SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

		For the quarter (twelve-weeks) ended June 14, 2003

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

		For the transition period from to

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarter (twelve weeks) ended September 7, 2002.

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

For the transition period from to

Commission File Number

Tom’s Foods Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

58-1516963
(I.R.S. Employer Identification No.)

900 8th Street
Columbus, GA 31902
(Address of principal executive offices, including zip code)

(706) 323-2721
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ~~[ü]~~ o No ~~[ ]~~ þ

TABLE OF CONTENTS

		CONDENSED BALANCE SHEETS
		CONDENSED STATEMENTS OF OPERATIONS
		CONDENSED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
Part II. OTHER INFORMATION
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES


BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
Part II. OTHER INFORMATION
EX-99.1 SECTION 906 CERTIFICATION

TOM’S FOODS INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE TWELVE -WEEKS ENDED ~~SEPTEMBER~~JUNE 714, ~~2002~~2003

TABLE OF CONTENTS

		Page	~~Page~~
PART I	FINANCIAL INFORMATION
Item 1	Condensed Financial Statements:
Item 1.	Financial Statements:
	Balance Sheets as of September 7, 2002 and December 29, 2001			3
	Balance Sheets as of June 14, 2003 (unaudited) and December 28, 2002	3
	Statements of Operations for the twelve and thirty-six weeks ended September 7, 2002 and September 8, 2001			4
	Statements of Operations for the twelve and twenty-four weeks ended June 14, 2003 and June 15, 2002 (unaudited)	4
	Statements of Cash Flows for the thirty-six weeks ended September 7, 2002 and September 8, 2001			5
	Statements of Cash Flows for the twenty-four weeks ended June 14, 2003 and June 15, 2002 (unaudited)	5
	Notes to Financial Statements	6		6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations			10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3	Quantitative and Qualitative Disclosures About Market Risk			13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4	Controls and Procedures			14
Item 4.	Controls and Procedures	12
PART II	OTHER INFORMATION
Item 5	Other Information			14
Item 6.	Exhibits and Reports on Form 8-K	12
Item 6	Exhibits and Reports on Form 8-K			14
Signatures				15

TOM’S FOODS INC. ~~CONDENSED BALANCE SHEETS~~ ~~SEPTEMBER 7, 2002 AND DECEMBER 29, 2001 (in thousands except per share data)~~

BALANCE SHEETS
JUNE 14, 2003 AND DECEMBER 28, 2002
(in thousands except per share data)

						September 7, 2002				December 29, 2001
					June 14, 2003				December 28, 2002
ASSETS						~~(unaudited)~~				~~(unaudited)~~
Current Assets:
Current assets:
	Cash and short-term investments				$	$1,267	~~1,253~~		$	$1,856	~~2,933~~
	Accounts and notes receivable, net of allowance for uncollectible accounts of $1,866 and $1,848 at September 7, 2002 and December 29, 2001, respectively						14,752				11,391
	Accounts and notes receivable, net of allowance for uncollectible of $1,385 and $1,687 at June 14, 2003 and December 28, 2002, respectively					11,915				11,746
	Inventories:	~~Inventories:~~
		Raw materials	~~Raw materials~~			4,197	~~2,676~~			2,489	~~2,415~~
		Packaging materials	~~Packaging materials~~			2,344	~~2,528~~			2,672	~~2,099~~
		Finished goods and work in progress	~~Finished goods and work in progress~~			5,525	~~5,961~~			5,910	~~5,639~~
	Other current assets					2,672	~~4,673~~			3,032	~~4,192~~
			Total current assets	~~Total current assets~~		27,920	~~31,843~~			27,705	~~28,669~~
Property, plant, and equipment:
Property, plant and equipment:
	Land and land improvements					5,910	~~5,886~~			5,908	~~5,871~~
	Buildings					18,346	~~18,284~~			18,273	~~18,056~~
	Machinery, equipment and vehicles					60,561	~~56,828~~			59,042	~~52,946~~
	Vending and other distribution equipment					12,925	~~12,729~~			12,953	~~12,183~~
	Furniture and fixtures					16,765	~~16,025~~			16,510	~~15,585~~
	Construction in progress					7,821	~~6,940~~			8,205	~~5,253~~
				Total property, plant, and equipment			116,692				109,894
			Total property, plants, and equipment			122,328				120,891
	Accumulated depreciation					(72,970	~~(66,432~~)	)		(69,166	~~(60,745~~)	)
			Net property, plant, and equipment	~~Net property, plant, and equipment~~		49,358	~~50,260~~			51,725	~~49,149~~
Noncurrent accounts and notes receivable, net						45	~~102~~			47	~~216~~
Other assets						1,789	~~226~~			226	~~225~~
Deferred debt issue costs, net							1,081				1,445
Deferred financing costs, net						676				919
Intangible assets, net						19,718	~~19,967~~			20,009	~~20,132~~
Goodwill, net						703	~~532~~			644	~~22,892~~
			Total assets	~~Total assets~~	$	$100,209	~~104,011~~		$	$101,275	~~122,728~~
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Revolving debt				$	$6,085	~~6,972~~		$	$—	~~3,065~~
	Accounts payable					9,057	~~7,713~~			11,751	~~9,068~~
	Accrued liabilities					8,473	~~11,483~~			11,166	~~9,872~~
	Current portion of other debt obligations					269	~~293~~			239	~~251~~
			Total current liabilities	~~Total current liabilities~~		23,884	~~26,461~~			23,156	~~22,256~~
Long-term debt:
	Senior secured notes					60,000	~~60,000~~			60,000	~~60,000~~
	Other debt obligations					394	~~493~~			431	~~455~~
			Total long-term debt	~~Total long-term debt~~		60,394	~~60,493~~			60,431	~~60,455~~
Other long-term obligations						37	37			37	37
Accrued pension cost						15,125	~~6,883~~			14,795	~~6,827~~
Accrued postretirement benefits other than pensions							0				1,666
Commitments & contingencies:
Exchangeable portion of Preferred Stock, $.01 par value, Class A, 7,000 shares authorized, 7,000 shares issued and outstanding at September 7, 2002 and December 29, 2001							10,000				10,000
Exchangeable portion of Preferred Stock, $.01 par value, Class A 7,000 shares authorized, 7,000 shares issued and outstanding at June 14, 2003 and December 28, 2002						10,000				10,000
Shareholders’ Equity:
	Common stock, $0.01 par value; 10,000 shares authorized, 5,000 shares issued and outstanding at September 7, 2002 and December 29, 2001						0				0
	Common stock, $0.01 par value; 10,000 shares authorized, 5,000 shares issued and outstanding at June 14, 2003 and December 28, 2002					0				0
	Nonexchangeable portion of Preferred Stock, $.01 par value, Class A, 7,000 shares authorized, 7,000 shares issued and outstanding at September 7, 2002 and December 29, 2001						1,566				765
	Nonexchangeable portion of Preferred Stock, $.01 par value, Class A 7,000 shares authorized, 7,000 shares issued and outstanding at June 14, 2003 and December 28, 2002					2,464				1,922
	Preferred Stock, $.01 par value, Class B, 21,737 shares authorized, 21,737 shares issued and outstanding at September 7, 2002 and December 29, 2001						34,298				32,142
	Preferred Stock, $.01 par value, Class B, 21,737 shares authorized, 21,737 shares issued and outstanding at June 14, 2003 and December 28, 2002					36,696				35,256
	Additional paid-in capital					43,725	~~43,725~~			43,725	~~43,725~~
	Accumulated other comprehensive income						2				11
	Accumulated other comprehensive income (loss)					(7,743	)			(7,742	)
	Accumulated deficit					(84,373	~~(79,454~~)	)		(80,305	~~(55,156~~)	)
			Total shareholders’ equity	~~Total shareholders’ equity~~		(9,231	~~137~~)			(7,144	~~21,487~~)
			Total liabilities and shareholders’ equity	~~Total liabilities and shareholders’ equity~~	$	$100,209	~~104,011~~		$	$101,275	~~122,728~~

The accompanying notes are an integral part of these financial statements.

TOM’S FOODS INC. ~~CONDENSED STATEMENTS OF OPERATIONS~~ ~~FOR THE TWELVE AND THIRTY SIX WEEKS ENDED~~ ~~SEPTEMBER 7, 2002 AND SEPTEMBER 8, 2001 (in thousands)~~

				Twelve Weeks Ended						Thirty-Six Weeks Ended
				Sept. 7, 2002			Sept. 8, 2001			Sept. 7, 2002			Sept. 8, 2001
				(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales				$	47,288		$	48,010		$	148,277		$	142,660
Cost of goods sold					(30,452	)		(30,457	)		(94,115	)		(90,104	)
			Gross profit		16,836			17,553			54,162			52,556
Expenses and other income:
		Selling and administrative expenses			(14,864	)		(15,333	)		(47,259	)		(46,535	)
		Amortization of goodwill and intangible assets			(159	)		(399	)		(478	)		(1,194	)
		Other income, net			69			90			269			431
	Restructuring and nonrecurring charges				0			0			0			(579	)
Income from operations					1,882			1,911			6,694			4,679
Interest expense, net					(1,705	)		(2,023	)		(4,998	)		(5,935	)
Income (loss) before income taxes					177			(112	)		1,696			(1,256	)
Provision for income taxes					35			35			103			106
Net income (loss) before cumulative effect of accounting change					142			(147	)		1,593			(1,362	)
Cumulative effect of accounting change					0			0			(22,934	)		0
Net income (loss)				$	142		$	(147	)	$	(21,341	)	$	(1,362	)

STATEMENTS OF OPERATIONS

FOR THE TWELVE AND TWENTY-FOUR WEEKS ENDED

JUNE 14, 2003 AND JUNE 15, 2002

(in thousands)



		Twelve Weeks Ended						Twenty-Four Weeks Ended

		June 14, 2003			June 15, 2002			June 14, 2003			June 15, 2002

		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales		$	46,579		$	52,087		$	93,318		$	100,989
Cost of goods sold			(28,312	)		(32,378			(58,488	)		(63,663	)

	Gross profit		18,267			19,709			34,830			37,326
Expenses and other income:
Selling and administrative expenses			(16,333	)		(16,307	)		(33,626	)		(32,395	)
Amortization of intangible assets			(163	)		(160	)		(325	)		(319	)
Other operating income, net			163			73			345			200

	Income from operations		1,934			3,315			1,224			4,812
Interest expense, net			(1,634	)		(1,672	)		(3,248	)		(3,293	)

	Income (loss) before income taxes		300			1,643			(2,024	)		1,519
Provision for income taxes			(31	)		(34	)		(62	)		(68	)

	Net income (loss) before cumulative effect of a change in accounting principle	$	269		$	1,609		$	(2,086	)	$	1,451

Cumulative effect of a change in accounting principle			0			0			0			(22,934	)

	Net income (loss)	$	269		$	1,609		$	(2,086	)	$	(21,483	)

The accompanying notes are an integral part of these financial statements.

TOM’S FOODS INC. ~~CONDENSED STATEMENTS OF CASH FLOWS~~ ~~FOR THE THIRTY-SIX WEEKS ENDED~~ ~~SEPTEMBER 7, 2002 AND SEPTEMBER 8, 2001 (in thousands)~~

					Thirty-Six Weeks Ended
					September 7, 2002			September 8, 2001
					(unaudited)			(unaudited)
Cash flows from operating activities:
	Net loss				$	(21,341	)	$	(1,362	)
		Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation				6,160			5,710
		Amortization of intangible assets and goodwill				478			1,194
		Amortization of deferred debt issuance cost				364			363
		Restructuring and nonrecurring charges				0			579
		Cumulative effect of accounting change				22,934			0
		Provision for income taxes				103			106
		Preferred A stock noncash interest expense				0			713
		Loss on disposal of property, plant, and equipment				8			8
		Changes in operating assets and liabilities:
			Accounts and notes receivable, net			(3,758	)		(3,209	)
			Inventories			(939	)		(1,792	)
			Other assets			(677	)		(958	)
			Accounts payable			(1,355	)		(687	)
			Other liabilities			1,466			1,096
			Accrued pension cost			(1,611	)		(183	)
				Total adjustments		23,173			2,940
				Net cash provided by operating activities		1,832			1,578
Cash flows from investing activities:
		Additions to property, plant, and equipment				(7,875	)		(3,523	)
		Proceeds from disposal of property, plant, and equipment				21			68
				Net cash used in investing activities		(7,854	)		(3,455	)
Cash flows from financing activities:
		Net borrowing from working capital revolving facility				3,908			2,982
		Repayment of industrial development revenue bonds				0			(4,800	)
		Return of industrial development revenue bond escrow deposit				354			0
		Borrowings (repayments) of other long-term debt				80			(172	)
				Net cash provided by (used in) financing activities		4,342			(1,990	)
Decrease in cash and short-term investments						(1,680	)		(3,867	)
Cash and short-term investments, beginning of period						2,933			5,612
Cash and short-term investments, end of period					$	1,253		$	1,745
Interest paid during the period					$	3,920		$	3,830
Income taxes paid during the period					$	99		$	111

STATEMENTS OF CASH FLOWS

FOR THE TWENTY-FOUR WEEKS ENDED

JUNE 14, 2003 AND JUNE 15, 2002

(in thousands)



					Twenty-Four Weeks Ended

					June 14, 2003			June 15, 2002

					(unaudited)			(unaudited)
Cash flows from operating activities:
	Net loss				$	(2,086	)	$	(21,483	)

	Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
		Depreciation				3,946			4,064
		Amortization of intangible assets				325			319
		Amortization of deferred debt issuance cost				242			243
		Cumulative effect of a change in accounting principle				0			22,934
		Provision for income taxes				62			68
		Loss on disposal of property, plant, and equipment				4			7
		Changes in operating assets and liabilities:
			Accounts and notes receivable, net			(168	)		(4,240	)
			Inventories			(994	)		(2,760	)
			Other assets			359			608
			Accounts payable			(2,694	)		464
			Other liabilities			(2,755	)		46
			Accrued pension cost			330			(1,245	)

				Total adjustments		(1,343	)		20,508

				Net cash used in operating activities		(3,429	)		(975	)

Cash flows from investing activities:
	Additions to property, plant, and equipment					(1,695	)		(6,588	)
	Proceeds from disposal of property, plant, and equipment					19			8

				Net cash used in investing activities		(1,676	)		(6,580	)

Cash flows from financing activities:
	Net borrowing from working capital revolving facility					6,085			5,271
	Return of industrial development revenue bond escrow deposit					0			354
	Litigation escrow deposit					(1,563	)		0
	(Payments) borrowings of other long-term debt					(6	)		76

				Net cash provided by financing activities		4,516			5,701

Decrease in cash and short-term investments						(589	)		(1,854	)
Cash and short-term investments, beginning of period						1,856			2,933

Cash and short-term investments, end of period					$	1,267		$	1,079

Interest paid during the period					$	3,577		$	3,634
Income taxes paid during the period					$	84		$	93

TOM’S FOODS INC. NOTES TO ~~CONDENSED~~ FINANCIAL STATEMENTS

~~Basis~~Item 1. ofBASIS ~~Financial~~OF ~~Statements~~FINANCIAL ~~and~~STATEMENTS ~~Formation~~AND ~~and~~FORMATION ~~Organization~~AND ORGANIZATION

The accompanying unaudited financial statements of Tom’s Foods Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the annual report and Form 10-K for the fiscal year ended December 2928, ~~2001~~2002.

The accompanying unaudited financial statements include, in the opinion of management, all adjustments, which are of a normal recurring nature, necessary for a fair presentation for the periods presented. Results for the interim periods presented are not necessarily indicative of results that may be expected for a full fiscal year.

The accompanying unaudited financial statements were reviewed by Deloitte & Touche LLP, the Company’s independent audit firm, selected to replace Arthur Andersen LLP by the Board of Directors at its meeting on August 7, 2002. Deloitte & Touche LLP has also reviewed the Company’s amended First Quarter 2002 Form 10-Q and its Second Quarter 2002 Form 10-Q. These reports were previously filed without review as the Company had not replaced its previous auditor at the time those filings were done. There were no noted adjustments to the previous filings.

Fiscal Year

The Company’s fiscal year is the 52- or 53-week period ending on the Saturday nearest to December 31. The current year, fiscal ~~2002~~2003, ends ~~December~~January 283, ~~2002~~2004 and contains 5253 weeks. The Company’s first three quarters contain twelve-weeks of results while the fourth quarter contains 16 or 17 weeks coinciding with the Company’s fiscal year.

Revenue Recognition

Revenues for distributor sales are recognized when the goods are received by the distributor. Revenues for product sold through the Company’s internal distributor network are recognized when the goods are received by the retailer. Revenues for contract sales are recognized when the goods are picked up by the customer.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and short-term investments, trade receivables, notes receivable, accounts payable, purchase commitments, senior secured notes, and other long-term obligations. In management’s opinion, the carrying amounts of these financial instruments approximate their fair values at September 7, 2002 and December 29, 2001.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the average cost for raw materials, packaging materials, and work in process. Finished goods cost is determined using the first-in, first-out method. Cost elements include the cost of raw materials, direct labor, and overhead incurred in the manufacturing process.

~~Postretirement Benefits~~6

DuringTable 2002, the Company discontinued its postretirement medical benefit plan designed to bridge certain employees, whom had taken early retirement, to Medicare eligibility. As a result of the plan's termination, there were no continuing benefit obligations under the plan, and the Company recorded the entire settlement gain in the second quarter of 2002. Accordingly, the associated accrued long-term liability, which had been previously expensed against operating income and had a balance of $1.7 million at December 29, 2001, was reversed with a corresponding credit to selling and administrative expense. Contents

Pension Plans

The Company’s pension costs are determined by using various assumptions and methodologies as prescribed by Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions”. These assumptions include discount rates, inflation, rate of compensation increases, expected return on plan assets, mortality rates and other factors. The Company believes that the assumptions utilized in recording the obligations under our plans are reasonable based on input from our outside actuary. The Company recorded an additional minimum liability of $7.9 million for the fiscal year ended December 28, 2002.

Hedging Transactions

The Company has limited involvement with derivative financial instruments and does not use them for speculative purposes. The Company enters into various futures contracts and futures options to reduce the impact of volatility in raw material prices. Effective December 31, 2000, the Company adopted the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” subsequently amended by SFAS No. 138, “Accounting for Certain Derivative Instruments.” SFAS No. 133 and SFAS No. 138 require the Company to recognize all derivative instruments as assets or liabilities and to measure those instruments at fair value. Changes in the derivative fair values are deferred and recorded as a component of accumulated other comprehensive income until the hedged transactions occur and are recognized in earnings. Any ineffective portion of a hedging derivative’s change in fair value is immediately recognized in earnings. The Company formally documents all relationships between hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking the hedge transactions. The Company links all hedges to forecast transactions and assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. Adoption of these Statements did not have a significant impact on the Company’s financial position and operating results. At ~~September 7~~June 14, ~~2002~~2003, the Company had no open futures or options contracts.

~~New~~Item 2. ~~Accounting~~MANAGEMENT’S ~~Pronouncements~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

InResults June 2001, the FASB issued SFAS No. 141, “Business Combinations”, which addresses the financial accounting and reporting for business combinations and supersedes Accounting Principles Board (“APB”) Opinion No. 16, “Business Combinations”, and SFAS No. 38, “Accounting for Preacquisition Contingencies of ~~Purchased~~ ~~Enterprises". SFAS No. 141 requires that all business combinations~~Operations ~~be accounted for by the purchase method, modifies the criteria for recognizing~~ ~~intangible assets, and expands disclosure requirements. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001.~~

InTWELVE-WEEKS ~~June~~ENDED ~~2001,~~JUNE ~~the FASB issued SFAS No. 142~~14, ~~“Goodwill and Other Intangible~~2003 ~~Assets",~~COMPARED ~~which~~TO ~~addresses~~TWELVE-WEEKS ~~financial~~ENDED ~~accounting~~JUNE ~~and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17~~15, ~~“Intangible~~ ~~Assets”. SFAS No. 142 addresses how intangible assets that are~~2002 ~~acquired individually or with a group of other assets should be accounted for~~ in financial statements upon acquisition and after they have been initially recognized in the financial statements. SFAS No. 142 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but rather tested at least annually for impairment, and intangible assets that

Net sales for the second quarter ended June 14, 2003 were $46.6 million, compared to sales of $52.1 million for the corresponding period in 2002. The decrease continues to be from lower volume in non-Tom’s brand contract pack sales consistent with the first quarter of 2003. During this quarter the Company received notification, from a contract customer, of the discontinuation of one of its product lines, the volume of which had been declining thru the first quarter and was the primary reason for the first and second quarter sales shortfall compared to prior year. Additionally, another contract customer revised/rescheduled the sales projection for its products for the remainder of the year. While this revised sales projection is lower than the budgeted sales, the volume is expected to be greater than 2002 on these same products. The core branded business, including the Company owned distribution continues to exceed the sales budgets for the year.

~~have~~Gross ~~finite~~profit ~~useful~~was ~~lives~~$18.3 million bein ~~amortized~~the ~~over~~second ~~their~~quarter ~~useful~~of ~~lives.~~2003 Inas ~~addition, SFAS~~compared Noto $19.7 ~~142~~million ~~expands~~in the ~~disclosure~~second ~~requirements~~quarter ~~about~~of ~~goodwill~~2002, ~~and~~due ~~other intangible assets in the years subsequent~~ to ~~their~~lower ~~acquisition.~~margin/fixed ~~Impairment~~cost ~~losses~~coverage ~~for~~resulting ~~goodwill~~from ~~and~~the ~~indefinite-life~~decreased ~~intangible~~contract ~~assets~~pack ~~that~~production, ~~arise~~as ~~due~~noted ~~to the~~above, ~~initial~~as ~~application~~well ofas ~~SFAS~~continued ~~No. 142~~increased ~~are~~energy toand becommodity ~~reported~~costs, aswhich awere ~~change~~noted in ~~accounting~~the ~~principle.~~first ~~The Company adopted SFAS No~~quarter. ~~141 and SFAS No. 142~~ ~~effective December 30, 2001.~~

~~Upon~~For ~~adoption~~the ofsecond ~~SFAS~~quarter No2003, selling and administrative expenses were flat to prior year at $16. ~~141~~3 asfor ofboth ~~December 30,~~quarters ~~2001~~due to continued emphasis on cost control, in spite of substantial increases in company owned routes. There are no selling expenses associated with the contract sales. During 2002, the Company ~~reclassified~~discontinued its postretirement medical benefit plan designed to bridge certain ~~intangible~~employees ~~assets~~whom ~~previously~~had ~~allocated~~taken an early retirement to ~~assembled~~Medicare ~~staff~~eligibility. The ~~into~~non-cash accrued postretirement long-term liability, which had been ~~goodwill~~previously expensed against operating income and had a balance of $1.7 million at December 29, 2001, was reversed with a corresponding non-cash credit to selling and ~~ceased~~administrative expense which was partially offset by the ~~amortization~~noted increase in Company owned route related tocosts ~~these~~and ~~intangibles~~higher estimated expenses associated with the Company’s insurance and employee welfare programs.

~~During~~Interest ~~the second quarter~~expense, ~~the~~net ~~Company completed the impairment test required by SFAS No. 142. As a result~~ of ~~this~~interest ~~impairment~~income ~~test, the Company determined that the carrying amount of goodwill~~ was ~~in excess of its fair value as determined by a discounted cash flow approach. As a result, the Company recorded an impairment charge of~~ $221.96 million ~~relating to goodwill which is presented as a cumulative effect of change~~ in ~~accounting~~the ~~principle.~~second ~~The Company amended its first~~ quarter ~~2002 filing on Form 10-Q to reflect the~~ impairment charge which had no effect on cash flow. The appraisal conducted for the impairment test also indicated market values for the Company’s tradename at levels significantly higher than historical book value, but the relevant accounting standards do not allow the value of ~~this~~2003 ~~intangible~~and ~~asset to be written up~~2002.

~~The~~Net ~~trademark~~income ~~intangible~~for ~~asset~~the ~~was~~twelve-week ~~purchased~~period onended ~~May~~June 1314, ~~1993~~2003 ~~and~~ was ~~being amortized~~$269,000 ~~on a straight-line basis over 40 years (the maximum permitted by APB~~compared ~~Opinion~~to No$1.6 ~~17,~~million ~~Intangible~~for ~~Assets).~~the ~~Upon~~corresponding ~~initial~~period ~~application~~in ~~of SFAS No. 142~~2002, ~~the~~ ~~Company~~due ~~reassessed the useful lives of its intangible assets and determined that the trademark has an indefinite useful life because it is expected~~ to ~~generate~~ ~~cash flow over an indefinite period into~~ the ~~future. Thus, the~~factors ~~Company~~discussed ~~ceased amortizing the trademark on December 30, 2001~~above.

The ~~Company~~provision ~~assesses goodwill and indefinite-lived intangibles~~ for ~~impairment annually~~income ~~unless~~taxes ~~events~~was ~~occur~~relatively ~~that~~flat ~~require~~at ~~more~~$31,000 ~~frequent~~in ~~reviews.~~2003 ~~Long-lived~~compared ~~assets,~~to ~~including amortizable intangibles~~$34,000 ~~are tested~~ for ~~impairment if impairment triggers occur~~2002. ~~Discounted~~The ~~cash~~Company ~~flow~~estimates ~~analyses~~that ~~are~~it ~~used~~will tohave ~~assess nonamortizable~~no ~~intangible~~Federal ~~impairment while undiscounted cash flow analyses are~~tax ~~used~~obligation tofor ~~assess long-lived asset impairment. If an assessment indicates impairment,~~ the ~~impaired~~fiscal ~~asset~~year isdue ~~written down~~ to ~~its~~loss ~~fair~~carryforwards ~~market~~from ~~value~~prior ~~based on the best information available~~years. ~~Estimated fair market value is generally~~ ~~measured with discounted estimated future cash flows.~~

The ~~useful~~Company’s ~~lives~~operating ofincome ~~amortizable~~remained ~~intangible~~on ~~assets~~budget ~~are~~through ~~evaluated~~the ~~periodically, and~~first ~~subsequent~~half toof ~~impairment reviews, to determine whether revision is~~the ~~warranted~~year. IfThe ~~cash~~core ~~flows~~branded ~~related~~business toincluding athe ~~nonamortizable~~Company ~~intangible~~owned ~~are not~~distribution ~~expected~~continued to ~~continue~~exceed ~~beyond~~ the ~~foreseeable~~sales ~~future,~~and aoperating ~~useful~~income ~~life~~budgets ~~would~~for ~~be assigned~~the year.

TWENTY-FOUR WEEKS ENDED JUNE 14, 2003
COMPARED TO TWENTY-FOUR WEEKS ENDED JUNE 15, 2002

Net sales for the first two quarters ended June 14, 2003 were $93.3 million, compared to sales of $101.0 million for the corresponding period in 2002. The sales decrease is attributable to a decrease in contract sales volume. During the second quarter the Company received notification, from a contract customer, of the discontinuation of one of its product lines, the volume of which had been declining thru the first quarter and was the primary reason for the first and second quarter sales shortfall compared to prior year. In addition, another contract customer revised/rescheduled the sales projection for its products for the remainder of the year. While the revised sales projection will be lower than the budgeted sales, the volume is expected to be greater than 2002, on these same products. The core branded business, including the Company owned distribution continues to exceed the sales budgets for the year.

Gross profit was $34.8 million in the first twenty-four weeks of 2003 as compared to $37.3 million in the corresponding period of 2002, due to lower margin/fixed cost coverage from the decreased contract pack production, as noted above, as well as continued increased energy and commodity costs, which were noted in the first quarter.

~~Summary~~For the first twenty-four weeks of ~~the~~2003, ~~changes~~selling and administrative expenses increased to ~~goodwill~~$33.6 million ~~for~~from $32.4 million in the ~~thirty-six~~same ~~weeks~~period ~~ended~~of ~~September 7~~2002, ~~2002~~due primarily isto ~~presented~~an ~~below:~~increase in the number of Company owned and operated distribution routes and one time costs associated with the increased distribution from new National Account customers. There are no selling expenses associated with contract sales.

				Accumulated			Carrying
	Goodwill			Amortization			Value
Balance at December 29, 2001	$	26,490		$	(5,646	)	$	20,844
ADD: Reclassification of Assembled Staff		3,839			(1,791	)		2,048
ADD: Goodwill acquired		574			—			574
LESS: Goodwill Impairment and related costs		(30,371	)		7,437			(22,934	)
Balance at September 7, 2002	$	532		$	—		$	532

Interest expense, net of interest income was $3.2 million in the first two quarters of 2003 and 2002.

~~Other~~Loss ~~intangible~~before ~~assets~~cumulative ~~are~~effect ~~subject~~of toa ~~amortization~~change ~~with~~in ~~useful~~accounting ~~lives~~principle ~~ranging~~was ~~up to 35 years~~$2. ~~Intangible~~1 ~~assets~~million ~~with~~for ~~indefinite~~the ~~lives~~first ~~are~~two ~~not~~quarters ~~amortized.~~of ~~The~~2003 ~~Company~~compared ~~has~~to ~~reviewed~~a ~~the~~net ~~carrying~~income ~~value~~ of ~~these~~$1.5 ~~assets~~million ~~under~~for the ~~guidance~~corresponding ofperiod ~~SFAS~~in ~~No. 144~~2002, ~~and~~due ~~determined there was no impairment related~~ to ~~these~~factors ~~balances~~discussed above. ~~The balances of these intangible assets are summarized below:~~

				Accumulated			Carrying
Balance at December 29, 2001		Total		Amortization			Value
Nonamortizable:
	Trademark	$	4,803	$	(1,121	)	$	3,682
	Assembled Staff		3,839		(1,791	)		2,048
	Goodwill		26,490		(5,646	)		20,844
			35,132		(8,558	)		26,574
Amortizable:
	Distribution System		22,432		(5,982	)		16,450
		$	57,564	$	(14,540	)	$	43,024

The provision for income taxes was relatively flat at $62,000 in 2003 compared to $68,000 for 2002. The Company estimates that it will have no Federal tax obligation for the fiscal year due to loss carryforwards from prior years.

				Accumulated			Carrying
Balance at September 7, 2002		Total		Amortization			Value
Nonamortizable:
	Trademark	$	4,803	$	(1,121	)	$	3,682
	Goodwill acquired, net of impairment		532		—			532
			5,335		(1,121	)		4,214
Amortizable:
	Distribution System		22,432		(6,460	)		15,972
	Distribution System, intangible asset acquired		313		—			313
			22,745		(6,460	)		16,285
		$	28,080	$	(7,581	)	$	20,499

In the first quarter of 2002, the Company completed its goodwill impairment testing indicating a non-cash goodwill impairment loss of $22.9 million recorded as a cumulative effect of accounting change and a reduction in goodwill. No such expense was incurred in 2003.

~~For~~The net loss for the ~~thirty~~twenty-~~six~~four ~~weeks~~week period ended ~~September~~June 714, ~~2002,~~2003 ~~amortization~~was ~~expense~~$2.1 million ~~related~~compared to ~~the~~a ~~amortizable~~net ~~intangible assets~~loss ~~was~~of ~~approximately~~ $~~478,000~~21.5 million ~~Estimated amortization~~ for the ~~remainder~~same period of 2002 ~~and the next~~. ~~four fiscal years is as follows:~~

2002	$	213,000
2003		691,000
2004		691,000
2005		691,000
2006		691,000

The Company’s operating income remained on budget during the second quarter of the year. The core branded business including the Company owned distribution continued to exceed the sales and operating income budgets for the year.

~~The~~FINANCIAL ~~following tables reconcile the impact of adopting SFAS No. 142 for the twelve and thirty-six weeks ended~~CONDITION ~~September 7, 2002 and September 8, 2001:~~

	Twelve Weeks Ended
	Sept. 7, 2002		Sept. 8, 2001
Net (loss) income	$	142	$	(147	)
Add back goodwill amortization		—		208
Add back trademark amortization		—		30
Adjusted net income	$	142	$	61

Liquidity and Capital Resources

	Thirty Six Weeks Ended
	Sept. 7, 2002			Sept. 8, 2001
Net loss	$	(21,341	)	$	(1,362	)
Add back cumulative effect of change in accounting principle		(22,934	)		—
		1,593			(1,362	)
Add back goodwill amortization		—			625
Add back trademark amortization		—			90
Adjusted net (loss) income	$	1,593		$	(737	)

On October 14, 1997, the Company issued (the “Offering”) $60 million of its 10.5% Senior Secured Notes (the “Notes”) due November 1, 2004. The Notes are secured by a first lien on and security interest in all of the Company’s real properties, other than the Perry, FL and Knoxville, TN facilities and the Company’s equipment and intellectual property. The indenture governing the Notes has certain covenants including, without limitation, covenants limiting the incurrence of additional indebtedness, assets sales, investments, restricted payments and liens. The Company may redeem the Notes in whole or in part at a redemption price of 102.625% until October 31, 2003, and 100% thereafter, plus accrued interest through the date of redemption. In connection with the Offering, the Company incurred $3.5 million in fees and expenses which were capitalized and are being amortized over the seven year term of the Notes. As of June 14, 2003, the accumulated amortization of these costs equaled approximately $2.8 million. The Company is in the process of evaluating various alternatives to refinance the Notes prior to their maturity on November 1, 2004. Failure to refinance the Notes on similar terms would have a material adverse affect on the Company’s future cash flows and its ability to reinvest in the business at current levels or fund its working capital requirements.

On January 31, 2000, the Company entered into a revolving credit facility which terminates on January 31, 2004 providing for a $17,000,000 revolving loan facility and letter-of-credit accommodations. Under the loan agreement, the revolving loan is based on 85% of all eligible accounts receivables, plus 55% of the value of eligible inventory, plus 10% of packaging materials, all as defined. The interest rate for the new revolving facility is the prime rate of

Ininterest ~~August 2001~~or, at the ~~FASB~~Company’s ~~issued~~option, ~~SFAS~~LIBOR Noplus 2. ~~144,~~0%. ~~“Accounting~~The ~~for~~revolving credit agreement requires the ~~Impairment~~Company orto maintain certain financial ratios relating to ~~Disposal~~fixed ofcharge ~~Long-Lived~~coverage, ~~Assets”.~~working ~~SFAS~~capital, Noand minimum borrowing availability, as defined. ~~144~~ ~~addresses~~The ~~financial~~Company’s ~~accounting~~revolving loan facility is secured by a first lien on and ~~reporting~~security ~~for~~interest in the ~~impairment~~inventory orand ~~disposal~~receivables of ~~long-lived~~the ~~assets~~Company and certain related Collateral. ~~The~~During 2003, the Company intends to generate ~~was~~sufficient ~~required~~cash flow to ~~adopt~~repay ~~SFAS~~any ~~No. 144~~borrowings onunder ~~December~~the credit facility outstanding at January 3031, ~~2001.~~2004 ~~The~~and ~~adoption~~to offund ~~SFAS~~its working capital requirements Nothrough 2004. Effective June ~~144~~20, ~~did~~2003, ~~not~~the ~~have~~Company aentered ~~material~~into ~~effect~~an onagreement to extend the ~~Company’s~~revolving ~~results~~credit offacility, ~~operations~~with the same terms and conditions, oruntil ~~financial~~August 30, ~~position~~2004.

InThe ~~June~~Company’s ~~2002,~~cash ~~the~~flow ~~FASB~~requirements ~~issued~~are ~~SFAS No. 146, “Accounting~~ for ~~Costs~~working ~~Associated with Exit or Disposal Activities"~~capital, ~~which addresses financial accounting and~~capital ~~reporting~~expenditures ~~for costs associated with exit or disposal activities~~ and ~~supersedes Emerging~~debt ~~Issues~~service. ~~Task~~The ~~Force~~Company ~~(“EITF”)~~has ~~Issue~~met ~~94-3,~~its ~~“Liability~~liquidity ~~Recognition~~needs ~~for~~through ~~Certain~~internally ~~Employee~~generated ~~Termination~~funds ~~Benefits~~ and ~~Other~~a ~~Costs~~revolving toline ~~Exit~~of ancredit ~~Activity (including~~established ~~Certain Costs Incurred~~ in ~~a Restructuring)”. SFAS No. 146 requires~~ ~~that~~January a2000, ~~liability~~which ~~for~~matures ~~a cost associated with an exit or disposal activity be recognized when the liability is incurred. A liability for an exit cost as defined~~ in ~~EITF~~August ~~94-3 is recognized at the date of an entity’s commitment to an exit plan~~2004. ~~SFAS No. 146 also establishes that the liability should initially~~ ~~be measured and recorded at fair value. The Company will adopt the provisions~~ ~~of SFAS No. 146 for exit or disposal activities that are initiated after December 28, 2002.~~

~~During~~As ~~2000, FASB’s EITF added to its agenda various issues that impact the income statement classification~~ of ~~certain sales and marketing promotional payments. In May 2000, the EITF reached a consensus on Issue 00-~~June 14, ~~“Accounting for Certain Sales Incentives.” Issue 00-14 addresses the recognition and income statement classification of various sales incentives. Among its requirements~~2003, ~~the~~ ~~consensus requires costs related to customer price reductions at~~ the ~~point of~~Company ~~sale~~had ~~and~~an ~~other~~outstanding ~~product~~revolving ~~promotions~~loan ~~currently~~balance ~~classified as marketing costs to be classified as a reduction~~ of ~~revenue. In April 2001, the EITF delayed the~~ ~~effective date for this consensus until 2002~~$6. ~~The impact of adopting this consensus for the thirty-six weeks ended September~~1 7million, ~~2002,~~letters ~~and~~of ~~September 8, 2001~~credit ~~reduced~~outstanding ~~selling~~of ~~and administrative expenses and net sales by approximately~~ $6.2.8 million, and $62.39 million~~, respectively. There was no impact on earnings or~~ ~~cash flow from the adoption~~ of ~~Issue~~borrowing ~~00-14~~availability thereunder. InThe ~~April~~Company’s ~~2001,~~working ~~the~~capital ~~EITF reached a~~position ~~consensus on Issue 00-25, “Vendor Income Statement Characterization~~ of ~~Consideration~~ ~~Paid to a Reseller of the Vendor’s Products~~$4.”0 million ~~Issue~~as ~~00-25 addresses the income statement classification~~ of ~~consideration~~June 14, ~~other~~2003, ~~than~~increased ~~that directly~~by ~~addressed in Issue 00-14~~$1.4 million, ~~from~~compared ~~a vendor~~ to ~~a reseller or another party~~the ~~that~~working ~~purchases~~capital ~~the~~position ~~vendor’s~~of ~~products~~$2.6 million ~~This consensus is effective~~ for ~~2002~~the ~~and is~~same ~~not~~period ~~expected~~of ~~to have a material impact on the Company’s financial statements~~2002.

~~ITEM~~Net 2cash used in operating activities was $3.4 million ~~MANAGEMENT’S~~for ~~DISCUSSION~~the ~~AND~~twenty-four ~~ANALYSIS~~week period OFended ~~FINANCIAL~~June 14, ~~CONDITION~~2003, ~~AND~~a ~~RESULTS~~variance OFof ~~OPERATIONS~~$2.4 million, versus $975,000 used during the same period in 2002.

~~Results~~Net cash used in investing activities was $1.7 million in the first two quarters of ~~Operations~~2003 compared to $6.6 million in 2002.

~~TWELVE~~Net ~~WEEKS~~cash ~~ENDED~~provided ~~SEPTEMBER~~by financing activities was $4.5 million the first two quarters of 2003 versus $5.7, million in the same period of 2002. Revolver ~~COMPARED~~borrowings TOwere ~~TWELVE~~$6.1 million ~~WEEKS~~in ~~ENDED~~the ~~SEPTEMBER~~first 8two quarters of 2003 compared to $5.3 million in the same period of 2002. In connection with the appeal of a $1.2 million verdict against the Company in the Circuit Court of Alabama, ~~2001~~the Company deposited $1.6 million in cash to secure a bond posted in order to stay the execution of the verdict pending such appeal, which is recorded as the litigation escrow deposit under financing activities.

~~Net~~New ~~sales~~Accounting ~~for the third quarter ended September 7, 2002 were $47.3 million, a~~Pronouncements ~~decrease of 1.5%, or $722,000 compared to the corresponding period in 2001 as a~~ result of weakness in general economic conditions and aggressive promotional activity by at least one competitor. The sales figures for each quarter have been reduced as a result of a reclassification of certain promotional expenses from selling and administrative expenses in accordance with the FASB EITF consensus Issue 00-14 which the Company adopted during the first quarter of 2002. The reclassified amounts for the third quarter of 2002 and 2001 were $2.0 million and $2.2 million, respectively.

In April 2002, the FASB issued SFAS No. 145 Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No 145 addresses the treatment of debt extinguishment as an extraordinary item in the statement of operations. Adoption of this standard is required for fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 required a reclassification of the extraordinary item for debt extinguishment included in the company’s December 29, 2001 financial statements to be reclassified to operating income (loss).

The FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45), which addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. FIN 45 also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the guarantor’s noncontingent obligations associated with such guarantee. The disclosure requirements of this Interpretation are effective for financial statements of periods ending after December 15, 2002 whereas the initial recognition and measurement provisions are applicable on a prospective basis for guarantees issued or modified after December 31, 2002.

~~Gross~~In ~~profit~~June ~~decreased~~2002, tothe ~~$16~~FASB issued SFAS No.8 ~~million~~146, in“Accounting ~~the~~for ~~third~~Costs ~~quarter~~Associated with ofExit ~~2002~~or ~~from~~Disposal ~~$17.5~~Activities”, which addresses financial accounting and ~~million~~reporting infor ~~the~~costs ~~third~~associated with exit or disposal activities and supersedes ~~quarter~~Emerging ofIssues ~~2001~~Task Force (“EITF”) Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a ~~decrease~~Restructuring): ofSFAS ~~$700,000~~No. 146 requires that a liability for a cost associated with an exit or 4disposal activity be recognized when the liability is incurred.1% ~~due~~A toliability for an exit cost as defined in EITF 9403 is recognized at the ~~sales~~date ~~decrease~~of an entity’s commitment to an ~~already~~exit ~~noted~~plan. ~~above~~SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The adoption of SFAS No. 146 did not have a ~~shift~~material ineffect ~~channel~~on ~~sales~~the ~~mix~~Company’s results of operations or financial position.

~~For~~In January 2003, the ~~third~~FASB ~~quarter~~issued ~~2002~~Interpretation No. 46, ~~selling~~Consolidation ~~and~~of Variable ~~administrative~~Interest ~~expenses~~Entities ~~were~~(“FIN ~~$14~~46”), an Interpretation of ARB No.9 51. FIN 46 ~~million~~requires ~~compared~~certain variable interest entities to ~~$15.3 million~~be ~~for~~consolidated ~~2001.~~by ~~The~~the ~~decrease~~primary beneficiary of the entity if the equity investors in ~~selling~~the ~~and administrative~~entity ~~expenses~~do ~~was~~not ~~due~~have ~~primarily~~the characteristics toof a ~~credit~~controlling ~~adjustment~~financial interest or do not have sufficient equity at risk for the entity to ~~expense~~finance its activities without additional subordinated financial support from ~~accrued~~other ~~long-term~~parties. ~~pension~~FIN ~~cost~~46 asis ~~the~~effective ~~Company~~for ~~adjusted~~all new ~~its~~variable ~~long-term~~interest entities created or acquired after January 31, 2003. For ~~pension~~variable ~~liability~~interest ~~balances~~entities created or acquired prior to ~~meet~~February 1, ~~actuarial~~2003, ~~estimates~~the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, ~~consistent~~2003. ~~with~~The ~~past~~Company does not expect FIN 46 to have a ~~practice~~material impact on the Company’s financial position or results of operations.

~~Amortization~~In ~~expenses~~May ~~decreased~~2003, bythe ~~$240,000~~FASB toissued ~~$159~~SFAS No. 150,~~000~~ Accounting for ~~the~~Certain ~~third quarter~~Financial Instruments With Characteristics of ~~2002~~Both ~~compared~~Liabilities toand ~~2001~~Equity. ~~due~~The tostatement establishes ~~the~~standards ~~cessation~~for ofhow ~~the~~an ~~amortization~~issuer ofclassifies ~~goodwill,~~and measures certain ~~discussed~~financial ~~more~~instruments ~~fully~~with ~~above~~both ~~under~~characteristics ~~new~~of ~~accounting~~liabilities ~~pronouncements~~and equity. ~~Other~~It requires ~~income~~that an issuer classify a financial instrument that is within its ~~was~~scope ~~$69,000~~as ~~for~~a ~~the~~liability ~~third~~(or ~~quarter~~an asset in some circumstances). Adoption of ~~2002~~this standard ~~compared~~is torequired ~~$90,000~~for existing or new contracts for ~~the corresponding~~fiscal ~~period~~years inbeginning after ~~2001~~December 15, 2003.

Interest expense, net of interest income, decreased to $1.7 million in the third quarter of 2002 from $2.0 million in the third quarter of 2001, a decrease of $300,000 due primarily to the early retirement of the Company’s outstanding industrial development revenue bonds in the second half of 2001 and the fact that there is no longer interest expense recorded on the exchangeable portion of the Company’s Preferred A stock. All increases in the liquidation preference on the Company’s Preferred A stock are now recorded as dividends and are reflected solely within the equity section of the balance sheet.

The provision for income taxes was $35,000 in both 2002 and 2001. The Company estimates that it will have no Federal tax obligation for the fiscal year due to loss carryforwards from the prior years.

As a result of the factors discussed above, net income for the twelve week period ended September 7, 2002 increased by $289,000 to $142,000 compared to a net loss of $147,000 for the same period in 2001.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) represents the sum of income (loss) before income taxes plus interest expense, depreciation and amortization. EBITDA is a widely accepted measure of a Company’s ability to incur and service debt, to undertake capital expenditures, and to meet working capital requirements. EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative either to net income as an indicator of the Company’s operating performance or as an indicator of the Company’s liquidity. Additionally, the Company’s calculation of EBITDA may differ from the calculation of EBITDA used by other companies. Consistent with the preceding discussion, EBITDA for the third quarter of 2002 was $4.1 million, or 8.7% of net sales, compared to $4.2 million, or 8.9% of net sales, for the same period of 2001.

THIRTY-SIX WEEKS ENDED SEPTEMBER 7, 2002 COMPARED TO THE THIRTY-SIX WEEKS ENDED SEPTEMBER 8, 2001

Net sales for the thirty-six weeks ended September 7, 2002 were $148.3 million, an increase of 3.9%, or $5.6 million compared to the corresponding period in 2001 in spite of weakness in general economic condition and aggressive promotional activity by at least one industry competitor, as noted in the quarterly discussion. The sales figures for both thirty-six week periods have been reduced as a result of the reclassification of certain promotional expenses from selling and administrative expenses in accordance with the FASB EITF consensus Issue 00-14 which the Company adopted during the first quarter of 2002. The reclassified amounts for the first thirty-six weeks of 2002 and 2001 were $6.2 million and $6.3 million, respectively.

Gross profit dollars for the first thirty-six weeks of 2002 increased by $1.6 million, or 3.1%, to $54.2 million compared to $52.6 million for the same period in 2001 due primarily to the above noted increases in sales volume.

For the first thirty-six weeks of 2002, selling and administrative expenses were $47.3 million, an increase of $724,000 or 1.6%, from the $46.5 million for the first thirty-six weeks of 2001, largely due to the expenses associated with operating an increased number of Company owned routes. As a percentage of net sales, selling and administrative expenses decreased to 31.8% for the first thirty-six weeks of 2002 from 32.6% for 2001. During 2002, the Company discontinued its postretirement medical benefit plan designed to bridge certain employees whom had taken an early retirement to Medicare eligibility. The accrued postretirement long-term liability, which had been previously expensed against operating income and had a balance of $1.7 million at December 29, 2001, was reversed with a corresponding credit to selling and administrative expense which was partially offset by the noted increase in Company owned route related costs and higher estimated expenses associated with the Company’s insurance and employee welfare programs.

Amortization expenses decreased by $716,000 to $478,000 for the first thirty-six weeks of 2002 compared to 2001 due to the cessation of the amortization of goodwill, discussed more fully above under new accounting pronouncements. Other income was $269,000 for the first thirty-six weeks of 2002 compared to $431,000 for the corresponding period in 2001.

In the first thirty-six weeks of 2001, the Company incurred a one-time nonrecurring charge of $579,000 related to a planned staff reorganization. No such expense was incurred in 2002.

Interest expense, net of interest income, decreased to $5.0 million in the first thirty-six weeks of 2002 from $5.9 million in same period of 2001, a decrease of $900,000 due primarily to the early retirement of the Company’s outstanding industrial development revenue bonds in the second half of 2001 and the fact that there is no longer interest expense recorded on the exchangeable portion of the Company’s Preferred A stock. All increases in the liquidation preference on the Company’s Preferred A stock are now recorded as dividends and are reflected solely within the equity section of the balance sheet.

The provision for income taxes was $103,000 in 2002 compared to $106,000 for 2001. The Company estimates that it will have no Federal tax obligation for the fiscal year due to loss carryforwards from the prior years.

As a result of the variances discussed above, net income before cumulative effect of accounting change for the thirty-six weeks ended September 7, 2002 increased by $3.0 million to $1.6 million compared to a net loss of $1.4 million for the same period of 2001.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) represents the sum of income (loss) before income taxes plus interest expense, depreciation and amortization. EBITDA is a widely accepted measure of a Company’s ability to incur and service debt, to undertake capital expenditures, and to meet working capital requirements. EBITDA is not a measure of financial performance under generally accepting accounting principles and should not be considered an alternative either to net income as an indicator of the Company’s operating performance or as an indicator of the Company’s liquidity. Additionally, the Company’s calculation of EBITDA may differ from the calculation of EBITDA used by other companies. Consistent with the preceding discussion, EBITDA year-to-date through the third quarter of 2002 increased by 9.6% to $13.3 million, or 9.0% of net sales, compared to $12.2 million, or 8.5% of net sales, for the same period of 2001.

FINANCIAL CONDITION

Liquidity and Capital Resources

The Company’s cash flow requirements are for working capital, capital expenditures and debt service. The Company has met its liquidity needs through internally generated funds and a revolving line of credit established in January 2000 which matures in January 2004.

As of September 7, 2002, the Company had an outstanding revolving loan balance of $7.0 million, had letters of credit outstanding of $2.8 million and $3.7 million of borrowing availability thereunder. The revolving loan balance has increased $3.9 million since December 29, 2001 in line with the sales increase of $5.6 million year-to-date and the related increases in receivables and inventory of $3.4 million and $1.0 million, respectively. The Company’s working capital position of $5.4 million as of September 7, 2002 decreased by $1.0 million from the working capital position of $6.4 million as of December 29, 2001. The decrease is primarily due to the seasonal increase in revolver borrowing offset slightly by increases in receivables and inventory.

Net cash provided by year-to-date operating activities was $1.8 million for the thirty-six week period ended September 7, 2002 versus $1.6 million provided by operating activities during the same period in 2001.

Net cash used in investing activities increased to $7.9 million for the first thirty-six weeks of 2002 from $3.5 million in 2001 due to the early timing of certain capital projects versus the prior year. Year-to-date capital expenditures have been made primarily for plant and facility improvements, distributor acquisitions, and information technology investments.

Net cash provided by financing activities was $4.3 million for the first thirty-six weeks of 2002 compared to the net cash used in financing activities of $2.0 million in the same period of 2001. Net revolver borrowings were $3.9 million compared to $3.0 million for the same period of 2001.

Cautionary Statement Related to Forward-Looking Statements

The statements contained in the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere which are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. There can be no assurance that any forward-looking statement will be realized or that actual results will not be significantly higher or lower than set forth in such forward-looking statement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Raw materials used by the Company are subject to price volatility caused by weather, government farm programs, global supply and demand, and other unpredictable factors. To manage potential volatility in raw material prices, the Company from time to time enters into commodity future and option contracts, which are less than one year in duration. The Company’s Board-approved policy is to use such commodity derivative financial instruments only to the extent necessary to manage these raw material price exposures. The Company does not use these financial instruments for speculative purposes. These commodity instruments are marketable exchange traded contracts designated as hedges, and the changes in the market value of such contracts have a high correlation to the price changes of the hedged commodity. As of June 14,

1311

~~designated as hedges~~2003, ~~and~~ the ~~changes in the market value of such contracts have a high correlation to the price changes of the hedged commodity. As of September 7, 2002 the~~ Company had no open futures or options contracts in wheat, soybean oil, corn, diesel, or natural gas.

The Company has a credit facility that has an interest rate based upon the prime rate or, at the Company’s option, the London InterBank Offered Rate (“LIBOR”) plus 2%. Any increases in such rates may dramatically increase the interest rates under such facility and would make it more costly for the Company to borrow funds thereunder. These increased borrowing costs may impede the Company’s growth and operating strategies if management determines that such costs are too high to implement those strategies. These increased costs may also hinder the Company’s ability to fund its working capital requirements.

The Company’s $60 million senior secured credit facility matures on November 1, 2004. In spite of continued financial improvement since the Company issued its senior notes in October 1997, there can be no assurance given current credit market conditions that the Company will be able to renew its senior credit facility on terms or at rates as favorable as those set to expire in 2004. While the facility expiration is ~~still~~ more than ~~two~~15 months ~~years~~ away, failure to renew on similar terms could hinder the Company’s future cash flows and its ability to reinvest in the business at current levels or fund its working ~~capital~~ capital requirements.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation within 90 days prior to the filing date of this report, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the foregoing evaluation.

Part II. OTHER INFORMATION

~~ITEM 5~~Item 6. Exhibits ~~OTHER~~and ~~INFORMATION~~Reports on Form 8-K.

On(a) ~~October 18, 2002, the Company announced that S~~Exhibits. ~~Albert~~Exhibit ~~Gaston, Sr~~99.1 ~~Vice President~~— ~~and~~Section ~~Chief~~906 ~~Financial~~certification ~~Officer~~(b) ~~would~~Reports beon ~~leaving~~Form ~~the Company effective October 25, 2002 to accept a career~~8-~~enhancing position at another company~~K. Mr. Gaston’s contributions to Tom’s have been substantive and this move in no way reflects anything negative in regard to the Company. The Company wishes Mr. Gaston well and he will be missed. The Company is confident that Mr. Gaston’s departure will not adversely affect the continuity of its financial management and controls. A replacement search has been initiated.

~~ITEM~~ There 6.were ~~EXHIBITS~~no ~~AND~~reports ~~REPORTS~~on ~~ON FORM~~ Form 8-K filed by the Registrant during the quarter ended June 14, 2003.

	(a)		Exhibits.
			None.
	(b)		Reports on Form 8-K.

Form 8-K was filed by the Registrant on August 12, 2002 announcing the Board of Director’s decision to select Deloitte & Touche LLC as the Company’s independent auditor to replace the Company’s previous auditor, Arthur Andersen.

SIGNATURES

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

TOM’S FOODS INC By /s/ Rolland G. Divin Rolland G. Divin President, Chief Executive Officer, and Director (Principal Executive Officer) Date: July 29, 2003 By /s/ Sharon M. Sanders Sharon M. Sanders Acting Chief Financial Officer Date: July 29, 2003

~~By /s/ Rolland G. Divin~~13

Date: October 22, 2002

By /s/ S. Albert Gaston

Date: October 22, 2002

I, Rolland G. Divin, certify that:

1)		I have reviewed this quarterly report on Form 10-Q of Tom’s Foods Inc.;

2)		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3)		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4)		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: ~~October 22~~ July 29, ~~2002~~ 2003 /s/ Rolland G. Divin Rolland G. Divin President, Chief Executive Officer, and Director (Principal Executive Officer)

~~/s/ Rolland G. Divin~~14

I, SSharon M. ~~Albert Gaston~~Sanders, certify that:

1) I have reviewed this quarterly report on Form 10-KQ of Tom’s Foods Inc.; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: ~~October 22~~ July 29, ~~2002~~ 2003 /s/ Sharon M. Sanders Sharon M. Sanders Acting Chief Financial Officer

~~/s/ S. Albert Gaston~~15

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · TOMS FOODS INC