhibits and Reports on Form 8-K	27
	Exhibit Index		27

	Exhibit 31.1 Section 302 Certification – Chief Executive Officer

	Exhibit 31.2 Section 302 Certification – Chief Financial Officer

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

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

Back to Contents

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

				November 30, 2003
ASSETS			February 29, 2004 (Unaudited)			June 1, 2003
				(Unaudited)			June 1, 2003
Current Assets:
ASSETS
Cash and Cash Equivalents		$	1,763,000		$	4,128,000
Current Assets:
Accounts and Notes Receivable, Net			30,073,000			25,099,000
	Cash and Cash Equivalents		$	2,805,000		$	4,128,000
Accounts Receivable from Related Parties, Net			183,000			163,000
	Accounts and Notes Receivable, Net			30,633,000			25,099,000
Inventories
	Accounts Receivable from Related Parties, Net			0			163,000
Finished Goods			46,524,000			40,746,000
	Inventories
Raw Materials and Supplies			18,135,000			17,562,000
		Finished Goods		53,853,000			40,746,000
Prepaid Expenses			2,163,000			2,216,000
		Raw Materials and Supplies		18,619,000			17,562,000
Prepaid Income Taxes			140,000			0
	Prepaid Expenses			891,000			2,216,000
Deferred Income Taxes			917,000			917,000
	Prepaid Income Taxes			140,000			0
Total Current Assets			99,898,000			90,831,000
	Deferred Income Taxes			917,000			917,000
Property, Plant and Equipment, at Cost:
		Total Current Assets		107,858,000			90,831,000
Land and Buildings			58,629,000			53,972,000
Property, Plant and Equipment, at Cost:
Machinery and Equipment			133,442,000			128,422,000
	Land and Buildings			55,006,000			53,972,000
Leasehold Improvements			544,000			544,000
	Machinery and Equipment			130,438,000			128,422,000
			192,615,000			182,938,000
	Leasehold Improvements			544,000			544,000
Less Accumulated Depreciation and Amortization			118,598,000			111,255,000
				185,988,000			182,938,000
			74,017,000			71,683,000
	Less Accumulated Depreciation and Amortization			115,887,000			111,255,000
Construction in Progress			3,795,000			951,000
				70,101,000			71,683,000
Total Property, Plant and Equipment			77,812,000			72,634,000
	Construction in Progress			3,113,000			951,000
Other Assets:
Total Property, Plant and Equipment				73,214,000			72,634,000
Goodwill & Intangible Assets			4,314,000			3,539,000
Other Assets:
Other Assets			5,929,000			4,429,000
	Goodwill & Intangible Assets – Less Accumulated Amortization of $3,175,000			3,539,000			3,539,000
Total Assets		$	187,953,000		$	171,433,000
	Other Assets			5,705,000			4,429,000
		Total Assets	$	190,316,000		$	171,433,000

See accompanying notes to condensed consolidated financial statements.

Back to Contents

PART I – FINANCIAL ~~INFORMATION~~INFORMATIONItem ~~Item~~ 1. Financial Statements, ~~Continued~~ContinuedHANOVER ~~HANOVER~~ FOODS CORPORATION AND ~~SUBSIDIARIES~~SUBSIDIARIESCondensed ~~Condensed~~ Consolidated Balance Sheets

				November 30, 2003
LIABILITIES AND STOCKHOLDERS’ EQUITY			February 29, 2004 (Unaudited)			June 1, 2003
				(Unaudited)			June 1, 2003
Current Liabilities:
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes Payable – Banks		$	17,797,000		$	7,634,000
Current Liabilities:
Accounts Payable			19,932,000			19,745,000
	Notes Payable – Banks			$	16,879,000		$	7,634,000
Accounts Payable to Related Parties – Net			0			7,000
	Accounts Payable				23,045,000			19,745,000
Accrued Expenses			11,131,000			10,921,000
	Accounts Payable to Related Parties – Net				500,000			7,000
Current Maturities of Long-Term Debt			4,286,000			4,286,000
	Accrued Expenses				13,307,000			10,921,000
Income Taxes Payable			662,000			1,211,000
	Current Maturities of Long-Term Debt				4,286,000			4,286,000
Total Current Liabilities			53,808,000			43,804,000
	Income Taxes Payable				957,000			1,211,000
Long-Term Debt, Less Current Maturities			22,857,000			25,357,000
Total Current Liabilities					58,974,000			43,804,000
Other Liabilities			7,011,000			5,916,000
Long-Term Debt, Less Current Maturities					22,857,000			25,357,000
Deferred Income Taxes			2,860,000			3,139,000
Other Liabilities					6,621,000			5,916,000
Total Liabilities			86,536,000			78,216,000
Deferred Income Taxes					2,900,000			3,139,000
Stockholders’ Equity:
Total Liabilities					91,352,000			78,216,000
Series A & B 8 1/4% cumulative convertible preferred, $25
Stockholders’ Equity:
Par Value, 120,000 shares authorized; 31,056 shares issued at June 1, 2003 and February 29, 2004; 14,564 shares outstanding at June 1, 2003 and February 29, 2004			776,000			776,000
	Series A & B 8 1/4% cumulative convertible preferred, $25 Par Value, 120,000 shares authorized;
Series C cumulative convertible preferred, $25 Par Value, 10,000 shares authorized, issued and outstanding			250,000			250,000
		31,056 shares issued at June 1, 2003 and November 30, 2003; 14,564 shares outstanding at June 1, 2003 and November 30, 2003			776,000			776,000
Common stock, Class A, non-voting, $25 Par Value; 800,000 shares authorized, 349,353 shares issued at June 1, 2003 and February 29, 2004; 288,062 shares outstanding at June 1, 2003 and 288,018 at February 29, 2004			8,733,000			8,733,000
	Series C cumulative convertible preferred, $25 Par Value,
Common stock, Class B, voting, $25 Par Value; 880,000 shares authorized, 649,072 shares issued at June 1, 2003 and 848,522 at February 29, 2004, 582,198 shares outstanding June 1, 2003 and 781,648 at February 29, 2004			21,213,250			16,227,000
		10,000 shares authorized, issued and outstanding			250,000			250,000
Capital Paid in Excess of Par Value			34,920,850			16,372,000
	Common stock, Class A, non-voting, $25 Par Value;
Retained Earnings			84,455,000			76,746,000
		800,000 shares authorized, 349,353 shares issued at June 1, 2003 and November 30, 2003; 288,062 shares outstanding at June 1, 2003 and November 30, 2003			8,733,000			8,733,000
Treasury Stock, at Cost			(8,177,000	)		(8,172,000	)
	Common stock, Class B, voting, $25 Par Value;
Value of Shares held in Employee Stock Trust – 146,930 shares at June 1, 2003 and 344,679 at February 29, 2004			(40,427,100	)		(17,096,000	)
		880,000 shares authorized, 649,072 shares issued at June 1, 2003 and 848,522 issued at November 30, 2003, 582,198 shares outstanding June 1, 2003 and 781,648 outstanding at November 30, 2003			21,213,250			16,227,000
Accumulated Other Comprehensive Loss			(327,000	)		(619,000	)
	Capital Paid in Excess of Par Value				34,920,850			16,372,000
Total Stockholders’ Equity			101,417,000			93,217,000
	Retained Earnings				82,409,000			76,746,000
Total Liabilities and Stockholders’ Equity		$	187,954,000		$	171,433,000
	Treasury Stock, at Cost				(8,172,000	)		(8,172,000	)
	Value of Shares held in Employee Benefit Trust – 146,930 shares at June 1, 2003 and 346,380 at November 30, 2003				(40,631,100	)		(17,096,000	)
	Accumulated Other Comprehensive Loss				(535,000	)		(619,000	)
Total Stockholders’ Equity					98,964,000			93,217,000
Total Liabilities and Stockholders’ Equity				$	190,316,000		$	171,433,000
See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Back to Contents

				Twenty-Six Weeks Ended						Thirteen Weeks Ended
			Thirty-Nine Weeks Ended						Thirteen Weeks Ended
				November 30,			December 1,			November 30,			December 1,
			February 29, 2004			March 2, 2003			February 29, 2004			March 2, 2003
				2003			2002			2003			2002
Net Sales		$	234,132,000		$	216,485,000		$	83,009,000		$	73,161,000
Net Sales			$	151,123,000		$	143,324,000		$	84,223,000		$	79,897,000
Cost of Goods Sold			199,482,000			180,871,000			71,566,000			60,657,000
Cost of Goods Sold				127,916,000			120,214,000			70,655,000			67,127,000
Gross Profit			34,650,000			35,614,000			11,443,000			12,504,000
Gross Profit				23,207,000			23,110,000			13,568,000			12,770,000
Selling Expenses			8,962,000			9,712,000			3,143,000			3,586,000
Selling Expenses				5,819,000			6,126,000			2,913,000			3,198,000
Administrative Expenses			11,087,000			11,277,000			4,009,000			4,364,000
Administrative Expenses				7,078,000			6,913,000			3,346,000			3,181,000
Operating Profit			14,601,000			14,625,000			4,291,000			4,554,000
Operating Profit				10,310,000			10,071,000			7,309,000			6,391,000
Interest Expense			1,794,000			2,218,000			594,000			708,000
Interest Expense				1,200,000			1,510,000			606,000			766,000
Other (Income) Expenses, Net			(231,000	)		230,000			(19,000	)		75,000
Other (Income) Expenses, Net				(212,000	)		155,000			11,000			(21,000	)
Earnings Before Income Taxes			13,038,000			12,177,000			3,716,000			3,771,000
Earnings Before Income Taxes				9,322,000			8,406,000			6,692,000			5,646,000
Income Taxes			4,569,000			4,338,000			1,365,000			1,407,000
Income Taxes				3,204,000			2,931,000			2,386,000			1,953,000
Net Earnings			8,469,000			7,839,000			2,351,000			2,364,000
Net Earnings				6,118,000			5,475,000			4,306,000			3,693,000
Dividends on Preferred Stock			31,000			31,000			10,000			10,000
Dividends on Preferred Stock				21,000			21,000			11,000			11,000
Net Earnings Applicable to
Net Earnings Applicable to Common Stock			$	6,097,000		$	5,454,000		$	4,295,000		$	3,682,000
Common Stock		$	8,438,000		$	7,808,000		$	2,341,000		$	2,354,000
Earnings Per Share:
Net Earnings Per Common Share – Basic	~~Net Earnings Per Common Share – Basic~~	$	$8.70	~~6.63~~	$	$10.85	~~7.59~~	$	$2.19	~~4.43~~	$	$3.26	~~5.12~~
Net Earnings Per Common Share – Diluted	~~Net Earnings Per Common Share – Diluted~~	$	$8.62	~~6.56~~	$	$10.70	~~7.48~~	$	$2.17	~~4.39~~	$	$3.22	~~5.05~~
Dividends per Share, Common		$	$0.825	~~0.550~~	$	$0.825	~~0.550~~	$	$0.275	~~0.275~~	$	$0.275	~~0.275~~
Basic Weighted Average Shares			969,620	~~919,575~~		719,822	~~718,791~~		1,069,710	~~968,889~~		721,883	~~718,791~~
Diluted Weighted Average Shares			982,686	~~932,641~~		732,888	~~731,857~~		1,082,776	~~981,955~~		734,949	~~731,857~~
See accompanying notes to condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements.

Back to Contents

		Total Stock- holder's Equity		Cumu-lative Conver-tible Pref- erred Stock Series A & B Shares			Amount		Cumu-lative Conver-tible Pref- erred Stock Series C Shares		Amount		Com-mon Stock Class A Shares		Amount	Com- mon Stock Class B Shares			Amount			Capital Paid In Excess Of Par Value			Retained Earnings		Trea- sury Stock Shares			Amount		Empl- oyee Stock Trust Shares		Amount			Accumu- lated Other Compre- hensive Income
		Total Stockholder’s Equity			Cumulative Convertible Preferred Stock Series A & B Shares			Amount		Cumulative Convertible Preferred Stock Series C Shares			Amount		Common Stock Class A Shares		Amount			Common Stock Class B Shares			Amount			Capital Paid In Excess Of Par Value			Retained Earnings			Treasury Stock Shares		Amount			Employee Stock Trust Shares		Amount			Accumulated Other Comprehensive Income
Balance, June 1, 2003	$	93,217,000		~~31,056~~	31,056	$	~~776,000~~$	776,000	~~10,000~~	$10,000	~~250,000~~	$	~~349~~250,~~353~~000	$	8349,~~733,000~~353	~~649,072~~$	8,733,000	$	~~16,227,000~~	649,072	$	~~16,372,000~~$	16,227,000	$	~~76,746,000~~$	16,372,000	~~144,657~~	$	$76,746,000	~~(8,172,000~~	)	~~146~~144,~~930~~657	$	(17$8,~~096~~172,000	)	$	~~(619~~146,~~000~~930	)	($17,096,000	)		($619,000	)
Net Earnings for the Period	$	68,~~118~~469,000																						$	~~6,118,000~~			$	8,469,000
Cash Dividends Per Share:
Preferred – $2.0625 annually	$	(21$31,000	)																					$	~~(21,000~~	)			($31,000	)
Common – $1.10 annually	$	(~~434~~$729,000	)																					$	~~(434,000~~	)			($729,000	)
Issuance of common stock to
Employee Stock Trust
Class B 199,450 shares	$	0														~~199,450~~			~~4,986,250~~	199,450		~~18,548,850~~	4,986,250			18,548,850						~~199,450~~		~~(23,535,100~~	)		(199,450	)	(23,535,100	)
Redemption of Common Stock
Issuance of Common Stock to Employee Stock Ownership Trust																																					(1,701	)	204,000
Class A
Redemption of Common Stock
Class B	$	0
Class A																																44		($5,000	)
Stock Conversions	$	0
Class B	$	0
Other Comprehensive Income	$	84,000																																		$	84,000
Stock Conversions	$	0
Balance November 30, 2003	$	98,964,000		31,056		$	776,000		10,000	$	250,000		349,353	$	8,733,000	848,522		$	21,213,250		$	34,920,850		$	82,409,000		144,657		$	(8,172,000)		346,380	$	(40,631,100	)	$	(535,000	)
Other Comprehensive Income		292,000																																							$	292,000
See accompanying notes to condensed consolidated financial statements.
Balance February 29, 2004	$	101,417,000			31,056		$	776,000		10,000		$	250,000		349,353	$	8,733,000			848,522		$	21,213,250		$	34,920,850		$	84,455,000			144,701		($8,177,000	)		344,679		($40,427,100	)		($327,000	)

See accompanying notes to condensed consolidated financial statements.

Back to Contents

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

	Twenty-Six Weeks Ended
		Thirty-Nine Weeks Ended
		Nov. 30, 2003			Dec. 1, 2002
		Feb. 29, 2004			Mar. 2, 2003
Cash Flows From:
Operating Activities:
Net Earnings	$	68,~~118~~469,000		$	57,~~475~~839,000
Adjustments to Reconcile Net Earnings:
To Net Cash Provided by (Used In) Operating Activities:
Depreciation and Amortization		47,~~632~~343,000			47,~~898~~361,000
Deferred Income Taxes		(239,000	)		164,000
Non Cash Charge (ESOP Contribution)		204,000			545,000
Deferred Income Taxes		(279,000	)		44,000
Changes in Assets and Liabilities:
Accounts Receivable		(54,~~371~~403,000	)		(1645,~~800,~~000	)
Inventories		(145,~~164~~701,000	)		(92,~~405~~212,000	)
Prepaid Expenses		174,~~185,~~000			1329,~~071,~~000
Accounts Payable and Accrued Expenses		6305,~~179,~~000			3(1,~~547~~994,000	)
Income Taxes Payable		(~~254~~689,000	)		~~432~~100,000
Other Liabilities		~~705~~1,095,000			~~585~~877,000
Net Cash Provided by (Used In) Operating Activities		(16,~~209~~418,000	)		413,~~967~~534,000
Investing Activities:
Decrease (Increase) in Other Assets		(1,~~192~~208,000	)		(~~371~~566,000	)
Acquisitions of Property, Plant and Equipment		(58,~~212~~830,000	)		(34,~~325~~180,000	)
Net Cash Provided by (Used In) Investing Activities		(6,404,000	)		(3,696,000	)
Purchases of Businesses		(5,643,000	)
Net Cash Provided by (Used In) Investing Activities		(15,681,000	)		(4,746,000	)
Financing Activities:
Increase in Notes Payable		910,~~245~~163,000			2(4,~~197~~246,000	)
Payments on Long-Term Debt		(2,500,000	)		(2,505,000	)
Proceeds from issuance of Long Term Debt		0			0
Payment of Dividends		(455,000	)		(499,000	)
Payments on Long-Term Debt		(2,500,000	)		(2,509,000	)
Net Cash Provided by (Used In) Financing Activities		6,290,000			(807,000	)
Payment of Dividends		(760,000	)		(748,000	)
Net Increase (Decrease) in Cash and Cash Equivalents		(1,323,000	)		464,000
Redemption of Common Stock		(5,000	)		(22,000	)
Net Cash Provided by (Used In) Financing Activities		6,898,000			(7,525,000	)
Net Increase (Decrease) in Cash and Cash Equivalents		(2,365,000	)		1,263,000
Cash and Cash Equivalents, Beginning of Period		4,128,000			2,816,000
Cash and Cash Equivalents, End of Period	$	21,~~805~~763,000		$	34,~~280~~079,000

See accompanying notes to condensed consolidated financial statements.

Back to Contents

PART I – FINANCIAL INFORMATION Item 1. Financial Statements, Continued HANOVER FOODS CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements ~~November~~February 3029, ~~2003~~2004 (Unaudited)

(1) BASIS OF PRESENTATION The condensed consolidated financial statements of the Registrant included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been omitted, the Registrant believes that the disclosures are adequate to make the information presented not misleading.The Corporation’s fiscal year ends at the close of operations on the Sunday nearest to May 31st. Accordingly, these financial statements reflect activity for the thirteen and thirty-nine week periods ended February 29, 2004 and March 2, 2003.It is suggested that these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Form 10-K/A for the Corporation’s fiscal year ended June 1, 2003.The condensed consolidated financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary to present a fair statement of the results of the interim period.The results for the interim periods are not necessarily indicative of trends or results to be expected for a full fiscal year.Certain reclassifications were made to the prior period financial statements to be consistent with the current period reporting presentation.

~~The~~(2) ~~condensed~~SHORT-TERM ~~consolidated financial~~BORROWINGS ~~statements~~The ofCorporation ~~the~~and ~~Registrant~~its ~~included~~subsidiaries ~~herein~~maintain ~~have~~short-term ~~been~~unsecured ~~prepared, without~~lines ~~audit,~~of ~~pursuant~~credit towith ~~the~~various ~~rules~~banks ~~and~~providing ~~regulations~~credit ofavailability ~~the~~amounting ~~Securities and~~to ~~Exchange~~$50,000,000 ~~Commission.~~of ~~Although~~which ~~certain~~$17,797,000 ~~information~~was ~~normally~~borrowed ~~included in~~at ~~financial~~February ~~statements~~29, ~~prepared~~2004. inThe ~~accordance~~average ~~with~~cost ~~generally~~of ~~accepted accounting~~funds ~~principles~~during ~~has~~thirty-nine ~~been~~week ~~omitted,~~period ~~the~~ended ~~Registrant~~February ~~believes~~29, ~~that~~2004 ~~the disclosures~~was ~~are~~1.89% ~~adequate~~compared to ~~make~~2.34% for the ~~information~~thirty-nine ~~presented~~week ~~not~~period ~~misleading~~ended March 2, 2003.

The Corporation’s fiscal year ends at the close of operations on the Sunday nearest to May 31st. Accordingly, these financial statements reflect activity for the thirteen and twenty-six week periods ended November 30, 2003 and December 1, 2002.

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

The condensed consolidated financial statements included herein reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary to present a fair statement of the results of the interim period.

The results for the interim periods are not necessarily indicative of trends or results to be expected for a full fiscal year.

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

Back to Contents

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

(23) ~~SHORT~~LONG-TERM ~~BORROWINGS~~DEBT

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


		February 29, 2004		June 1, 2003

8.74% unsecured senior notes payable to an insurance company, due through 2007	$	7,143,000	$	7,143,000

7.01% unsecured senior notes payable to an insurance company, due through 2011		20,000,000		22,500,000

Total Long-Term Debt		27,143,000		29,643,000

Less current maturities		4,286,000		4,286,000

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

The senior note agreements and the agreements for seasonal borrowing with financial institutions contain various restrictive provisions including those relating to mergers and acquisitions, additional borrowing, guarantees of obligations, lease commitments, limitations on declaration and payment of dividends, repurchase of the Corporation’s stock, and the maintenance of working capital and certain financial ratios.


	The Corporation is in compliance with the restrictive provisions in the agreements as of February 29, 2004.

Back to Contents

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

(34) ~~LONG-TERM~~RELATED ~~DEBT~~PARTY ~~The~~TRANSACTIONSThe ~~long-term~~Corporation ~~debt~~and ofits subsidiaries, in the normal course of business, purchase and sell goods and services to related parties. The Corporation believes that the cost of such purchases and ~~its~~sales ~~subsidiaries~~are ~~consist~~competitive with alternative sources of: supply and markets.

			November 30, 2003			June 1, 2003
				Thirty-NineWeeks Ended					Thirteen Weeks Ended
	8.74% unsecured senior notes payable to an insurance company, due through 2007	$	7,143,000		$	7,143,000
				Feb. 29, 2004			Mar. 2, 2003		Feb. 29, 2004		Mar. 2, 2003
	7.01% unsecured senior notes payable to an insurance company, due through 2011		20,000,000			22,500,000
Revenues:
	Total Long-Term Debt		27,143,000			29,643,000
	Park 100 Foods, Inc.		$	942,000		$	1,643,000	$	369,000	$	393,000
	Less current maturities		4,286,000			4,286,000
Expenditures:
	Net Long-Term Debt	$	22,857,000		$	25,357,000
	Park 100 Foods, Inc.		$	19,000		$	12,000	$	8,000	$	2,000
	Warehime Enterprises, Inc.			3,000			3,000		1,000		1,000
	John A. & Patricia M. Warehime			30,000			48,000		12,000		15,000
	Lippy Brothers, Inc.			1,108,000			1,146,000		14,000		704,000
	Schaier Travel			0			3,000		0		0

Back to Contents

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

~~(4)~~The ~~RELATED~~respective ~~PARTY~~June ~~TRANSACTIONS~~1, 2003 and February 29, 2004 account balances with related parties are as follows:

The Corporation and its subsidiaries, in the normal course of business, purchase and sell goods and services to related parties. The Corporation believes that the cost of such purchases and sales are competitive with alternative sources of supply and markets.

			February 29, 2004		June 1, 2003

Accounts Receivable:

	Park 100 Foods, Inc.	$	186,000	$	163,000


Accounts Payable:

	Park 100 Foods, Inc.		0		7,000
	John & Patricia Warehime		3,000		3,000

		Twenty-Six Weeks Ended				Thirteen Weeks Ended
			Nov. 30, 2003		Dec. 1, 2002		Nov. 30, 2003		Dec. 1, 2002
Revenues:
	Park 100 Foods, Inc.	$	573,000	$	793,000	$	235,000	$	501,000
Expenditures:
	Park 100 Foods, Inc.	$	11,000	$	10,000	$	0	$	7,000
	Warehime Enterprises, Inc.		2,000		2,000		1,000		1,000
	John A. & Patricia M. Warehime		18,000		33,000		9,000		16,000
	Lippy Brothers, Inc.		1,094,000		442,000		939,000		200,000
	Schaier Travel		0		3,000		0		0

Back to Contents

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

~~The~~(5) ~~respective~~COMPREHENSIVE ~~June~~INCOMEComprehensive 1,income ~~2003~~is ~~and~~determined ~~November 30, 2003 account balances with related parties are~~ as follows:

		November 30, 2003		June 1, 2003
			39 Weeks Ended					13 Weeks Ended
Accounts Receivable:
			Feb. 29, 2004		Mar. 2, 2003			Feb. 29, 2004		Mar. 2, 2003
	Park 100 Foods, Inc	$	228,000	$	163,000
Net Income		$	8,469,000	$	7,839,000		$	2,351,000	$	2,364,000
Accounts Payable:
Other Comprehensive Income (Loss) -Unrealized Gain (Loss) on Investments			292,000		(270,000	)		208,000		(183,000	)
	Park 100 Foods, Inc		0		7,000
Comprehensive Income		$	8,761,000	$	7,569,000		$	2,559,000	$	2,181,000
	Lippy Brothers, Inc.		723,000		0
	Warehime Enterprises, Inc.		1,000		0
	John & Patricia Warehime		4,000		0

Back to Contents

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

(5) COMPREHENSIVE INCOME

Comprehensive income is determined as follows:

	26 Weeks Ended					13 Weeks Ended
	Nov 30, 2003		Dec 1, 2002			Nov 30, 2003		Dec 1, 2002
Net Income	$	6,118,000	$	5,475,000		$	4,306,000	$	3,693,000
Other Comprehensive Income (Loss) – Unrealized Gain (Loss) on Investments		84,000		(87,000	)		50,000		56,000
Comprehensive Income	$	6,202,000	$	5,388,000		$	4,356,000	$	3,749,000

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

Numerator for basis earnings per share:

	26 Weeks Ended						13 Weeks Ended
			39 Weeks Ended						13 Weeks Ended
		Nov 30, 2003			Dec 1, 2002			Nov 30, 2003			Dec 1, 2002
			Feb. 29, 2004			Mar. 2, 2003			Feb. 29, 2004			Mar. 2, 2003
Net earnings applicable to common stock	$	~~6,097,000~~$	8,438,000	$	~~5,454,000~~$	7,808,000	$	~~4,295,000~~$	2,341,000	$	~~3,682,000~~$	2,354,000
Preferred stock dividends		~~21,000~~	31,000		~~21,000~~	31,000		~~11,000~~	10,000		~~11,000~~	10,000
Net earnings assuming dilution	$	~~6,118,000~~$	8,469,000	$	~~5,475,000~~$	7,839,000	$	~~4,306,000~~$	2,351,000	$	~~3,693,000~~$	2,364,000
Denominator:
Basic weighted average shares		~~919,575~~	969,620		~~718,791~~	719,822		~~968,889~~	1,069,710		~~718,791~~	721,883
Effect of dilutive securities		~~13,066~~	13,066		~~13,066~~	13,066		~~13,066~~	13,066		~~13,066~~	13,066
Diluted weighted average shares		~~932,641~~	982,686		~~731,857~~	732,888		~~981,955~~	1,082,776		~~731,857~~	734,949

Back to Contents

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

(7)

STOCK OPTION PLAN

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

On October 17, 2003, the Corporation’s Board of Directors adopted the Hanover Foods Corporation 2003 Stock Option Plan (the “2003 Option Plan”). All full-time employees (excluding employees represented by a collective bargaining agent) of the Corporation and of any present or future parent or subsidiary of the Corporation who have been employed for at least one year, excluding John A. Warehime, are eligible to receive options under the 2003 Option Plan. No individual may receive options under the 2003 Option Plan for more than 5% of the total number of shares of the Corporation’s Class B common stock authorized for issuance under the 2003 Option Plan. 200,000 shares of the Corporation’s Class B common stock, par value $25.00 per share, are authorized for issuance under the 2003 Option Plan. On October 17, 2003, the Board of Directors of the Corporation voted to make a grant to all full-time, non-union employees of the Corporation who have been employed by the Corporation for at least one year, other than John A. Warehime except that if an individual is in the employ of the Corporation or any of its subsidiaries as of October 17, 2003, but has not been employed for at least one year as of October 17, 2003, once the one year employment requirement has been satisfied, the employee will receive stock options, with an option price equal to the appraised fair market value at the time of the option grant. The Board of Directors granted options for199,450 shares of Class B common stock.

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

Back to Contents

~~PART~~Had Icompensation –expense ~~FINANCIAL~~for ~~INFORMATION Item~~all 1stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the method prescribed under SFAS No. ~~Financial~~ ~~Statements~~123, ~~Continued HANOVER~~“Accounting ~~FOODS~~for ~~CORPORATION~~Stock-Based ~~AND~~Compensation” ~~SUBSIDIARIES Notes~~as toamended, ~~Condensed~~net ~~Consolidated Financial~~(loss) ~~Statements~~ income and (~~Unaudited~~loss) earnings per share would have been adjusted to the pro forma amounts as follows:

(7) STOCK OPTION PLAN

		39 Weeks Ended						13 Weeks Ended

		Feb. 29, 2004			Mar. 2, 2003			Feb. 29, 2004			Mar. 2, 2003

Net earnings applicable to common stockholders, as reported	$	8,438,000		$	7,808,000		$	2,341,000		$	2,384,000
Deduct: Total stock based employee compensation expense determined under the fair value base method for all awards, net of related tax effects		(60,000	)		(60,000	)		(20,000	)		(20,000	)

Pro forma net income applicable to common stock	$	8,738,000		$	7,748,000		$	2,321,000		$	2,334,000


Earnings per share:
Basic-as reported	$	8.70		$	10.85		$	2.19		$	3.26
Basic – pro-forma	$	8.64		$	10.76		$	2.17		$	3.23
Diluted-as reported	$	8.62		$	10.70		$	2.17		$	3.22
Diluted-pro forma	$	8.53		$	10.57		$	2.14		$	3.18

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

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

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

Back to Contents

~~Had~~PART ~~compensation~~I ~~expense~~– ~~for~~FINANCIAL ~~all~~INFORMATIONItem ~~stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the method prescribed under SFAS No~~1. Financial ~~123~~Statements, ~~“Accounting~~ContinuedHANOVER ~~for~~FOODS ~~Stock-Based~~CORPORATION ~~Compensation”~~AND asSUBSIDIARIESNotes ~~amended, net~~to ~~(loss)~~Condensed ~~income~~Consolidated ~~and~~Financial Statements(~~loss~~Unaudited) ~~earnings per share would have been adjusted to the pro forma amounts as follows:~~

	26 Weeks Ended						13 Weeks Ended
	Nov. 30, 2003			Dec. 1, 2002			Nov. 30, 2003			Dec. 1, 2003
Net earnings applicable to common stockholders, as reported	$	6,097,000		$	5,454,000		$	4,295,000		$	3,682,000
Deduct: Total stock based employee compensation expense determined under the fair value base method for all awards, net of related tax effects		(40,000	)		(40,000	)		(20,000	)		(20,000	)
Pro forma net income applicable to common stock	$	6,057,000		$	5,414,000		$	4,275,000		$	3,662,000
Earnings per share:
Basic – as reported	$	6.63		$	7.59		$	4.43		$	5.12
Basic – pro-forma	$	6.59		$	7.53		$	4.41		$	5.09
Diluted – as reported	$	6.56		$	7.48		$	4.39		$	5.05
Diluted – pro forma	$	6.52		$	7.43		$	4.36		$	5.02

(9)

LEGAL MATTERS

Derivative Action

On September 13, 1996, certain Class A shareholders filed a complaint in equity against six of the Corporation’s directors and the estate of a former director in the Court of Common Pleas of York County, Pennsylvania (the complaint). The suit also names the Corporation as a nominal defendant. The suit sought various forms of relief including, but not limited to, rescission of the board’s April 28, 1995 approval of John A. Warehime’s 1995 Employment Agreement and the board’s February 10, 1995 adjustment of director’s fees. (Since the filing of this lawsuit, John A. Warehime’s 1995 Employment Agreement was amended.) In addition, the plaintiffs sought costs and fees incident to bringing suit. On November 4, 1996, the complaint was amended to add additional plaintiffs. On June 24, 1997, the Court dismissed the amended complaint for failure to make a prior demand. An appeal was filed on the Court’s June 24, 1997 Order. On December 2, 1998, the Superior Court of Pennsylvania held that the derivative plaintiffs had made adequate demand.

On May 12, 1997, a written demand was received by the Corporation from the attorney for those Class A shareholders containing similar allegations and the allegations raised by the Class A common stockholders were investigated by a special independent committee of the Board of Directors and found to be without merit.

The director defendants filed an Answer and New Matter to the amended complaint on March 17, 1999. On September 5, 2001, director defendants filed a Motion to Dismiss the Derivative Action. On September 20, 2001, plaintiffs filed an answer to director defendants’ Motion to Dismiss. On May 17, 2002, the court entered an order denying defendants’ Motion to Dismiss.

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

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

Warehime Family Litigation

On February 13, 1997, the Board of Directors proposed an amendment and restatement of the Corporation’s Articles of Incorporation (the “Amended and Restated Articles”) which provides that if all of the following Class B shareholders (or their estates upon the death of such shareholders), Michael A. Warehime, John A. Warehime, Sally W. Yelland, J. William Warehime, and Elizabeth W. Stick (all members of the Warehime family, do not agree in writing to the composition of the Board of Directors or other important matters specified below on or after the 1998 annual shareholders meeting, the trustees of the Corporation’s 401(k) Savings Plan (or a similar employee benefit plan), who qualify as disinterested directors acting as fiduciaries for the employees who participate in the Plan, and the Class A shareholders may become entitled to vote in the manner described in the document.

(8) NEW ACCOUNTING STANDARDS

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

Back to Contents

~~PART~~The IAmended –and ~~FINANCIAL~~Restated ~~INFORMATION Item~~Articles created a Series C Convertible Preferred Stock , which, in case of a dispute among the above mentioned members of the Warehime family on Board of Directors composition or other important matters, would be entitled to 35 votes per shares (a total of 350,000 votes based on 10,000 shares of Series C Convertible Preferred Stock issued to and held by the trustees of the Corporation’s 401(k) Savings Plan); if Series C Convertible Preferred Stock were entitled to vote because of such dispute, each share of Class A Common Stock would be entitled to 1/10th of a vote per share. ~~Financial~~ ~~Statements~~The Amended and Restated Articles also classified the terms of the Board of Directors commencing with the election at the 1997 annual shareholders’ meeting and permitted directors to be elected for four-year term as permitted by Pennsylvania law. Pursuant to the Corporation’s Bylaws, ~~Continued HANOVER~~as ~~FOODS~~then ~~CORPORATION~~in ~~AND~~effect, ~~SUBSIDIARIES Notes~~nominations for directors must be submitted to ~~Condensed~~the ~~Consolidated~~Corporation ~~Financial~~in ~~Statements~~ the manner prescribed by the Bylaws no later than June 1 of the year in which the meeting is to occur. On February 21, 1997, Michael A. Warehime, a Class B shareholder, and certain Class A shareholders filed motions for a preliminary injunction against the Corporation, John A. Warehime, in his capacity as voting trustee, and certain directors of the Corporation in the Court of Common Pleas of York County, Pennsylvania against a Proposal of the Board of Directors to amend and restate the Corporation’s Articles of Incorporation in the manner described herein. The motions for a preliminary injunction were dismissed by the Court on June 24, 1997. The Class B shareholders on June 25, 1997 approved the Amended and Restated Articles (~~Unaudited~~John A. Warehime, being the sole Class B shareholder voting affirmatively in his capacity as voting trustee) and the Amended and Restated Articles became effective June 25, 1997. In August 1997, the Board of Directors proposed a further amendment (the “Amendment”) to the Amended and Restated Articles to expand the definition of “disinterested directors” in the manner described below, and to approve certain performance based compensation for John A. Warehime solely for the purpose of making the Corporation eligible for a federal income tax deduction pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. A special meeting was scheduled for August 14, 1997 (the “Special Meeting”) to vote on these proposals. On August 8, 1997, Michael A. Warehime filed a motion in the Court of Common Pleas of York County, Pennsylvania to prevent John A. Warehime, in his capacity as voting trustee from voting on these proposals and to enjoin the Amendment. This motion was denied by the Court on August 11, 1997. The Amendment and the proposal under Section 162(m) were approved by Class B shareholders (John A. Warehime was the sole Class B shareholder to vote affirmatively, in his capacity as voting trustee) on August 14, 1997 and the Amendment became effective on August 14, 1997. Under the Amendment, the definition of “disinterested directors” means a person who, in the opinion of counsel for the Corporation, meets any of the following criteria: (i) disinterested directors as defined in Section 1715(e) of the Pennsylvania Business Corporations Law of 1988, as amended; (ii) persons who are not “interested” directors as defined in Section 1.23 of The American Law Institute “Principles of Corporate Governance: Analysis and Recommendations” (1994); or (iii) persons who qualify as members of the Audit Committee pursuant to Section 303.00 of the New York Stock Exchange’s Listed Company Manual.

(9) LEGAL MATTERS

Derivative Action

On September 13, 1996, certain Class A shareholders filed a complaint in equity against six of the Corporation’s directors and the estate of a former director in the Court of Common Pleas of York County, Pennsylvania (the complaint). The suit also names the Corporation as a nominal defendant. The suit sought various forms of relief including, but not limited to, rescission of the board’s April 28, 1995 approval of John A. Warehime’s 1995 Employment Agreement and the board’s February 10, 1995 adjustment of director’s fees. (Since the filing of this lawsuit, John A. Warehime’s 1995 Employment Agreement was amended.) In addition, the plaintiffs sought costs and fees incident to bringing suit. On November 4, 1996, the complaint was amended to add additional plaintiffs. On June 24, 1997, the Court dismissed the amended complaint for failure to make a prior demand. An appeal was filed on the Court’s June 24, 1997 Order. On December 2, 1998, the Superior Court of Pennsylvania held that the derivative plaintiffs had made adequate demand.

On May 12, 1997, a written demand was received by the Corporation from the attorney for those Class A shareholders containing similar allegations and the allegations raised by the Class A common stockholders were investigated by a special independent committee of the Board of Directors and found to be without merit.

The director defendants filed an Answer and New Matter to the amended complaint on March 17, 1999. On September 5, 2001, director defendants filed a Motion to Dismiss the Derivative Action. On September 20, 2001, plaintiffs filed an answer to director defendants’ Motion to Dismiss. On May 17, 2002, the court entered an order denying defendants’ Motion to Dismiss.

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

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

Warehime Family Litigation

On February 13, 1997, the Board of Directors proposed an amendment and restatement of the Corporation’s Articles of Incorporation (the “Amended and Restated Articles”) which provides that if all of the following Class B shareholders (or their estates upon the death of such shareholders), Michael A. Warehime, John A. Warehime, Sally W. Yelland, J. William Warehime, and Elizabeth W. Stick (all members of the Warehime family, do not agree in writing to the composition of the Board of Directors or other important matters specified below on or after the 1998 annual shareholders meeting, the trustees of the Corporation’s 401(k) Savings Plan (or a similar employee benefit plan), who qualify as disinterested directors acting as fiduciaries for the employees who participate in the Plan, and the Class A shareholders may become entitled to vote in the manner described in the document.

Back to Contents

~~The~~Michael A. Warehime filed an appeal from the denial of his motion to enjoin the previously described Amendment to the Corporation’s Amended and Restated Articles. ~~created~~On December 2, 1998, a ~~Series C~~majority ~~Convertible~~panel ~~Preferred~~of ~~Stock~~the Superior Court of Pennsylvania issued a decision holding that although John A. Warehime had acted in good faith in voting for the Amendment to the Amended and Restated Articles as trustee of the Warehime voting trust, ~~which~~he had breached his fiduciary duty to the beneficiaries of the Warehime voting trust in voting for the Amendment. On November 29, 1999, the Supreme Court of Pennsylvania granted a petition for allowance of appeal, filed by John A. Warehime, and granted a cross-petition for appeal filed by Michael A. Warehime. On August 13, 1999, Michael A. Warehime filed a complaint in ~~case~~equity in the Court of Common Pleas of York County, Pennsylvania, naming as defendants Arthur S. Schaier, Cyril T. Noel, Clayton J. Rohrbach, Jr., John A. Warehime, and the Corporation. The complaint sought a ~~dispute~~court ~~among~~order declaring that the ~~above mentioned~~September ~~members~~1999 election for the Board of Directors of the ~~Warehime~~Corporation ~~family~~be onconducted in accordance with the Articles of Incorporation of the Corporation as they existed prior to June 25, 1997, an order declaring that the Series C Convertible Preferred Stock cannot be voted, and an order that the following candidates for the Board of Directors ~~composition or~~of ~~other~~the ~~important matters~~Corporation proposed by Michael A. Warehime, ~~would~~Sally Yelland, Elizabeth Stick and J. William Warehime be ~~entitled~~accepted by the Corporation and listed on the ballot to 35be ~~votes~~distributed ~~per~~at ~~shares~~the (annual meeting of shareholders of the Corporation to be held on September 16, 1999: Michael A. Warehime, Daniel Meckley, Elizabeth Stick, Sonny Bowman, and John Denton. The basis for the complaint was the December 2, 1998 decision of the Superior Court of Pennsylvania which held that John A. Warehime breached his fiduciary duties in voting for the Amended and Restated Articles as trustee of the Warehime voting trust. The requested relief was denied by the Court of Common Pleas of York County and Michael Warehime appealed to the Superior Court of Pennsylvania. On September 12, 2000, the Superior Court of Pennsylvania stated, in a ~~total~~Memorandum decision, that the June 25, 1997 shareholder vote, which adopted the Amended and Restated Articles of ~~350~~the Corporation should be set aside,~~000~~ ~~votes based~~and remanded the case to the Court of Common Pleas of York County to determine what further relief would be appropriate. On remand, the Court of Common Pleas of York County entered an Order on October 10,~~000~~ ~~shares~~2000 declaring that the Amended and Restated Articles of ~~Series~~Incorporation Cwere ~~Convertible~~set ~~Preferred~~aside ~~Stock~~and that an election should be held without the Amended or Restated Articles. On October 11, 2000, the Supreme Court of Pennsylvania entered an Order staying the Order of the Court of Common Pleas of York County. On November 27, 2000, the Supreme Court of Pennsylvania reversed and remanded the Order of the Superior Court issued to on December 2, 1998 and, ~~held~~in by effect, the ~~trustees~~Order of the ~~Corporation~~Superior Court issued September 12, 2000. In reversing the Superior Court’s ~~401(k)~~Order, ~~Savings~~the ~~Plan);~~Supreme ifCourt ~~Series~~of CPennsylvania ~~Convertible Preferred~~held ~~Stock~~that ~~were~~John ~~entitled~~A. toWarehime, ~~vote~~the ~~because~~trustee of ~~such~~the ~~dispute~~voting trust, ~~each~~did ~~share~~not breach his fiduciary duties in voting the trust shares in favor of ~~Class~~ the Amended and Restated Articles of Incorporation. The Supreme Court remanded the case to the Superior Court of Pennsylvania to consider other issues raised by Michael A. ~~Common~~Warehime ~~Stock~~On ~~would~~May be4, ~~entitled~~2001, the Superior Court of Pennsylvania, on remand from the Supreme Court of Pennsylvania to ~~1/10th~~decide several remaining issues, held that the 1997 amendments to the Corporation’s Amended and Restated Articles of Incorporation “violated principles of corporate democracy” and should be invalidated even though the Superior Court found the directors acted in good faith and their actions in approving the amendments did not result in a ~~vote~~breach ~~per~~of ~~share~~their fiduciary duties. A petition for allocatur was filed with the Supreme Court of Pennsylvania requesting that the Supreme Court of Pennsylvania review the Superior Court’s May 4, 2001 ruling. On September 17, 2002, the Supreme Court of Pennsylvania granted the petition for allocatur and oral argument was heard in the matter on May 13, 2003.

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

On February 21, 1997, Michael A. Warehime, a Class B shareholder, and certain Class A shareholders filed motions for a preliminary injunction against the Corporation, John A. Warehime, in his capacity as voting trustee, and certain directors of the Corporation in the Court of Common Pleas of York County, Pennsylvania against a Proposal of the Board of Directors to amend and restate the Corporation’s Articles of Incorporation in the manner described herein.

The motions for a preliminary injunction were dismissed by the Court on June 24, 1997. The Class B shareholders on June 25, 1997 approved the Amended and Restated Articles (John A. Warehime, being the sole Class B shareholder voting affirmatively in his capacity as voting trustee) and the Amended and Restated Articles became effective June 25, 1997.

In August 1997, the Board of Directors proposed a further amendment (the “Amendment”) to the Amended and Restated Articles to expand the definition of “disinterested directors” in the manner described below, and to approve certain performance based compensation for John A. Warehime solely for the purpose of making the Corporation eligible for a federal income tax deduction pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. A special meeting was scheduled for August 14, 1997 (the “Special Meeting”) to vote on these proposals. On August 8, 1997, Michael A. Warehime filed a motion in the Court of Common Pleas of York County, Pennsylvania to prevent John A. Warehime, in his capacity as voting trustee from voting on these proposals and to enjoin the Amendment. This motion was denied by the Court on August 11, 1997. The Amendment and the proposal under Section 162(m) were approved by Class B shareholders (John A. Warehime was the sole Class B shareholder to vote affirmatively, in his capacity as voting trustee) on August 14, 1997 and the Amendment became effective on August 14, 1997.

Under the Amendment, the definition of “disinterested directors” means a person who, in the opinion of counsel for the Corporation, meets any of the following criteria: (i) disinterested directors as defined in Section 1715(e) of the Pennsylvania Business Corporations Law of 1988, as amended; (ii) persons who are not “interested” directors as defined in Section 1.23 of The American Law Institute “Principles of Corporate Governance: Analysis and Recommendations” (1994); or (iii) persons who qualify as members of the Audit Committee pursuant to Section 303.00 of the New York Stock Exchange’s Listed Company Manual.

Back to Contents

~~Michael~~On A.December 12, 2002, Michael Warehime filed an Emergency Application for Expedited Relief with the Pennsylvania Supreme Court in the Warehime v. Warehime appeal ~~from~~concerning the ~~denial~~ election of ~~his~~directors ~~motion~~noticed tofor ~~enjoin~~December ~~the~~23, ~~previously~~2002. ~~described~~The ~~Amendment~~Pennsylvania toSupreme ~~the Corporation~~Court denied Michael Warehime’s ~~Amended~~emergency ~~and~~application ~~Restated~~on ~~Articles~~December 20, 2002. On December 212, ~~1998~~2002, Michael Warehime filed a ~~majority~~Motion ~~panel~~for ofRelief under the ~~Superior~~Warehime ~~Court~~v. ofSchaier ~~Pennsylvania~~caption ~~issued~~in athe ~~decision holding that~~York ~~although~~County ~~John~~Court Aof Common Pleas. Michael Warehime’s ~~had~~motion ~~acted~~requested, ininter ~~good~~alia, ~~faith~~that inHanover ~~voting~~Foods ~~for~~Corporation’s ~~the Amendment~~December to23, ~~the~~2002 ~~Amended~~election ~~and~~be ~~Restated~~conducted according to the Articles of Incorporation as ~~trustee~~they ofexisted ~~the~~prior ~~Warehime voting~~to ~~trust~~June 25, he1997. ~~had~~Following ~~breached~~a ~~his~~hearing ~~fiduciary~~on ~~duty~~December to20, 2002, the ~~beneficiaries~~York County Court of ~~the~~ ~~Warehime~~Common ~~voting~~Pleas ~~trust~~denied inMichael ~~voting~~Warehime’s Motion for ~~the Amendment~~Relief. On ~~November~~January 2917, ~~1999,~~ 2003 Michael Warehime appealed the ~~Supreme~~Court’s denial of his Motion for Relief to the Superior Court of Pennsylvania. ~~granted~~Oral aargument ~~petition~~was ~~for~~heard ~~allowance of~~in ~~appeal~~this matter before the Superior County on January 13, ~~filed~~ by2004. ~~John~~The ACorporation is involved in various other claims and legal actions arising in the ordinary course of business. ~~Warehime~~In the opinion of management, ~~and~~the ~~granted~~ultimate disposition of these matters will not have a ~~cross-petition~~material ~~for~~adverse ~~appeal~~effect ~~filed by~~on ~~Michael~~the A.Corporation’s ~~Warehime~~consolidated financial position, results of operations or liquidity.

On(10) ~~August~~SUBSEQUENT ~~13,~~EVENTIn ~~1999,~~March ~~Michael A. Warehime filed a complaint in equity in the Court of Common Pleas of York County~~2004, ~~Pennsylvania, naming~~Aunt asKitty’s ~~defendants Arthur S. Schaier~~Foods, ~~Cyril T~~Inc. ~~Noel, Clayton J. Rohrbach, Jr., John A. Warehime, and the Corporation. The complaint sought~~ a ~~court order~~wholly ~~declaring~~owned ~~that~~subsidiary ~~the September 1999 election for the Board~~ of ~~Directors of~~ the Corporation bepurchased ~~conducted~~substantially inall ~~accordance~~of ~~with~~ the ~~Articles~~assets of ~~Incorporation of~~a ~~the~~canned ~~Corporation~~food asprocessing ~~they~~company ~~existed~~located ~~prior~~in toNew ~~June~~Jersey ~~25,~~in ~~1997,~~a anforeclosure ~~order~~sale ~~declaring that the Series C Convertible Preferred Stock cannot be voted, and an order that the following candidates~~ for ~~the Board of Directors of the Corporation proposed by Michael A. Warehime~~$6, ~~Sally Yelland~~400, ~~Elizabeth Stick and J~~000. ~~William~~ Warehime be accepted by the Corporation and listed on the ballot to be distributed at the annual meeting of shareholders of the Corporation to be held on September 16, 1999: Michael A. Warehime, Daniel Meckley, Elizabeth Stick, Sonny Bowman, and John Denton. The ~~basis~~operation ~~for the complaint was the December 2, 1998 decision~~ of the ~~Superior~~acquired ~~Court~~company ofwill ~~Pennsylvania which~~be ~~held~~included ~~that John A. Warehime breached his fiduciary duties~~ in ~~voting for~~ the ~~Amended~~consolidated ~~and~~financial ~~Restated~~statements ~~Articles as trustee~~ of ~~the~~Hanover ~~Warehime~~Foods ~~voting trust.~~Corporation ~~The~~from ~~requested relief was denied by~~ the ~~Court~~date of ~~Common Pleas of York County and Michael Warehime appealed to the Superior Court of Pennsylvania~~acquisition.

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

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

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

Back to Contents

OnPART ~~September~~I ~~17,~~– ~~2002,~~FINANCIAL ~~the~~INFORMATIONItem ~~Supreme~~2. Management’s ~~Court of~~Discussion ~~Pennsylvania~~and ~~granted~~Analysis ~~the~~ofFinancial ~~petition~~Condition ~~for allocatur~~ and ~~oral~~Results ~~argument was~~of ~~heard~~OperationsHANOVER inFOODS ~~the~~CORPORATION ~~matter~~AND ~~on May 13, 2003.~~SUBSIDIARIES

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

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

The Corporation is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Corporation’s consolidated financial position, results of operations or liquidity.

(10) SUBSEQUENT EVENT

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

Back to Contents

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

FORWARD LOOKING STATEMENTS

When used in this Annual Report, the words or phrases “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimate”, “projected”, or similar expressions are intended to identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including but not limited to quarterly fluctuations in operating results, competition, state and federal regulation, environmental considerations, and foreign operations. Such factors, which are discussed in the Form 10-Q, could affect the Company’s financial performance and could cause the Company’s actual result for future periods to differ materially from any opinion or statements expressed herein with respect to future periods. As a result, the Company wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made.

The following comments should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Corporation’s Annual Report on Form 10-K/A for the fiscal year ended June 1, 2003.

GENERAL

Prices for processed food tend to rise with overall inflation and not in line with prices of raw farm products. Generally, price surges in farm products due to material supply reductions and crop problems are not passed on to consumers dollar for dollar. Management believes consumers often switch from one food product that has risen to another which has not changed in price. As a result, food processors tend to absorb raw farm product price increases to remain competitive. However, when raw farm product prices drop, food processors try to retain some of the savings. The Corporation does not expect the overall number of pounds of product consumed to significantly increase over the next several years. Generally, the Corporation expects sales growth by processors beyond expected inflation rates and population growth will come at the expense of and loss of market share by another processor. Sales growth can increase internationally and through promotions to increase consumption through the introduction of new or improved food products.

20RESULTS OF OPERATIONS NET SALES

Consolidated net sales were $234.1 million for the thirty-nine week period ended February 29, 2004. This represents an increase of 8.2% over the thirty-nine week period ended March 2, 2003 consolidated net sales of $216.5 million. Consolidated net sales were $83.0 million for the thirteen week period ended February 29, 2004, a 13.5% increase from the consolidated net sales of $73.2 million for the corresponding period in the prior year. The increase in consolidated net

Back to Contents

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

~~RESULTS~~sales OFfor ~~OPERATIONS~~the thirty-nine week period was due to increased refrigerated and fresh food sales as well as increases in our snacks, branded sales, private label, and food service sales. These increases were partially offset by decreases in industrial and canned mushroom sales. The increase in consolidated net sales for the thirteen week period was due to increases in refrigerated and fresh food sales as well as increases in our snacks, branded, private label, industrial and food service sales.

NET SALES

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

COST OF GOODS SOLD

Cost of goods sold were $~~127~~199.95 million, or 8485.62% of consolidated net sales in the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004 and $~~120~~180.29 million, or 83.95% of consolidated net sales for the corresponding period in ~~2002~~2003. Cost of goods sold were $7071.76 million, or 8486.02% of consolidated net sales for the thirteen week period ended ~~November~~February 3029, ~~2003~~2004 as compared to $6760.17 million, or 8482.09% of consolidated net sales for the corresponding period in ~~2002~~2003. The increase in cost of goods sold as a percentage ofor net sales resulted primarily from the increases in refrigerated food sales and private label ~~snack~~snacks ~~sales~~ at a higher cost of sales percentage as compared to other sales of the ~~company~~Company as well as higher energy, ~~and~~ health care costs and raw commodity price increases without a corresponding increase in prices due to competition pressures. The increase cost of ~~sales~~goods sold as a percentage of net sales for the thirteen- week period ~~was~~resulted ~~consistent~~primarily ~~with~~from ~~last~~higher ~~fiscal~~energy ~~year~~costs, ~~due~~health tocare ~~lower~~costs ~~operating~~and ~~expenses~~raw incommodity ~~our~~prices ~~frozen~~as ~~division~~well ~~off-set~~as by higher cost of ~~sales~~goods percentage in our refrigerated ~~food~~foods sales and private label snack sales as well as frozen industrial sales which ~~has~~have increased for the quarter. ended February 29, 2004

GROSS MARGIN

Gross margins were $2334.27 million, or 1514.38% of consolidated net sales in the ~~twenty~~thirty-~~six~~nine week period ended ~~November 30~~February 29, ~~2003~~2004 and $2335.16 million, or 16.15% of consolidated net sales for the corresponding period in ~~2002~~2003. Gross margins were $1311.64 million, or 1613.18% of consolidated net sales for the thirteen week period ended ~~November~~February 3029, ~~2003~~2004 as compared to $12.8 5 million, or 1617.01% of consolidated net sales for the corresponding period in ~~2002.~~ 2003. The decrease in gross margins as a percentage of net sales ~~resulted~~for ~~primarily~~both ~~from~~ the thirty-nine ~~increases~~week ~~in refrigerated food sales~~ and ~~private~~thirteen-week ~~label~~periods ~~snack~~resulted ~~sales~~primarily atfrom ~~lower~~higher ~~gross~~energy costs, ~~margins~~increases asin ~~compared~~health tocare ~~other~~costs ~~sales~~and ofhigher ~~the~~raw ~~Company~~commodity costs as well as ~~higher~~lower ~~energy~~gross ~~and~~margins ~~health~~in ~~care~~our ~~costs~~refrigerated ~~without~~food asales ~~corresponding~~and ~~increase~~private inlabel ~~prices due~~snack ~~to competition pressures.~~ ~~The~~sales ~~gross~~which ~~margin~~increased asfor athe ~~percentage~~period. ofDuring ~~net sales for~~ the thirteen- week period ~~was~~ended February ~~consistent~~29, ~~with~~2004 ~~last~~our ~~fiscal~~industrial ~~year~~frozen ~~due~~sales toincreased ~~lower~~19%, ~~operating~~which ~~expenses~~have ~~in our frozen division off-set by~~ lower margins ~~margin~~than ~~percentage~~other ~~in our refrigerated food~~ sales ~~and~~areas ~~private~~of ~~label snack sales which has increased for~~ the ~~quarter~~corporation.

Back to Contents

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

SELLING EXPENSES

Selling expenses were $59.80 million, or 3.98% of consolidated net sales for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~ 30February 29, ~~2003~~2004 as compared to $69.17 million or 4.25% of consolidated net sales for the corresponding period in ~~2002~~2003. Selling ~~expenses~~expense were $23.91 million or 3.48% of consolidated net sales for the thirteen week period ended November 30, 2003 as compared to $3.2 million, or 4.0% of consolidated net sales during the corresponding period in 2002. The decrease in selling expenses for both periods reflects lower customer advertising dollars as well as lower customer fees on promotion charges due to faster processing of the data.

Back to Contents

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

sales for the thirteen week period ended February 29, 2004 as compared to $3.6 million, or 4.9% of consolidated net sales during the corresponding period in 2003. The decrease in selling expense for both periods reflects lower customer advertising dollars, lower customer fees on promotion charges due to faster processing of the data as well as lower package design expenses.

ADMINISTRATIVE EXPENSES

Administrative expenses were $711.1 million, or 4.7% of consolidated net sales for the ~~twenty~~thirty-~~six~~nine week period ended ~~November 30~~February 29, ~~2003~~2004 as compared to $611.93 million, or 45.82% of consolidated net sales for the corresponding period in ~~2002~~2003. Administrative expenses were $34.30 million, or 34.98% of consolidated net sales for the thirteen week period ended ~~November 30~~February 29, ~~2003~~2004 as compared to $34.24 million, or 46.0% ofor consolidated net sales for the corresponding period in ~~2002~~2003. The ~~increase~~decrease in ~~administrative~~administration ~~expenses~~ expense for both the ~~twenty~~thirty-~~six~~nine and thirteen week period reflects ~~increases~~lower ~~in the provision for the supplemental pension benefits off-set by decreases in the~~ workmen’s compensation insurance reserves at Hanover Insurance Company Limited, a wholly-owned subsidiary of Hanover Foods Corporation, and lower 401K and ESOP contribution reserves, off-set by increases in the provision for the supplemental pension benefits.

INTEREST EXPENSE

Interest expense was $1.28 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004 as compared to $12.52 million for the same period in ~~2002~~2003. Interest expense was $.6 million for the thirteen week period ended ~~November~~February 3029, ~~2003~~2004 as compared to $.87 million for the same period in ~~2002~~2003. The decreases in both periods reflects lower average borrowings as well as lower average borrowing rate for the periods compared to ~~2002~~2003.

The average seasonal borrowings were $1211.65 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004 a decrease of $87.23 million compared to the corresponding period in ~~2002~~2003. The average seasonal borrowing rate was 1.9392% for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~ 2004 a decrease of .5748% compared to the corresponding period in ~~2002~~2003. The average seasonal borrowings was $16.9 million for the thirteen week period ended ~~November~~February 3029, ~~2003~~2004 aan ~~decrease~~increase of $7.2 million compared to the corresponding period in ~~2002~~2003. The average seasonal borrowing rate was 1.9384% for the thirteen week period ended ~~November~~February 3029, ~~2003~~2004 a decrease of .5157% compared to the corresponding period in ~~2002~~2003.

2221

Back to Contents

OTHER (INCOME) EXPENSES

Other income was $.2 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004 as compared to other expense of $.2 million for the same period in ~~2002~~2003. Other ~~expense~~income, net was $1119,000 for the thirteen week period ended ~~November~~February 3029, ~~2003~~2004 as compared to other ~~income~~expenses, net of $2175,000 for the same period in ~~2002~~2003. The ~~decrease~~increase in other ~~expenses~~income for the ~~twenty~~thirty-~~six~~nine week period is due from income generated from the sales of investments. The ~~increase~~decrease in other expenses for the thirteen week period is due to an ~~increase~~decrease in the foreign translation loss for the current period compared to the prior year, and income generated from the sales of investments.

INCOME TAXES

The provision for corporate federal and state income taxes for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~ 2004 was $34.26 million, or 3435.40% of pretax earnings, as compared to $24.93 million, or 3435.56% of pre-tax earnings for the same period in ~~2002~~2003. The provisions for corporate federal and state income taxes for the thirteen week period ended February ~~November 30~~29, ~~2003~~2004 was $21.4 million, or 3537.83% of pre-tax earnings as compared to $21.04 million, or 3537.7% of pre-tax earnings for the same period in ~~2002~~2003. ~~The~~ The decrease in the effective tax rate for the ~~twenty~~thirty-~~six~~nine week period is primarily due to increased earnings in jurisdiction with lower effective tax for the current period as compared to the prior period. The ~~increase~~decrease in the effective tax rate for the thirteen week period is primarily due to increased earnings in jurisdiction with ~~higher~~lower effective tax rates in the current period as compared to the prior period.

LIQUIDITY AND CAPITAL RESOURCES

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

OPERATING ACTIVITIES

Net working capital was $4846.91 million at ~~November~~February 3029, ~~2003~~2004 and $47.0 million at June 1, 2003. The current ratios were 1.8386 on ~~November~~February 3029, ~~2003~~2004 and 2.07 on June 1, 2003.

Cash ~~used~~provided in operating activities for the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004 was $16.24 million as compared to cash provided from operating activities of $513.05 million during the same period of ~~2002~~2003. The uses of cash during the ~~twenty~~thirty-~~six~~nine week period consisted primarily of an increase in finished goods inventory and an increase in accounts and notes receivable partially offset by sources of cash attributed to earnings and ~~a decrease in prepaid expenses and~~ increases in accounts payable and accrued expenses and other liabilities.

2322

Back to Contents

ACQUISITIONS

On December 12, 2003, Bickel’s Snack Foods, Inc. purchased Wege Pretzel Company real estate, equipment, motor vehicles, accounts receivable and inventory owned by LDI, Inc., Hanover, PA for $4,200,000.

On February 29, 2004, Spring Glen Fresh Foods, Inc. purchased certain assets of Sunsprout of Lancaster County, Inc. for $1,443,000.

INVESTING ACTIVITIES

During the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004, the Corporation spent approximately $58.28 million for the purchase of plant upgrades, expansions and ~~expansions~~acquisitions. This compares to $3.3 million spent during the same period last year for capital projects. ~~During~~ During the ~~twenty~~thirty-~~six~~nine week period the market value of investments increased $1.84 million compared to the same period last fiscal year and the Corporation recorded $.8 million of goodwill due to the acquisition of Sunsprout Corp. of Lancaster, PA on February 29, 2004.

FINANCING ACTIVITIES

The increase in notes payable of approximately $910.21 million during the ~~twenty~~thirty-~~six~~nine week period ended ~~November~~February 3029, ~~2003~~2004 represents borrowings made against available seasonal lines of credit from financial institutions for use in operations and plant upgrades, expansions and ~~expansions~~acquisitions.

The Corporation has available seasonal lines of credit from financial institutions in the amount of $50.0 million, of which $1617.98 million was utilized as of ~~November~~February 3029, ~~2003~~2004. Additional borrowing is permitted within prescribed parameters in existing debt agreements, which contain certain performance covenants.

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

The following table summarizes the Corporation’s contractual obligations and other commitments as of ~~November~~February 3029, ~~2003~~2004:

	~~Payment Due by Period~~					Payment Due by Period
Contractual Obligations		~~Total~~	Total		~~1 Year~~	1 Year		~~2-3 Years~~	2-3 Years		~~4-5 Years~~	4-5 Years		~~After 5 Years~~	After 5 Years
Short-Term Notes Payable	$	~~16,879,000~~$	17,797,000	$	~~16,879,000~~$	17,797,000	$	~~-0-~~$	-0-	$	~~-0-~~$	-0-	$	~~-0-~~$	-0-
Long-Term Debt		~~27,143,000~~	27,143,000		~~4,286,000~~	4,286,000		~~8,572,000~~	8,572,000		~~6,785,000~~	6,785,000		~~7,500,000~~	7,500,000
Operating Leases		~~1,121,000~~	1,121,000		~~433,000~~	433,000		~~470,000~~	470,000		~~218,000~~	218,000		~~-0-~~	-0-
Total contractual obligations	$	~~45,143,000~~$	46,061,000	$	~~21,598,000~~$	22,516,000	$	~~9,042,000~~$	9,042,000	$	~~7,003,000~~$	7,003,000	$	~~7,500,000~~$	7,500,000

Currently, the Company is obligated to purchase 6,000,000 pounds of tomato paste from California Tomato Products, Colusa, California in each of the fiscal years from 2003 through 2006, at a price based on annual cost of production. The current market price of tomato paste is 28¢/lb. FOB California.23

Back to Contents

In the current fiscal year, the Company is obligated to purchase 6,000,000 lbs. of tomato paste from California Tomato Products, Colusa, California. Effective March 15, 2004, the Company contracted to purchase a minimum of 5,000,000 lbs. of tomato paste per year from The Morningstar Packing Company L.P., Los Banos, California until June 30, 2007. The current market price of tomato paste is 28¢/lb. FOB California.

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

NEW ACCOUNTING STANDARDS

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

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

• The allowance for potentially uncollectible receivables and pending deductions requires management to make significant judgments in estimating future amounts to be received. Our judgments are based upon historical experience and current market conditions. Changes in estimates could be impacted as a result of events, such as a deterioration of the credit status of customers or material reductions in product and sales volumes. • Determination of liabilities for pension and post-retirement benefits includes significant assumptions and estimates relating to compensation and health care cost trends, discount rates and rate of return on plan assets. The assumptions are based upon current market and health care trends. • Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows estimated to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. However, determining fair value is subject to estimates of both cash flows and interest rates and different estimates could yield different results. There are no events or changes in circumstances of which management is aware indicating that the carrying value of the Corporation’s long-lived assets may not be recoverable. • Effective June 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). In accordance with SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. As required by SFAS 142, management performed transitional impairment testing during the third quarter and annual impairment testing of goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2003. These tests confirmed that the fair value of the Corporation’s reporting units exceeds their carrying values, and that no impairment loss needed to be recognized for goodwill upon the adoption of SFAS 142. The annual evaluation of goodwill and other indefinite-lived intangible assets requires the use of estimates about future operating results for each reporting unit to determine their estimated fair value. Changes in forecasted operations can materially affect these estimates. Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the fair value of goodwill and other indefinite-lived intangible assets could change and, therefore, impact the assessments of impairment in the future.

Back to Contents

•

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


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


	•	Effective June 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). In accordance with SFAS 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. As required by SFAS 142, management performed transitional impairment testing during the third quarter and annual impairment testing of goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2003. These tests confirmed that the fair value of the Corporation’s reporting units exceeds their carrying values, and that no impairment loss needed to be recognized for goodwill upon the adoption of SFAS 142. The annual evaluation of goodwill and other indefinite-lived intangible assets requires the use of estimates about future operating results for each reporting unit to determine their estimated fair value. Changes in forecasted operations can materially affect these estimates. Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the fair value of goodwill and other indefinite-lived intangible assets could change and, therefore, impact the assessments of impairment in the future.

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

~~PART I – FINANCIAL INFORMATION Item 3. Quantitative and Qualitative Disclosures About Market Risk HANOVER FOODS CORPORATION AND SUBSIDIARIES~~25

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

PART I – FINANCIAL ~~INFORMATION Item~~INFORMATIONItem 43. Quantitative ~~Controls~~ and ~~Procedures HANOVER~~Qualitative Disclosures About Market RiskHANOVER FOODS CORPORATION AND SUBSIDIARIES

AsThere ofare ~~November~~no ~~30,~~material ~~2003,~~changes to the ~~Company’s~~disclosures ~~principal~~on ~~executive~~this ~~officer~~matter ~~and~~provided ~~principal~~in ~~financial officer concluded that~~ the Company’s ~~disclosure~~Annual ~~controls~~Report ~~and~~on ~~procedures~~Form ~~were~~10-K ~~effective~~for ~~in timely alerting them to material information required to be disclosed by~~ the ~~Company~~fiscal inyear ~~the~~ended ~~reports~~June ~~that it files with the SEC under the Securities Exchange Act of 1934~~1, ~~as amended~~2003, ~~during~~and the ~~period that the report is being prepared. There were no significant changes in the~~ Company’s ~~internal~~Report ~~controls~~on orForm in10-Q ~~other~~for ~~factors that could significantly affect those controls subsequent to~~ the ~~date~~Quarterly ofPeriod ~~their~~ended ~~evaluation. As~~February ~~a result~~29, ~~no corrective actions were taken~~2004.

PART III – ~~OTHER~~FINANCIAL ~~INFORMATION HANOVER~~INFORMATIONItem 4. Controls and ProceduresHANOVER FOODS CORPORATION AND SUBSIDIARIES

As of February 29, 2004, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective in timely alerting them to material information required to be disclosed by the Company in the reports that it files with the SEC under the Securities Exchange Act of 1934, as amended, during the period that the report is being prepared. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation. As a result, no corrective actions were taken.

Back to Contents

PART II – OTHER INFORMATION
HANOVER FOODS CORPORATION AND SUBSID IARIES

ITEM 1. LEGAL PROCEEDINGS

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

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES – None

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

ITEM 5. OTHER INFORMATION – None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K – None

(a) EXHIBITS

Exhibit 10.1 2003 Stock Option Plan

Exhibit 31.1 Section 302 Certification – Chief Executive Officer

Exhibit 31.2 Section 302 Certification – Chief Financial Officer

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

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

(b) REPORTS ON FORM 8-K – None

2527

Back to Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~HANOVER FOODS CORPORATION~~		HANOVER FOODS CORPORATION
Date: January 14, 2004	By:	/s/ Pietro Giraffa
Date: April 14, 2004			By:	/s/ Pietro Giraffa
		Pietro Giraffa
				—————————————
		Vice President & Controller
				Pietro GiraffaVice President & ControllerChief Accounting Officer(Principal Accounting Officer)
		Chief Accounting Officer
			By:	/s/ Gary T. Knisely
		(Principal Accounting Officer)
				—————————————
	By:	/s/ Gary T. Knisely
				Gary T. KniselyExecutive Vice PresidentChief Financial Officer
		Gary T. Knisely
		Executive Vice President
		Chief Financial Officer

2628

Back to Contents

EXHIBIT INDEX

Item S-K Exhibit Number	Description


Exhibit 31.1	Section 302 Certification – Chief Executive Officer

Exhibit 31.2	Section 302 Certification – Chief Financial Officer

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

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

Item S-K Exhibit Number	Descritption
Exhibit 10.1	2003 Stock Option Plan
Exhibit 10.2	PNC Bank Line of Credit Personal
Exhibit 10.3	Citizen’s Bank Line of Credit Personal
Exhibit 31.1	Section 302 Certification – Chief Executive Officer
Exhibit 31.2	Section 302 Certification – Chief Financial Officer
Exhibit 32.1	Certification by John A. Warehime, Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit
Exhibit 32.2	Certification by Gary T. Knisely, Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filing Compare · HANOVER FOODS CORP /PA/