HANOVER FOODS CORP /PA/ (Form: 10-K/A, Received: 09/30/2004 17:07:02)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Amendment No. 1)

(Mark One)

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

	For the fiscal year ended May 30, 2004

	OR

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

	For the transition period from _____________________ to _____________________
	Commission file number 000-17896

HANOVER FOODS CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania		23-0670710

(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

1486 YORK STREET, P.O. BOX 334
HANOVER, PENNSYLVANIA 17331-0334

(Address of principal executive offices) (Zip code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class		Name of each exchange on which registered

Securities registered pursuant to Section 12(g) of the Act:

Class A Nonvoting Common Stock

(Title of Class)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

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

As of November 30, 2003, the registrant’s last business day of the second fiscal quarter of fiscal 2004, aggregate value of Class B Voting Common Stock held by non-affiliates of the registrant based on the price at which such shares were last sold as of November 28, 2003 as reported on the NASDAQ over the counter market was $11,458,125 excluding 355,399 shares owned by the Employee Stock Trust and Employee Stock Ownership Plan. As of November 30, 2003, the estimated aggregate market value of Class A Nonvoting Common Stock held by non-affiliates of the registrant was $14,818,356 based on the price at which such shares were last sold as of November 28, 2003 as reported on the NASDAQ over the counter market. (The exclusion of the market value of shares owned by any individual or entity shall not be deemed an admission that such person is an “affiliate” of the registrant.) There were 781,648 shares of Class B Common Stock outstanding as of August 11, 2004, of which 355,399 shares were owned by the Employee Stock Trust and Employee Stock Ownership Plan. There were 287,996 shares of Class A Common Stock outstanding as of August 11, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of the registrant’s 2004 Annual Report to Shareholders, attached as Exhibit 13 to this Form 10-K, are incorporated by reference into Part II of this Form 10-K.

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EXPLANATORY NOTE

The registrant is amending its Annual Report on Form 10-K (the “Amendment”) filed on August 30, 2004 to correct and supplement certain information contained in the document as well as the notes to the financial statements for the year ended May 30, 2004. The Amendment does not restate any of the financial information contained in the registrant’s consolidated financial statements filed in the Annual Report on Form 10-K.

PART I

ITEM 1.

BUSINESS

Forward Looking Statements

When used in this Annual Report on Form 10-K, 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, foreign operations, and a change of control as a result of the pending Warehime family litigation. Such factors, which are discussed in the Annual Report, could affect the Corporation’s financial performance and could cause the Corporation’s actual results for future periods to differ materially from any opinion or statements expressed herein with respect to future periods. As a result, the Corporation wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made.

OVERVIEW

Hanover Foods Corporation (as used herein the term “Corporation” or “Company” refers to Hanover Foods Corporation and its consolidated subsidiaries) was incorporated on December 12, 1924 in Harrisburg, Pennsylvania.

The Corporation has seven (7) wholly-owned subsidiaries, Tri-Co. Foods Corp., Spring Glen Fresh Foods, Inc., Consumers Packing Company, Hanover Insurance Company, Ltd., Nittany Corporation, Bickel’s Snack Foods, Inc and Aunt Kitty’s Foods, Inc. Tri-Co. Foods Corp. has two (2) wholly-owned subsidiaries: Sunwise Corporation and Mayapac, S.A.

Originally, the Corporation was established to provide seasonal packing of locally grown peas, beans and other vegetables. See “Part I — Item 1. Business — Risk Factors — Seasonality and Quarterly Fluctuations.” From this beginning, the Corporation has grown to become one of the leading independent processors of canned vegetables, soups, pasta and stews, frozen vegetables and fruits, frozen meat products, frozen entrees, frozen soft pretzels, canned and frozen mushrooms, fresh foods and snack food products in the eastern United States. The Corporation’s raw materials are readily available, and the Corporation is not dependent on a single supplier or a few suppliers. This growth has resulted from the Corporation’s extended scope of operations, new product development and acquisitions. See “Part I — Item 1. Business — Risk Factors — Industry Conditions and Price and Volume Fluctuations.”

The Corporation is a vertically integrated processor of food products in one industry segment. It is involved in the growing, processing, canning, freezing, packaging, marketing and distribution of its products under its own trademarks, as well as other branded, customer and private labels. See “Part I — Item 1. Business — Risk Factors — General Risks of the Food Industry.”

The Corporation enjoys the strongest retail sales of its products in the mid-Atlantic states and Florida. Introduction of frozen ethnic blends, specialty vegetables, frozen soft pretzels, refrigerated food, canned and frozen mushrooms and snack food products has enabled the Corporation to increase and expand its distribution throughout the eastern seaboard. Distribution in the remainder of the United States is limited to food service, military and industrial customers.

OPERATIONS

The Corporation has operations at eleven (11) plants in Pennsylvania, one (1) plant in Maryland, one (1) plant in Delaware, one (1) plant in New Jersey and two (2) plants in Guatemala.

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PRODUCTS

The Corporation markets its products under the brand names HANOVER, HANOVER FARMS, MYERS, PHILLIPS, GIBBS, SUPERFINE, MARYLAND CHIEF, MITCHELL’S, DUTCH FARMS, SUNWISE, O&C (jarred onions only), SPRING GLEN FRESH FOODS, SUNNYSIDE FOODS, NOTTINGHAM, BICKEL’S, BON TON, YORK SNACKS, CABANA, DRAPER KING COLE, VENICE MAID, AUNT KITTY’S AND HARVEST CHOICE. The products sold by the Corporation under these brand names include canned vegetables, beans and pasta as well as frozen vegetables, frozen meat products, food entrees, refrigerated and fresh foods, canned and frozen mushrooms and potato chips. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Year Ended May 30, 2004 Compared to Year Ended June 1, 2003” in the 2004 Annual Report to Shareholders attached hereto as Exhibit 13 (the “Annual Report”).

DISTRIBUTION

The Corporation’s products are marketed under its brand labels and customer private labels to the consumer for home use and also to the food service trade which includes restaurants, fast food chains, hospitals and schools as well as military and other governmental uses. The Corporation’s ten largest customers accounted for approximately 36% of the Corporation’s net sales for the fiscal year ended May 30, 2004 and 38% of accounts receivable as of May 30, 2004. No single customer accounted for more than 10% of net sales for the fiscal years ended May 30, 2004, June 1, 2003 and June 2, 2002. The Corporation’s products are distributed directly to its customers and indirectly via independent distributors. Sales activities are conducted via Corporation employed sales personnel and independent sales brokerage firms. The Corporation also manufactures private label food products for other food companies.

COMPETITION

The Corporation markets its food products to the retail and food service sectors in the Northeastern, Mid-Atlantic, Southeastern and Midwestern areas of the United States. See “Part I — Item 1. Business — Risk Factors — Competition.” The principal methods of competition within the food processing industry are: price, promotion, advertising, product quality and service. The Corporation competes with national processors such as Birds Eye Foods and Campbell Foods and regional processors such as Bush, Allen and Morgan Foods.

TRADEMARKS

The Corporation has various registered and unregistered trademarks, service marks and licenses which are of material importance to the Corporation’s business. The principal trademarks of the Corporation are: Hanover, Myers, Gibbs, Phillips, Spring Glen, L.K. Bowman, Bickel’s, Bon Ton, Cabana, Aunt Kitty’s and Venice Maid.

BACKLOG OF ORDERS

The Corporation manufactures against customer forecasts and orders. While at any given time there may be a backlog of orders, such backlog is not material to total sales, nor are the changes from time to time significant.

RESEARCH AND DEVELOPMENT

The Corporation engages in research and development of new products and improvement of existing products as well as the improvement and modernization of its operating plants and equipment. See Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

REGULATION

The Corporation’s operations, as is the case of all food companies, are subject to strict regulation by the U.S. Food and Drug Administration (FDA). The Corporation is also subject to inspection by the Food Safety and Quality Service Division (USDA), for its meat and poultry products. FDA regulates the safety of the food product, the identity of the product, its purity and identification of ingredients therein. USDA establishes grades for products and regulates sanitation. The appropriate state agencies regulate the sanitation of the Corporation’s plants and the manufacture of food products utilizing flour in any baking process.

The Corporation is also regulated by many other federal and state governmental agencies such as Occupational Safety and Health Administration (OSHA), Federal Trade Commission and U.S. Environmental Protection Agency. See “Part I — Item 1. Business — Risk Factors — Regulation.”

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ENVIRONMENTAL CONSIDERATIONS

The Corporation continually makes investments to comply with all federal, state and local laws, environmental rules and regulations. To date, such expenditures have not been material with respect to the Corporation’s capital expenditures, earnings or competitive position. See “Part I — Item 1. Business — Risk Factors — Environmental Risks.”

SOURCES OF SUPPLY

The Corporation maintains an intimate involvement in all phases of agricultural crop production as well as direct procurement of fresh vegetables. The Corporation procures all of its fresh vegetable requirements through direct contracts with farmers who cultivate and harvest the crops according to the Corporation’s specifications. In addition, the Corporation directly procures beans, tomato based products, pasta, herbs and other ingredients, as well as containers and packaging materials from outside vendors throughout the world. No supplier provides more than 10% of the raw materials or packaging materials purchased by the Corporation. See “Risk Factors — Seasonality and Quarterly Fluctuations.”

EMPLOYEES

As of August 1, 2004, the Corporation, its divisions and subsidiaries employed 2,205 employees on a full-time and a seasonal basis. 1,622 employees are employed in the United States and 583 are employed in Guatemala.

A total of 744 production workers at the Hanover, PA; Centre Hall, PA; and Clayton, DE plants are members of the United Food and Commercial Workers Union - Locals 1776, 72 and 56, respectively. The Corporation’s subsidiary, Aunt Kitty’s Foods, Inc., at its Vineland, NJ plant has 99 employees, who are members of United Food and Commercial Workers Union Local #56 and 9 employees, who are members of Teamsters Local #676. The Hanover and Centre Hall, PA plants each have their own three (3) year contract beginning January 1, 2003 and ending December 31, 2005. The Clayton, DE plant has its own three (3) year contract beginning January 1, 2002 and ending December 31, 2004. The Vineland, NJ plant union contracts have terms ending as follows: Teamsters #676 – March 31, 2006 and United Food and Commercial Workers Local #56 – March 31, 2008. The Corporation is currently negotiating a collective bargaining agreement with United Food and Commercial Workers Union Local #56 for 87 production and warehouse employees of the Ridgely, MD plant as a result of an election held on June 30, 2004 and certified by the National Labor Relations Board on July 14, 2004. There are no union contracts at any other plants or locations of the Corporation. The Corporation has never had any strikes or labor disputes interfering with its operations. Management considers labor relations to be excellent.

FOREIGN OPERATIONS

The Corporation’s wholly-owned subsidiary, Tri-Co. Foods Corp., has two wholly-owned subsidiaries, Mayapac, S.A., of San Jose Pinula, Guatemala; and Sunwise Corporation, Lakeland, Florida.

Mayapac S.A. procures, processes and ships vegetables and fruit produced in Guatemala. Mayapac S.A. contracts with approximately 2,000 independent farmers in Guatemala for the growing and harvesting of broccoli, cauliflower, okra , Brussels sprouts, melons, cantelope and papaya. The raw vegetable products purchased by the Corporation are frozen at one of two Corporation plants located in San Jose Pinula, Guatemala; and Teculutan, Guatemala.

Sunwise Corporation imports and distributes the Guatemalan products to the Corporation.

The business of the Corporation in Guatemala is subject to the laws of Guatemala which may place restrictions and controls on such matters as ownership, imports and exports, prices, product lines and transfer of funds, and is also subject to the fluctuating exchange rate between the Guatemalan quetzal and the U.S. dollar. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Impact of Events and Commitments of Future Operations” in the Annual Report and “Part I — Item 1. Business — Risk Factors — Risks Associated With Foreign Operations.

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Information with respect to the revenue, cost of sales and identifiable assets for the Corporation’s foreign operations is set forth in Note 11 to the Consolidated Financial Statements entitled "Foreign Operations" in the Annual Report.

RISK FACTORS

Industry Conditions and Price and Volume Fluctuations

The Corporation’s financial performance and growth are related to conditions in the food processing industry. The United States food processing industry is a mature industry. The Corporation’s net sales are a function of product availability and market pricing. In the food processing industry, product availability and market prices tend to have an inverse relationship: market prices tend to decrease as more product is available, whereas if less product is available, market prices tend to increase. Product availability is a direct result of plantings, growing conditions, crop yields and inventories, all of which vary from year to year. In addition, price can be affected by the planting, inventory level and individual pricing decisions of the three or four largest processors in the industry. Generally, the market prices in the food processing industry tend to adjust more quickly to variations in product availability than an individual processor can adjust its cost structure; thus, in an over-supply situation, a processor’s margins likely will weaken, as suppliers generally are not able to adjust their cost structure as rapidly as market prices adjust for the over-supply. The Corporation typically has experienced lower margins during times of industry over-supply. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.

Seasonality and Quarterly Fluctuations

The Corporation’s operations are affected by the growing cycle of the vegetables it processes. The Corporation’s business can be positively or negatively affected by weather conditions nationally and the resulting impact on crop yields. Favorable weather conditions can produce high crop yields and an over-supply situation in a given year. This over-supply typically will result in depressed selling prices and reduced profitability to the Corporation on the inventory produced from that year’s crops. Excessive rain or drought conditions can produce low crop yields and a shortage situation. This shortage typically will result in higher selling prices and increased profitability to the Corporation. While the national supply situation controls the pricing, the supply can differ regionally because of variations in weather.

Because many of the raw materials processed by the Corporation are agricultural crops, production of products using these crops is predominantly seasonal. As a result, the Corporation needs access to working capital financing to meet its production requirements during these periods. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.

Competition

All of the Corporation’s products compete with those of other national, major and small regional food processing companies under highly competitive conditions. Many of the Corporation’s major competitors in the market are larger and have greater financial and marketing resources than the Corporation. Continued industry consolidation also may increase the market strength of the Corporation’s larger competitors making it more difficult for the Corporation to increase its market share.

Regulation

United States and foreign governmental laws, regulations and policies directly affect the agricultural industry and food processing industry. The Corporation is subject to regulation by the FDA, the USDA, the Federal Trade Commission, the Environmental Protection Agency and various state agencies with respect to production, packaging, labeling and distribution of its food products. The application or modification of existing, or the adoption of new laws, regulations or policies could have an adverse effect on the Corporation’s business and results of operations.

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General Risks of the Food Industry

Food processors are subject to the risks of adverse changes in general economic conditions; evolving consumer preferences and nutritional and health-related concerns; changes in food distribution channels and increasing buying power of large supermarket chains and other retail outlets that tend to resist price increases; federal, state and local food processing controls; consumer product liability claims; and risks of product tampering.

Environmental Risks

The disposal of solid and liquid waste material resulting from the preparation and processing of foods are subject to various federal, state and local laws and regulations relating to the protection of the environment. Such laws and regulations have an important effect on the food processing industry as a whole, requiring substantially all firms in the industry to incur material expenditures for modification of existing processing facilities and for construction of upgraded or new waste treatment facilities.

The Corporation cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Enactment of more stringent laws or regulations or more strict interpretation of existing laws and regulations may require additional expenditures by the Corporation, some of which could be material.

Risks Associated with Foreign Operations

Foreign operations generally involve greater risks than doing business in the United States. Foreign economies differ favorably or unfavorably from the United States’ economy in such respects as the level of inflation and debt, which may result in fluctuations in the value of the country’s currency and real property. Further, there may be less government regulation in various countries, and difficulty in enforcing legal rights outside the United States. Additionally, in some foreign countries, there is the possibility of expropriation or confiscatory taxation, limitations on the removal of property or other assets, political or social instability or diplomatic developments which could affect the operations and assets of U.S. companies doing business in that country. Some of these risks are more pronounced in developing countries, such as Guatemala. At May 30, 2004, the total assets of the Corporation’s foreign operations were approximately $12.5 million or .006% of total assets.

Litigation Risks

The Corporation is involved in litigation with the Warehime family (see “Part I — Item 3. — Legal Proceedings”). As a result of the pending litigation there may be a change of control of the Corporation. A change in control may not be in the best interests of shareholders and could have an adverse effect on the Corporation’s business and results of operations.

Impact of a Change in Control on the Corporation’s Senior Debt

A change in control of the Corporation would trigger a repayment obligation with respect to $20.0 million in aggregate principal amount of 7.01% Senior Notes due September 15, 2011 of the Corporation (the “Notes”). In the event of any change of control of the Corporation, the Corporation has an obligation to prepay the Notes in the amount equal to 100% of the outstanding principal amount of the Notes and accrued interest thereon, together with a premium equal to the applicable Make-Whole Amount, as defined in the Note Purchase Agreement. A “change in control” as defined in the Note Purchase Agreement means the date on which (i) John Warehime ceases to hold the positions of Chairman, President and Chief Executive Officer of the Corporation or (ii) Gary T. Knisely ceases to hold the positions of Executive Vice President and Secretary of the Corporation. To the extent a change of control were to occur and the lenders demand repayment of the Notes, the Corporation would be required to obtain an alternative funding source to repay this obligation. While the Corporation currently believes it would be successful in obtaining additional financing, no assurance can be given as to whether the Corporation will be successful in obtaining additional funding sources or if such financing will be on terms and conditions that are acceptable to the Corporation. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in the Annual Report.

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WHERE YOU CAN FIND MORE INFORMATION

The Corporation files, annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 450 Fifth Street, N.W., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our SEC filings are also available on the SEC’s internet website, www.sec.gov . The reference to the SEC’s website, above, is intended to be an inactive textual reference and no documents from the SEC website are intended to be incorporated by reference in this Annual Report on Form 10-K. We will provide, at no cost, copies of our reports and other filings made with the SEC. Requests should be directed to:

	Gary T. Knisely
	Hanover Foods Corporation
	1486 York Street
	P.O. Box 334
	Hanover, PA 17331
	Telephone: (717) 632-6000

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ITEM 2.

PROPERTIES

The following is a list of the Corporation’s manufacturing, processing and warehousing properties. The Corporation owns each of the properties.

UNITED STATES
	Hanover, PA (3 locations)	Canned and jarred products processing, repackaging of frozen vegetables, frozen soft pretzels manufacture, and dry and frozen storage. Corporate research, new product development and quality assurance laboratory (corporate headquarters).

	Centre Hall, PA	Frozen vegetable processing, frozen food entrée and meat pie manufacturing. Dry and frozen storage.

	Lancaster, PA	Fresh vegetables, dry and refrigerated storage.

	Nottingham, PA	Canned mushrooms, dry storage.

	Ephrata, PA	Refrigerated, fresh foods and soups manufacturing. Dry, refrigerated and frozen storage.

	Manheim, PA	Dry storage and direct store distribution center.

	Ridgely, MD	Frozen peas, onions, peppers, zucchini and celery, frozen and blanched mushrooms. Dry and frozen storage.

	Clayton, DE	Frozen vegetables, breaded mushrooms & okra, frozen food entrees, meat pies and soup manufacture. Dry and frozen storage.

	York, PA (3 locations)	Dry storage and distribution. Corn product manufacturer. Dry storage. Extruded corn product manufacturer. Dry storage.

	Vineland, NJ	Canned, soups, stews, pasta and meat processing. Dry storage.

GUATEMALA
	San Jose Pinula	Frozen vegetable processing, dry and frozen storage, research and quality assurance laboratory.

	Teculutan	Frozen vegetable and fruit processing, dry and frozen storage.

The Corporation believes that all plants described above are in adequate condition based upon their purpose and are adequate to meet the Corporation’s production requirements.

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ITEM 3.	LEGAL PROCEEDINGS

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, recission 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.

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

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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.

Michael A. Warehime filed an appeal from the denial of his motion to enjoin the previously described Amendment to the Corporation’s Amended and Restated Articles. On December 2, 1998, a majority panel of the Superior Court of Pennsylvania issued a decision holding that although John A. Warehime had acted in good faith in voting for the Amendment to the Amended and Restated Articles as trustee of the Warehime voting trust, he had breached his fiduciary duty to the beneficiaries of the Warehime voting trust in voting for the Amendment. On November 29, 1999, the Supreme Court of Pennsylvania granted a petition for allowance of appeal, filed by John A. Warehime, and granted a cross-petition for appeal filed by Michael A. Warehime.

On August 13, 1999, Michael A. Warehime filed a complaint in equity in the Court of Common Pleas of York County, Pennsylvania, naming as defendants Arthur S. Schaier, Cyril T. Noel, Clayton J. Rohrbach, Jr., John A. Warehime, and the Corporation. The complaint sought a court order declaring that the September 1999 election for the Board of Directors of the Corporation be conducted in accordance with the Articles of Incorporation of the Corporation as they existed prior to June 25, 1997, an order declaring that the Series C Convertible Preferred Stock cannot be voted, and an order that the following candidates for the Board of Directors of the Corporation proposed by Michael A. Warehime, Sally Yelland, Elizabeth Stick and J. William Warehime be accepted by the Corporation and listed on the ballot to be distributed at the annual meeting of shareholders of the Corporation to be held on September 16, 1999: Michael A. Warehime, Daniel Meckley, Elizabeth Stick, Sonny Bowman, and John Denton. The basis for the complaint was the December 2, 1998 decision of the Superior Court of Pennsylvania which held that John A. Warehime breached his fiduciary duties in voting for the Amended and Restated Articles as trustee of the Warehime voting trust. The requested relief was denied by the Court of Common Pleas of York County and Michael Warehime appealed to the Superior Court of Pennsylvania.

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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.

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.

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. Oral argument was heard in this matter before the Superior Court of Pennsylvania on January 13, 2004. On April 22, 2004, the Superior Court of Pennsylvania issued a memorandum reversing the December 22, 2002 decision by the York County Court of Common Pleas and remanding for further proceedings.

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.

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ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Information contained under the caption “Market for the Registrant’s Common Equity and Related Stockholder Matters” in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, which is attached as Exhibit 13, is incorporated herein by reference in response to this item. See “Part III — Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters — Equity Compensation Plan Information” regarding the Corporation’s equity compensation plans, which information is incorporated by reference.

ITEM 6.

SELECTED FINANCIAL DATA

Information contained under the caption “Financial Highlights Five Years” in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, which is attached as Exhibit 13, is incorporated herein by reference in response to this item.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, which is attached as Exhibit 13, is incorporated herein by reference in response to this item.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information contained under the caption “Quantitative and Qualitative Disclosures about Market Risk” in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, which is attached as Exhibit 13, is incorporated herein by reference in response to this item.

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements for Hanover Foods Corporation and subsidiaries contained in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, and quarterly financial data contained in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, which is attached as Exhibit 13, are incorporated herein by reference in response to this item.


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Information contained under caption “Changes in and Disagreements With Accountants on Accounting and Financial Disclosure” contained in the Corporation’s Annual Report to Shareholders as of and for the year ended May 30, 2004, which is attached as Exhibit 13, is incorporated herein by reference in response to this item.

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ITEM 9A.

CONTROLS AND PROCEDURES

The Corporation, under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the principal executive officer and principal financial officer concluded that the Corporation’s disclosure controls and procedures are effective in reaching a reasonable level of assurance that information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms.

There were no changes to internal control over financial reporting (“Internal Control”) which occurred during the quarter ended May 30, 2004 that materially affected or which are reasonably likely to materially affect Internal Control.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Corporation have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Corporation conducts periodic evaluations to enhance, where necessary its procedures and controls.

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table and disclosure set forth the name, age and the present principal occupation or employment, and the name and principal business of any corporation or other organization in which such employment is carried on, of the directors of the Corporation.

			Director
Name	Age (1)	Principal Occupation or Employment	Since

John A. Warehime	66	Chairman of the Board, President and Chief Executive	1985
		Officer of the Corporation
Clayton J. Rohrbach, Jr	84	Retired; formerly Vice President of Marketing at CPC	1984
		International
Cyril T. Noel ⁽²⁾	79	Retired; formerly Vice President of Finance of the	1983
		Corporation
T. Edward Lippy	74	Vice President of Lippy Brothers, Inc.	1994
Arthur S. Schaier	62	President & CEO at Schaier Nissan & Schaier Honda,	1994
		Schaier’s Enterprises, Inc.
James G. Sturgill, CPA, CVA	63	Managing Partner at Sturgill & Associates, LLP	1994
James A. Washburn	54	Chairman and CEO at Park 100 Foods, Inc.	1996
Jennifer W. Carter ⁽³⁾	40	Homemaker, Former Assistant to the Chairman	2002
T. Michael Haugh	54	President of Hospitality Management Corp.	2002



(1)	Age as of August 11, 2004.

(2)	Mr. Noel served on the Board from May 1983 until June 1994 and from October 1994 to present.

(3)	Ms. Carter is the daughter of John A. Warehime.

The Corporation’s Amended and Restated Bylaws (the “Bylaws”), provide that the board of directors should consist of not less than seven and not more than fifteen directors. The Amended and Restated Articles of Incorporation and amendments thereto (the “Articles of Incorporation”) of the Corporation provide that the board of directors is divided into four classes, having staggered terms of office, which are as equal in number as possible, and that the members of each class of directors are to be elected for a term of four years and will serve until their successors have been elected and qualify.

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The following information about the Corporation’s directors is based, in part, upon information supplied by such persons.

John A. Warehime has served as Chairman of the Board and Chief Executive Officer of the Corporation since 1989 and as a Director of the Corporation since 1985. Mr. Warehime has 51 years of experience in the food processing industry.

Clayton J. Rohrbach is currently retired. Prior to his retirement, Mr. Rohrbach was employed at CPC International, a large New York Stock Exchange traded food company located in Englewood Cliffs, New Jersey, from 1975 through 1985 as Vice President of Marketing.

Cyril T. Noel is currently retired. Mr. Noel was the Vice President of Finance of the Corporation from 1985 through 1994. Mr. Noel has served on the Board from May 1983 until June 15, 1994 and from October 18, 1994 to the present.

T. Edward Lippy has been the Vice President of Lippy Brothers, Inc., a family farming company located in Hampstead, Maryland, since 1994. Mr. Lippy has served as Vice Chairman and Director of Farmers & Merchants Bank, a public company located in Fowblesburg, Maryland, since 1989. Additionally, Mr. Lippy, served as the Chairman of Baltimore Farm Credit Bank from 1990 through 1992 and as Chairman of the Farm Credit Council, Washington, D.C. from 1993 through 1997.

Arthur S. Schaier has been a shareholder; President & CEO – Schaier Nissan, Schaier Honda, and Schaier Enterprieses, Inc., a retail car dealership headquartered at Long Beach, California since 2003. Prior to 2003, he was Corporate General Manager of Earnhardt’s Dodge Motor Companies located in Gilbert, Arizona, since 1981.

James G. Sturgill, CPA, CVA, has been the Managing Partner at Sturgill & Associates, LLP, a public accounting firm headquartered in Westminster, Maryland, since 1993. Prior to 1993, he was employed at Sturgill, Rager & Lehman, a firm located in Westminster, Maryland from 1980 to 1993.

James A. Washburn has been the Chairman and Chief Executive Officer of Park 100 Foods, Inc., a food manufacturing company, located in Tipton, Indiana, since 1991. Mr. Washburn is also Chief Executive Officer of Hamilton Medaris Corporation and H.M.C. Transportation located in Fishers, Indiana.

Jennifer W. Carter was Sales and Marketing Facilitator at the Corporation from 1997 to May 2004 and was Assistant to the Chairman of the Corporation from June 1, 2000 until her retirement on May 1, 2004. Ms. Carter is the daughter of John Warehime.

T. Michael Haugh has been President of Hospitality Management Corporation, Abbottstown, Pennsylvania, a contract food service company including a fine dining restaurant and off-premises catering operation, since 1997.

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EXECUTIVE OFFICERS OF THE CORPORATION WHO ARE NOT ALSO DIRECTORS

		Principal Occupation During
Name and Age (1)		Past Five (5) Years and Term in Office

GARY T. KNISELY, ESQUIRE		Executive Vice President-1995-Present;
Chief Financial Officer, Counsel		Vice President-Administration-1989-1995;
Executive Vice President and Secretary		Counsel-1987-Present; Secretary-1987-
Age: 55		Present. Mr. Knisely also acts as Chief
		Financial Officer of the Corporation
		(January 1996-Present).

PIETRO D. GIRAFFA, JR.		Vice President-Controller-1996-Present;
Vice President-Controller		Controller-1984-1996. Mr. Giraffa also acts as
Chief Accounting Officer		Chief Accounting Officer of the Corporation
Age: 58		(January 1996-Present).

ALAN T. YOUNG		Senior Vice President-Purchasing & Transportation
Senior Vice President-Purchasing and Transportation		July 28, 2000-Present;
Age: 61		Vice President-Transportation-1996-2000;
		Vice President-Operations-1991-1996;
		Director of Corporate Logistics-1990-1991;
		Manager of Corporate Systems-1986-1990.

DANIEL E. SCHUCHART		Vice President of Sales-October 19, 2000-Present;
Vice President of Sales		Vice President of Industrial Sales-June 1, 1995-
Age: 50		October 18, 2000.

STEVEN E. ROBERTSON		Treasurer - January 2003 - Present
Treasurer		Treasury Manager– 1991 – January 2003
Age: 48


(1)	Age as of August 11, 2004.

FAMILY RELATIONSHIPS OF DIRECTORS AND EXECUTIVE OFFICERS

Director Jennifer W. Carter is the married daughter of John A. Warehime, Chairman, Chief Executive Officer and President of the Corporation.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act, requires that directors and certain officers of the Corporation file reports of ownership and changes in ownership with the SEC as to the shares of the Corporation Class A Common Stock beneficially owned by them.

Based solely on its review of copies of such forms received by it, the Corporation believes that during the Corporation’s fiscal year ended May 30, 2004, all filing requirements applicable to its directors and officers were complied within a timely fashion, except for a late Form 3 filed by Mr. Robertson and a late Form 4 filed by each of Messrs Knisely, Giraffa, Young, Schuchart, Robertson and Ms. Carter.

BOARD OF DIRECTORS, COMMITTEES AND ATTENDANCE AT MEETINGS

The Board of Directors held five meetings during fiscal 2004. Each director attended 75% or more of the meetings of the Board and committees of which the director was a member during fiscal 2004. The Board of Directors has a standing audit committee, nominating and corporate governance committee and compensation committee, the functions and composition of which are described below.

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Audit Committee

The audit committee is responsible for, among other matters, the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged by the Corporation, approving all audit and permissible non-audit services performed by the auditors, reviewing the results of the audit engagement and considering the independence of auditors. Messrs. Noel, Rohrbach and Schaier constituted members of the audit committee in fiscal 2004, with Mr. Noel acting as chairman of the audit committee. On August 25, 2004, the Board of Directors appointed Mr. Sturgill as a member of the audit committee. The Board of Directors determined that at least one member of the audit committee, Mr. Sturgill, serves as the audit committee financial expert. The Board of Directors believes that all members of the audit committee are independent, as required by the Corporate Governance Rules of The NASDAQ Stock Market, Inc. (“NASDAQ Corporate Governance Rules”). The audit committee met four times during fiscal 2004. On August 25, 2004, the audit committee adopted the Amended and Restated Audit Committee Charter, attached to this Form 10-K as Exhibit 99.1. On August 25, 2004 the Board of Directors adopted the Amended and Restated Bylaws, attached to this Form 10-K as Exhibit 3(c), to provide that (i) each audit committee member must be independent and (ii) the audit committee has the authority to select each year the independent accountants to audit the annual financial statements. Prior to this amendment and restatement, the Corporation’s Bylaws provided that (i) a majority of audit committee members must be independent and (ii) the audit committee had the authority to recommend to the Board the independent accountants to audit the annual financial statements.

Nominating and Corporate Governance Committee

In fiscal 2004, the Corporation did not have a nominating committee and the function of nominating directors was carried out by the full Board of Directors. As of August 25, 2004, the Board of Directors has designated a standing nominating and corporate governance committee, referred to as the nominating committee in this document, that is responsible for, among other matters, establishing criteria for selecting directors and recommending to the Board nominees for director and membership on various Board committees. See the nominating committee’s charter, which is attached to this Form 10-K as Exhibit 99.2, for a complete list of the nominating committee’s duties and responsibilities.

Messrs. Noel, Rohrbach and Schaier constitute the nominating committee, with Mr. Rohrbach acting as chairman of the nominating committee. All members of the nominating committee are independent as independence for the nominating committee members is defined in the NASDAQ Corporate Governance Rules.

Consideration of Director Candidates Recommended or Nominated by Shareholders. The nominating committee will consider properly submitted shareholder recommendations of director candidates. A shareholder who wishes to recommend a prospective director nominee should send a letter to the chairman of the nominating committee at: 1486 York Street, P.O. Box 334, Hanover, PA 17331. Such letter must be signed and dated and the following information must be included in or attached to the letter:

	•	name and address of the shareholder making the recommendation;

	•	proof that the shareholder was the shareholder of record, and/or beneficial owner, of the Company’s common stock as of the date of the letter;

	•	the name, address and resume of the recommended nominee; and

	•	the written consent of the recommended nominee to serve as a director of the Company if so nominated and elected.

In addition, Article III, Section 2 of the Corporation’s Bylaws permits a shareholder of a class of stock entitled to vote for the election of directors to nominate directors for election at the Corporation’s shareholders meeting, provided the shareholder follows the procedures summarized below:


•	shareholder nominations for directors to be elected, other than those made by or on behalf of the Board, must be made in writing and delivered to the Secretary;

•	each shareholder nomination must set forth the following:

	•	the name, address and qualifications of each proposed nominee;

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	•	all other information regarding the shareholder nominee as would be required to be included in a proxy statement filed pursuant to the SEC proxy rules; and

	•	written confirmation executed by the proposed nominee that such nominee has agreed to serve as a director of the Corporation if so elected; and

•	nominations not made in accordance with the foregoing procedures will be disregarded by the chairman of the meeting and the judge or judges of election will disregard all votes cast for that nominee.

The deadline for submitting shareholder recommendations of director candidates is the same as the deadline for submitting shareholder nominations for director candidates set forth in the Bylaws, which is June 1 of the calendar year in which the meeting to elect the director or directors is to be held. If the number of directors to be elected is increased subsequent to the June 1 deadline, the deadline for the submission of recommendations and nominations for director will be 15 calendar days after the Corporation mails notice of the meeting at which the additional directors are to be elected.

Director Qualifications. In order to be nominated for director, a candidate must meet the following criteria:

	•	the director must be a natural person over 21 years of age;

	•	the director should have high-level business experience;

	•	the director should have knowledge about the issues affecting the Corporation’s business and the food processing industry;

	•	the director should have high moral character and share the values of the Corporation; and

	•	the director should have sufficient time to devote the director’s energy and attention to the diligent performance of the director’s duties, including, but not limited to, review of the Corporation documents, SEC filings and other materials and the attendance of the Board and committee meetings, as applicable.

Additional special criteria apply to directors being considered to serve on a particular committee of the Board, including, but not limited to, the audit committee. For instance, the nominating committee will review, if applicable, whether the director nominee is independent, as independence is defined in NASDAQ Corporate Governance Rules.

Identifying and Evaluating Nominees for Director. The nominating committee assesses the appropriate size of the Board in accordance with the Corporation’s Bylaws, whether any vacancies on the Board are expected and what incumbent directors will stand for re-election at the next meeting of shareholders. If vacancies are anticipated, or otherwise arise, the nominating committee considers candidates for director suggested by members of the nominating committee and other Board members as well as management, shareholders and other parties and makes recommendations to the Board regarding proposed candidates to fill the vacancy. The nominating committee also has the sole authority to retain a search firm to identify and evaluate director candidates. Except for incumbent directors standing for re-election as described below, there are no differences in the manner in which the nominating committee evaluates nominees for director, based on whether the nominee is recommended by a shareholder or any other party.

In the case of an incumbent director whose term of office expires, the nominating committee reviews such director’s service to the Corporation during the past term, including, but not limited to, the number of Board and committee meetings attended, as applicable, quality of participation and whether the candidate continues to meet the general qualifications for a Board member outlined above, including the director’s independence, as well as any special qualifications applicable to a member of a particular Board committee if such director serves on one or more committees of the Board and makes a recommendation regarding such director’s nomination for reelection to the Board. When a member of the nominating committee is an incumbent director eligible to stand for re-election, such director does not participate in the portion of the nominating committee meeting at which such director’s potential recommendation for nomination for election as a director is discussed by the nominating committee.

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In the case of a new director candidate, the nominating committee will evaluate, if applicable, whether the nominee is independent, as independence is defined under NASDAQ Corporate Governance Rules, and whether the nominee meets the qualifications for a Board member outlined above as well as any special qualifications applicable to a member of a particular Board committee, on which the nominee may be appointed to serve if elected. In connection with such evaluation, the nominating committee determines whether it should interview the nominee, and if warranted, one or more members of the nominating committee interview the nominee in person or by telephone.

Upon completing the evaluation, and the interview in case of a new candidate, the nominating committee makes a recommendation to the Board as to whether to nominate the director nominee for election at the next shareholders meeting at which directors will be elected.

Process for Shareholders to Send Communications to the Board. The Board of Directors believes that the Corporation’s shareholders should have a method of communicating issues or concerns regarding the Corporation’s business or the functions of the Board of Directors to the Board.

Shareholders may address correspondence to the Board of Directors or to individual members of the Board, including the Chairman of the Board’s nominating, compensation or audit committees, c/o Secretary, Hanover Foods Corporation, 1486 York Street, P.O. Box 334, Hanover, PA 17331 .

The Corporation’s Secretary will review all correspondence and will create a log of all correspondence received. The Secretary will periodically forward any correspondence received from a holder of the Corporation’s securities which, in the Secretary’s opinion, deals with concerns regarding the Corporation’s business or with the functions of its Board or which he otherwise determines requires attention, to the Board of Directors or to the member of the Board to whom the correspondence is addressed. Directors may at any time review the log of all correspondence received and request copies of any such correspondence.

Concerns relating to internal accounting controls and questionable accounting or auditing matters will be brought to the attention of the Board in accordance with the procedures established by the audit committee with respect to such matters and set forth in the Corporation’s Whistle-Blower Policy.

Policy Regarding Board Members’ Attendance of Annual Shareholder Meetings. The Board of Directors has adopted a policy that a majority of the Corporation’s directors attend the Corporation’s Annual Meeting of Shareholders. Three directors attended the prior annual meeting of shareholders held on December 23, 2002.

Compensation Committee

The compensation committee is responsible for making recommendations to the Board of Directors concerning compensation for the Corporation’s executive officers and taking such other actions as may be required in connection with the Corporation’s compensation and incentive plans. Messrs. Rohrbach and Schaier constitute members of the compensation committee with Mr. Rohrbach acting as chairman of the compensation committee. During fiscal 2004, the compensation committee held one meeting.

CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

The Board of Directors has adopted the Code of Ethics for Senior Financial Officers that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer and controller. A copy of the Code of Ethics for Senior Financial Officers is attached to this Form 10-K as Exhibit 14.

DIRECTOR COMPENSATION

During fiscal year 2004, each director of the Corporation was paid an annual retainer of $12,000 payable in equal monthly installments of $1,000. Board Members also receive a fee of $1,500 for each quarterly Board meeting attended in person and $750 for each quarterly Board meeting which the director participated in by telephone. Directors are paid $1,000 for each special Board meeting attended in person and $500 for each special Board meeting which the director participated in by telephone. In addition, an annual fee of $1,000 per year was paid for service as a committee chairman. Committee members also received a fee of $1,000 for each committee meeting attended in person and $500 for each committee meeting which the director participated in by telephone.

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AUDIT COMMITTEE REPORT

On July 23, 2004, the Audit Committee met with management to review and discuss the audited financial statements. The Audit Committee also conducted discussions with its independent auditors, BDO Seidman LLP, regarding the matters required by the Statement on Auditing Standards No. 61. As required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” the Audit Committee has discussed with and received the required written disclosures and a confirming letter from BDO Seidman LLP regarding its independence and has discussed with BDO Seidman LLP its independence. Based upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended May 30, 2004.

This Audit Committee Report shall not be deemed incorporated by reference in any document previously or subsequently filed with the Securities and Exchange Commission that incorporates by reference all or any portion of this Annual Report on Form 10-K, except to the extent that the Corporation specifically requests that the Audit Committee Report be specifically incorporated by reference.

Members of the Audit Committee

Cyril T. Noel

Clayton Rohrbach, Jr.

Arthur S. Schaier

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ITEM 11.

EXECUTIVE COMPENSATION.

The following table sets forth certain information regarding the compensation paid to the Chief Executive Officer and each of the four other most highly compensated executive officers of the Corporation for services rendered in all capacities during the past three fiscal years (“Named Officers”).

SUMMARY COMPENSATION TABLE

	Annual Compensation								Long Term Compensation Awards

Name and Principal Position	Fiscal Year		Salary		Bonus		Other Annual Compensation		Securities Underlying Options SARS (5)			All Other Compensation

John A. Warehime	2004	$	773,950	$	326,550	$	6,695	(1)	-0-		$	1,320,670	(2)(4)
Chairman, President and Chief Executive Officer	2003		737,095		432,045		6,695	(1)	-0-			1,025,509
Chairman, President and Chief Executive Officer	2002		701,995		455,505		6,623		-0-			934,500

Gary T. Knisely	2004	$	255,256	$	196,547	$	-0-		2,500	(6)	$	283,559	(3)(4)
Chief Financial Officer, Counsel, Executive Vice President and Secretary	2003		243,101		243,101		-0-		2,000	(5)		181,425
	2002		231,525		231,525		-0-		-0-			89,000

Alan T. Young	2004	$	155,344	$	141,267	$	-0-		2,500	(6)	$	10,000	(4)
Senior Vice President – Purchasing and Transportation	2003		150,819		158,507		-0-		1,500	(5)		10,000
Senior Vice President – Purchasing and Transportation	2002		146,426		153,217		-0-		-0-			7,638

Pietro D. Giraffa, Jr	2004	$	141,813	$	109,196	$	-0-		2,500	(6)	$	10,000	(4)
Vice President – Controller and Chief Accounting Officer	2003		137,683		137,683		-0-		1,000	(5)		10,000
Vice President – Controller and Chief Accounting Officer	2002		131,127		131,127		-0-		-0-			6,477

Daniel E. Schuchart	2004	$	128,104	$	98,640	$	-0-		2,500	(6)	$	10,000	(4)
Vice President – Sales	2003		124,373		124,373		-0-		1,000	(5)		10,000
	2002		118,450		94,405		-0-		-0-			7,245


(1)	Includes perquisites paid pursuant to the June 12, 1995 Employment Agreement, as amended, including the value of a company car and country club dues totaling $6,695.

(2)	Includes the Corporation’s payment for premiums of $153,000 for two split-dollar life insurance policies on the life of Patricia M. Warehime, the wife of Mr. Warehime, and the accrual of $1,157,670 to reflect supplemental pension benefits to be paid pursuant to Mr. Warehime’s Employment Agreement dated June 12, 1995, as amended.

(3)	Includes the Corporation’s accrual of $273,559 to reflect supplemental pension benefits to be paid pursuant to Mr. Knisely’s Employment Agreement, dated January 23, 1997.

(4)	Includes the Corporation’s matching contributions pursuant to the 401(k) Plan made to the accounts of Messrs. Warehime, Knisely, Young, Giraffa and Schuchart in the amount of $10,000.

(5)	On June 20, 2002, the Corporation granted stock options to purchase a total of 13,500 shares of the Corporation’s Class B common stock to the executive officers and key employees, other than John Warehime. No options were granted to John Warehime. Such options have an exercise price of $110.00 per share and vest at a rate of 12.5% of the initial award per year beginning June 20, 2004.

(6)	On October 17, 2003, the Corporation granted stock options to purchase a total of 199,450 shares of the Corporation’s Class B common stock to all full-time non-union employees who had at least one (1) year of service with the Corporation as of October 17, 2003 or have one year of service with the Corporation on or before October 17, 2004 other than John A. Warehime. No options were granted to John Warehime. The options granted to the eligible employees on October 17, 2003 have an exercise price of $118.00 per share and vest at a rate of 12.5% of the initial award per year beginning October 17, 2005.

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The following table provides information regarding options granted to the Corporation’s Named Officers during fiscal 2004.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS

Name	Number of	% of Total
	Securities	Options/SARs			Exercise			Black Scholes
	Underlying	Granted to			or Base			Grant Date
	Options/SARs	Employees in			Price	Expiration		Present
	Granted (#)(1)	Fiscal Year			($/sh)	Date		Value ($) (2)

John A. Warehime	-0-	-0-			-0-	N/A		N/A

Gary T. Knisely	2,500	1.25	%	$	118.00	10/17/13	$	88,175

Alan T. Young	2,500	1.25	%	$	118.00	10/17/13	$	88,175

Pietro D. Giraffa, Jr.	2,500	1.25	%	$	118.00	10/17/13	$	88,175

Daniel E. Schuchart	2,500	1.25	%	$	118.00	10/17/13	$	88,175



(1)	Such options have a term of 10 years and become exercisable in eight equal annual installments beginning on the second anniversary of the grant date.

(2)	The Corporation utilized the Black-Scholes option pricing model. The Corporation’s use of this model should not be construed as an endorsement of its accuracy for valuing options. All stock option valuation models, including the Black-Scholes model, require a prediction about the future movement of the stock price. The real value of the options in this table depends upon the actual performance of the Corporation’s stock during the applicable period. The following Black-Scholes assumptions were utilized:

Risk-free interest rate		5.45	%
Dividend yield		1	%
Expected life		9
Market price at grant(appraisal value)	$	118
Expected volatility		8.6

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The following table provides information regarding option exercises during fiscal 2004 and year end option values.

AGGREGATED OPTIONS/SAR EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

	Shares Acquired On Exercise		Number of Securities
			Underlying		Value of Unexercised
			Unexercised Options		In-the-Money
			at Fiscal		Options at
			Year End		Fiscal Year End
			Exercisable/		Exercisable/
Name		Value Realized($)	Unexercisable		Unexercisable ⁽¹⁾

John A. Warehime	—	—	0/0	$	0/0
Gary T. Knisely	—	—	0/4,500	$	0/0
Alan T. Young	—	—	0/4,000	$	0/0
Pietro D. Giraffa, Jr.	—	—	0/3,500	$	0/0
Daniel E. Schuchart	—	—	0/3,500	$	0/0


(1)	Represents the aggregate market value (market price of the Class B Common Stock less the exercise price) of the options granted based upon the closing sales price per share of $27.00 on May 28, 2004.

(2)	The exercise price of options are: $110.00 per share for options granted under the 2002 Stock Option Plan and $118.00 per share for the options granted under the 2003 Stock Option Plan.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL SEVERANCE AGREEMENTS

On June 12, 1995, the Corporation entered into a five-year employment agreement with its Chief Executive Officer, John A. Warehime, at an annual base salary of $650,000 with such compensation payable retroactively from April 1, 1994 (the “1995 Employment Agreement”). The 1995 Employment Agreement was amended on February 13, 1997 (“Amended Employment Agreement”). The principal terms of Mr. Warehime’s employment arrangements with the Corporation as amended by the Amended Employment Agreement are set forth below.

The Amended Employment Agreement provides for annual increases (but not decreases) in the employee’s annual salary equal to the greater of 5% of the prior year’s salary or the annual percentage increase in the Consumer Price Index (CPI). Mr. Warehime’s annual base salary for fiscal 2004 and 2003 was $773,950 and $737,095, respectively. Unless terminated by either party, the Amended Employment Agreement automatically renews annually on each anniversary date so that five years always remain on the term of the agreement. In the event the employee is terminated without cause, or in the event the employee terminates his employment after a reduction (without his written consent) of his duties or authority, compensation, or similar events, the Amended Employment Agreement provides for the payment of the salary and bonus (including all other benefits) over the remaining term of the agreement. In the event of termination due to death or disability, the Amended Employment Agreement provides for the same payment to the employee (or in the event of the death of the employee, his spouse, or descendants) for one year and thereafter the payment of supplemental pension benefits as described below. In addition, the Amended Employment Agreement provides for the reimbursement by the Corporation of the employee’s legal and accounting fees up to $75,000 per year and reasonable business expenses incurred by the employee in connection with the business of the Corporation. The Amended Employment Agreement also provides the employee with various other benefits including the use of an automobile, disability and life insurance, and a club membership.

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The annual bonus payable to the employee under the Amended Employment Agreement is equal to $100,000 plus 10% of the Corporation’s pretax earnings over $5.0 million provided that no annual bonus is payable if pretax earnings of the Corporation are less than $5.0 million. The Amended Employment Agreement limits salary and the annual bonus payment described above to an aggregate of not more than $1.0 million annually. Annual bonuses can be paid in cash or Class A Common (non-voting) Stock at the option of the employee. For the years ended May 30, 2004, June 1, 2003, and June 2, 2002, the bonus accrued under this agreement was $226,050, $262,905, and $298,000, respectively.

The Amended Employment Agreement also provides for the annual payment of a long-term performance bonus based upon the Corporation’s performance over the prior five-year period as measured by its average sales growth and average increase in operating profits as compared to an industry peer group over the same period. The bonus payable is calculated based upon a formula matrix set forth in the Amended Employment Agreement, with such formula being recommended by an independent management consulting firm retained by the Corporation and approved by the Compensation Committee of the Board of Directors. For the years ended May 30, 2004, June 1, 2003, and June 2, 2002, the long-term performance bonus accrued under this agreement was $100,500, $169,140, and $157,000, respectively.

The Amended Employment Agreement provides for annual supplemental pension benefits, commencing upon the earlier of (a) five years after termination of the employee (or one year following his death or disability) or (b) the date of retirement, payable during the life of the employee and upon his death for the life of his spouse. Such annual supplemental pension benefits are equal to 60% of average total compensation (including bonuses) over the latest three-year period prior to retirement, assuming retirement at age 65 or later. Supplemental pension benefits are reduced based upon an established formula to the extent the employee retires prior to age 65. The net present value of the cost of providing this future benefit is recognized by the Corporation over the remaining expected years of service. The expense recognized under this agreement was approximately $1,158,000, $863,000, and $773,000 for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, respectively. The projected benefit obligation was approximately $5,493,101 and $4,447,000 at May 30, 2004 and June 1, 2003, respectively.

The Amended Employment Agreement was revised effective as of August 1, 1997 to make certain clarifying changes and to require that bonus payments to Mr. Warehime in any taxable year in excess of $1.0 million would be subject to shareholder approval, which shareholder approval was given on August 14, 1997.

On January 23, 1997, the Corporation entered into a five-year employment agreement with Gary T. Knisely, Executive Vice President, Secretary, and Counsel of the Corporation, at an annual salary of $175,000 with such compensation payable retroactively from June 1, 1996 (the “Knisely Agreement”). Unless terminated by either party, the Knisely Agreement automatically renews annually on each anniversary date so that five years always remain on the term of the agreement. The Knisely Agreement provides for annual salary increases (but not decreases) equal to the greater of 5% of the prior year’s salary or the annual percentage increase in the CPI, as well as incentive bonuses and various other benefits. As of May 30, 2004, the aggregate liability of the Corporation under this agreement for the next five years is estimated to be $1,480,973, excluding annual performance bonuses. In the event the employee is terminated without cause, or in the event the employee terminates his employment after a reduction (without his written consent) of his duties or authority, compensation, or similar events, the Knisely Agreement provides for the payment of the salary and bonus (including all other benefits) over the remaining term of the agreement. In the event of termination due to death or disability, the Knisely Agreement provides for the payment of salary and bonus (including all other benefits) to the employee (or his spouse or other descendants in the event of the employee’s death) for the later of one year from the date of such termination or the death of the employee.

The Knisely Agreement also provides for annual supplemental pension benefits equal to 60% of the employee’s average annual compensation (including bonuses but excluding other benefits) over the three most recent fiscal years prior to the employee’s termination if the employee is no longer employed by the Corporation and the employee has attained the age of 55. Such annual supplemental pension benefits are payable for the remainder of the lifetime of the employee. The net present value of the cost of providing this future pension benefit is recognized by the Corporation over Mr. Knisely’s expected remaining years of service. The expense recognized for supplemental pension benefits under this agreement was approximately $273,559, $171,000, and $81,000, for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, respectively. The projected benefit obligation was approximately $1,191,056 and $593,000 at May 30, 2004 and June 1, 2003, respectively.

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On May 21, 1997, the Corporation entered into a change in control severance agreement with Alan T. Young which provides for termination compensation if Mr. Young’s employment is terminated: (i) involuntarily, within 24 months of change in control or (ii) voluntarily, following a reduction in base salary, duties and responsibilities, within 24 months of a change in control. A “change in control” shall be deemed to occur if John A. Warehime ceases to be Chief Executive Officer of the Corporation or ceases to have the power and authority of the Chief Executive Officer. Pursuant to the terms of this agreement, any payment due thereunder shall be made over a two year period no less frequently than monthly and all payments during any twelve month period shall not in the aggregate exceed the officer’s total cash compensation (salary and bonus) received from the Corporation during fiscal 2001.

On October 17, 2001, the Corporation entered into a similar change in control severance agreement with each of the following seven current officers: Mr. Pietro D. Giraffa, Jr., Mr. Edward L. Boeckel, Jr., Mr. Daniel E. Schuchart, Mr. William S. Gaugler, Jr., Mr. Timothy D. Mechler, Mr. Jeffrey A. Warehime and Mr. J. Andrew Warehime. Jeffrey A. Warehime and Andrew Warehime are the adult children of John Warehime, the Chairman of the Corporation.

All payments made pursuant to any of these agreements are subject to the further conditions that: (i) the officer maintain the confidentiality of the Corporation’s trade secrets, customer lists and other proprietary information of the Corporation; (ii) for a period of two years following the termination of the officer, neither the officer or his employer or business associate shall enter into or attempt to enter into any business relationship, solicit for employment or employ any person, employed by the Corporation or its affiliates at any time within six months prior to the officer’s termination; and (iii) for a period of two years following the termination, the officer shall not directly or indirectly own, manage, operate, join or participate in any capacity, any entity which is primarily engaged in a business which competes with any significant business of the Corporation or its affiliates. If the executives were terminated on May 30, 2004, under circumstances entitling them to severance payments pursuant to these agreements, the aggregate amount due to each under the agreement would have been as follows: Mr. Young $387,810, Mr. Giraffa $331,472, Mr. Boeckel $240,626, Mr. Schuchart $313,326, Mr. Gaugler $217,648, Mr. Mechler $216,892, Mr. Jeffrey A. Warehime $240,500 and Mr. J. Andrew Warehime $123,678.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Hanover Foods has designed its executive compensation program to attract, motivate and retain talented executives. Toward this end, the executive compensation program provides:

	•	A base salary program and benefits to attract and retain talented executives who demonstrate the qualities required in Hanover Food’s business operations and who meet the Corporation’s established goals and standards.

	•	Annual incentive bonus payments that are highly variable based on the achievement of the Corporation’s pre-tax earnings goals and pre-established individual goals. These incentive bonuses reward individuals whose performance contributes to achieving strategic and financial corporate objectives, which increase shareholder value. Additionally, the long-term component of the Chief Executive Officer’s bonus is determined pursuant to a formula based on the Corporation’s performance over the prior five years as compared to an industry peer group over the same period.

The Corporation’s officer compensation program is comprised of base salary, annual cash incentive compensation and various benefits generally available to all full-time employees of the Corporation, including participation in group medical and life insurance plans and a 401(k) plan. The Corporation seeks to be competitive with compensation programs offered by companies in the food processing industry and other companies of a similar size located in its market area based on formal and informal surveys conducted by the Corporation.

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Base Salary . The Corporation has entered into employment agreements with Messrs. Warehime and Knisely pursuant to which they were entitled to receive annual base salaries of $773,950 and $255,256 during fiscal 2004, respectively. Pursuant to the terms of the employment agreements, such salaries are adjusted each year in accordance with the Consumer Price Index. The Board of Directors believe that the compensation levels established in the employment agreements were consistent with competitive practices for executives at this level based upon an evaluation performed on these employment agreements by an independent management consulting firm.

The Corporation also entered into change in control severance agreement with certain officers of the Corporation which are described under “Employment Agreements and Change in Control Severance Agreements.” These agreements do not establish a base salary for these officers.

Annual Incentive Compensation . Under his employment agreement, Mr. Warehime is entitled to receive an annual bonus if the Corporation’s pre-tax earnings are $5.0 million or more. Such bonus is equal to $100,000 plus 10% of all pre-tax earnings over $5.0 million. Such bonus, along with base salary, is limited to a maximum of $1.0 million per year. Mr. Warehime is also entitled to a long-term annual bonus based upon the Corporation’s performance over the past five years as measured by its average sales growth percentage (“sales performance index”) and average percentage of operating profits to sales (“profitability index”) as compared to the performance of companies in an industry peer group. The bonus amount is determined by a formula contained in Mr. Warehime’s employment agreement as calculated by an independent management consulting firm retained by the Corporation.

Annual cash bonuses of up to 100% of an officer’s base salary are paid to the Corporation’s officers, other than the Chief Executive Officer, based upon the Corporation’s pre-tax earnings. In certain cases, bonuses are based on certain individual performance goals. In addition, Alan T. Young, Senior Vice President of Purchasing and Transportation received a bonus on incremental industrial sales.

Stock Options . In fiscal 2003 and 2004, the Board of Directors approved Stock Option Plans as a means of compensating its executive officers and key employees in fiscal 2003 and all of its full time non union employees who had at least one full year of service in fiscal 2004. Options in fiscal 2003 and fiscal 2004 were awarded pursuant to these plans to certain executive officers, excluding John Warehime.

Compensation of Chief Executive Officer . Pursuant to his employment agreement, Mr. Warehime’s annual base salary for fiscal 2004 was $773,950, which represents an increase of $36,855 from fiscal 2003. Mr. Warehime also was paid a bonus (which represents both short and long term components of Mr. Warehime’s bonus) pursuant to his employment agreement as a result of the achievement of certain levels of pre-tax income by the Corporation and increases in the Corporation’s sales performance index and profitability index as compared to its peers.

Policy with respect to Section 162(m) of the Internal Revenue Code . Generally, Section 162(m) of the Internal Revenue Code of 1986, and the regulations promulgated thereunder (collectively, “Section 162(m)”), denies a deduction to any publicly held corporation, such as the Corporation, for certain compensation exceeding $1,000,000 paid during a taxable year to the chief executive officer and the four other highest paid executive officers, excluding, among other things, certain performance-based compensation. The Compensation Committee evaluates to what extent Section 162(m) will apply to its compensation programs. In order to bring bonus payments to Mr. Warehime under his Employment Agreement in excess of $1,000,000 into compliance with Section 162(m), shareholders of the Class B Common Stock approved such bonus payments at a meeting held in August 1997.

Members of the Compensation Committee

Clayton J. Rohrbach, Jr. Arthur S. Schaier

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ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth as of August 11, 2004 certain information with respect to the beneficial ownership of the capital stock by: (i) each person who is known by the Corporation to be the beneficial owner of more than five percent of any class of the Corporation’s capital stock; (ii) each of the Corporation’s directors; (iii) each of the Named Officers; and (iv) the Corporation’s directors and executive officers as a group. Except as otherwise indicated, the beneficial owners of the capital stock listed below have sole investment and voting power with respect to such shares. The address of the directors and Named Officers is that of the Corporation.

As of August 11, 2004, the following number of shares of each class of capital stock were outstanding:

Class of Capital Stock	Number of Shares

Class A Common Stock	287,996
Class B Common Stock	781,648
Preferred Stock, Series A	6,228
Preferred Stock, Series B	8,336
Preferred Stock, Series C	10,000

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		Shares
	Beneficially Owned ⁽¹⁾

	Title of
	Class	Amount	% of Class

NAME OF 5% BENEFICIAL OWNER
Common Stock

Alan A. Warehime Intervivos Trust A ⁽²⁾	Common A	—	—
Farmers Bank	Common B	39,828	5.0
c/o Allfirst Bank
13 Baltimore Street
Hanover, PA 17331

Alan A. Warehime Intervivos Trust B ⁽³⁾	Common A	—	—
Farmers Bank	Common B	76,165	9.7
c/o Allfirst Bank
13 Baltimore Street
Hanover, PA 17331

Heartland Advisors, Inc. ⁽⁴⁾	Common A	49,500	17.2
c/o William J. Nasgovitz	Common B	—	—
790 North Milwaukee Street
Milwaukee, WI 53202

ARWCO Corporation ⁽¹⁸⁾	Common A	2,568	*
P.O. Box 917	Common B	—
Hanover, PA 17331

Warehime Enterprises, Inc. ⁽¹⁸⁾	Common A	19,109	6.6
251 Frederick Street	Common B	15,994	2.0
Hanover, PA 17331

Elizabeth W. Stick ⁽¹⁸⁾	Common A	14,972	5.2
35 Peyton Road	Common B	44,244	5.7
York, PA 17403

J. William Warehime ⁽¹⁸⁾	Common A	1,834	*
257 Frederick Street	Common B	77,708	9.9
Hanover, PA 17331

Sally W. Yelland ⁽¹⁸⁾	Common A	—	—
2015 Youngs Road	Common B	36,962	4.7
Hanover, PA 17331

Hanover Foods Corporation ⁽⁵⁾	Common A	—	—
Employee Stock Trust	Common B	355,399	45.5
1486 York Street
Hanover, PA 17331

Series C Preferred Stock

Hanover Foods Corporation 401(k) Savings Plan Trust ⁽⁶⁾	Common A	—	—
1486 York Street	Common B	—	—
Hanover, PA 17331	Preferred C	10,000	100.0

;

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	Shares
	Beneficially Owned ⁽¹⁾

	Title of
	Class	Amount	% of Class

DIRECTORS AND NAMED OFFICERS

John A. Warehime ⁽⁹⁾	Common A	3,890	1.4
	Common B	45,229	5.8
	Preferred C	192	1.9

Clayton J. Rohrbach, Jr. ⁽⁷⁾	Common A	88	*
	Common B	—	—

Cyril T. Noel ^{(7) (8) (10)}	Common A	301	*
	Common B	—	—
	Preferred A	432	6.9
	Preferred B	360	4.3

T. Edward Lippy ⁽¹¹⁾	Common A	385	*
	Common B	—	—

Arthur S. Schaier ⁽⁷⁾	Common A	3,500	1.2
	Common B	—	—

James G. Sturgill, CPA, CVA ⁽¹²⁾	Common A	100	*
	Common B	—	—

James A. Washburn	Common A	—	—
	Common B	—	—

Jennifer W. Carter ⁽¹³⁾	Common A	207	*
	Common B	5,855	*
	Preferred C	98	*

T. Michael Haugh	Common A	—	—
	Common B	—	—

Gary T. Knisely, Esq. ^{(8) (14)}	Common A	1,688	*
	Common B	4,627	*
	Preferred B	64	*
	Preferred C	192	1.8

Pietro D. Giraffa, Jr. ⁽¹⁵⁾	Common A	—	—
	Common B	3,616	*
	Preferred C	190	1.8

Alan T. Young ⁽¹⁶⁾	Common A	—	—
	Common B	4,122	*
	Preferred C	192	1.8

Daniel E. Schuchart ⁽¹⁷⁾	Common A	88	*
	Common B	3,620	*
	Preferred C	163	1.5

Stephen E. Robertson ⁽¹⁹⁾	Common A	—	—
	Common B	1,563	*
	Preferred C	78	.8

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	Shares
	Beneficially Owned ⁽¹⁾

	Title of
	Class	Amount	% of Class

All directors and executive officers as a group (14 persons)	Common A	10,247	3.6
	Common B	68,632	8.8
	Preferred A	432	6.9
	Preferred B	424	5.1
	Preferred C	1,105	11.1



*	Less than one percent.

(1)	The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the Securities and Exchange Commission and, accordingly, include securities owned by or for the spouse, children or certain other relatives of such person as well as other securities as to which the person has or shares voting or investment power or has the right to acquire within 60 days after August 11, 2004. The same shares may be beneficially owned by more than one person. Beneficial ownership may be disclaimed as to certain of the securities.

(2)	Includes shares held by the Alan A. Warehime Intervivos Trust A. Voting and dispositive power with respect to such shares is shared by five trustees, each of whom has one vote. A majority vote of such individuals is required to vote or dispose of such shares. Trustees of such trust include John A. Warehime, Chairman, President and Chief Executive Officer of the Corporation, Cyril T. Noel, a director of the Corporation, Sally Yelland, Michael Warehime and the Allfirst Bank.

(3)	Includes shares held by the Alan A. Warehime Intervivos Trust B. Voting and dispositive power with respect to such shares is shared by five trustees, each of whom has one vote. A majority vote of such individuals is required to vote or dispose of such shares. Trustees of such trust include John A. Warehime, Chairman, President and Chief Executive Officer of the Corporation, Cyril T. Noel, a director of the Corporation, Sally Yelland, Michael Warehime and the Allfirst Bank.

(4)	As reported by Heartland Advisors, Inc. (“Heartland”) and William J. Nasgovitz, the President and a principal shareholder of Heartland, in Amendment Five to Schedule 13G dated December 31, 2000. Each of Heartland and Mr. Nasgovitz reported sole voting and no dispositive power with respect to the shares held. Such shares are held in investment advisory accounts of Heartland. The interests of one such account, Heartland Value Fund, relates to more than 5% of the class.

(5)	Represents shares held by the Employee Stock Trust and the Employee Stock Ownership Plan Trust which includes 10,860 shares owned by the Employee Stock Ownership Plan and 13,500 shares and 199,450 shares contributed to the Employee Stock Trust for the purpose of funding the Corporation’s obligations under the 2002 and 2003 Stock Option Plans, respectively. Shares held by the Employee Stock Trust are voted by the employee beneficiaries of the Employee Stock Ownership Plan and option grantees under the Stock Option Plans, on a confidential basis, except for procedural matters where the shares are voted by the trustee of such trust, Director Noel.

(6)	The 401(k) Plan may be deemed to beneficially own the shares held by such plan. The Series C Preferred Stock is currently convertible into shares of the Class A Common Stock on a one for one basis. The trustee of the 401(k) Plan is First Union National Bank. The trustees of the subtrust, which holds the Series C Preferred stock under the plan, are Directors Noel, Rohrbach and Schaier.

(7)	Excludes 10,000 shares of the Series C Preferred Stock held by the 401(k) Plan Trust. In their capacity as co-trustees of such plan, Directors Noel, Rohrbach and Schaier have shared voting and dispositive power over the 10,000 shares held by the 401(k) Plan Trust. Shares held by the 401(k) Plan Trust are voted by a majority of the plan trustees. The Series C Preferred Stock is convertible into Class A Common Stock on a one for one basis.

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(8)	Shares of Series A or B Preferred Stock are convertible into Class A Common Stock on an equitable basis. The current conversion ratio is 5.62 shares of Series A or B Preferred Stock to one share of Class A Common Stock. Such conversion ratio is subject to change based upon current book value of the Class A Common Stock.

(9)	Includes 3,562 shares of Class A Common Stock owned jointly with spouse, 328 shares of Class A owned by Mr. Warehime’s spouse, 9,057 shares of Class B Common Stock owned jointly with spouse, and 192 shares of Series C Preferred Stock owned by Mr. Warehime through the 401(k) Plan.

(10)	Includes 88 shares of Class A Common Stock owned jointly with children, 160 shares of Series A Preferred Stock owned jointly with spouse.

(11)	Includes 385 shares of Class A Common Stock owned jointly with spouse.

(12)	Includes 100 shares of Class A Common Stock owned jointly with spouse.

(13)	Includes 58 shares of Class B Common Stock owned by Ms. Carter through the Employee Stock Ownership Plan, 42 shares of Class B Common Stock owned by Ms. Carter’s husband through the Employee Stock Ownership Plan, 90 shares of Series C Preferred Stock owned by Ms. Carter through 401(k) Plan, 8 shares of Series C Preferred Stock owned by Ms. Carter’s husband through 401(k) Plan, and 2,000 shares of Class B Common Stock issuable upon the exercise of options, as to which Ms. Carter has voting power and 750 shares of Class B Common Stock issuable upon the exercise of options granted to Ms. Carter’s husband. See Footnote 5 above.

(14)	Includes (i) 127 shares of Class B Common Stock owned by Mr. Knisely through the Employee Stock Ownership Plan, as to which such officer may instruct the trustee how to vote such shares, (ii) 4,500 shares of Class B Common Stock issuable upon the exercise of options, as to which Mr. Knisely has voting power, (iii) 1,461 shares of Class A Common Stock, owned jointly with spouse, (iv) 227 shares of Class A Common Stock owned by Mr. Knisely’s spouse, (v) 64 shares of Series B Preferred Stock, owned jointly with spouse, and (vi) 192 shares of Series C Preferred Stock owned by Mr. Knisely through the 401(k) Plan.

(15)	Includes 116 shares of Class B Common Stock owned by Mr. Giraffa through the Employee Stock Ownership Plan, as to which such officer may instruct the trustee how to vote such shares, 3,500 shares of Class B common Stock issuable upon the exercise of options, as to which Mr. Giraffa has voting power, and 190 shares of Series C Preferred Stock owned by Mr. Giraffa through the 401(k) Plan.

(16)	Includes 122 shares of Class B Common Stock owned by Mr. Young through the Employee Stock Ownership Plan, as to which such officer may instruct the trustee how to vote such shares, 4,000 shares of Class B common Stock issuable upon the exercise of options, as to which Mr. Young has voting power, and 192 shares of Series C Preferred Stock owned by Mr. Young through the 401(k) Plan.

(17)	Includes 120 shares of Class B Common Stock owned by Mr. Schuchart through the Employee Stock Ownership Plan, as to which such officer may instruct the trustee how to vote such shares, 3,500 shares of Class B common Stock issuable upon the exercise of options, as to which Mr. Schuchart has voting power, and 163 shares of Series C Preferred Stock owned by Mr. Schuchart through the 401(k) Plan.

(18)	Ms. Stick and Ms. Yelland are directors and/or officers of ARWCO Corporation or Warehime Enterprises, Inc. The shares owned by Warehime Enterprises, Inc. and ARWCO Corporation are not included in the shares beneficially owned by the individual directors and officers.

(19)	Includes 63 shares of Class B Common Stock owned by Mr. Robertson through the Employee Stock Ownership Plan, as to which such officer may instruct the trustee how to vote such shares, 1,500 shares of Class B Common Stock issuable upon the exercise of options, as to which Mr. Robertson has voting power, and 78 shares of Series C Preferred Stock owned by Mr. Robertson through the 401(k) Plan.

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EQUITY COMPENSATION PLAN INFORMATION

The following table indicates information regarding the Corporation’s equity compensation plans.

						Number of securities
						remaining available for future
	Number of securities to			Weighted-average		issuance under equity
	be issued upon exercise			exercise price of		compensation plans
	of outstanding options,			outstanding options,		(excluding securities reflected
Plan Category	warrants and rights			warrants and rights		in column (a))

	(a)			(b)		(c)

Equity compensation plans approved by security holders	—			—		—

Equity compensation plans not approved by security holders: (7)
2002 Stock Option Plan	13,500	(1)	$	110 per share	(2)	21,100	(3)
2003 Stock Option Plan	199,450	(4)	$	118 per share	(5)	550	(6)

Total	212,950		$	117.49		21,650


(1)		Amounts reflect options granted during fiscal 2003.

(2)		Reflects the exercise price of options granted on June 20, 2002.

(3)		Represents shares available for issuance under the 2002 Stock Option Plan approved by the Board of Directors following award of options on June 20, 2002.

(4)		Amounts reflect options granted during fiscal 2004.

(5)		Reflects the exercise price of options granted on October 17, 2003.

(6)		Represents shares available for issuance under the 2003 Stock Option Plan approved by the Board of Directors following award of options on October 17, 2003.

(7)		Does not include 131,589 shares held by the Employee Stock Trust and 10,860 shares allocated to the Employee Stock Ownership Plan. The Employee Stock Trust is designed to fund contributions to employee benefit plans for non-union employees of the Corporation (excluding John A. Warehime), including, but not limited to, the Employee Stock Ownership Plan and the Stock Option Plans, and holds shares available for issuance under the Employee Stock Ownership Plan and under the Stock Option Plans and to fund other employee benefit plans. In addition, the table does not include 10,000 shares of Series C Preferred Stock held by the 401(k) Savings Plan, of which 196 shares were available for issuance as of the fiscal year end.

2002 STOCK OPTION PLAN

On June 20, 2002, the Corporation’s Board of Directors adopted the Hanover Foods Corporation 2002 Stock Option Plan (the “2002 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 2002 Stock Option Plan, and options to purchase 13,500 shares were granted during fiscal 2003. 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 2002 Stock Option Plan, excluding John A. Warehime. No individual may receive options under the 2002 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 2002 Stock Option Plan.

The 2002 Stock Option Plan will be administered by the Corporation’s Board of Directors or by an option committee appointed by the Corporation’s Board of Directors. The option committee will consist of a minimum of two and a maximum of five members of the Board of Directors, each of whom will be a “non-employee director” within the meaning of Rule 16b-3(b)(3) under the Exchange Act.

Options issued pursuant to the 2002 Stock Option Plan will be non-qualified stock options. (An “incentive stock option” is an option that satisfies all of the requirements of Section 422(b) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder, and) a “non-qualified stock option” is an option that either does not satisfy all of those requirements or the terms of the option provide that it will not be treated as an incentive stock option. The option price for options issued under the 2002 Stock Option Plan will be equal at least to the fair market value of the Corporation’s Class B common stock on the date of the grant of the option. Options will not be granted pursuant to the 2002 Stock Option Plan after the expiration of ten years from June 20, 2002. The number of shares available for award under the 2002 Stock Option Plan is subject to adjustment in the event of any change in the outstanding shares of the Class B common stock as a result of, among other circumstances, a stock dividend, stock split, recapitalization, merger, transfer of assets, or reorganization.

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2003 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 Corp oration 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. On October 17, 2003 the Board of Directors granted options for 199,450 shares of Class B common stock.

Under the 2002 Stock Option Plan and 2003 Option Plan, 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.

EMPLOYEE STOCK TRUST

The Hanover Foods Corporation Employee Stock Trust (the “Trust”) was revised and restated effective June 20, 2002, amended on July 23, 2004. The Trust is designed to fund contributions to employee benefit plans for non-union employees of Hanover (excluding John A. Warehime), including, but not limited to, the Hanover Foods Corporation Employee Stock Ownership Plan (“ESOP”), the 2002 Stock Option Plan and 2003 Option Plan. Currently, stock held in the Trust is allocated to either the Employee Stock Ownership Plan sub-account or the Stock Option Plan sub-account and the stock in each sub-account is to be used exclusively to satisfy the Corporation’s obligations under the applicable benefit plan. Stock held in the ESOP sub-account is voted by the co-trustees Cyril T. Noel and Luzerne National Bank, pursuant to the instructions of active participants in the ESOP. Stock held in the 2002 Stock Option Plan and the 2003 Option Plan sub-accounts are voted by the co-trustees pursuant to the instructions of holders of unexercised stock options. All voting instructions are made on a confidential basis. Shares for which no instructions are given are voted in the same proportion as shares for which instructions are given. The co-trustees are not required to obtain instruction for voting on procedural or ministerial matters such as shareholder meeting procedure.

Dividends and other distributions attributable to stock held in the Trust are to be used exclusively for the purpose of satisfying the Corporation’s obligations under its various employee benefit plans. The Trust is irrevocable, provided however, no shares of stock held by the Trust may be transferred to any other employee benefit plan other than the ESOP or to satisfy obligations under the Stock Option Plans for a period of five years from the effective date of the Trust. Stock held in the Trust is governed exclusively by the terms of the Trust Agreement and is not directly or indirectly controlled by the Board of Directors. Concurrent with the revision and restatement of the Trust, the Corporation contributed an additional 199,450 shares of Hanover Class B common stock to the Trust for the purpose of funding obligations under the 2003 Stock Option Plan on October 17, 2003.

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EMPLOYEE STOCK OWNERSHIP PLAN

Effective January 1, 2001, the Corporation adopted the Hanover Foods Corporation Employee Stock Ownership Plan (“ESOP). The ESOP was amended and restated in its entirety on February 25, 2002, and amended further August 1, 2002, December 15, 2003 and January 7, 2004. The ESOP is a defined contribution employee pension plan designed to invest primarily in securities of the Corporation. Non-union employees, except John A. Warehime, are eligible to participate upon completion of one year of service. Contributions may be made annually at the discretion of the Corporation. Contributions to the ESOP may take the form of cash or securities of the Corporation. It is intended that contributions will be made primarily by the transfer of Class B common stock of the Corporation from the Employer Stock Trust to the ESOP. Securities so contributed to the ESOP are allocated to the accounts of all “active participants” in the ESOP in proportion to e ach participant’s compensation. “Active participant” is defined as each participant who has completed a year of service during the plan year or retired or was on leave as of the last day of the plan year. Although the ESOP is designed to invest primarily in Corporation securities, participants have the option to diversify their accounts after completing 10 years of participation and attaining age 55. The option to diversify is permitted for six Plan Years. For the first five Plan Years, up to 25% of each such participant’s account may be invested in securities other than Corporation securities. In the sixth Plan Year, up to fifty percent (50%) of such participant’s account may be invested in securities other than Corporation securities.

Corporation securities owned by the ESOP are voted by the ESOP co-trustees Cyril T. Noel and Luzerne National Bank. Participants with Corporation securities allocated to their accounts are permitted to instruct the ESOP trustee as to the manner in which such shares are voted. All voting instructions are made on a confidential basis. The instruction so received are tabulated on a “one share one vote” basis. All shares held by the ESOP for which instruction is not received, including unallocated shares and shares allocated to the account of a participant who declines to instruct the co-trustees as to the manner in which such shares should be voted, are voted proportionately in accordance with the tabulation of the voting instructions received by the co-trustees. The co-trustees are not required to obtain instruction from ESOP participants for voting on procedural or ministerial matters such as shareholder meeting procedure.

401(K) SAVINGS PLAN

On April 2, 1990, the Corporation adopted a defined contribution benefit plan, known as the Corporation’s 401(k) Savings Plan (the “401(k) Plan”). The 401(k) Plan was amended on June 5, 1992, April 4, 1994, April 28, 1995, July 25, 1997, and December 14, 1997. The Plan was subsequently amended on August 1, 2002, January 9, 2004 and May 28, 2004 to read in its present form. Non-union, full-time domestic employees and those employees who are members of Local 56 of the United Food and Commercial Workers Union at the Company’s Clayton, Delaware plant are eligible to participate after completion of one year of service. Each eligible employee has the option to defer up to 16% of his or her total annual cash compensation per year. As of December 31st of each year, the Corporation, at its discretion, may make matching contributions equal to one hundred percent of each participating employee’s account for the first five percent of compensation deferred by each employee. These contributions may be made in cash, Corporation stock, or a combination of cash and Corporation stock. The 401(k) Plan provides various investment options. The 401(k) Plan provides for loans to plan participants but does not permit early withdrawals. Matching contributions made by the Corporation to the accounts of the Named Officers are included in the Summary Compensation Table contained previously herein.

Corporation securities owned by the 401(k) Plan are voted by the 401(k) Plan trustees: Cyril T. Noel, Clayton J. Rohrbach, and Arthur S. Schaier. All shares held by the 401(k) Plan are voted as a block according to the decision of a simple majority vote of the 401(k) Plan trustees who actually cast a vote. Each 401(k) Plan trustee is entitled to abstain from voting. If only one 401(k) Plan trustee chooses to cast a vote, the vote shall be legally effective, provided that such 401(k) Plan trustee is the chairman of the board (unless the chairman of the board elects in writing otherwise). None of the trustees currently serves as such chairman of the board.

STOCK REPURCHASE PLAN

Sixty-six (66) shares of the Company’s Class A Common Stock were repurchased under the plan for the fiscal year ended May 30, 2004. The Company has agreed to purchase the Company’s Class A Common Stock purchased or owned by employees prior to April 20, 1988 at appraised value. This guarantee of repurchase by the Company is for an indefinite period of time. No shares were repurchased under this plan for the years ended June 1, 2003 and June 2, 2002. As of May 30, 2004, there were 8,983 shares outstanding that would be eligible for repurchase under this plan. The maximum commitment, if requested, for all eligible shares would be approximately $1,051,000 based on the most recent appraised value per share as of March 31, 2004.

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ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 2004, the Corporation and its subsidiaries, in the normal course of business, purchased and sold goods and services to companies affiliated with the Corporation’s directors and officers. These transactions are summarized below.

During fiscal 2004, the Corporation rented equipment from Park 100 Foods, Inc. ,Tipton, Indiana. The rental payments pursuant to such lease agreements totaled $19,000 during fiscal 2004. As of May 30, 2004, the Corporation had an accounts receivable of $275,000 from Park 100 Foods, Inc. for food products sold and shipped to Park 100 Foods, Inc. During fiscal 2004, the Corporation sold approximately $1.3 million of frozen food products to Park 100 Foods, Inc. James A. Washburn, a director of the Corporation, owns approximately 80% of the outstanding stock of Park 100 Foods, Inc.

During fiscal 2004, the Corporation leased a two story farm house, adjoining one story guest house and adjoining ground located on Trolley Road, R.D. #3, Hanover, Heidelberg Township, Pennsylvania, for customer housing and temporary new employee housing from John A. and Patricia M. Warehime for a total of $45,000.

During fiscal 2004, the Corporation leased a barn for seed storage, located in Heidelberg Township, Pennsylvania for $4,000 from Warehime Enterprises, Inc. J. William Warehime, a shareholder of the Corporation, and John A. Warehime, Chairman of the Corporation, own 44.4% and 14.8% of the outstanding stock of Warehime Enterprises, Inc., respectively.

During fiscal 2004, the Corporation purchased $1.1 million of vegetable crops from Lippy Brothers, Inc. As of May 30, 2004, the Corporation owed an amount of $32,000 to Lippy Brothers, Inc. for vegetable crops purchased. T. Edward Lippy, a director of the Corporation owns approximately 37% of the outstanding stock of Lippy Brothers, Inc.

During fiscal 2003, the Corporation via its Guatemalan subsidiary, sold its condominium real estate, located in Naples, FL to John and Patricia M. Warehime for $127,500, which approximates fair value.

During fiscal 2004 the adult children of the Corporation’s Chairman, John Warehime, were employed by the Corporation, including Jennifer Carter, Director, who was employed as Assistant to the Chairman, Jeffrey Warehime, who is employed as Director – Fresh Produce, and Andrew Warehime, who is employed as Special Sales Manager. Jennifer Carter’s husband, Michael Carter, is employed as Director – Retail Branded Sales. Jennifer Carter was and Jeffrey Warehime, Andrew Warehime and Michael Carter are employed by the Corporation at annual salaries of $93,845, $100,857, $63,993, and $75,000 respectively. See “Part III — Item 11. Employment Agreements and Change in Control Severance Agreements.” Ms. Carter also receives director compensation customary for the Corporation’s directors which totaled $18,000 during fiscal 2004. See “Part III — Item 10. Directors and Executive Officers of the Corporation — Director Compensation.” On June 20, 2002, each of Jennifer Carter, Jeffrey Warehime, and Andrew Warehime were granted an option to purchase 500 shares of Class B common stock at an exercise price of $110 per share. On October 17, 2003, Jennifer Carter, Jeffrey Warehime and Andrew Warehime were granted an option to purchase 1,500 shares of Class B Common Stock at an exercise price of $118 per share and Michael Carter was granted an option to purchase 750 shares of Class B Common Stock at an exercise price of $118 per share. Andrea Kint, the daughter of Pietro Giraffa, Vice President and Controller of the Corporation, is employed as Assistant Production Manager — Hanover, PA Frozen Operations at an annual salary of $50,923. On October 17, 2003, Andrea Kint was granted an option to purchase 500 shares of Class B Common Stock at an exercise price of $118 per share.

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STOCK PERFORMANCE GRAPH

The following graph shows a comparison of the cumulative total return for the Corporation’s Class A Common Stock, the NASDAQ Stock Market and the Hanover Peer Group (defined below) assuming an investment of $100 on May 30, 1999 and the reinvestment of all dividends. The Peer Group includes Seneca Foods Corporation, The J.M. Smucker Company, Maui Land Pineapple Company, Inc., Del Monte Foods, Company and J & J Snack Foods Corp. The data points used for the performance graph are listed below.

The following graph is required to be included in this Annual Report by SEC regulations; however, in reviewing these materials shareholders are advised that since the Corporation’s Class A Common Stock is not actively traded, it can not be properly compared to companies whose securities are traded on an exchange or the NASDAQ Stock Market.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate fees billed by BDO Seidman, LLP for professional services rendered for the audit of the Company’s annual financial statements for the fiscal year ended May 30, 2004 and the review of the financial statements included in the Company’s Forms 10-Q for fiscal year 2004 totaled $152,000. The aggregate fees billed by KPMG LLP for professional services rendered for the audit of the Company’s annual financial statements for the fiscal year ended June 1, 2003 and the review of the financial statements included in the Company’s Forms 10-Q for fiscal year 2003 totaled $140,000.

Audit-Related Fees. The aggregate fees billed by BDO Seidman, LLP for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements for the fiscal year ended May 30, 2004 and that are not disclosed in the paragraph captioned “Audit Fees” above, were $8,000. The services performed by BDO Seidman, LLP in connection with these fees consisted of the following: review of the purchase price allocation in connection with the acquisition of Venice Maid Foods, Inc. and planning for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The aggregate fees billed by KPMG LLP for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements for the fiscal year ended June 1, 2003 and that are not disclosed in the paragraph captioned “Audit Fees” above, were $15,000. The services performed by KPMG LLP in connection with these fees consisted of the following: fees in connection with employee benefit plan audits.

Tax Fees. The aggregate fees billed by BDO Seidman, LLP for professional services rendered for tax compliance, tax advice and tax planning for the fiscal year ended May 30, 2004 were $20,000. The services performed by BDO Seidman, LLP in connection with these fees consisted of the following: tax compliance services. The aggregate fees billed by KPMG LLP for professional services rendered for tax compliance, tax advice and tax planning for the fiscal year ended June 1, 2003 were $68,000. The services performed by KPMG LLP in connection with these fees consisted of the following: fees in connection with tax compliance and consultation services.

All Other Fees. The aggregate fees billed by BDO Seidman, LLP for products and services, other than the services described in the paragraphs “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” above for the fiscal year ended May 30, 2004 were $0. The aggregate fees billed by KPMG LLP for products and services, other than the services described in the paragraphs “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” above for the fiscal year ended June 1, 2003 were $0.

The audit committee has established its pre-approval policies and procedures, pursuant to which the audit committee approved the foregoing audit and permissible non-audit services to be provided by BDO Seidman, LLP in fiscal 2005.

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PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1. Financial Statements:

Hanover Foods Corporation and Subsidiaries

The following financial statements of Hanover Foods Corporation and Subsidiaries are incorporated herein by reference to the Corporation’s Annual Report to Shareholders for the year ended May 30, 2004.

Report of Independent Registered Public Accounting Firm as of and for the year ended May 30, 2004

Report of Independent Registered Public Accounting Firm as of June 1, 2003 and for each of the years in the two year period ended June 1, 2003

Consolidated Balance Sheets as of May 30, 2004 and June 1, 2003.

Consolidated Statements of Earnings for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002.

Consolidated Statements of Comprehensive Income for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002.

Consolidated Statements of Cash Flows for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002.

Consolidated Statements of Stockholders’ Equity for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002.

Notes to Consolidated Financial Statements for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002.

2. Financial Statement Schedules

None. All schedules are omitted because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto.

3. Exhibits

The following exhibits are filed herein or have been previously filed with the Securities and Exchange Commission and are incorporated by reference herein.

Number	Description

3(a)	Registrant’s Amended and Restated Articles of Incorporation is incorporated by reference to the Form 10-K filed on August 29, 1997, wherein such Exhibit is designated as 3(a).

3(b)	Amendment No. 1 to Registrant’s Amended and Restated Articles of Incorporation is incorporated by reference to the Form 10-K filed on August 29, 1997, wherein such Exhibit is designated as 3(b).

3(c)	Registrant’s Amended and Restated Bylaws, as amended, enacted August 25, 2004 is attached as Exhibit 3(c).

4(a)	Note Agreement dated as of December 1, 1991, between the Corporation and Allstate Life Insurance Corporation, with regard to the Corporation’s $25,000,000, 8.74% Senior Notes Due March 15, 2007, is incorporated herein by reference to the Form 10-K filed June 25, 1992 wherein such Exhibit is designated as 4(a).

4(b)	June 20, 1995 First Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) and Waiver of Compliance with Section 5.9 of the Note Agreement is incorporated herein by reference to the Form 10-K filed on July 3, 1995, wherein such Exhibit is designated as 4(b).

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Number	Description

4(c)	June 24, 1996 waiver to covenants in the December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the "Note Agreement") is incorporated herein by reference to the Form 10-K filed on July 2, 1996, wherein such Exhibit is designated as 4(c).

4(d)	July 1, 1996 Second Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 27, 1997, wherein such Exhibit is designated as 4(d).

4(e)	August 1, 1997 Third Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 30, 1999, wherein such Exhibit is designated as 4(e).

4(f)	March 15, 1999 Fourth Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 30, 1999, wherein such Exhibit is designated as 4(f).

4(g)	July 26, 1999 waiver to covenants in the December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 30, 1999, wherein such Exhibit is designated as 4(g).

4(h)	July 28, 2000 waiver to covenants in the December 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 23, 2000, wherein such Exhibit is designated as 4(h).

4(i)	August 3, 2001 waiver to covenants in the December 1991 Note Agreement between the Corporation and Allstate Life Insurance Compensation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibits are designated 4(i).

4(j)	Note Purchase Agreement dated as of September 1, 2001, between the Corporation and a group of lenders led by John Hancock Life Insurance Company with regard to the Corporation’s $25,000,000, 7.01% Senior Notes Due September 15, 2011 wherein such Exhibit is designated 4(j).

9(a)	April 5, 1988 Voting Trust Agreement is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 9(a).

9(b)	December 1, 1988 Voting Trust Agreement is incorporated herein by reference to the Form 10–K filed July 28, 1989, wherein such Exhibit is designated as 9(b).

9(c)	Writing dated April 5, 1988 appointing John A. Warehime as Successor Voting Trustee under Voting Trust Agreement dated December 1, 1988, is incorporated herein by reference to the Form 8-K filed June 1, 1990, wherein such Exhibit is designated as 9(c).

9(d)	Writing dated December 1, 1988 appointing John A. Warehime as Successor Voting Trustee under Voting Trust Agreement dated December 1, 1988, is incorporated herein by reference to the Form 8-K filed June 1, 1990, wherein such Exhibit is designated as 9(d).

10(a)	April 28, 1988 Sublease Agreement between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(a).

10(b)	April 28, 1988 Agreement of Sale between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(b).

10(c)	March 3, 1989 Agreement of Sale between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(c).

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Number	Description

10(d)	November 14, 1986 Employment Agreement between Hanover Brands, Inc. and Patricia H. Townsend is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(d).

10(e)	May 10, 1991 Amendment to April 28, 1988 Agreement of Sale between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed June 29, 1991, wherein such Exhibit is designated as 10(e).

10(f)	October 1, 1994 Amendment to the June 1, 1994 Lease Agreement between Hanover Foods Corporation and Food Service East, Inc. is incorporated herein by reference to the Form 10-K filed July 3, 1995, wherein such Exhibit is designated as 10(f).

10(g)	June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated herein by reference to the Form 10-K filed July 3, 1995, wherein such Exhibit is designated as 10(g). *

10(h)	April 4, 1994 Lease Agreement between John A. and Patricia M. Warehime and Hanover Foods Corporation is incorporated herein by reference to the Form 10-K filed July 2, 1996, wherein such Exhibit is designated as 10(h).

10(i)	July 27, 1995 Installment Sales Agreement for the purchase of 5,148 shares of Hanover Foods Class B Voting Common Stock from Cyril T. Noel, individually, and Cyril T. Noel and Frances L. Noel, jointly, is incorporated herein by reference to the Form 10-K filed July 2, 1996, wherein such Exhibit is designated as 10(i).

10(j)	April 1, 1996 Installment Sales Agreement for the purchase of 1,210 shares of Hanover Foods Class B Voting Common Stock and 5,990 shares of Hanover Foods Class A Nonvoting Common Stock from John R. Miller, Jr. is incorporated herein by reference to the Form 10-K filed July 2, 1996, wherein such Exhibit is designated as 10(j).

10(k)	January 23, 1997 Employment Agreement between Hanover Foods Corporation and Gary T. Knisely is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(k). *

10(l)	February 13, 1997 Amendment No. 1 to June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(l). *

10(m)	August 1, 1997 Amendment No. 2 to June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(m).*

10(n)	May 21, 1997 Senior Executive Agreement between Hanover Foods Corporation and Clement A. Calabrese is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(n). *

10(o)	May 21, 1997 Senior Executive Agreement between Hanover Foods Corporation and Alan T. Young is incorporated herein by reference to the Form 10-K filed on August 27, 1997, wherein such Exhibit is designated 10(o). *

10(p)	April 22, 1997 John R. Miller, Jr. Voting Agreement is incorporated herein by reference to the Form 10-K filed on August 27, 1997, wherein such Exhibit is designated as 10(p). *

10(q)	April 1, 2000 Amendment No. 3 to June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated by reference to the Form 10-K filed on August 23, 2000, wherein such Exhibits designated as 10 (q).

10(r)	April 1, 2000 Amendment No. 1 to January 23, 1997 Employment Agreement between Hanover Foods Corporation and Gary T. Knisely is incorporated by reference to the Form 10-K filed on August 23, 2000, wherein such Exhibit designated as 10 (r).

10(s)	Annual Top Management Cash Bonus Program. *

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Number	Description

10(t)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Pietro D. Giraffa, Jr. is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(t). *

10(u)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Edward L. Boeckel, Jr. is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(u). *

10(v)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Daniel E. Schuchart is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(v). *

10(w)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and William S. Gaugler, Jr. incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(w). *

10(x)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Timothy D. Mechler is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(x). *

10(y)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Jennifer L. Carter is incorporated by reference to the Form 10(k) filed on August 31, 2001, wherein such Exhibit is designated as 10(y).

10(z)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Jeffrey A. Warehime is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(z). *

10(aa)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and J. Andrew Warehime is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(aa). *

10(bb)	2002 Stock Option Plan and Form of Option Agreement is incorporated by reference to the Form 10-K filed on September 2, 2002, wherein such Exhibit is designated as 10 (bb).

10(cc)	Revised and Restated Employee Stock Trust, effective June 20, 2002 is incorporated by reference to the Form 10-K filed on September 2, 2002, wherein such Exhibit is designated as 10(cc).

10(dd)	2003 Stock Option Plan and Form of Option Agreement is incorporated by reference to the Form 10-Q filed on January 14, 2004, wherein such Exhibit is designated as 10(dd).

10(ee)	July 23, 2004 Amendment No. 1 to Revised and Restated Employee Stock Ownership Plan Trust, effective June 20, 2002, is attached as Exhibit 10(ee).

10(ff)	July 23, 2004 Amendment No. 2 to Revised and Restated Employee Stock Trust, effective June 20, 2002, is attached as Exhibit 10(ff).

10 (gg)	October 28, 2003 Renewal of PNC Bank $11,500,000 – Letter of Credit facility is incorporated by reference to Form 10-Q filed on January 14, 2004, wherein such exhibit is designated at Exhibit 10(gg).

10(hh)	November 7, 2004 Renewal of Citizens Bank $15,000,000 Line of Credit facility incorporated by reference to the Form 10-Q filed on January 14, 2004, wherein such exhibit is designated as Exhibit 10(hh).

11	Computation of Earnings Per Share. Incorporated by reference to Note 12 of the Notes to Consolidated Financial Statements.

13	2004 Annual Report to Shareholders is attached as Exhibit 13.

14	Code of Ethics for Senior Financial Officers is attached as Exhibit 14.

21	List of Subsidiaries of the Registrant is attached as Exhibit 21.

31.1	Certification of CEO pursuant to Section 302 Sarbanes Oxley Act of 2002 is attached as Exhibit 31.1.

31.2	Certification of CFO pursuant to Section 302 Sarbanes Oxley Act of 2002 is attached as Exhibit 31.2

32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached as Exhibit 32.1.

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Number	Description

32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached as Exhibit 32.2.

99.1	Amended and Restated Audit Committee Charter is attached as Exhibit 99.1

99.2	Nominating and Corporate Governance Committee Charter is attached as Exhibit 99.2

*Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

DATE: September 30, 2004

	HANOVER FOODS CORPORATION

	By:	/s/ John A. Warehime

		JOHN A. WAREHIME
		Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ John A. Warehime	By:	/s/ Clayton J. Rohrbach, Jr.

	John A. Warehime		Clayton J. Rohrbach, Jr.
	Chairman, President		Director
	Chief Executive Officer and Director

Date: September 30, 2004		Date: September 30, 2004

By:	/s/ Gary T. Knisely	By:	/s/ James G. Sturgill

	Gary T. Knisely		James G. Sturgill
	Executive Vice President		Director
	Counsel
	Chief Financial Officer

Date: September 30, 2004		Date: September 30, 2004

By:	/s/ Pietro D. Giraffa, Jr.	By:	/s/ James A. Washburn

	Pietro D. Giraffa, Jr.		James A. Washburn
	Vice President - Controller		Director
	Chief Accounting Officer

Date: September 30, 2004		Date: September 30, 2004

By:	/s/ Arthur S. Schaier	By:	/s/ Cyril T. Noel

	Arthur S. Schaier		Cyril T. Noel
	Director		Director

Date: September 30, 2004		Date: September 30, 2004

By:	/s/ T. Edward Lippy	By:	/s/ Jennifer W. Carter

	T. Edward Lippy		Jennifer W. Carter
	Director		Director

Date: September 30, 2004		Date: September 30, 2004

By:	/s/ T. Michael Haugh

	T. Michael Haugh
	Director

Date: September 30, 2004

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HANOVER FOODS CORPORATION

EXHIBIT INDEX

Number	Description


3(a)	Registrant’s Amended and Restated Articles of Incorporation is incorporated by reference to the Form 10-K filed on August 29, 1997, wherein such Exhibit is designated as 3(a).

3(b)	Amendment No. 1 to Registrant’s Amended and Restated Articles of Incorporation is incorporated by reference to the Form 10-K filed on August 29, 1997, wherein such Exhibit is designated as 3(b).

3(c)	Registrant’s Amended and Restated Bylaws, as amended, enacted August 25, 2004 is attached as Exhibit 3(c).

4(a)	Note Agreement dated as of December 1, 1991, between the Corporation and Allstate Life Insurance Corporation, with regard to the Corporation’s $25,000,000, 8.74% Senior Notes Due March 15, 2007, is incorporated herein by reference to the Form 10-K filed June 25, 1992 wherein such Exhibit is designated as 4(a).

4(b)	June 20, 1995 First Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) and Waiver of Compliance with Section 5.9 of the Note Agreement is incorporated herein by reference to the Form 10-K filed on July 3, 1995, wherein such Exhibit is designated as 4(b).

4(c)	June 24, 1996 waiver to covenants in the December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the "Note Agreement") is incorporated herein by reference to the Form 10-K filed on July 2, 1996, wherein such Exhibit is designated as 4(c).

4(d)	July 1, 1996 Second Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 27, 1997, wherein such Exhibit is designated as 4(d).

4(e)	August 1, 1997 Third Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 30, 1999, wherein such Exhibit is designated as 4(e).

4(f)	March 15, 1999 Fourth Amendment to December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 30, 1999, wherein such Exhibit is designated as 4(f).

4(g)	July 26, 1999 waiver to covenants in the December 1, 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 30, 1999, wherein such Exhibit is designated as 4(g).

4(h)	July 28, 2000 waiver to covenants in the December 1991 Note Agreement between the Corporation and Allstate Life Insurance Corporation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 23, 2000, wherein such Exhibit is designated as 4(h).

4(i)	August 3, 2001 waiver to covenants in the December 1991 Note Agreement between the Corporation and Allstate Life Insurance Compensation (the “Note Agreement”) is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibits is designated 4(i).

4(j)	Note Purchase Agreement dated as of September 1, 2001, between the Corporation and a group of lenders led by John Hancock Life Insurance Company with regard to the Corporation’s $25,000,000, 7.01% Senior Notes Due September 15, 2011 is incorporated herein by reference to the Form 10-K filed September 2, 2002, wherein such Exhibit is designated as 4(j).

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Number	Description

9(a)	April 5, 1988 Voting Trust Agreement is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 9(a).

9(b)	December 1, 1988 Voting Trust Agreement is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 9(b).

9(c)	Writing dated April 5, 1988 appointing John A. Warehime as Successor Voting Trustee under Voting Trust Agreement dated December 1, 1988, is incorporated herein by reference to the Form 8-K filed June 1, 1990, wherein such Exhibit is designated as 9(c).

9(d)	Writing dated December 1, 1988 appointing John A. Warehime as Successor Voting Trustee under Voting Trust Agreement dated December 1, 1988, is incorporated herein by reference to the Form 8-K filed June 1, 1990, wherein such Exhibit is designated as 9(d).

10(a)	April 28, 1988 Sublease Agreement between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(a).

10(b)	April 28, 1988 Agreement of Sale between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(b).

10(c)	March 3, 1989 Agreement of Sale between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(c).

10(d)	November 14, 1986 Employment Agreement between Hanover Brands, Inc. and Patricia H. Townsend is incorporated herein by reference to the Form 10-K filed July 28, 1989, wherein such Exhibit is designated as 10(d).

10(e)	May 10, 1991 Amendment to April 28, 1988 Agreement of Sale between Warehime Enterprises, Inc. and Hanover Brands, Inc., is incorporated herein by reference to the Form 10-K filed June 29, 1991, wherein such Exhibit is designated as 10(e).

10(f)	October 1, 1994 Amendment to the June 1, 1994 Lease Agreement between Hanover Foods Corporation and Food Service East, Inc. is incorporated herein by reference to the Form 10-K filed July 3, 1995, wherein such Exhibit is designated as 10(f).

10(g)	June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated herein by reference to the Form 10-K filed July 3, 1995, wherein such Exhibit is designated as 10(g). *

10(h)	April 4, 1994 Lease Agreement between John A. and Patricia M. Warehime and Hanover Foods Corporation is incorporated herein by reference to the Form 10-K filed July 2, 1996, wherein such Exhibit is designated as 10(h).

10(i)	July 27, 1995 Installment Sales Agreement for the purchase of 5,148 shares of Hanover Foods Class B Voting Common Stock from Cyril T. Noel, individually, and Cyril T. Noel and Frances L. Noel, jointly, is incorporated herein by reference to the Form 10-K filed July 2, 1996, wherein such Exhibit is designated as 10(i).

10(j)	April 1, 1996 Installment Sales Agreement for the purchase of 1,210 shares of Hanover Foods Class B Voting Common Stock and 5,990 shares of Hanover Foods Class A Nonvoting Common Stock from John R. Miller, Jr. is incorporated herein by reference to the Form 10-K filed July 2, 1996, wherein such Exhibit is designated as 10(j).

10(k)	January 23, 1997 Employment Agreement between Hanover Foods Corporation and Gary T. Knisely is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(k). *

10(l)	February 13, 1997 Amendment No. 1 to June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(l). *

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Number	Description

10(m)	August 1, 1997 Amendment No. 2 to June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(m).*

10(n)	May 21, 1997 Senior Executive Agreement between Hanover Foods Corporation and Clement A. Calabrese is incorporated herein by reference to the Form 10-K filed August 27, 1997, wherein such Exhibit is designated 10(n). *

10(o)	May 21, 1997 Senior Executive Agreement between Hanover Foods Corporation and Alan T. Young is incorporated herein by reference to the Form 10-K filed on August 27, 1997, wherein such Exhibit is designated 10(o). *

10(p)	April 22, 1997 John R. Miller, Jr. Voting Agreement is incorporated herein by reference to the Form 10-K filed on August 27, 1997, wherein such Exhibit is designated as 10(p). *

10(q)	April 1, 2000 Amendment No. 3 to June 12, 1995 Employment Agreement between Hanover Foods Corporation and John A. Warehime is incorporated by reference to the Form 10-K filed on August 23, 2000, wherein such Exhibits designated as 10 (q).

10(r)	April 1, 2000 Amendment No. 1 to January 23, 1997 Employment Agreement between Hanover Foods Corporation and Gary T. Knisely is incorporated by reference to the Form 10-K filed on August 23, 2000, wherein such Exhibit designated as 10 (r).

10(s)	Annual Top Management Cash Bonus Program.

10(t)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Pietro D. Giraffa, Jr. is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(t). *

10(u)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Edward L. Boeckel, Jr. is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(u). *

10(v)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Daniel E. Schuchart is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(v). *

10(w)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and William S. Gaugler, Jr incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(w). *

10(x)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Timothy D. Mechler is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(x). *

10( y)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Jennifer L. Carter is incorporated by reference to the Form 10(k) filed on August 31, 2001, wherein such Exhibit is designated as 10(y).

10(z)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and Jeffrey A. Warehime is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(z). *

10(aa)	October 27, 2000 Senior Executive Agreement between Hanover Foods Corporation and J. Andrew Warehime is incorporated by reference to the Form 10-K filed on August 31, 2001, wherein such Exhibit is designated as 10(aa). *

10(bb)	2003 Stock Option Plan and Form of Option Agreement is incorporated by reference to the Form 10-K filed on September 2, 2002, wherein such Exhibit is designated at 10(bb).

10(cc)	Revised and Restated Employee Stock Trust, effective June 20, 2002 is incorporated by reference to the Form 10-K filed on September 2, 2003, wherein such Exhibit is designated as 10(cc).

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Number	Description

10(dd)	2003 Stock Option Plan and Form of Option Agreement is incorporated by reference to the Form 10-Q filed on January 14, 2004, wherein such Exhibit is designated as 10(dd).

10(ee)	July 23, 2004 Amendment No. 1 to Revised and Restated Employee Stock Ownership Plan Trust, effective June 20, 2002, is attached as Exhibit 10(ee).

10(ff)	July 23, 2004 Amendment No. 2 to Revised and Restated Employee Stock Trust, effective June 20, 2002, is attached as Exhibit 10(ff).

10(gg)	October 28, 2003 Renewal of PNC Bank $11,500,000 – Letter of Credit facility is incorporated by reference to Form 10-Q filed on January 14, 2004, wherein such exhibit is designated at Exhibit 10(gg).

10(hh)	November 7, 2004 Renewal of Citizens Bank $15,000,000 Line of Credit facility incorporated by reference to the Form 10-Q filed on January 14, 2004, wherein such exhibit is designated as Exhibit 10(hh).

11	Computation of Earnings Per Share. Incorporated by reference to Note 12 of the Notes to Consolidated Financial Statements.

13	2004 Annual Report to Shareholders is attached as Exhibit 13.

14	Code of Ethics for Senior Financial Officers is attached as Exhibit 14.

21	List of Subsidiaries of the Registrant is attached as Exhibit 21.

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 is attached at Exhibit 31.1.

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 is attached as Exhibit 31.2.

32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached as Exhibit 32.1.

32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is attached as Exhibit 32.2.

99.1	Amended and Restated Audit Committee Charter is attached as Exhibit 99.1.

99.2	Nominating and Corporate Governance Committee Charter is attached as Exhibit 99.2.



*	Management contract or compensatory plan or arrangement.

Exhibit 3 (c)

HANOVER FOODS CORPORATION

Amended and Restated Bylaws

These Bylaws are supplemental to the Pennsylvania
Business Corporation Law of 1988, as the same shall
from time to time be in effect.

ARTICLE I. GENERAL

Section 1. Office.

The principal office of Hanover Foods Corporation (the “Corporation”) shall be in Penn Township, York County, Pennsylvania.

Section 2. Seal.

The Corporation shall have a common seal containing the words “Hanover Foods Corporation – Pennsylvania” in a circle within which the word “SEAL” is contained.

Section 3. Fiscal Year.

The fiscal year of the Corporation shall end with the close of business on Sunday nearest May 3lst.

ARTICLE II. SHAREHOLDERS

Section 1. Place of Shareholders’ Meetings.

All meetings of the shareholders shall be held at such place or places, inside or outside the Commonwealth of Pennsylvania, as determined by the Board of Directors from time to time.

Section 2. Annual Shareholders’ Meeting.

The annual meeting of the shareholders for the election of directors and the transaction of such other business as may properly come before such meeting shall be held at such time and place as determined by the Board of Directors. Any business which is a proper subject for shareholder action may be transacted at the annual meeting, irrespective of whether the notice of said meeting contains any reference thereto, except as otherwise provided by applicable law.

Section 3. Special Meetings of Shareholders.

Special meetings of the shareholders may be called at any time by the Board of Directors or the Chairman or the Chief Executive Officer or as provided by applicable law.

Section 4. Conduct of Shareholders’ Meetings.

The Chairman shall preside at all shareholders’ meetings. In the absence of the Chairman, the Chief Executive Officer shall preside, or in his absence, the Secretary shall preside or, in his absence, any officer designated by the Board of Directors shall preside. The officer presiding over the shareholders’ meeting may establish such rules and regulations for the conduct of the meeting as he or she may deem to be reasonably necessary or desirable for the orderly and expeditious conduct of the meeting. Unless the officer presiding over the shareholders’ meeting otherwise requires, shareholders need not vote by ballot on any questions.

Section 5. Proposals by Shareholders.

Any proposal by a shareholder which is to be submitted for consideration by shareholders at such meeting must be submitted by June 1 of the year in which the annual shareholders meeting is to be held All late proposals shall be disregarded by the Chairman of the meeting. Notwithstanding the foregoing, even if a shareholder proposal is submitted before the June 1 deadline, the Chairman of the annual meeting shall not be required to submit the proposal to the shareholders if the Chairman is advised by legal counsel that such proposal is not required to be submitted to shareholders under the Pennsylvania Business Corporation Law of 1988 (which, as amended from time to time, is hereafter called the “BCL”).

ARTICLE III. DIRECTORS

Section 1. Management by Board of Directors.

The business and affairs of the Corporation shall be managed by its Board of Directors who need not be residents of the Commonwealth of Pennsylvania or shareholders of the Corporation. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute, regulation, the Amended and Restated Articles of Incorporation (the “Articles”) or these Amended and Restated Bylaws (the “Bylaws”) directed or required to be exercised or done by the shareholders.

Section 2. Nomination for Directors.

Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of a class of stock entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the Board of Directors, shall be made in writing, and shall be delivered to the Secretary in writing not later than June I of the calendar year in which the meeting to elect the director or directors is to be held. A nomination, other than those made by or on behalf of the Board of Directors, shall contain or be accompanied by the following:

(1)

The name and address of each proposed nominee;


	(2)	The qualifications of each proposed nominee;

(3)

All other information required by Schedule 14A adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934; and


	(4)	Written confirmation executed by the proposed nominee that such proposed nominee has agreed to serve if elected.

Nominations not made in accordance with this Section shall be disregarded by the Chairman of the meeting and the judge or judges of Election shall disregard all votes cast for that nominee. Notwithstanding the foregoing, if the number of directors to be elected is increased subsequent to the June 1 deadline, the deadline for the submission of nominations for director by shareholders pursuant to this section shall be 15 calendar days after the Corporation mails notice of the meeting at which the additional directors are to be elected.

Section 3. Number and Classification of Directors.

The Board of Directors shall consist of not less than seven (7) and not more than fifteen (15) directors. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles or by these Bylaws directed or required to be exercised or done by the shareholders. The Board of Directors shall be divided into four (4) classes, as described in the Articles. The Board of Directors shall be divided into four (4) classes, as nearly equal in number as possible, known as Class A, consisting of three (3) directors, Class B, consisting of two (2) directors, Class C, consisting of two (2) directors, and Class D, consisting of two (2) directors. In all other respects the provisions of Article 7 of the Articles shall continue in full force and effect and this amendment shall not alter the terms of members of each class.

Section 4. Resignations of Directors.

Any director may resign at any time. Such resignation shall be in writing, but the acceptance thereof shall not be necessary to make it effective.

Section 5. Compensation of Directors.

No director shall be entitled to any salary, as such, but the Board of Directors may fix, from time to time, a reasonable annual fee for acting, as a director and a reasonable fee to be paid each director for his or her services in attending meetings of the Board or committees thereof.

Section 6. Regular Meetings.

Regular meetings of the Board of Directors shall be held on such day, at such hour, and at such place, consistent with applicable law, as the Board shall from time to time designate or as may be designated in any notice from the Secretary calling the meeting. The Board of Directors shall meet for reorganization at the first regular meeting following the annual meetings of shareholders at which the directors are elected. Notice need not be given of regular meetings of the Board of Directors which are held at the time and place designated by the Board of Directors. If a regular meeting is not to be held at the time and place designated by the Board of Directors, notice of such meeting, which need not specify the business to be transacted thereat and which may be either oral or written, shall be given by the Secretary to each member of the Board at least twenty-four hours before the time of the meeting.

Section 7. Special Meetings.

Special meetings of the Board of Directors may be called by the Chairman and shall be called whenever a majority of the members of the Board so request in writing. A special meeting of the Board of Directors shall be deemed to be any meeting other than the regular meeting of the Board of Directors. Notice of the time and place of every special meeting, which need not specify the business to be transacted thereat and which may be either oral or written, shall be given by the Secretary to each member of the Board at least twenty-four hours before the time of such meeting.

Section 8. Committees.

The following committees of the Board of Directors may be established by the Board of Directors in addition to any other committee the Board of Directors may in its discretion establish: (a) Audit Committee; and (b) Compensation Committee.

Section 9. Audit Committee.

The Audit Committee shall consist of at least two (2) directors, each of whom shall be independent. Meetings of the Audit Committee may be called at any time by the Chairman of the Audit Committee and shall be called whenever two or more members of the Committee so request in writing. The Audit Committee shall have the following authority, powers and responsibilities:

(a) To select each year the independent accountants to audit the annual financial statements of the Corporation and its consolidated subsidiaries and to review the fees charged for such audits or for special engagements given to such accountants;

(b) To meet with the independent accountants, Chairman, Chief Executive Officer, Chief Financial Officer and any other Corporation executives as the Audit Committee deems appropriate at such times as the Audit Committee shall determine to review: (i) the scope of the audit plan; (ii) the Corporation’s financial statements; (iii) the results of external and internal audits; (iv) the effectiveness of the Corporation’s system of internal controls; (v) any limitations imposed by Corporation personnel on the independent public accountants; and (vi) such other matters as the Audit Committee shall deem appropriate;

(d) To take such other action as the Audit Committee shall deem necessary or appropriate to assure that the interests of the Corporation are adequately protected.

Section 10. Compensation Committee.

The Compensation Committee shall consist of at least two (2) directors. Meetings of the Committee may be called at any time by the Chairman of the Committee and shall be called whenever two or more members of the Committee so request in-writing. The Committee shall review compensation of executive officers and make recommendations to the Board of Directors regarding executive compensation and shall have such other duties as the Board of Directors prescribes.

Section 11. Appointment of Committee Members.

The Board of Directors shall appoint or shall establish a method of appointing the members of the Audit and Compensation Committees and of any other committee established by the Board of Directors, and the Chairman of each such committee, to serve until the next annual meeting of shareholders.

Section 12. Absentee Participation in Meetings.

A director may participate in a meeting of the Board of Directors or a meeting of a committee established by the Board of Directors by use of a conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other.

ARTICLE III. OFFICERS

Section 1. Officers .

The officers of the Corporation shall be a Chairman, a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers and assistant officers as the Board of Directors may from time to time deem advisable. Except for the Chairman, Chief Executive Officer, President, Secretary and Treasurer, the Board may refrain from filling any of the said offices at any time and from time to time. The same individual may hold any two or more offices. The following officers shall be elected by the Board of Directors at the time, in the manner and for such terms as the Board of Directors from time to time shall determine: Chairman, Chief Executive Officer, President, Secretary, and Treasurer. The Chairman may appoint such other officers and assistant officers as he may deem advisable provided such officers or assistant officers have a title no higher than Vice President, who shall hold office for such periods as the Chairman shall determine. Any officer may be removed at any time, with or without cause, and regardless of the term for which such officer was elected.

Section 2. Chairman.

The Chairman shall be a member of the Board of Directors and shall preside at the meetings of the Board and shareholders and perform such other duties as may be prescribed by the Board of Directors.

Section 3. Chief Executive Officer.

The Chief Executive Officer shall have general supervision of all of the departments and business of the Corporation; he or she shall prescribe the duties of the other officers and employees and see to the proper performance thereof. The Chief Executive Officer shall be responsible for having all orders and resolutions of the Board of Directors carried into effect. The Chief Executive Officer shall execute on behalf of the Corporation and may affix or cause to be affixed a seal to all authorized documents and instruments requiring such execution, except to the extent that signing and execution thereof shall have been delegated to some other officer or agent of the Corporation by the Board of Directors or by the Chief Executive Officer. The Chief Executive Officer shall be a member of the Board of Directors. In the absence or disability of the Chairman or his or her refusal to act, the Chief Executive Officer shall preside at meetings of the Board. In general, the Chief Executive Officer shall perform all the duties and exercise all the powers and authorities incident to his or her office or as prescribed by the Board of Directors.

Section 4. President.

The President shall perform such duties as are incident to his or her office or prescribed by the Board of Directors or the Chief Executive Officer. In the event of the absence or disability of the Chief Executive Officer or his or her refusal to act, the President shall perform the duties and have the powers and authorities of the Chief Executive Officer. The President shall execute on behalf of the Corporation and may affix or cause to be affixed a seal to all authorized documents and instruments requiring such execution, except to the extent that signing and execution thereof shall have been delegated to some other officer or agent of the Corporation by the Board of Directors or the President.

Section 5. Vice Presidents.

The Vice Presidents shall perform such duties, do such acts and be subject to such supervision as may be prescribed by the Board of Directors, the Chief Executive Officer and President. In the event of the absence or disability of the Chief Executive Officer and the President or their refusal to act, the Vice Presidents, in the order of their rank, and within the same rank in the order of their seniority, shall perform the duties and have the powers and authorities of the Chief Executive Officer and President, except to the extent inconsistent with applicable law.

Section 6. Secretary.

The Secretary shall act under the supervision of the Chief Executive Officer and President or such other officer as the Chief Executive Officer and President may designate. Unless a designation to the contrary is made at a meeting, the Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all of the proceedings of such meetings in a book to be kept for that purpose, and shall perform like duties for the standing committees when required by these Bylaws or otherwise. The Secretary shall keep a seal of the Corporation, and, when authorized by the Board of Directors, Chief Executive Officer and President, cause the seal to be affixed to any documents and instruments requiring it. The Secretary shall perform such other duties as may be prescribed by the Board of Directors, Chief Executive Officer and President or such other supervising officer as the Chief Executive Officer and President may designate.

Section 7. Treasurer.

The Treasurer shall act under the supervision of the Chief Executive Officer and President or such other officer as the Chief Executive Officer and President may designate. The Treasurer shall have custody of the Corporation’s funds and such other duties as may be prescribed by the Board of Directors, Chief Executive Officer and President or such other supervising officer as the Chief Executive Officer and President may designate.

Section 8. Assistant Officers.

Unless otherwise provided by the Board of Directors, each assistant officer shall perform such duties as shall be prescribed by the Board of Directors, Chief Executive Officer and President or the officer to whom he or she is an assistant. In the event of the absence or disability of an officer or his or her refusal to act, his or her assistant officers shall, in the order of their rank, and within the same rank in the order of their seniority, have the powers and authorities of such officer.

Section 9. General Powers.

The officers are authorized to do and perform such corporate acts as are necessary in the carrying on of the business of the Corporation, subject always to the directions of the Board of Directors.

ARTICLE IV. PERSONAL LIABILITY AND INDEMNIFICATION

Section 1. Personal Liability of Directors.

(a) A director of this Corporation shall not be personally liable, as such, for monetary damages for any action taken, or any failure to take any action, unless:

(i) the director has breached or failed to perform the duties of his office under Chapter 17, Subchapter B of the BCL; and

(ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness

(b) This Section I of Article IV shall not apply to a director’s liability for monetary damages to the extent prohibited by Section 1713(b) of the BCL.

Section 2. Mandatory Indemnification.

The Corporation shall, to the fullest extent permitted by applicable law, indemnify its directors and officers who were or are a party or are threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not such action, suit or proceeding arises or arose by or in the right of the Corporation or other entity) by reason of the fact that such director or officer is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, general partner, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise (including service with respect to employee benefit plans), against expenses (including, but not limited to, reasonable attorneys’ and investigation fees and costs), judgments, fines (including excise taxes assessed on a person with respect to any employee benefit plan) and amounts paid in settlement actually and reasonably incurred by such director or officer in connection with such action, suit or proceeding, except as otherwise provided in Section 4 of Article IV hereof. Persons who were directors or officers of the Corporation prior to the date this Section is approved by members of the Corporation, but who do not hold such office on or after such date, shall not be covered by this Section 2 of Article IV. A director or officer of the Corporation entitled to indemnification under this Section 2 of Article IV is hereafter called a “person covered by Section 2 of Article IV hereof”.

Section 3. Expenses.

Expenses incurred by a person covered by Section 2 of Article IV hereof in defending a threatened, pending or completed civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation, except as otherwise provided in Section 4 of Article IV.

Section 4. Exceptions.

No indemnification under Section 2 of Article IV or advancement or reimbursement of expenses under Section 3 of Article IV shall be provided to a person covered by Section 2 of Article IV hereof: (a) with respect to expenses or the payment of profits arising from the purchase or sale of securities of the Corporation in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended; (b) if a final unappealable judgment or award establishes that such director or officer engaged in intentional misconduct or a transaction from which the director or officer derived an improper personal benefit; (c) for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, and amounts paid in settlement) which have been paid directly to, or for the benefit of, such person by an insurance carrier under a policy of officers’ and directors’ liability insurance whose premiums are paid for by the Corporation or by an individual or entity other than such director or officer; and (d) for amounts paid in settlement of any threatened, pending or completed action, suit or proceeding without the written consent of the Corporation, which written consent shall not be unreasonably withheld. The Board of Directors of the Corporation is hereby authorized, at any time by resolution, to add to the above list of exceptions from the right of indemnification under Section 2 of Article IV or advancement or reimbursement of expenses under Section 3 of Article IV, but any such additional exception shall not apply with respect to any event, act or omission which occurred prior to the date that the Board of Directors in fact adopts such resolution. Any such additional exception may, at any time after its adoption, be amended, supplemented, waived or terminated by further resolution of the Board of Directors of the Corporation.

Section 5. Continuation of Rights.

The indemnification and advancement or reimbursement of expenses provided by, or granted pursuant to, this Article IV shall continue as to a person who has ceased to be a member, director or officer of the Corporation, and shall inure to the benefit of the heirs, executors and administrators of such person.

Section 6. General Provisions.

(a) The term “to the fullest extent permitted by applicable law”, as used in this Article IV shall mean the maximum extent permitted by public policy, common law or statute. Any person covered by Section 2 of Article IV hereof may, to the fullest extent permitted by applicable law, elect to have the right to indemnification or to advancement or reimbursement of expenses, interpreted, at such person’s option; (i) on the basis of the applicable law on the date this Section was approved by the shareholders; or (ii) on the basis of the applicable law in effect at the time of the occurrence of the event, act or omission giving rise to the action, suit or proceeding, or (iii) on the basis of the applicable law in effect at the time indemnification is sought.

(b) The right of a person covered by Section 2 of Article IV hereof to be indemnified or to receive an advancement or reimbursement of expenses pursuant to Section 3 of Article IV; (i) may be enforced as a contract right pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set forth in a separate written contract between the Corporation and such person; (ii) to the fullest extent permitted by applicable law, is intended to be retroactive and shall be available with respect to events, acts or omissions occurring prior to the adoption hereof; and (iii) shall continue to exist after the rescission or restrictive modification (as determined by such person) of any provision of this Article IV with respect to events, acts and omissions occurring before such rescission or restrictive modification is adopted.

(c) If a request for indemnification or for the advancement or reimbursement of expenses pursuant hereto is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation together with all supporting information reasonably requested by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim (plus interest at the prime rate announced from time to time by the Corporation’s primary lending bank) and, if successful in whole or in part, the claimant shall be entitled also to be paid the expenses (including, but not limited to, attorneys’ and investigation fees and costs) of prosecuting such claim. Neither the failure of the Corporation (including its Board of Directors or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of or the advancement or reimbursement of expenses to the claimant is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or independent legal counsel) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled.

(d) The indemnification and advancement or reimbursement of expenses provided by, or granted pursuant to, this Article IV shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement or reimbursement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise.

(e) Nothing contained in this Article IV shall be construed to limit the rights and powers the Corporation possesses under Chapter 17, Subchapter D of the BCL, or otherwise, including, but not limited to, the powers to purchase and maintain insurance, create funds to secure or insure its indemnification obligations, and any other rights or powers the Corporation may otherwise have under applicable law.

(f) The provisions of this Article IV may, at any time (and whether before or after there is any basis for a claim for indemnification or for the advancement or reimbursement of expenses pursuant hereto), be amended, supplemented, waived, or terminated, in whole or in part, with respect to any person covered by Section 2 of Article IV hereof by a written agreement signed by the Corporation and such person.

(g) The Corporation shall have the right to appoint the attorney for a person covered by Section 2 of Article IV hereof, provided such appointment is not unreasonable under the circumstances.

Section 7. Optional Indemnification.

The Corporation may, to the fullest extent permitted by applicable law, indemnify, and advance or reimburse expenses for, persons in all situations other than that covered by Section 2 of Article IV.

ARTICLE V. SHARES OF CAPITAL STOCK

Section 1. Authority to Sign Share Certificate.

Every share certificate of the Corporation shall be signed by the Chairman, Chief Executive Officer or the President and by the Secretary or one of the Assistant Secretaries. If the certificate is signed by a transfer agent or registrar, the signature of any officer of the Corporation on the certificate may be facsimile, engraved or printed.

Section 2. Lost or Destroyed Certificates.

Any person claiming a share certificate to be lost, destroyed or wrongfully taken shall receive a replacement certificate if such shareholder: (a) requests such replacement certificate before the Corporation has notice that the shares have been acquired by a bona fide purchaser; and (b) satisfies any other reasonable requirements as may be fixed by the Board of Directors.

ARTICLE VI. GENERAL

Section 1. Record Date.

The Board of Directors may fix any time prior to the date of any meeting of shareholders as a record date for the determination of shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than ninety (90) days prior to the date of the meeting of shareholders. The Board of Directors may (without limiting the right of the Board of Directors to establish a record date for other purposes) fix any time whatsoever (whether or not the same is more than ninety (90) days) prior to the date for the payment of any dividend, or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or will go into effect, as a record date for the determination of the shareholders entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares.

Section 2. Emergency Bylaws.

In the event of any emergency resulting from an attack on the United States, a nuclear disaster or another catastrophe as a result of which a quorum cannot be readily assembled and during the continuance of such emergency, the following Bylaw provisions shall be in effect, notwithstanding any other provisions of these Bylaws.

(a) A meeting of the Board of Directors or of any committee thereof may be called by any officer or director upon one hour’s notice to all persons entitled to notice whom, in the sole judgment of the notifier, it is feasible to notify;

(b) The director or directors in attendance at the meeting of the Board of Directors or of any committee thereof shall constitute a quorum; and

(c) These Bylaws may be amended or repealed, in whole or in part, by a majority vote of the directors attending any meeting of the Board of Directors, provided such amendment or repeal shall only be effective for the duration of such emergency.

Section 3. Severability.

If any provision of these Bylaws is illegal or unenforceable as such, such illegality or unenforceability shall not affect any other provision of these Bylaws and such other provisions shall continue in full force and effect.

ARTICLE VII. AMENDMENTS

Section 1. Amendments.

These Bylaws may be amended or repealed, in whole or In part, by the affirmative vote of a majority of the members of the Board of Directors at any regular or special meeting; subject, however, to the power of the shareholders to amend or repeal the bylaws at any annual or special meeting duly convened after notice of that purpose.

Section 2. Recording Amendments.

The text of all amendments to these Bylaws shall be attached hereto, and a notation of the date of its adoption and a notation of whether it was adopted by the directors or the shareholders shall be made in Section 2 of Article VIII hereof.

ARTICLE VIII. ADOPTION OF BYLAWS AND
RECORD OF AMENDMENTS THERETO

Section 1. Adoption and Effective Date.

These Bylaws have been adopted and approved by the Board of Directors of the Corporation on January 15, 1999. These Bylaws shall be effective as of January 15, 1999.

Section 2. Amendments to Bylaws.


Section Amended	Date Amended	Adopted By

Section 2 of Article III, Directors	Effective as of July 25, 2002	Board of Directors
Section 3 of Article III, Directors	Effective as of July 25, 2002	Board of Directors
Section 9 of Article III, Directors	Effective as of August 25, 2004	Board of Directors

Exhibit 10(ee)

HANOVER FOODS CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN TRUST AGREEMENT

(Effective January 1, 2002)

AMENDMENT NO. 1

Hanover Foods Corporation, a Pennsylvania corporation, hereby adopts this amendment to the Hanover Foods Corporation Employee Stock Trust (“Trust”). This amendment is adopted pursuant to Section 8.1 of the Trust.

1. The following language shall be submitted as the last WHEREAS clause of the introductory language of the Trust:

“WHEREAS, Cyril T. Noel has been reappointed as Trustee and Luzerne National Bank Corporation has been appointed as Trustee and each and has accepted such appointment as of the date set forth below”

2. Section 1.1 shall be amended to add the following language at the end thereof:

“The term ‘Trustee’ as used herein shall apply to both Luzerne National Bank Corporation and Cyril T. Noel; provided, however, that Luzerne National Bank shall be a directed Trustee and its duties, responsibilities and obligations shall be limited to those specifically described in this Trust Agreement. With respect to such duties, responsibilities and obligations of Luzerne National Bank Corporation in its capacity as trustee, the term ‘Corporate Trustee’ shall be used. All other duties, responsibilities and obligations designated to the ‘Trustee’ or to ‘Trustee Noel’ herein shall apply solely to Cyril T. Noel in his capacity as trustee.”

3. Section 2.2(f) shall be amended and restated as follows:

“(f) except as specifically provided below, the Corporate Trustee shall have the power to vote, as directed by Corporate Election Services, Inc., at any election of any corporation, including the Company, in which the Fund is invested; and similarly to exercise, personally or by a general or limited power of attorney, any right appurtenant to any authorized investment, including securities of the Company, held by the Fund. The Corporate Trustee shall not have any duty or obligation to vote in any election or act in any matter unless specifically directed by Corporate Election Services, Inc. With respect to any matter that Trustee Noel determines to be procedural or ministerial in nature (including, but not limited to, adjournment, postponement other similar motions at shareholders meetings and other procedural matters to come before such meetings), or any other matter in which appropriate direction is not given to Corporate Trustee, Trustee Noel shall have complete and exclusive authority to vote and similarly to exercise any right appurtenant to any authorized investment, including securities of the Company, held by the Fund.”

4. Section 2.2(k) shall be amended and restated as follows:

“to consult with legal counsel (who may also be counsel for Trustee Noel, Corporate Trustee or the Company generally) with respect to any of its duties or obligations hereunder; to be fully protected in relying upon the written opinion of such legal counsel; and to pay the reasonable fees and expenses of such counsel, which shall be deemed to be expenses of the Trust and for which the Trustee Noel and/or Corporate Trustee shall be reimbursed in accordance with Section 4.1.”

5. Section 4.1(b) shall be amended to add the following sentence at the end thereof:

“The above notwithstanding, the Corporate Trustee shall be paid a fee as set forth on Schedule A hereto and shall be entitled to be reimbursed for its reasonable legal fees and expenses incurred in connection with its duties under this Agreement.”

6. Section 4.1(d) shall be amended to add the following sentence:

“The Corporate Trustee shall be under no liability to any person for any loss of any kind which may result by reason of its voting of shares as directed by Corporate Election Services, Inc. or its successors as required under Section 2.2(f).”

7. Article V shall be amended to add the following Section 5.3:

“5.3 Allocation of Trustee Duties . Corporate Trustee shall have only those powers and duties specified in Sections 2.2 and 4.1. All other powers and duties are reserved to Trustee Noel.”

8. This amendment shall be effective as of July 23, 2004.

IN WITNESS WHEREOF, and as evidence of the adoption of this amendment, the Company has caused the same to be executed and attested by its duly authorized officers and the Trustee has executed this amendment as of this 23rd day of July, 2004.

ATTEST:		HANOVER FOODS CORPORATION


/s/ Gary T. Knisely		By:	/s/ John A. Warehime

Secretary			President

WITNESS:


/s/ Gary T. Knisely		/s/ Cyril T. Noel

		Cyril T. Noel, Trustee


ATTEST:		LUZERNE NATIONAL BANK CORPORATION


By:	/s/ Thomas Guidi	By:	/s/ Emil J. Warren

			Vice President & Trust Officer

Exhibit 10(ff)

HANOVER FOODS CORPORATION
EMPLOYEE STOCK TRUST

(Revised and Restated, Effective June 20, 2002)

AMENDMENT NO. 2

The fifth WHEREAS clause shall be amended as restated as follows:

The definition of Trustee in Article I shall be amended and restated as follows:

“ Trustee means Cyril T. Noel, Luzerne National Bank Corporation and/or any successor thereto. To the extent that any duties, responsibilities or obligations herein relate solely to Cyril T. Noel, in his capacity as trustee, the term ‘Trustee Noel’ shall be used. To the extent that any duties, responsibilities or obligations herein relate solely to Luzerne National Bank Corporation in its capacity as trustee, the term ‘Corporate Trustee’ shall be used.”

Section 4.1 shall be amended at line 1 replacing the word Trustee with “Trustee Noel”.

Section 4.2 shall be amended at line 1 replacing the word Trustee with “Trustee Noel”.

A new Section 4.3 shall be added to Article 4 to read as follows:

“4.3 Corporate Trustee Compensation and Expense . The Corporate Trustee shall be entitled to annual compensation in the amount of $5,000, inclusive of, and not in addition to compensation paid to Corporate Trustee for services rendered in connection with the Hanover Foods Corporation Employee Stock Ownership Plan Trust. (The annual compensation amount may be adjusted from time to time upon mutual agreement of the Company and the Corporate Trustee.) The Corporate Trustee shall be entitled to be reimbursed for its reasonable legal fees and expenses incurred in connection with its duties under this Agreement.”

Section 5.3 introductory paragraph shall be amended and restated as follows:

“5.3 Trustee’s Administrative Powers . Except as provided herein and subject to the Trustee’s duties hereunder, Trustee Noel shall have the following powers and rights, in addition to those provided elsewhere in this Agreement or by law, except as specifically provided in subsection 5.3(g), which is also applicable to the Corporate Trustee.”

Section 5.3(g) shall be amended and restated as follows:

“(g) to consult with legal counsel (who may also be counsel for Trustee Noel, Corporate Trustee or the Company generally) with respect to any of its duties or obligations hereunder; to be fully protected in relying upon the written opinion of such legal counsel; and to pay the reasonable fees and expenses of such counsel, which shall be deemed to be expenses of the Trust and for which the Trustee shall be reimbursed in accordance with Section 4.1.”

Section 5.4 shall be amended to read in full as follows:

“5.4 Rights Regarding Company Stock.

Except as provided in this Section 5.4 (including, but not limited to, Section 5.4(d)), the Corporate Trustee shall retain sole voting power with respect to the Company Stock held by the Trust, whether such Company Stock is held in the ESOP Plan Subaccount or the Option Plan Subaccount, and Trustee Noel shall have no voting power. Except as provided in Section 5.4(d), the Corporate Trustee shall vote Company Stock held by the ESOP Plan Subaccount in the same proportions as ESOP Active Participants (as that term is used in Section 1.42 of the ESOP) have directed the voting of Company Stock allocated to their Company Stock Accounts pursuant to Section 6.07 of the ESOP. Company Stock held in the Option Plan Subaccount shall be voted as provided in Section 5.4(c) and 5.4(d) hereof.

Except as provided in Section 5.4(d), the Corporate Trustee shall retain sole voting power attendant to the Company Stock held by the ESOP Plan Subaccount with respect to any vote that occurs prior to the date upon which Company Stock is initially allocated to ESOP Active Participants’ Company Stock Accounts. Except as provided in Section 5.4(d), the Corporate Trustee shall vote such stock in the same proportions as instructed by the ESOP Active Participants. Each Active Participant’s voting instructions shall be accorded a value equal to the ratio of the Active Participant’s Compensation to the aggregate Compensation of all ESOP Active Participants who tender voting instructions. The Corporate Trustee would then vote the Company Stock in accordance with the aggregate voting instructions. With respect to Company Stock as to which no voting instruction has been received, such Company Stock shall be voted by the Corporate Trustee (except as provided in Section 5.4(d)) in the same proportion to the aggregate voting instructions actually received from all ESOP Active Participants who provide voting instructions.

Except as provided in Section 5.4(d), the Corporate Trustee shall retain voting powers attendant to the Option Plan Shares held in the Option Plan Subaccount. The Corporate Trustee shall vote the Option Plan Shares in the same proportions as instructed by the Option Plan Participants. Each Option Plan Participant’s voting instructions will be accorded a value equal to the ratio of the Option Plan Participant’s unexercised Options to the total unexercised Options held by all Option Plan Participants who tender voting instructions. The Corporate Trustee shall then vote the Option Plan Shares in accordance with the aggregate voting instructions. With respect to Option Plan Shares as to which no voting instruction has been received, such Option Plan Shares shall be voted by the Corporate Trustee (except as provided in Section 5.4(d)) in the same proportion to the aggregate voting instructions actually received from all Option Plan Participants who provide voting instructions.

Notwithstanding any other provision in this Section 5.4, with respect to any vote that the Trustee Noel determines in his sole discretion to be procedural or ministerial in nature (including, but not limited to, adjournment, postponement other similar motions at shareholders meetings and other procedural matters to come before such meetings),Trustee Noel shall have the sole voting power with respect to such procedural or ministerial matter(and the Corporate Trustee shall have no voting power), and Trustee Noel shall exercise his independent judgment in voting the Company Stock held in the Trust with respect to such procedural or ministerial matter. The previous sentence notwithstanding, in no event shall this Section 5.4(d) apply to any vote of Company Stock on a corporate matter which relates to the election or removal of directors, any amendment to the Articles of Incorporation or Bylaws of the Company, the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or any other similar transaction described in Code Section 409(c)(3) or any regulations or rulings issued thereunder. With respect to such matters, the Corporate Trustee shall vote Company Stock in accordance with Section 5.4(a) (or if applicable Section 5.4(b)) and Section 5.4(c).

The Corporate Trustee shall employ Corporate Election Services, Inc., an independent firm, to determine the voting instructions of each ESOP Active Participant and each Option Plan Participant and to advise the Corporate Trustee of the aggregate voting instructions of such individuals. The communication of the voting instructions by any individual ESOP Active Participant and any individual Option Plan Participant shall be confidential and shall not be divulged to either the Corporate Trustee or Trustee Noel or to anyone including the Company or any director, officer, employee or agent of the Company. The Corporate Trustee shall take all appropriate action to assure confidentiality as to the voting instructions of ESOP Active Participants and Option Plan Participants.”

Section 5.5 (a) shall be amended to add the following sentence as the penultimate sentence of Section 5.5(a):

“The Corporate Trustee is a directed trustee and shall be under no liability to any person for any loss of any kind which may result by reason of its voting of shares as required under Section 5.4.”

Section 6.1 shall be amended and restated as follows:

“6.1 Records and Accounts of Trustee . Trustee Noel shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection or audit by any person designated by the Company and which shall be retained. Corporate Trustee shall maintain accurate and detailed records and accounts of its votes and promptly report the same to Trustee Noel.”

Section 6.3 shall be amended and restated as follows:

“6.3 Final Statement . In the event of the resignation or removal of Trustee Noel hereunder, the Committee may request and Trustee Noel or his successor shall with reasonable promptness submit, for the period ending on the effective date of such resignation or removal, a statement similar in form and

purpose to that described in Section 6.2. In the event of the resignation or removal of Corporate Trustee, the Committee may request and the Corporate Trustee shall with reasonable promptness submit, for the period ending on the effective date of such resignation or removal, a statement which shall include a history of all votes cast and expenditures, if any, while serving in its Corporate Trustee capacity.”

Article 6 shall be amended to add the following Section 6.4:

“6.4 Allocation of Trustee Duties . Corporate Trustees shall have only those powers and duties specified in Sections 5.3, 5.4, 6.1 and 6.3. All other powers and duties are reserved to Trustee Noel.

Section 7.1 shall be amended and restated as follows:

“7.1 Resignation of Trustee . A Trustee or any successor thereto may resign as Trustee hereunder at any time upon delivering a written notice of such resignation, to take effect 60 days after the delivery thereof to the Committee, unless the Committee accepts shorter notice. In the event of such resignation, the remaining Trustee shall assume all duties, responsibilities and obligations under this Agreement until a successor to the resigning Trustee assumes the office of Trustee hereunder.”

Section 9.3 shall be amended to add the following Notice Information:

“To the Corporate Trustee Luzerne National Bank Corporation, c/o Allan M. Kluger, 600 Third Avenue, Kingston, PA 18704”.

This amendment shall be effective as of July 23, 2004.

ATTEST:	HANOVER FOODS CORPORATION

/s/ Gary T. Knisely	By: /s/ John A. Warehime

Secretary		President

WITNESS:

/s/ Gary T. Knisely	/s/ Cyril T. Noel

	Cyril T. Noel, Trustee

ATTEST:	LUZERNE NATIONAL BANK CORPORATION

By: /s/ Darren A. Dirle	By: /s/ Emil J. Warren

Exhibit 10(s)

ANNUAL TOP MANAGEMENT CASH BONUS PROGRAM

The Corporation maintains a cash bonus plan whereby the executive officers are eligible to receive cash bonuses equal to a percentage of the executive officer’s base salary if certain corporate pretax profit objectives are achieved. The executive officers selected each year to participate in the cash bonus plan, as well as the performance targets on which the cash bonuses are based and the amount of the cash bonuses are determined each year at the discretion of the Chairman and the Board of Directors.

Specifically, the Chairman recommends to the Board of Directors certain executive officers who will participate in the plan each year. Such executive officers who will participate in the plan as evidenced by written notice from the Corporation. The amount of the actual cash bonus paid to the various executive officers participating in the cash bonus plan is calculated based on the attainment of the corporate pretax profit objectives set-at the commencement of each fiscal year.

The cash bonuses are normally paid within the sixty (60) days after the end of the fiscal year.

Exhibit 13

2004 Annual Report to Shareholders

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GENERAL OVERVIEW

Hanover Foods Corporation (as used herein the term “Corporation” or “Company” refers to Hanover Foods Corporation and its consolidated subsidiaries) is a vertically integrated processor of food products which operates through seven (7) wholly-owned subsidiaries, Tri-Co. Foods Corp., Consumers Packing Corporation, Spring Glen Fresh Foods, Inc., Hanover Insurance Corporation, Ltd., Nittany Corporation, Bickel’s Snack Foods, Inc. and Aunt Kitty’s Foods, Inc. Tri-Co. Foods Corp. has two (2) wholly-owned subsidiaries: Sunwise Corporation and Mayapac, S.A.

The Corporation enjoys the strongest retail sales of its products in the mid-Atlantic states and Florida. Introduction of frozen ethnic blends, specialty vegetables and fruits, canned pasta, frozen soft pretzels, refrigerated food, canned and frozen mushrooms and snack food products has enabled the Corporation to increase and expand its distribution throughout the eastern seaboard. Distribution in the remainder of the United States is limited to food service, military and industrial customers.

Intense competition and continued consolidation in the food processing industry also impact the Corporation’s results of operations. Large nationally recognized competitors with greater resources than the Corporation can reduce profit margins for the Corporation’s products. Consolidation resulting from acquisitions by these large competitors has made it more difficult for the Corporation to increase its market share.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

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, foreign operations, and a change of control as a result of the pending Warehime family litigation. Such factors, which are discussed in the Annual Report, could affect the Corporation’s financial performance and could cause the Corporation’s actual results for future periods to differ materially from any opinion or statements expressed herein with respect to future periods. As a result, the Corporation wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made.

Description of Business

The Corporation is a vertically integrated processor of food products in one industry segment. The Corporation is involved in the growing, processing, canning, freezing, freeze-drying, packaging, marketing and distribution of its products under its own trademarks as well as other branded, customer and private labels. The Corporation has operations in ten plants in Pennsylvania, one plant in Maryland, one plant in Delaware, one plant in New Jersey and two plants in Guatemala. The Corporation and its subsidiaries, in the normal course of business, purchase and sell goods and services to related parties. See Note 7 of the notes to the Consolidated Financial Statements.

The Corporation’s fiscal year ends at the close of operations on the Sunday nearest to May 31. Accordingly, the following discussion compares the results of operations for the fiscal year ended May 30, 2004 compared to the year ended June 1, 2003, and the fiscal year ended June 1, 2003 compared to the year ended June 2, 2002.

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RESULTS OF OPERATIONS

Year Ended May 30, 2004 Compared to Year Ended June 1, 2003

Net Sales

Consolidated net sales were $318.0 million for fiscal 2004 compared to $290.3 million for fiscal 2003. The increase in consolidated net sales comprised of the following volume and sales price components:

	Volume		Sales Price		Combined

Frozen Foods	.3	%	(.5	)%	(.2	)%
Canned Foods	3.8	%	—		3.8	%
Prepared/Snack Foods	4.3	%	1.6	%	5.9	%

	8.4	%	1.1	%	9.5	%

The increased volume in frozen food sales was principally due to an increase in retail brand sales and industrial sales. These increases were offset by decreases in food service and private label sales. Frozen food prices have remained relatively consistent with last fiscal year in all major sales areas.

The increased volume in canned food sales was principally due to increases in retail brand sales, food service and private label sales as well as the canned food plant acquisition of the assets of Venice Maid Foods, Vineland, NJ made during the fourth quarter of fiscal 2004 which accounted for 35% of the total volume increase. Canned food prices have remained relatively consistent with last fiscal year in all major sales areas.

The increase volume in prepared and snack foods was principally due to increases in snack foods as well as the acquisition of snack food plant and business of Wege Pretzel Co., Hanover, PA and the fresh prepared food plant acquisition of Sunsprout of Lancaster County, Lancaster, PA made during the third and fourth quarter of fiscal 2004 which accounted for 34% of the total volume increase. The prices for snack foods remained consistent with last fiscal year. The prices for prepared food increased due to larger case sizes sold at higher unit prices at a major customer acquired in May 2003.

Cost of Goods Sold

Consolidated cost of goods sold represent 85.2% of consolidated net sales for fiscal year 2004 compared to 84.2% for fiscal 2003. The consolidated cost of sales increased $26.7 million to $271.0 million in fiscal 2004 compared to $244.3 million for fiscal 2003. The cost of sales increased $22.4 million due to the volume increase of 8.4% for the current fiscal year. The remaining increase was due to higher energy, health care and commodity costs during the current fiscal year.

Selling Expenses

Consolidated selling expenses represented 3.8% of consolidated net sales for fiscal 2004 and 4.2% for fiscal 2003. Consolidated selling expenses decreased from $12.2 million in fiscal 2003 to $12.1 million in fiscal 2004. The decrease in the amount of selling expenses reflects lower customer advertising and Company bonus provision for sales personnel. These decreases were partially offset by increased package design and brokerage fees paid during the fiscal year.

Administration Expenses

Consolidated administration expenses were $16.1 million for fiscal year 2004, or 5.1% of consolidated net sales, as compared to $15.8 million, or 5.4% of consolidated net sales in 2003. The increase in administration expenses reflects increases in the provision for the supplemental pension benefits, provision for post-retirements benefits as well as increases in the executive bonus provision for the current fiscal year. These increases were partially offset by decreases in the workman’s compensation insurance reserves at Hanover Insurance Company, Limited, a wholly-owned subsidiary of Hanover Foods Corporation.

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Interest Expense

Consolidated interest expense for fiscal 2004 decreased $0.5 million to $2.3 million compared to $2.8 million in fiscal 2003. The decrease reflected lower average borrowings as well as lower average borrowing rates for the fiscal year 2004 compared to fiscal year 2003.

Other Income (Expense)

Consolidated other income increased $204,000 to $474,000 for fiscal 2004 as compared to other income of $270,000 for fiscal 2003. The increase was due to income generated from the sales of investments. This increase was partially offset by an increase in the foreign exchange translation loss during fiscal year 2004.

Income Taxes

The provision for corporate federal and state income taxes for the fiscal year 2004 was $5.6 million or 32.9% of pretax earnings, as compared to $5.7 million or 36.4% of pretax earning for 2003. The decrease in the effective rate is primarily due to increased earnings in jurisdictions with lower effective tax rates for the current fiscal year as compared to the prior fiscal year. Refer to Note 9 to the consolidated financial statements for a reconciliation of the effective tax rate to the statutory rate.

Net Earnings

Consolidated net earnings for fiscal year 2004 were $11.4 million, or 3.6% of consolidated net sales, as compared to $9.9 million, or 3.4% of consolidated net sales for fiscal 2003 as a result of the factors discussed above.

RESULTS OF OPERATIONS

Year Ended June 1, 2003 Compared to Year Ended June 2, 2002

Net Sales

Consolidated net sales were $290.3 million for fiscal 2003 compared to $290.2 million for fiscal 2002. The increase in consolidated net sales comprised of the following volume and sales price components:

	Volume		Sales Price		Combined

Frozen Foods	1.0	%	(.7	)%	.3	%
Canned Foods	(1.3	)%	.6	%	(.7	)%
Prepared/Snack Foods	.1	%	.3	%	.4	%

	(.2	)%	.2	%	0	%

The increased volume in frozen food sales was principally due to an increase in retail brand sales and private label sales. These increases were partially offset by decreases in food service and industrial sales. Frozen food prices have remained relatively consistent with last fiscal year, however the increase in price sensitive promotions did decrease price, and the increase in private label sales was made at a lower price per unit that offset the increased price in branded retail sales.

The decreased volume in canned food sales was principally due to a decrease in industrial and private label sales. Canned food prices have remained relatively consistent with last fiscal in all major sales areas.

Prepared and snack foods volume was consistent with last fiscal with increases in prepared foods and offset by decreases in snack food sales. The prices for both prepared and snack foods remained relatively consistent with last fiscal year.

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Cost of Goods Sold

Consolidated cost of goods sold represent 84.2% of consolidated net sales for fiscal year 2003 compared to 84.6% for fiscal 2002. The consolidated cost of sales decreased $1.4 million to $244.3 million in fiscal 2003 compared to $245.7 million for fiscal 2002. The cost of sales decreased $0.9 million primarily due to a reduction in ingredient costs and to a lesser extent due to the volume reduction which decreased cost of goods by $0.5 million for fiscal 2003.

Selling Expenses

Consolidated selling expenses represented 4.2% of consolidated net sales for fiscal 2003 and 4.9% for fiscal 2002. The decrease in the amount of selling expenses reflect lower media advertising, customer advertising, free goods marketing program, accounts receivable write-off and the elimination of the amortization of trademarks.

Administration Expenses

Consolidated administration expenses were $15.8 million for fiscal year 2003, or 5.4% of consolidated net sales, as compared to $14.6 million, or 5.0% of consolidated net sales in 2002. The increase in administration expenses reflects increases in outside professional fees and services, the provision for the supplemental pension benefits, the provision for post-retirement benefits as well as increase in the 401(k) contribution and the ESOP contribution.

Interest Expense

Consolidated interest expense for fiscal 2003 decreased $0.8 million to $2.8 million compared to $3.6 million in fiscal 2002. The decrease reflected lower average borrowings as well as lower average borrowing rates for the fiscal year compared to last fiscal year.

Other Income (Expense)

Consolidated other income decreased $101,000 to $270,000 for fiscal 2003 as compared to other income of $371,000 for fiscal 2002. The decrease was due to lower gain on sale of investments and a lower gain on the sales of fixed assets.

Income Taxes

The provision for corporate federal and state income tax for the fiscal year 2003 was $5.7 million or 36.4% of pretax earnings, as compared to $5.1 million or 41.3% of pretax earning for 2002. The decrease in the effective rate was primarily due to the elimination of the income taxes in our Guatemala subsidiary. Alcosa lost its income tax exoneration on March 31, 2001, and the government granted an income tax exoneration to Mayapac, S.A. beginning January 2002 and ending January 2012.

Net Earnings

Consolidated net earnings for fiscal year 2003 were $9.9 million, or 3.4% of consolidated net sales, as compared to $7.3 million, or 2.5% of consolidated net sales, for fiscal 2002 as a result of the factors discussed above.

RELATED PARTY TRANSACTIONS

During fiscal 2004, the Corporation and its subsidiaries, in the normal course of business, purchase and sell goods and services to companies affiliated with the Corporation’s directors and officers. These transactions are summarized below.

During fiscal 2004, the Corporation rented equipment from Park 100 Foods, Inc. The rental payments pursuant to such lease agreements totaled $19,000 during fiscal 2004. As of May 30, 2004, the Corporation had an accounts receivable of $275,000 from Park 100 Foods, Inc. for food products sold and shipped to Park 100 Foods, Inc. During fiscal 2004, the Corporation sold approximately $1.3 million of frozen food products to Park 100 Foods, Inc., Tipton, Indiana. James A. Washburn, a director of the Corporation, owns approximately 80% of the outstanding stock of Park 100 Foods, Inc.

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During fiscal 2004, the Corporation leased a barn for seed storage, located in Heidelberg Township, Pennsylvania for $4,000 from Warehime Enterprises, Inc. John A. Warehime, Chairman of the Corporation, owns 15% of the outstanding stock of Warehime Enterprises, Inc.

During fiscal 2004, the Corporation purchased $1.1 million of contracted vegetables from Lippy Brothers, Inc. As of May 30, 2004, the Corporation owed an amount of $32,000 to Lippy Brothers, Inc. for vegetable crops purchased. T. Edward Lippy, a director of the Corporation, owns approximately 37% of the outstanding stock of Lippy Brothers, Inc.

During fiscal 2003, the Corporation via its Guatemalan subsidiary, sold its condominium real estate located in Naples, FL to John and Patricia M. Warehime for $127,500, which approximates fair value.

During fiscal 2004 the adult children of the Corporation’s Chairman, John Warehime, were employed by the Corporation, including Jennifer Carter, a Director of the Corporation, who was employed as Assistant to the Chairman, Jeffrey Warehime, who is employed as Director – Fresh Produce, and Andrew Warehime, who is employed as Special Sales Manager. Jennifer Carter’s husband, Michael Carter, is employed as Director – Retail Branded Sales. Jennifer Carter was and Jeffrey Warehime, Andrew Warehime and Michael Carter are employed by the Corporation at annual salaries of $93,845, $100,857, $63,993, $75,000 respectively. See “Part III — Item 11. Employment Agreements and Change in Control Severance Agreements.” Ms. Carter also receives director compensation customary for the Corporation’s directors which totaled $18,000 during fiscal 2004. See “Part III — Item 10. Directors and Executive Officers of the Corporation — Director Compensation.” On June 20, 2002, each of Jennifer Carter, Jeffrey Warehime, and Andrew Warehime were granted an option to purchase 500 shares of Class B common stock. On October 17, 2003, Jennifer Carter, Jeffrey Warehime and Andrew Warehime were granted an option to purchase 1,500 shares of Class B Common Stock at an exercise price of $118 per share. Michael Carter was granted an option to purchase 750 shares of Class B Common Stock at an exercise price of $118 per share. Andrea Kint, the daughter of Pietro Giraffa, Vice President and Controller of the Corporation, is employed as Assistant Production Manager — Hanover, PA Frozen Operations at an annual salary of $50,923. On October 17, 2003, Andrea Kint was granted an option to purchase 500 shares of Class B Common Stock at an exercise price of $118 per share.

LIQUIDITY AND CAPITAL RESOURCES

The Corporation’s need for cash fluctuates based upon the seasonal nature of its business. The Corporation’s cash flow requirements increase from June through November of each fiscal year as a result of the purchase of seasonal agricultural crops. The Corporation’s cash flow requirements decline from December through May of each year as the seasonal inventory is sold. The Corporation utilizes lines of credit to fund a portion of its cash requirements during periods of the year when its requirements increase as a result of purchases of raw materials. The Corporation generally repays these lines of credit when it receives funds from the sale of its products.

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.

Net working capital was $41.7 million at May 30, 2004 and $47.0 million at June 1, 2003. The current ratio was 1.66 on May 30, 2004 and 2.07 on June 1, 2003.

Net cash provided by operations for the fiscal year ended May 30, 2004 was $15.6 million, compared to $23.1 million, for the fiscal year ended June 1, 2003. Sources of net cash provided by operations consisted principally of net earnings of $11.4 million adjusted for non-cash depreciation and amortization expense of $9.9 million and increases in accounts payable and accrued expenses of $4.3 million. The use of net cash for operations consisted primarily of increases in inventory and accounts receivable of $8.6 million.

Net cash provided by operations for the fiscal year ended June 1, 2003 was $23.1 million, compared to $19.0 million, for the fiscal year ended June 2, 2002. Sources of net cash provided by operations consisted principally of net earnings of $9.9 million and non-cash depreciation and amortization expense of $9.6 million and decreases in inventory and accounts receivable of $5.7 million. The use of net cash for operations consisted primarily of decreased accounts payable and accrued expenses of $2.4 million and deferred income taxes of $1.3 million.

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Net cash used by investing activities for the fiscal year ended May 30, 2004 was $26.4 million as compared to $5.5 million for fiscal year ended June 1, 2003. The principle use of funds was upgrade of property, plants and equipment as well as acquisitions of businesses. During the year ended May 30, 2004, $13.7 million was spent on development and modernization of equipment as compared to $5.6 million in fiscal year ended June 1,2003. During the fiscal year ended May 30, 2004 the corporation spent $12.2 million to acquire businesses. These projects were funded by internally generated funds and notes payable.

Net cash used by investing activities for the fiscal year ended June 1, 2003 was $5.5 million as compared to $6.8 million for fiscal year ended June 2, 2002. The principal use of funds was the upgrade of property, plants and equipment. During the year ended June 1, 2003, $5.6 million was spent on development and modernization of equipment as compared to $6.8 million in fiscal year ended June 2, 2002. These projects were funded by internally generated funds.

Net cash provided by financing activities was $8.7 million for the fiscal year ended May 30, 2004, compared to cash used by financing activities of $16.4 million for the fiscal year ended June 1, 2003. Seasonal borrowings amounting to $97.8 million were used throughout the fiscal year to fund operating needs and business acquisitions. Seasonal borrowings increased $14.0 million as of May 30, 2004 compared to June 1, 2004. Payments on long-term debt were $4.3 million. The weighted average cost of seasonal borrowing was 1.88% for the fiscal year ended May 30, 2004 compared to 2.28% for the fiscal year ended June 1, 2003.

Net cash used by financing activities was $16.4 million for the fiscal year ended June 1, 2003, compared to cash used by financing activities of $11.1 million for the fiscal year ended June 2, 2002. Seasonal borrowings amounting to $145.3 million were used throughout the fiscal year to fund operating needs. Seasonal borrowing decreased $11.4 million as of June 1, 2003 compared to June 2, 2002. Payments on long-term debt were $4.3 million. The weighted average cost of seasonal borrowing was 2.28% for the fiscal year ended June 1, 2003 compared to 4.02% for the fiscal year ended June 2, 2002.

At May 30, 2004, the Corporation had commitments from financial institutions to provide seasonal lines of credit in the amount of $50.0 million. Borrowing is permitted within prescribed parameters in existing debt agreements, which contain certain performance covenants. The term loan agreements with the lenders and seasonal borrowing with financial institutions, contain various restrictive provisions including those relating to mergers and acquisitions, additional borrowing, guarantee of obligations, lease commitments, limitations to declare or pay dividends, repurchase stock, and the maintenance of working capital and certain financial ratios and changes in control. Based on the requirements of the agreements at May 30, 2004, $38,576,000 of retained earnings were restricted from distribution. The Corporation was in compliance with the restrictive provisions in the agreements as of May 30, 2004. See Notes 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report for additional information regarding the Corporation’s seasonal borrowing with financial institutions and term loan agreements.

The Corporation paid dividends on all classes of capital stock of $763,000 during fiscal 2004 compared to $688,000 in fiscal 2003.

The Corporation 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 May 30, 2004

			Payment Due by Period

			Less Than								More Than
Contractual Obligation		Total	1 Year		1-3 Years			3-5 Years			5 Years

Short-Term Debt Obligations	$	21,609,000	$	21,609,000	$	-0	-	$	-0	-	$	-0	-
Long-Term Debt Obligations		25,357,000		4,286,000		8,571,000			5,000,000			7,500,000
Operating Lease Obligations		1,717,000		808,000		825,000			84,000			-0	-
Other Obligations		5,010,000		1,670,000		3,340,000			-0	-		-0	-

Total Contractual Obligations	$	53,693,000	$	28,373,000	$	12,736,000		$	5,084,000		$	7,500,000

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Currently, the Corporation is obligated to purchase 5,000,000 pounds of tomato paste from The Morning Star Packing Company, L.P., Los Banos, California in each of the fiscal years from 2005 through 2007.

The Corporation’s sources of liquidity are primarily funds from operation and available amounts under seasonal lines of credit expiring (two of which expire on October 31, 2004 and one will expire January 28, 2005), which are expected to be renewed in the ordinary course of business.

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 which have been discussed with the Audit Committee 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.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Corporation is subject to market risk associated with changes in interest rates. To manage the risk of fluctuations in interest rates, the Corporation’s borrowings are a mix of fixed and floating rate obligations. This includes the $25.3 million of unsecured senior notes payable, $5.3 million bears interest at an 8.74% fixed rate and is due in 2007, $20.0 million bears interest at a 7.01% fixed rate and is due in 2013. The Corporation also maintains short-term unsecured lines of credit that bear interest at floating rates.

The following table presents the expected maturity and effective interest rates of the Corporation’s debt obligations (dollars in thousands):

																									Fair
	2004			2005			2006			2007			2008			2009			Thereafter			Total			Value

Fixed Rate
Unsecured senior notes	$	4,286		$	4,286		$	4,286		$	4,285		$	2,500		$	2,500		$	7,500		$	25,357			—
Effective interest rate	7.42		%	7.37		%	7.30		%	7.20		%	7.01		%	7.01		%	7.01		%		7.22	%		—
Variable Rate
Lines of credit	$	21,609			—			—			—			—			—			—		$	21,609		$	21,609
Effective interest rate	1.81		%		—			—			—			—			—			—			1.81	%		—

IMPACT OF EVENTS AND COMMITMENTS OF FUTURE OPERATIONS

Competition in the Marketplace

The Corporation faced stiff competition from national and regional branded companies during the entire fiscal year 2004 in all of its market areas and management anticipates this competitive environment to continue throughout fiscal year 2005.

Impact of Inflation and Changing Prices

The changes in cost and prices within the Corporation’s business due to inflation were not significantly different from inflation in the United States economy as a whole. Levels of capital investment, pricing and inventory investment were not materially affected by the moderate inflation.

New Accounting Standards

In May 2003, the FASB issued SFAS No. 150 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measure certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer 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. The statement is not expected to have a material impact on our consolidated financial statements.

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FINANCIAL HIGHLIGHTS FIVE YEARS
(in thousands except share and per-share data)

The consolidated financial information set forth below should be read in conjunction with the more detailed consolidated financial statements, including related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” including elsewhere in this Annual Report.

	May 30,		June 1,		June 2,		June 3,		May 28,
	2004		2003		2002		2001		2000

Net Sales	$	318,028	$	290,311	$	290,227	$	293,049	$	277,334
Earnings before income taxes	$	17,027	$	15,528	$	12,392	$	9,158	$	13,648
Net Earnings	$	11,441	$	9,874	$	7,271	$	6,661	$	8,619
Net Earnings per common share-basic	$	15.74	$	13.64	$	10.10	$	9.26	$	11.99
Net Earnings per common share-diluted	$	15.51	$	13.40	$	9.97	$	9.15	$	11.82
Basic weighted-average shares		724,186		720,684		716,191		714,565		715,249
Diluted weighted-average shares	737,608			733,750		729,577		728,235		729,389
Common shares outstanding-year end	724,972			723,330		718,791		714,496		714,670
Preferred shares outstanding-year end		24,564		24,564		24,564		24,724		24,764
Working Capital	$	41,661	$	47,027	$	36,547	$	6,826	$	7,566
Property, plant and equipment-net	$	84,105	$	72,634	$	76,639	$	78,837	$	73,484
Long-term debt	$	21,071	$	25,357	$	29,643	$	8,940	$	10,741
Stockholders’ equity	$	104,100	$	93,217	$	83,991	$	77,465	$	72,312
Total assets	$	199,388	$	171,433	$	179,016	$	180,728	$	179,512
Dividend per common share	$	1.10	$	1.10	$	1.10	$	1.10	$	1.21

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms	F-2

Consolidated Balance Sheets as of May 30, 2004 and June 1, 2003	F-4

Consolidated Statements of Earnings for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002	F-6

Consolidated Statements of Comprehensive Income for the Years Ended May 30, 2004, June 1, 2003 and June 2, 2002	F-7

Consolidated Statements of Cash Flows for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002	F-8

Consolidated Statements of Stockholders’ Equity for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002	F-9

Notes to Consolidated Financial Statements for the Years Ended May 30, 2004, June 1, 2003, and June 2, 2002	F-10

F-1

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Hanover Foods Corporation:

We have audited the accompanying consolidated balance sheet of Hanover Foods Corporation and subsidiaries as of May 30, 2004, and the related consolidated statements of earnings, comprehensive income, cash flows, and stockholders’ equity for the year then ended. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hanover Foods Corporation and subsidiaries at May 30, 2004, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/BDO Seidman, LLP
Bethesda, MD
July 23, 2004

F-2

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Hanover Foods Corporation:

We have audited the accompanying consolidated balance sheet of Hanover Foods Corporation and subsidiaries as of June 1, 2003 and the related consolidated statements of earnings, comprehensive income, cash flows, and stockholders’ equity for each of the years in the two-year period ended June 1, 2003. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hanover Foods Corporation and subsidiaries as of June 1, 2003 and the results of their operations and their cash flows for each of the years in the two-year period ended June 1, 2003, in conformity with U.S. generally accepted accounting principles.

/s/KPMG LLP
Harrisburg, Pennsylvania
July 23, 2003

F-3

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 30, 2004 AND JUNE 1, 2003

		May 30,		June 1,
Assets		2004		2003


Current assets:
Cash and cash equivalents	$	3,015,000	$	4,128,000
Accounts and notes receivable – net of allowance for doubtful accounts of $1,547,000 and $ 1,393,000		30,323,000		25,099,000
Accounts receivable from related parties		275,000		163,000
Inventories:
Finished goods		46,779,000		40,746,000
Raw materials and supplies		17,027,000		12,472,000
Prepaid expenses		6,958,000		7,306,000
Deferred income taxes		917,000		917,000


Total current assets		105,294,000		90,831,000


Property, plant, and equipment – at cost:
Land and buildings		63,585,000		53,972,000
Machinery and equipment		135,029,000		128,422,000
Leasehold improvements		544,000		544,000


		199,158,000		182,938,000

Less accumulated depreciation and amortization		121,028,000		111,255,000


		78,130,000		71,683,000

Construction in progress		5,975,000		951,000


		84,105,000		72,634,000


Other assets:
Goodwill		2,070,000		1,300,000
Intangible assets		2,274,000		2,239,000
Other assets		5,645,000		4,429,000


Total assets	$	199,388,000	$	171,433,000

See accompanying notes to consolidated financial statements.

F-4

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 30, 2004 AND JUNE 1, 2003

		May 30,			June 1,
Liabilities and Stockholders’ Equity		2004			2003


Current liabilities:
Accounts payable	$	23,393,000		$	19,745,000
Accounts payable to related parties		32,000			7,000
Notes payable – banks		21,609,000			7,634,000
Accrued expenses		14,011,000			10,921,000
Current maturities of long-term debt		4,286,000			4,286,000
Income taxes payable		302,000			1,211,000


Total current liabilities		63,633,000			43,804,000

Long-term debt, less current maturities		21,071,000			25,357,000
Deferred income taxes		2,948,000			3,139,000
Other liabilities		7,636,000			5,916,000


Total liabilities		95,288,000			78,216,000


Commitments and contingencies (note 9)

Stockholders’ equity:
Series A and B 8-1/4% cumulative convertible preferred stock		776,000			776,000
Series C cumulative convertible preferred stock		250,000			250,000
Common stock, Class A – non-voting		8,733,000			8,733,000
Common stock, Class B – voting		21,213,250			16,227,000
Capital paid in excess of par value		34,913,850			16,372,000
Retained earnings		87,424,000			76,746,000
Treasury stock, at cost		(8,379,000	)		(8,172,000	)
Employee Stock Trust		(40,419,100	)		(17,096,000	)
Accumulated other comprehensive loss		(412,000	)		(619,000	)


Total stockholders’ equity		104,100,000			93,217,000


Total liabilities and stockholders’ equity	$	199,388,000		$	171,433,000

See accompanying notes to consolidated financial statements.

F-5

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED MAY 30, 2004, JUNE 1, 2003 AND JUNE 2, 2002

		Year Ended			Year Ended			Year ended
		May 30,			June 1,			June 2,
		2004			2003			2002

Net sales	$	318,028,000		$	290,311,000		$	290,227,000
Cost of goods sold		270,979,000			244,302,000			245,673,000

Gross profit		47,049,000			46,009,000			44,554,000
Selling expenses		12,053,000			12,192,000			14,306,000
Administrative expenses		16,121,000			15,767,000			14,624,000

Operating profit		18,875,000			18,050,000			15,624,000
Interest expense		2,322,000			2,792,000			3,603,000
Other income – net		(474,000	)		(270,000	)		(371,000	)

Earnings before income taxes		17,027,000			15,528,000			12,392,000
Income taxes		5,586,000			5,654,000			5,121,000

Net earnings		11,441,000			9,874,000			7,271,000
Dividends on preferred stock		41,000			41,000			41,000

Net earnings applicable to
Common stock	$	11,400,000		$	9,833,000		$	7,230,000

Basic earnings per common share	$	15.74		$	13.64		$	10.10

Diluted earnings per common share	$	15.51		$	13.46		$	9.97

See accompanying notes to consolidated financial statements.

F-6

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED MAY 30, 2004, JUNE 1, 2003 AND JUNE 2, 2002

			Year Ended		Year Ended			Year Ended
			May 30,		June 1,			June 2,
			2004		2003			2002

Net earnings		$	11,441,000	$	9,874,000		$	7,271,000

Other comprehensive income
	Unrealized gain (loss) on securities, net of reclassification adjustments (net of taxes of $110,000 in 2004, $29,000 in 2003, and $44,000 in 2002)		207,000		(22,000	)		(238,000	)

	Minimum pension liability adjustment (net of taxes of $0 in 2004, $328,000 in 2003, and $1,000 in 2002)		0		(458,000	)		(3,000	)

Other comprehensive income (loss)			207,000		(480,000	)		(241,000	)

Comprehensive income		$	11,648,000	$	9,394,000		$	7,030,000

See accompanying notes to consolidated financial statements.

F-7

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 30, 2004, JUNE 1, 2003 AND JUNE 2, 2002

		Year Ended			Year Ended			Year Ended
		Ended			ended			Ended
		May 30,			June 1,			June 2,
		2004			2003			2002

Cash flows from operating activities:
Net earnings	$	11,441,000		$	9,874,000		$	7,271,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization		9,919,000			9,604,000			9,375,000
Gain on sale of property, plant, and equipment		(73,000	)		(126,000	)		(120,000	)
Loss (gain) on sale of investments		19,000			(18,000	)		(105,000	)
Deferred income taxes		(191,000	)		(1,279,000	)		396,000
Non cash charge for ESOP contribution		204,000			544,000			480,000
Change in assets and liabilities:
Accounts and notes receivable		(2,982,000	)		1,822,000			442,000
Inventories		(5,617,000	)		3,919,000			2,615,000
Prepaid expenses and other assets		(1,558,000	)		(243,000	)		(3,606,000	)
Accounts payable and accrued expenses		4,348,000			(2,406,000	)		1,182,000
Income taxes payable		(1,141,000	)		29,000			543,000
Other liabilities		1,270,000			1,417,000			424,000

Net cash provided by operating activities		15,639,000			23,137,000			18,897,000

Cash flows from investing activities:
Acquisition of businesses		(12,173,000	)		0			0
Acquisitions of property, plant, and equipment		(13,733,000	)		(5,614,000	)		(6,779,000	)
Proceeds from dispositions of property, plant,
and equipment		436,000			151,000			0

Net cash used in investing activities		(25,470,000	)		(5,463,000	)		(6,779,000	)

Cash flows from financing activities:
Proceeds from notes payable		97,752,000			145,250,000			212,419,000
Payment on notes payable		(83,777,000	)		(156,603,000	)		(245,760,000	)
Proceeds from issuance of long-term debt		0			0			25,000,000
Payment on long-term debt		(4,286,000	)		(4,297,000	)		(1,801,000	)
Payment of dividends		(763,000	)		(688,000	)		(984,000	)
Common stock redemptions		(208,000	)		(24,000	)		0

Net cash provided by (used in) financing activities		8,718,000			(16,362,000	)		(11,126,000	)

Net (decrease) increase in cash and cash equivalents		(1,113,000	)		1,312,000			992,000
Cash and cash equivalents, beginning of year		4,128,000			2,816,000			1,824,000

Cash and cash equivalents, end of period	$	3,015,000		$	4,128,000		$	2,816,000

See accompanying notes to consolidated financial statements.

F-8

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended May 30, 2004, June 1, 2003 and June 2, 2002

					Cumulative
					convertible					Cumulative																			Employee Stock Trust
					preferred					convertible																									Accumulated
			Total		stock Series					preferred			Common			Common				Capital paid															Other
			Stockholders’		A and B					stock Series			stock Class A			stock Class B				in excess of			Retained		Treasury										Comprehensive
			equity		Shares			Amount		C Shares		Amount	Shares		Amount	Shares		Amount		par value			earnings		stock Shares		Amount		Shares			Amount			Income (Loss)

Balance, June 3, 2001		$	77,465,000		31,216		$	780,000		10,000	$	250,000	349,316	$	8,732,000	635,572	$	15,889,000	$	15,254,000		$	61,273,000		144,435	$	(8,148,000	)	142,449		$	(16,667,000	)	$	102,000

Net earnings			7,271,000																				7,271,000
Cash dividends per share:
	Preferred – $2.0625 annually		(41,000	)	—			—		—		—	—		—	—		—		—			(41,000	)	—		—		—			—			—
	Common – $1.10 annually		(943,000	)	—			—		—		—	—		—	—		—		—			(943,000	)	—		—		—			—			—
Issuance of common stock to
	Employee Stock Ownership Plan
	Class B 4,258 shares		480,000		—			—		—		—	—		—	—		—		(19,000	)		—		—		—		(4,258	)		499,000			—
Stock Conversion			—		(160	)		(4,000	)	—		—	37		1,000	—		—		3,000			—		—		—		—			—			—
Other comprehensive loss			(241,000	)	—			—		—		—	—		—	—		—		—			—		—		—		—			—			(241,000	)

Balance, June 2, 2002		$	83,991,000		31,056		$	776,000		10,000	$	250,000	349,353	$	8,733,000	635,572	$	15,889,000	$	15,238,000		$	67,560,000		144,435	$	(8,148,000	)	138,191		$	(16,168,000	)	$	(139,000	)

Net earnings			9,874,000		—			—		—		—	—		—	—		—		—			9,874,000		—		—		—			—			—
Cash dividends per share:
	Preferred – $2.0625 annually		(41,000	)	—			—		—		—	—		—	—		—		—			(41,000	)	—		—		—			—			—
	Common – $1.10 annually		(647,000	)	—			—		—		—	—		—	—		—		—			(647,000	)	—		—		—			—			—
Issuance of common stock to
	Employee Stock Ownership Plan
	Class B 4,761 shares		544,000		—			—		—		—	—		—	—		—		—			—		—		—		(4,761	)		544,000			—
	Employee Stock Trust				—			—		—		—	—		—	13,500		338,000		1,134,000			—		—		—		13,500			(1,472,000	)		—
Redemption of Common Stock
	Class B		(24,000	)	—			—		—		—	—		—	—		—		—			—		222		(24,000	)	—			—			—
Other comprehensive loss			(480,000	)	—			—		—		—	—		—	—		—		—			—		—		—		—			—			(480,000	)

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

Net earnings			11,441,000		—			—		—		—	—		—	—		—		—			11,441,000		—		—		—			—			—
Cash dividends per share:
	Preferred – $2.0625 annually		(41,000	)	—			—		—		—	—		—	—		—		—			(41,000	)	—		—		—			—			—
	Common – $1.10 annually		(722,000	)	—			—		—		—	—		—	—		—		—			(722,000	)	—		—		—			—			—
Issuance of common stock to
	Employee Stock Ownership Plan																								—		—		—			—			—
	Class B 1,708 shares		205,000		—			—		—		—	—		—	—		—		(7,000	)		—		—		—		(1,708	)		212,000			—
	Employee Stock Trust		—		—			—		—		—	—		—	199,450		4,986,250		18,548,850			—		—		—		199,450			(23,535,100)			—
Redemption of Common Stock
	Class B		(207,000	)	—			—		—		—	—		—	—		—		—			—		66		(207,000	)	—			—			—
Other comprehensive income			207,000		—			—		—		—	—		—	—		—		—			—		—		—		—			—			207,000

Balance, May 30, 2004		$	104,100,000		31,056		$	776,000		10,000	$	250,000	349,353	$	8,733,000	848,522	$	21,213,250	$	34,913,850		$	87,424,000		144,723	$	(8,379,000	)	344,672		$	(40,419,100)		$	(412,000	)

See accompanying notes to consolidated financial statements.

F-9

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies

	*(a)*	*Description of Business* Hanover Foods Corporation (the “Company”) is a vertically integrated processor of food products in one industry segment. The Company is involved in the growing, processing, canning, freeze-drying, packaging, marketing, and distribution of its products under its own trademarks as well as other branded, customer, and private labels primarily to the retail, foodservice and industrial customers primarily in the Eastern United States from Maine to Florida. The Company has operations in eleven plants in Pennsylvania, one plant in Delaware, one plant in Maryland, one plant in New Jersey and two plants in Guatemala. The Company’s raw materials are readily available and the Company is not dependent on a single supplier or a few suppliers. Revenue is recognized when title transfers pursuant to shipping terms. Separately billed shipping and handling is included in net sales. Shipping and handling costs are included in cost of goods sold.

	*(b)*	*Principles of Consolidation* The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, which are Consumers Packing Company (T/A Hanover Foods –Lancaster Division), Spring Glen Fresh Foods, Inc., Bickel’s Snack Foods, Inc., Hanover Insurance Company Ltd., Nittany Corporation, Aunt Kitty’s Foods, Inc., Tri-Co Foods Corp. and its subsidiaries – Sunwise Corporation and Mayapac S.A., all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated.

(c)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist of trade receivables. Wholesale and retail food distributors comprise a significant portion of the trade receivables; collateral is not required. The risk associated with the concentration is generally limited due to the large number of wholesalers and retailers and their geographic dispersion, however, the Company’s ten largest customers accounted for approximately 36%, 38%, and 36%, of the Company’s net sales for the years ended May 30, 2004, June 1, 2003 and June 2, 2002, respectively. The Company’s ten largest customers account for approximately 38% and 30% of the Company’s accounts receivable as of May 30, 2004 and June 1, 2003 respectively. No single customer accounted for more than 10% of net sales for the years ended May 30, 2004, June 1, 2003 and, June 2, 2002.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont’d)

	*(d)*	*Cash and Cash Equivalents* Cash equivalents of $3,015,000 as of May 30, 2004 and $4,128,000 as of June 1, 2003, respectively, consist of short-term interest-bearing investments with maturities of less than three months. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

	*(e)*	*Trade Accounts Receivable* Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The company determines the allowance based on historical write-off experience.

	*(f)*	*Fair Value of Financial Instruments* The carrying value of cash and cash equivalents, accounts and notes receivable, accounts payable and notes payable approximates fair values due to the short-term maturities of these instruments.

		The fair values of each of the Company’s long-term debt instruments are based on the amount of future cash flows associated with each instrument discounted using the Company’s current borrowing rate for similar debt instruments of comparable maturity. The amount reported in the consolidated balance sheet for long-term debt approximates fair value.


	*(g)*	*Inventories* Inventories are stated at the lower of cost (determined by average cost which approximates the first-in, first-out method) or market.

	*(h)*	*Property, Plant, and Equipment* Property, plant, and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred; additions and betterments that materially increase the lives of the related assets are capitalized. Upon retirement, sale, or other disposition of buildings and equipment, cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in operations.

		Depreciation on property, plant, and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives range from approximately 3 years to 12 years for equipment and up to 40 years for buildings. Accelerated methods are used for tax reporting purposes. Plant and equipment held under capital leases are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont’d)

	*(i)*	*Goodwill and Intangible Assets*

On June 3, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No.142 “Goodwill and Other Intangible Assets”. In connection with this adoption, the Company performed an initial impairment test of the goodwill and discontinued amortization of goodwill. The initial valuation did not indicate any impairment of the goodwill. Additionally, the SFAS requires the Company to perform an annual impairment test of the goodwill. The Company has chosen March 1 as the date to perform the annual impairment test of goodwill. The March 1 impairment test did not indicate any impairment.

		Intangible assets consist of the Company’s trademarks. The trademarks were determined to have an indefinite life and are not amortized. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, the Company will perform an annual review of its trademarks to determine whether impairments exists. As of May 30, 2004, the Company did not recognize any impairment charges related to these trademarks.

	*(j)*	*Impairment of Long-Lived Assets*

		Long-lived assets, such as property, plant and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. At the time of sale the depreciation ceases.

		Goodwill and intangible assets not subject to amortization are tested annually for impairment. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

	*(k)*	*Insurance*

		The Company, through its wholly-owned insurance subsidiary, is self-insured with respect to certain general liability and workers’ compensation claims. Excess insurance coverage is maintained for general liability and workers’ compensation claims.

		Outstanding claims include a provision for claims reported as advised to the Company by the primary insurer and a provision for incurred but not reported claims based upon the advice of the primary insurer on the ultimate liability of the Company under the reinsurance assumed or, in the absence of such an evaluation, the provision is based upon the best estimate of the ultimate liability of the Company.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont’d)

	*(l)*	*Income Taxes*

		Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings of foreign operations are reinvested in the business and no provision for domestic income tax or foreign withholding tax is made on such earnings until distributed.

	*(m)*	*Research and Development*

		Research and development costs are expensed as incurred. Research and development costs amounted to $633,000, $608,000, and $600,000, for the years ended May 30, 2004, June 1, 2003 and June 2, 2002, respectively.

	*(n)*	*Promotional Costs*

		Promotional costs are expensed as incurred. Accounts and notes receivable are presented net of allowances for bad debts and promotional programs.

	*(o)*	*Advertising Costs*

		Advertising costs are expensed as incurred. Advertising expenses amounted to $714,000, $730,000, and $724,000, for the years ended May 30, 2004, June 1, 2003 and June 2, 2002, respectively.

	*(p)*	*Earnings per Share*

		Earnings per share are computed in accordance with SFAS No. 128, “Earnings per Share” . Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

	*(q)*	*Fiscal Year End*

		The Company’s fiscal year ends at the close of operations on the Sunday nearest to May 31. The fiscal years ended May 30, 2004 and June 1, 2003 and June 2, 2002 were comprised of 52 weeks.

	*(r)*	*Use of Estimates*

		Management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont’d)

	*(s)*	*Accounting for Stock-Based Compensation*

		The Company applies the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations in accounting for our stock-based compensation plans. Accordingly, no compensation expense has been recognized for stock-based compensation plans. Had compensation expense for all stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended, our net (loss) income and (loss) earnings per share would have been adjusted to the pro forma amounts as follows:


		2004		2003

Net Income – as reported	$	11,441,000	$	9,874,000

Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards,net of related tax effects		784,000		81,000

Pro forma net income	$	10,657,000	$	9,793,000

Earnings per share:
Basic – as reported	$	15.74	$	13.64
Basic – pro forma	$	14.72	$	13.53

Diluted – as reported	$	15.51	$	13.46
Diluted – pro forma	$	14.45	$	13.29


	*(t)*	*Reclassifications*

		Certain amounts in prior periods have been reclassified to conform to classification made in the current year.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 2 Goodwill and Other Intangible Assets

Amortization expense related to goodwill and other intangible assets was $115,000 for June 2, 2002. The following table reconciles previously reported net income as if the provisions of SFAS No. 142 were in effect in the fiscal year ended June 2, 2002.

		2002

Reported net income	$	7,271,000
Add back: Goodwill Amortization		75,000
Add back: Trademark Amortization		40,000

Adjusted net income		7,386,000


Basic Earnings per share:
Reported net income	$	10.10
Add back: Goodwill Amortization		.10
Add back: Trademark Amortization		.06

Adjusted net income		10.26


Diluted earnings per share:
Reported net income	$	9.97
Add back: Goodwill Amortization		.10
Add back: Trademark Amortization		.05

Adjusted net income		10.12

Note 3 Notes Payable – Banks

The Company maintains short-term unsecured lines of credit with various banks providing credit availability amounting to $50,000,000, of which $21,609,000 was borrowed (including an overdraft of $3,081,000) at May 30, 2004 and $7,634,000 was borrowed (including an overdraft of $892,000) at June 1, 2003. The Company borrows funds under these lines of credit under two methods of cost of funds. The first method used to price the cost of short-term borrowings is based upon LIBOR plus thirty-five to one hundred twenty-five basis points. The second method is based upon the financial institution’s “calculated cost of funds” plus an earnings modification. The weighted-average interest rate on short-term borrowings at May 30, 2004 and June 1, 2003, was 1.88% and 2.29%, respectively. The maximum amount of borrowings outstanding under short-term lines of credit at any one time during the years ended May 30, 2004, June 1, 2003, and June 2, 2002, was approximately $20,823,125, $26,848,000, and $55,513,000.

The Corporation’s sources of liquidity are primarily funds from operations and available amounts under seasonal lines of credit expiring (two of which expire on October 31, 2004 and one which expires January 28, 2005), which are expected to be renewed in the ordinary course of business.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 4 Long-term Debt

The long-term debt of the Company and its subsidiaries consists of:

		May 30, 2004			June 1, 2003

8.74% unsecured senior notes payable to
an insurance company, due through 2007	$	5,357,000		$	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		25,357,000			29,643,000
Less current maturities		(4,286,000	)		(4,286,000	)

Long-term debt, excluding current maturities	$	21,071,000		$	25,357,000

The term loan agreements with the insurance company and seasonal borrowing with financial institutions (note 3), contain various restrictive provisions including those relating to mergers and acquisitions, additional borrowing, guarantee of obligations, lease commitments, limitations to declare or pay dividends, repurchase stock, and the maintenance of working capital and certain financial ratios and change in control. Based on the requirements of the agreements at May 30, 2004, $38,576,000 of retained earnings are restricted from distribution. The Company was in compliance with the restrictive provisions in the agreements as of May 30, 2004.

The aggregate long-term debt maturities follow:

For the fiscal year ending:

2005	$	4,286,000
2006		4,286,000
2007		4,285,000
2008		2,500,000
2009		2,500,000
Thereafter		7,500,000


Total	$	25,357,000

Note 5 Leases

The Company has several noncancelable operating leases, primarily for equipment, that expire over the next five years. These leases generally contain renewal options for periods ranging from three to five years and require the Company to pay all executory costs such as maintenance and insurance. Rental expense for operating leases (except those with lease terms of a month or less that were not renewed) during the periods ended May 30, 2004, June 1, 2003, and June 2, 2002, amounted to $2,544,000, $1,918,000, and $3,042,000, respectively.

Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of May 30, 2004 are:

F-16

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 5 Leases (Cont’d)

For the fiscal year ending:		Operating
For the fiscal year ending:		leases

2005	$	808,000
2006		509,000
2007		316,000
2008		77,000
2009		7,000

Total minimum lease payments	$	1,717,000

Note 6 Capital Stock

The Company’s capital stock consists of Class A Nonvoting Common Stock, Class B Voting Common Stock, 8 1/4% Series A and B Cumulative Convertible Preferred Stock, and 4.4% Series C Cumulative Convertible Preferred Stock. Holders of Class B Common Stock have one vote per share. No other classes of stock have voting rights except as discussed below.

The Company’s Amended and Restated Articles of Incorporation authorize the Board of Directors to issue up to 10,000 shares of Series C Convertible Preferred Stock to the Company’s 401(k) Savings Plan Trust. At least a majority of the trustees of the Company’s 401(k) Savings Plan (or similar employee benefit plan), who are appointed by the Board of Directors, must be “disinterested directors” of the Company. If certain Warehime family Class B shareholders cannot unanimously agree in writing on the composition of the Board of Directors or on other important matters specified below, the Amended and Restated Articles permit each of the 10,000 shares of Series C Convertible Preferred Stock the right to cast 35 votes in the election of directors, and each share of Class A Common Stock would have one-tenth (1/10) of a vote per share, thereby enabling them to influence the ultimate result of the election by the Class B shareholders. The Amended and Restated Articles also permit the trustees and the Class A shareholders to similarly vote on proposals to remove directors, and in connection with any proposal (not previously approved by the Board of Directors) to further amend the Articles of Incorporation or Bylaws or to effectuate a merger, consolidation, division, or sale of substantially all of the assets of the Company. The voting power of the Series C Convertible Preferred Stock ceased in January 2003. Under the Amended and Restated Articles, each of the shares of Series C Convertible Preferred Stock is convertible into one share of Class A Common Stock and is not entitled to vote except in the event that certain Warehime family Class B shareholders cannot agree in writing on the composition of the Board of Directors or on other important matters specified above.

During fiscal year 2001, the Corporation established an Employee Stock Trust (the “Trust”) to fund future stock related and other obligations of the Corporation’s compensation and benefit plans, including a concurrently established Employee Stock Ownership Plan (“ESOP”). For financial reporting purposes, the Trust is consolidated with the Corporation. On March 1, 2001, the Corporation contributed 142,449 shares of Class B Common Stock to the Trust. Upon contribution, these shares were recorded at a fair value of $117 per share based upon the most recent appraised value of Class B Common Stock as determined by an independent valuation. During the years ended May 30, 2004, June 1, 2003 and June 2, 2002 the Company transferred 1,708, 4,761 and 4,258 shares of Class B Common Stock to the ESOP respectively, which do not include shares issued as a result of the payment of quarterly dividends of $0.275 per share of Class B Common Stock. The shares had a fair market value of approximately $120, $114 and $112 on the respective transfer dates and accordingly, the Company recorded a charge to earnings of approximately $205,000, $544,000 and $480,000 respectively.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 6 Capital Stock (Cont’d)

On June 20, 2002, the Corporation’s Board of Directors adopted the 2002 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 2002 Stock Option Plan, and options to purchase 13,500 shares were granted during fiscal year 2003 with weighted-average exercise price of $110 per share. Options vest at the rate of 12.50% per year beginning June 20, 2004 and June 20 of each following year up to and including June 20, 2011. 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 2002 Stock Option Plan, excluding John A. Warehime. No individual may receive options under the 2002 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 2002 Stock Option Plan.

On June 20, 2002, the Corporation contributed 13,500 shares of Class B Common Stock to the Trust for the purpose of funding stock options under the 2002 Stock Option Plan to officers and key employees of the Corporation. Upon contribution, these shares were recorded at a fair value of $110 per share based upon the most recent appraised value as determined by an independent valuation.

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 to eligible non-union full time employees. The 199,450 shares were issued to the Trust.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 6 Capital Stock (Cont’d)

The following summarizes the Company’s capital stock at May 30, 2004 and June 1, 2003:

	May 30, 2004		June 1, 2003

	Issued	Outstanding	Issued	Outstanding

Series A 8 1/4% cumulative convertible preferred stock – $25 Par value, 60,000 shares authorized	14,948	6,228	14,948	6,228

Series B 8 1/4% cumulative convertible preferred stock – $ 25 Par value, 60,000 shares authorized	16,108	8,336	16,108	8,336

Series C 4.4% cumulative convertible preferred stock – $25 par value, 10,000 shares authorized	10,000	10,000	10,000	10,000

Class A nonvoting common stock – $25 par value, 800,000 shares authorized	349,353	287,996	349,353	288,062

Class B voting common stock – $25 par value, 880,000 shares authorized	848,522	781,648	649,072	582,198

At any time, the holders of the Series A and B Cumulative Convertible Preferred Stock have the option to convert their shares to shares of Class A Nonvoting Common Stock based on the book value of the Class A Nonvoting Common Stock at the time of conversion. At May 30, 2004, 5.62 shares of Series A or B Preferred Stock could be converted into one share of Class A Common Stock.

Note 7 Related Party Transactions

The Company and its subsidiaries, in the normal course of business, purchase and sell goods and services to related parties. Transactions with related parties are summarized below:

		Year ended		Year ended		Year ended
		May 30,		June 1,		June 2,
		2004		2003		2002

Revenues:
Park 100 Foods, Inc.	$	1,321,000	$	1,877,000	$	1,555,000
Expenditures:
Lippy Brothers, Inc.		1,108,000		1,146,000		1,158,000
Warehime Enterprises, Inc.		4,000		4,000		81,000
John A. and Patricia M. Warehime		45,000		58,000		49,000
Park 100 Foods, Inc.		19,000		12,000		25,000
Schaier Travel		0		3,000		10,000
Accounts receivable:
Park 100 Foods, Inc.		275,000		163,000		164,000
Lippy Brothers, Inc.		0		0		3,000
Accounts payable:
Park 100 Foods		0		7,000		0
Lippy Brothers, Inc.		32,000		0		0

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 7 Related Party Transactions (Cont’d)

Included in other assets is a related party receivable of $1,183,000 in 2004 and $1,030,000 in 2003 related to two split interest life insurance contracts on the life of Patricia M. Warehime.

In connection with the amended complaint filed by Michael A. Warehime versus John A. Warehime (note 10), pursuant to applicable state law, the Company has agreed to pay directly all expenses (including attorney’s fees) and costs in advance of the final disposition of the litigation or any substantially similar or related action, suit, or proceeding. The Company has received an undertaking from John A. Warehime to repay all costs and expenses if it is ultimately determined that he is not entitled to be indemnified by the Company. The amount paid and expensed by the Company under this arrangement for the years ended May 30, 2004, June 1, 2003 and June 2, 2002, was approximately $0, $365, and $65,000, respectively.

A portion of rental expense included in note 5 was paid to Park 100 Foods, Inc. and Warehime Enterprises, Inc. The amounts were $20,000, $14,000, and $15,000, for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, respectively.

During fiscal year 2003, the Corporation via its Guatemalan subsidiary, sold its condominium real estate, located in Naples, Florida to John A. and Patricia M. Warehime for $127,500, which approximates fair value.

Note 8 Benefit Plans

	*(a)*	*Defined Contribution Plan*

		The Company offers a 401(k) plan covering certain of its employees. The Company contributes an amount equal to 100% of each employee’s salary deferral up to 5% of the employee’s annual salary. Effective July 25, 1997, the plan was amended to permit matching contributions to be made in cash and/or securities of the Company (see note 6). The Company’s contribution to the 401(k) plan for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, was $903,000, $694,000, and $759,000, respectively.

	*(b)*	*Pension Plan*

		The Company offers pension benefits to eligible employees who are members of the United Food and Commercial Workers Union 56 at its Vineland NJ plant.

	*(c)*	*Postretirement Benefits other than Pensions*

		Certain employees receive postretirement benefits other than pensions. This plan is currently not funded. The Company accounts for these costs by accruing for them over the employee service period. The status of the plan, based on the most recent measurement dates, is as follows:

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont’d)

			May 30,			June 1,
			2004			2003

Change in benefit obligation:
	Benefit obligation at beginning of year		$	(7,817,000	)	$	(4,599,000	)
	Service cost			(203,000	)		(126,000	)
	Interest cost			(453,000	)		(405,000	)
	Amortization of transition obligation			(73,000	)		(73,000	)
	Plan assumptions			(1,055,000	)		(1,790,000	)
	Change in plan			1,249,000			(1,062,000	)
	Benefits paid			(300,000	)		(238,000	)
	Other			0			0

		Benefit obligation at end of year		(8,052,000	)		(7,817,000	)

Change in plan assets
	Fair value of plan assets at beginning of year			—			—
	Contributions			300,000			238,000
	Benefits paid			(300,000	)		(238,000	)

		Fair value of plan assets at end of year		—			—

Funded status:
	Unrecognized net loss			4,013,000			4,333,000
	Unrecognized prior service cost			156,000			173,000
	Unrecognized net transition obligation			716,000			789,000

	Accrued postretirement benefit cost		$	(3,167,000	)	$	(2,522,000	)

A discount rate of 6.00% for May 30, 2004 and 6.25% for June 1, 2003, was used in determining the actuarial present value of the accumulated postretirement benefit obligation.

The cost of postretirement benefits other than pensions consisted of the following components:

	Year ended		Year ended		Year ended
	May 30,		June 1,		June 2,
	2004		2003		2002

Service cost	$	126,000	$	126,000	$	115,000
Interest cost		453,000		405,000		347,000
Amortization of transition obligation		73,000		73,000		73,000
Other amortization and deferral		215,000		147,000		131,000

	$	867,000	$	751,000	$	666,000

The assumed postretirement health care cost trend rates in measuring the accumulated post retirement obligation was as follows:

	•	Medical: 6.5% in 2002, decreasing by .5% per year to an ultimate rate of 5.0% in 2005 and later
	•	Prescription Drugs: 8.0% in 2002, decreasing by .5% per year to an ultimate rate of 5.0% in 2008 and later
	•	Dental: 4.0% in 2002 and later

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont’d)

		The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of February 29, 2004 by $1,569,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended February 29, 2004 by $152,000.

	*(d)*	*Employment and Deferred Compensation Agreements*

		On June 12, 1995, the Company entered into a five-year employment agreement with its Chief Executive Officer, John A Warehime, at an annual base salary of $650,000 with such compensation payable retroactively from April 1, 1994 (the “1995 Employment Agreement”). The 1995 Employment Agreement was amended on February 13, 1997 (“Amended Employment Agreement”). The principal terms of Mr. Warehime’s employment arrangements with the Company as amended by the Amended Employment Agreement are set forth below.

		The Amended Employment Agreement provides for annual increases (but not decreases) in the employee’s annual salary equal to the greater of 5% of the prior year’s salary or the annual percentage increase in the Consumer Price Index (CPI). Mr. Warehime’s annual base salary for fiscal 2004, 2003 and 2002 was $773,950, $737,000, and $702,000, respectively. Unless terminated by either party, the Amended Employment Agreement automatically renews annually on each anniversary date so that five years always remain on the term of the agreement. In the event the employee is terminated without cause, or in the event the employee terminates his employment after a reduction (without his written consent) of his duties or authority, compensation, or similar events, the Amended Employment Agreement provides for the payment of the salary and bonus (including all other benefits) over the remaining term of the agreement. In the event of termination due to death or disability, the Amended Employment Agreement provides for the same payment to the employee (or in the event of the death of the employee, his spouse, or descendants) for one year and thereafter the payment of supplemental pension benefits as described below. In addition, the Amended Employment Agreement provides for the reimbursement by the Company of the employee’s legal and accounting fees up to $75,000 per year and reasonable business expenses incurred by the employee in connection with the business of the Company. The Amended Employment Agreement also provides the employee with various other benefits including the use of an automobile, disability and life insurance, and a club membership.

		The annual bonus payable to the employee under the Amended Employment Agreement is equal to $100,000 plus 10% of the Company’s pretax earnings over $5.0 million provided that no annual bonus is payable if pretax earnings of the Company are less than $5.0 million. The Amended Employment Agreement limits salary and the annual bonus payment described above to an aggregate of not more than $1.0 million annually. Annual bonuses can be paid in cash or Class A Common (non-voting) Stock at the option of the employee. For the years ended May 30, 2004, June 1, 2003, and June 2, 2002, the bonus accrued under this agreement was $226,000, $263,000, and $298,000, respectively.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont’d)

		The Amended Employment Agreement also provides for the annual payment of a long-term performance bonus based upon the Company’s performance over the prior five-year period as measured by its average sales growth and average increase in operating profits as compared to an industry peer group over the same period. The bonus payable is calculated based upon a formula matrix set forth in the Amended Employment Agreement, with such formula being recommended by an independent management consulting firm retained by the Company and approved by the Compensation Committee of the Board of Directors. For the years ended May 30, 2004, June 1, 2003, and June 2, 2002, the long-term performance bonus accrued under this agreement was $101,000, $169,000, and $157,000, respectively.

		The Amended Employment Agreement provides for annual supplemental pension benefits, commencing upon the earlier of (a) five years after termination of the employee (or one year following his death or disability) or (b) the date of retirement, payable during the life of the employee and upon his death for the life of his spouse. Such annual supplemental pension benefits are equal to 60% of average total compensation (including bonuses) over the latest three-year period prior to retirement, assuming retirement at age 65 or later. Supplemental pension benefits are reduced based upon an established formula to the extent the employee retires prior to age 65. The net present value of the cost of providing this future benefit is recognized by the Company over the remaining expected years of service. The expense recognized under this agreement was approximately $1,158,000, $863,000, and $773,000, for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, respectively. The projected benefit obligation was approximately $5,493,000 and $4,447,000, May 30, 2004 and June 1, 2003, respectively.

		The Amended Employment Agreement was revised effective as of August 1, 1997 to make certain clarifying changes and to require that bonus payments to Mr. Warehime in any taxable year in excess of $1.0 million would be subject to shareholder approval, which shareholder approval was given on August 14, 1997.

		On January 23, 1997, the Company entered into a five-year employment agreement with Gary T. Knisely, Executive Vice President, Secretary, and Counsel of the Company, at an annual salary of $175,000 with such compensation payable retroactively from June 1, 1996 (the “Knisely Agreement”). Unless terminated by either party, the Knisely Agreement automatically renews annually on each anniversary date so that five years always remain on the term of the agreement. The Knisely Agreement provides for annual salary increases (but not decreases) equal to the greater of 5% of the prior year’s salary or the annual percentage increase in the CPI, as well as incentive bonuses and various other benefits. As of May 30, 2004, the aggregate liability of the Company under this agreement for the next five years is estimated to be $1,481,000, excluding annual performance bonuses. In the event the employee is terminated without cause, or in the event the employee terminates his employment after a reduction (without his written consent) of his duties or authority, compensation, or similar events, the Knisely Agreement provides for the payment of the salary and bonus (including all other benefits) over the remaining term of the agreement. In the event of termination due to death or disability, the Knisely Agreement provides for the payment of salary and bonus (including all other benefits) to the employee (or his spouse or other descendants in the event of the employee’s death) for the later of one year from the date of such termination or the death of the employee.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont’d)

		The Knisely Agreement also provides for annual supplemental pension benefits equal to 60% of the employee’s average annual compensation (including bonuses but excluding other benefits) over the three most recent fiscal years prior to the employee’s termination if the employee is no longer employed by the Company and the employee has attained the age of 55. Such annual supplemental pension benefits are payable for the remainder of the lifetime of the employee. The net present value of the cost of providing this future pension benefit is recognized by the Company over Mr. Knisely’s expected remaining years of service. The expense recognized for supplemental pension benefits under this agreement was approximately $274,000, $171,000, and $81,000, for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, respectively. The pension liability was approximately $1,191,000 and $593,000 and at May 30, 2004 and June 1, 2003, respectively.

		The Company also entered into a change in control severance agreements with several officers and executives which provides for termination compensation if respective individual’s employment is terminated: (i) involuntarily within 24 months of a change in control or (ii) voluntarily, following a reduction in base salary, duties, and responsibilities within 24 months of a change in control. A “change in control” shall be deemed to occur if John A. Warehime ceases to be Chief Executive Officer of the Company or ceases to have the power and authority of the Chief Executive Officer. Pursuant to the terms of this agreement, any payment due thereunder shall be made over a two year period no less frequently than monthly and all payments during any twelve month period shall not in the aggregate exceed the individual’s total cash compensation (salary and bonus) received from the Company during fiscal 2000.

		All payments made pursuant to this agreement are subject to the further conditions that: (i) the individual maintain the confidentiality of the Company’s trade secrets, customer lists, and other proprietary information of the Company; (ii) for a period of two years following the termination of the officer, neither the individual or his employer or business associate shall enter into or attempt to enter into any business relationship, solicit for employment or employ any person, employed by the Company or its affiliates at any time within the six months prior to the officer’s termination; and (iii) for a period of two years following the termination, the individual shall not directly or indirectly own, manage, operate, join, or participate in any capacity, any entity which is primarily engaged in a business which competes with any significant business of the Company or its affiliates. If all officers and executives subject to agreements were terminated on May 30, 2004 under circumstances entitling them to severance payments pursuant to the agreements, the aggregate amount due to them under these agreements would be approximately $2,072,000.

	*(e)*	*Stock Option Plans*

		On June 20, 2002, the Corporation’s Board of Directors adopted the 2002 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 2002 Stock Option Plan, and options to purchase 13,500 shares were granted during fiscal year 2003 with weighted-average exercise price of $110 per share. Options vest at the rate of 12.50% per year beginning June 20, 2004 and June 20 of each following year up to and including June 20, 2011. 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 2002 Stock Option Plan, excluding John A. Warehime. No individual may receive options under the 2002 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 2002 Stock Option Plan.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont’d)

		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.

		The Stock Option Plan will be administered by the Corporation’s Board of Directors or by an option committee appointed by the Corporation’s Board of Directors. The option committee will consist of a minimum of two and a maximum of five members of the Board of Directors, each of whom will be a “non-employee director” within the meaning of Rule 16b-3(b)(3) under the Exchange Act.

		Options issued pursuant to the Stock Option plan may be either incentive stock options or non-qualified stock options. An “incentive stock option” is an option that satisfies all of the requirements of Section 422(b) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder, and a “non-qualified stock option” is an option that either does not satisfy all of those requirements of the terms of the option provide that it will not be treated as an incentive stock option. The option price for options issued under the Stock Option Plan will be equal at least to the fair market value of the Corporation’s Class B Common Stock on the date of the grant of the option. Options will not be granted pursuant to the Stock Option Plan until after the expiration of the ten years from June 20, 2002. The number of shares available for award under the Stock Option Plan is subject to adjustment in the event of any change in the outstanding shares of Class B Common Stock as a result of, among other circumstances, a stock dividend, stock split, recapitalization, merger, transfer of assets or reorganization.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont’d)

The following summarizes the transactions pursuant to the two plans:

	2004			2003

			Weighted			Weighted
			Average Price			Average Price
	Options		Per Share	Options		Per Share

Options outstanding at beginning of year	13,500	$	110.00	0	$	0.00
Options issued during year	199,450	$	118.00	13,500	$	110.00
Options outstanding at end of year	212,950	$	117.49	13,500	$	110.00
Options exercisable at end of year	0	$	117.49	0	$	110.00

The following table summaries information for stock options outstanding at May 30, 2004:

	Options Outstanding			Options Exercisable

		Weighted
		Average
		Remaining	Weighted		Weighted
	Number	Contractual	Average Price	Number	Average Price
Exercise Price	Outstanding	Life	Per Share	Exercisable	Per Share

$110.00	13,500	8	$110.00	0	$110.00
$118.00	199,450	9.42	$118.00	0	$118.00
$110.00-118.00	212,950	9.33	$117.49	0	$117.49

The per share weighted average fair value of stock options granted during 2004 and 2003 is calculated as $35.27 and $26.23, respectively, on the date of grant using the Black-Scholes option-pricing model. The weighted average assumptions based on the date of grant are as follows:

	2004		2003

Divided yield	1	%	1	%
Volatility	8.6		8.6
Risk-free interest rate	5.45	%	3.5	%
Expected life	9 years		9 years

	*(f)*	*Employee Stock Ownership Plan*

		The Company has a noncontributory employee stock ownership plan in which substantially all non-union employees are eligible to participate. The Company makes annual contributions to the plan in an amount determined by a resolution of the Board of Directors. Compensation expense is recorded for the amount of the annual contribution to the plan as determined by resolution of the Board of Directors of the Company.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 8 Benefits Plans ( Cont’d)

	*(g)*	*Defined Benefit Plan*

		On April 1, 2004, the Company acquired the assets of Venice Maid Foods. In connection with the acquisition, the Company assumed the existing defined benefit pension plan.

	May 30, 2004

Change in benefit obligation
Benefit obligation at beginning of year	$	—
Acquisition		3,273

Benefit obligation at end of year	$	3,273

Change in plan assets
Fair value of plan assets at beginning of year	$	—
Acquisition		2,524

Fair value of plan assets at end of year		2,524

Funded status		(749	)

Accrued benefit cost	$	(749	)

Weighted-average assumptions as of
March 31, 2004
Discount Rate		6.25	%
Expected return on plan assets		8.50	%
Rate of compensation increase		0	%

Note 9 Income Taxes

Total income taxes for the years ended May 30, 2004, June 1, 2003, and June 2, 2002, were attributable to the following:

		May 30,		June 1,			June 2,
		2004		2003			2002

Earnings from operations	$	5,586,000	$	5,654,000		$	5,121,000
Stockholders’ equity for unrealized gains (losses) on securities and minimum pension liability		110,000		(357,000	)		(45,000	)

	$	5,696,000	$	5,297,000		$	5,076,000

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 9 Income Taxes (Cont’d)

Income tax expense (benefit) attributable to earnings from operations consists of:

	Current			Deferred				Total

Year ended May 30, 2004
U.S. Federal	$	4,240,000		$	(169,000	)	$	4,071,000
State		1,537,000			(22,000	)		1,515,000

	$	5,777,000		$	(191,000	)	$	5,586,000

Year ended June 1, 2003
U.S. Federal	$	5,758,000		$	(809,000	)	$	4,949,000
State		1,049,000			(122,000	)		927,000
Foreign		(222,000	)		0			(222,000	)

	$	6,585,000		$	(931,000	)	$	5,654,000

Year Ended June 2, 2002
U.S. Federal	$	3,230,000		$	385,000		$	3,615,000
State		342,000			20,000			362,000
Foreign		1,144,000			0			1,144,000

	$	4,716,000		$	405,000		$	5,121,000

The Guatemala government has granted an income tax exemption to the Company’s subsidiary Mayapac beginning 2001 through 2012.

A reconciliation of the Company’s effective tax rate to the amount computed by applying the federal income tax rate of 35% to earnings before taxes attributable to earnings from operations expressed in percentages, follows:

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 9 Income Taxes (Cont’d)

	Year Ended		Year Ended		Year Ended
	May 30,		June 1,		June 2,
	2004		2003		2002

Federal income tax rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in taxes:
State taxes – net of federal tax benefit	5.8		3.9		1.9

Taxes related to foreign subsidiaries	(3.1	)	(1.5	)	3.3
Other items – net	(4.9	)	(0.9	)	1.1

Effective income tax rate	32.8	%	36.5	%	41.3	%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at May 30, 2004 and June 1, 2003 follow:

		May 30,			June 1,
		2004			2003
Deferred tax assets:
Inventory costs	$	209,000		$	243,000
Accrued expenses and other liabilities		3,060,000			2,828,000
Pension and postretirement benefits		1,251,000			1,014,000
Net operating loss carryforwards		145,000			70,000
Minimum pension liability		0			364,000
Other		959,000			546,000

Total gross deferred tax assets	$	5,624,000		$	5,065,000

Deferred tax liabilities:
Property, plant and equipment	$	(6,083,000	)	$	(6,534,000	)
Net unrealized gain on marketable securities		0			(59,000	)
Other		(1,572,000	)	$	(694,000	)

Total gross deferred tax liabilities		(7,655,000	)		(7,287,000	)

Net deferred tax liabilities	$	(2,031,000	)	$	(2,222,000	)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 9 Income Taxes (Cont’d)

The Company has not recognized a deferred tax liability for the undistributed earnings and tax basis differences of its investment in foreign subsidiaries since the earnings and investment are considered to be permanently invested in the businesses and, under the tax laws, are not subject to such taxes until distributed. The accumulated amount of such undistributed earnings was approximately $9,035,000 at May 30, 2004.

At May 30, 2004, the Company has net operating loss carryforwards for state income tax purposes of approximately $1,722,000, which are available to offset future state taxable income, if any, through 2020.

Note 10 Commitments and Contingencies

	*(a)*	*Letter of Credit*

		As of May 30, 2004, the Company’s wholly-owned reinsurance company had outstanding two letters of credit in the amount of $131,000 and $985,000 as security for the reimbursement of losses arising from the reinsurance assumed by the Company.

	*(b)*	*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.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont’d)

	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.

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

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

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

	The motions for a preliminary injunction were dismissed by the Court on June 24, 1997. The Class B shareholders on June 25, 1997 approved the Amended and Restated Articles (John A. Warehime, being the sole Class B shareholder voting affirmatively in his capacity as voting trustee) and the Amended and Restated Articles became effective June 25, 1997. In August 1997, the Board of Directors proposed a further amendment (the “Amendment”) to the Amended and Restated Articles to expand the definition of “disinterested directors” in the manner described below, and to approve certain performance based compensation for John A. Warehime solely for the purpose of making the Corporation eligible for a federal income tax deduction pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended. A special meeting was

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont’d)

	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.

	Michael A. Warehime filed an appeal from the denial of his motion to enjoin the previously described Amendment to the Corporation’s Amended and Restated Articles. On December 2, 1998, a majority panel of the Superior Court of Pennsylvania issued a decision holding that although John A. Warehime had acted in good faith in voting for the Amendment to the Amended and Restated Articles as trustee of the Warehime voting trust, he had breached his fiduciary duty to the beneficiaries of the Warehime voting trust in voting for the Amendment. On November 29, 1999, the Supreme Court of Pennsylvania granted a petition for allowance of appeal, filed by John A. Warehime, and granted a cross-petition for appeal filed by Michael A. Warehime.

	On August 13, 1999, Michael A. Warehime filed a complaint in equity in the Court of Common Pleas of York County, Pennsylvania, naming as defendants Arthur S. Schaier, Cyril T. Noel, Clayton J. Rohrbach, Jr., John A. Warehime, and the Corporation. The complaint sought a court order declaring that the September 1999 election for the Board of Directors of the Corporation be conducted in accordance with the Articles of Incorporation of the Corporation as they existed prior to June 25, 1997, an order declaring that the Series C Convertible Preferred Stock cannot be voted, and an order that the following candidates for the Board of Directors of the Corporation proposed by Michael A. Warehime, Sally Yelland, Elizabeth Stick and J. William Warehime be accepted by the Corporation and listed on the ballot to be distributed at the annual meeting of shareholders of the Corporation to be held on September 16, 1999: Michael A. Warehime, Daniel Meckley, Elizabeth Stick, Sonny Bowman, and John Denton. The basis for the complaint was the December 2, 1998 decision of the Superior Court of Pennsylvania which held that John A. Warehime breached his fiduciary duties in voting for the Amended and Restated Articles as trustee of the Warehime voting trust. The requested relief was denied by the Court of Common Pleas of York County and Michael Warehime appealed to the Superior Court of Pennsylvania.

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

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont’d)

	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.

	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.

	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. Oral argument was heard in this matter before the Superior Court of Pennsylvania on January 13, 2004. On April 22, 2004, the Superior Court of Pennsylvania issued a memorandum reversing the December 22, 2002 decision by the York Court of Common Pleas and remanding for further proceedings.

	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.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont’d)

	*(c)*	*Stock Repurchase Plan*

		Sixty-six (66) shares of the Company’s Class A Common Stock were repurchased under the plan for the fiscal year ended May 30, 2004. The Company has agreed to purchase the Company’s Class A Common Stock purchased or owned by employees prior to April 20, 1988 at appraised value. This guarantee of repurchase by the Company is for an indefinite period of time. No shares were repurchased under this plan for the year ended June 1, 2003. As of May 30, 2004, there are 8,983 shares outstanding that would be eligible for this plan. The maximum commitment, if requested, for all eligible shares would be approximately $1,051,000 based on the most recent appraised value per share as of March 31, 2004.

	*(d)*	*Sales and Lease Agreement*

		In February 2004, the Company entered into a Lease Agreement and Tomato Paste Purchase Agreement to lease the Colusa plant for three (3) years beginning July 1, 2004 and to purchase 6 million pounds of tomato paste on a cost basis formula from the lessee during the second through sixth year of the agreement The Company expects to use this annual purchase commitment through normal operations.

Note 11 Foreign Operations

The Company’s foreign subsidiary, Mayapac, S.A. produces food products in Guatemala, which are sold to Sunwise Corporation in the United States. The revenues generated by the operations in Guatemala and the assets employed in generating those revenues are as follows:

	May 30,		June 1,		June 2,
	2004		2003		2002

Revenues	$	20,539,000	$	19,072,000	$	18,699,000
Cost of goods sold		18,324,000		16,911,000		15,075,000
Assets		12,459,000		9,964,000		9,092,000

Maya Pac maintains its accounting records in quetzals. For financial reporting purposes the U.S. dollar is considered the functional currency. The financial statements of MAYAPAC, S.A. have been translated to their U.S. dollar equivalents prior to being consolidated. Assets and liabilities have been translated to their U.S. dollar equivalents based on rates of exchange prevailing at the end of the period except for inventories, fixed assets, deferred and prepaid expenses, and other assets, which have been translated at historical rates. Revenue and expense accounts have been translated at average exchange rates during the period except for depreciation of fixed assets, which is based on the historical rate. The aggregate exchange gains and losses arising from the translation of foreign assets and liabilities and from foreign currency transactions are included in income under the caption of Other income – net, and amount to a loss of $115,000, $15,000, and $178,000, or the years ended May 30, 2004, June 1, 2003, and June 2, 2002, respectively. At May 30, 2004 the prevailing exchange rate was Q 8.0 to U.S. $1.00.

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HANOVER FOODS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Note 12 Reconciliation of Numerator and Denominator for Basic and Diluted Earnings per Share

	Year Ended		Year ended		Year ended
	May 30, 2004		June 1, 2003		June 2, 2002

Numerator for basic earnings per share:
Net earnings applicable to
Common stock	$	11,400,000	$	9,833,000	$	7,230,000
Effect of dilutive securities:
8 ¼% cumulative convertible
Preferred stock		30,000		30,000		30,000
4.40% cumulative convertible
Preferred stock		11,000		11,000		11,000

Net earnings assuming dilution	$	11,441,000	$	9,874,000	$	7,271,000


Denominator:
Basic weighted-average shares		724,186		720,684		716,191
Effect of dilutive securities:
8 ¼% cumulative convertible
Preferred stock		3,422		3,066		3,386
4.40% cumulative convertible
Preferred stock		10,000		10,000		10,000

Diluted weighted-average shares		737,608		733,750		729,577

Basic earnings per share	$	15.74	$	13.64	$	10.10
Diluted earnings per share		15.51		13.46		9.97

Stock options of 199,450 and 13,500 shares in 2004 and 2003, respectively, are not included in the earnings per share computation as their effect would have been anti-dilutive. Shares held in the Employee Stock Trust are not considered to be outstanding for the purposes of the calculation of earnings per share.

Note 13 Statement of Cash Flow Information

	Year Ended		Year Ended		Year Ended
	May 30, 2004		June 3, 2003		June 2, 2002

Supplemental disclosure of cash paid for:
Interest	$	2,404,858	$	2,874,000	$	3,292,000
Income taxes		6,686,000		5,004,000		4,043,000

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QUARTERLY FINANCIAL DATA


Dollars in thousands (except per share)	First quarter		Second Quarter			Third quarter		F ourth quarter

2004
Net sales	$	66,900	$	84,223	$	83,009	$	83,896
Gross profit	$	9,639	$	13,568	$	11,443	$	12,399
Net earnings	$	1,812	$	4,306	$	2,351	$	2,972
Net earnings per common share – Basic	$	2.49	$	5.95	$	3.25	$	4.25
Net earnings per common share – Diluted	$	2.46	$	5.91	$	3.23	$	3.91
Cash Dividends per common share	$	.275	$	.275	$	.275	$	.275

2003
Net sales	$	63,427	$	79,897	$	73,161	$	73,826
Gross profit	$	10,340	$	12,770	$	12,504	$	10,395
Net earnings	$	1,772	$	3,682	$	2,354	$	2,066
Net earnings per common share – Basic	$	2.47	$	5.12	$	3.26	$	2.79
Net earnings per common share – Diluted	$	2.43	$	5.05	$	3.22	$	2.76
Cash Dividends per common share	$	.275	$	.275	$	.275	$	.275

MARKET FOR THE REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

Although the Corporation’s Class B Common Stock is currently quoted on the OTC Bulletin Board under the symbol “HNFSB” and the Corporation’s Class A Common Stock is currently quoted on the OTC Bulletin Board under the symbol “HNFSA,” trading in the Class B and Class A Common Stock is very sporadic. As a result of the limited market for Class B and Class A Common Stock, shareholders are cautioned not to place undue reliance on bid prices contained herein as indicators of the true value of the shares of Class B and Class A Common Stock.

The following table sets forth the high and low bid prices per share of the Class A and Class B Common Stock on a quarterly basis of the past two fiscal years as provided by NASDAQ, as well as dividends paid per share. Over-the-Counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	Class A Common Stock						Class B Common Stock

Quarter Ended	High		Low		Dividends		High		Low		Dividends

September 1, 2002	$	53.00	$	51.75	$	0.275		—		—	$	0.275
December 1, 2002	$	50.75	$	49.25	$	0.275	$	25.45	$	25.00	$	0.275
March 2, 2003	$	52.75	$	50.00	$	0.275	$	25.45	$	25.00	$	0.275
June 1, 2003	$	61.00	$	54.00	$	0.275	$	25.50	$	25.50	$	0.275
August 31, 2003	$	70.50	$	52.50	$	0.275	$	27.00	$	26.00	$	0.275
November 30, 2003	$	75.00	$	71.70	$	0.275	$	27.00	$	27.00	$	0.275
February 29, 2004	$	94.00	$	76.00	$	0.275	$	27.00	$	27.00	$	0.275
May 30, 2004	$	95.00	$	82.00	$	0.275	$	27.00	$	27.00	$	0.275

Class B Common Stock started being quoted on the OTC Bulletin Board as of October 9, 2002. Therefore information for the high and low bid prices per share of Class B Common Stock for the quarter ended December 1, 2002 is available only starting from October 9, 2002.

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As of August 11, 2004, there were 334 record holders of the Class A Common Stock and there were 43 record holders of Class B Common Stock.

Issuer Purchases of Equity Securities

Period	Total number of Shares (or units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(1)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs

February 1 – 29, 2004	44	$	114/share	44	9,005 shares
April 1 – 30, 2004	22	$	114/share	22	8,983 shares

Total	66	$	114/share	66	8,983 shares

(1)

In 1988, the Company publicly announced its plan to purchase the Company’s Class A Common Stock purchased or owed by employees prior to April 20, 1988 at appraised value available at the time of repurchase. The appraised value is determined by an independent appraiser on a quarterly basis. This guarantee of purchase is for an indefinite period of time.

DIVIDEND POLICY

The Corporation has maintained a policy of paying a quarterly dividend of $0.275 per share for both Class A and Class B Common Stock. The continuing payment by the Corporation of dividends in the future is at the sole discretion of its Board of Directors and will depend, among other things, upon the Corporation’s earnings, its capital requirements and financial condition, restrictive covenants in the Corporation’s credit facilities, as well as other relevant factors.

CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On December 16, 2003, the audit committee of the Company engaged BDO Seidman, LLP as the Company’s independent auditor to audit the Company’s consolidated financial statements for the year ending May 30, 2004. KPMG LLP who had been engaged by the Company as the independent accountants to audit the Company’s consolidated financial statements was dismissed effective December 16, 2003. The decision to change the Company’s independent accountants from KPMG LLP to BDO Seidman, LLP was approved by the audit committee of the Board of Directors.

The reports of KPMG LLP, on the financial statements of the Company during the two-year period ended June 1, 2003, did not contain an adverse opinion, or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the two-year period ended June 1, 2003, and interim period from June 1, 2003 through December 16, 2003, the Company did not have any disagreements with KPMG LLP, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG LLP, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports.

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ANNUAL AND OTHER REPORTS

The Corporation is required to file an annual report on Form 10-K for its fiscal year ended May 30, 2004 with the Securities and Exchange Commission. Copies of the Form 10-K annual report, including exhibits, and the Corporation’s quarterly reports may be obtained without charge by contacting:

Gary T. Knisely
Executive Vice President, Secretary, Counsel
Hanover Foods Corporation
1486 York Street
P.O. Box 334
Hanover, PA 17331
717-632-6000

OFFICERS AND BOARD OF DIRECTORS

OFFICERS

JOHN A. WAREHIME
Chairman, President & Chief Executive Officer

GARY T. KNISELY, ESQ.	PIETRO D. GIRAFFA, JR.	STEVEN E. ROBERTSON
Chief Financial Officer	Chief Accounting Officer	Treasurer
Executive Vice President	Vice President – Controller
Secretary, Counsel

ALAN T. YOUNG	DANIEL E. SCHUCHART
Senior Vice President- Purchasing and Transportation	Vice President of Sales

BOARD OF DIRECTORS

JOHN A. WAREHIME	ARTHUR S. SCHAIER	JAMES A. WASHBURN
Chairman of the Board	President & Chief Executive Officer	Chief Executive Officer
Hanover Food Corporation	Schaier Nissan, Schaier Honda	Park 100 Foods, Inc., a food
	Long Beach, CA, a retail auto dealership	manufacturing company
		Tipton, IN

CLAYTON J. ROHRBACH	T. EDWARD LIPPY	CYRIL T. NOEL
Retired Vice President of Marketing CPC	Vice President	Retired Vice President of Finance
International, a food company	Lippy Brothers, Inc., a farming company	Hanover Foods Corporation
Englewood Cliffs, NJ	Hampstead, MD

JAMES G. STURGILL, CPA, CVA	JENNIFER W. CARTER	T. MICHAEL HAUGH
Managing Partner	Retired Assistant to the Chairman	President
Sturgill & Associates LLP,	Hanover Foods Corporation	Hospitality Management Corporation, a
an accounting firm, Westminster, MD		contract food service company
		Abbottstown, PA

EXECUTIVE OFFICES	CERTIFICATE TRANSFER MAIL
1486 York Street, P.O. Box 334, Hanover, PA 17331-0334	MELLON INVESTORS SERVICES, L.L.C.
(717) 632-6000	Securities Transfer Services
	P.O. Box 3300
SHAREHOLDER INQUIRIES	South Hackensack, NJ 07606-1910
Shareholder inquiries should be directed to the following offices and addresses.	NOTE: It is recommended that all certificates be sent via registered mail.
All telephone inquiries should be made by using the toll-free
1-800-756-3353.	CERTIFICATE TRANSFERS HAND DELIVERIES
Copies of 10-K report are available upon request.	Mellon Investors Services, L.L.C.
	120 Broadway, 13 ^th Floor
	New York, NY 10271
SHAREHOLDER INQUIRIES ADDRESS CHANGES
CONSOLIDATING	CLASS A COMMON STOCK
Hanover Foods Corporation	Class A Common Stock is quoted on the OTC bulletin board.
P.O. Box 3316
South Hackensack, NJ 07606-1916	CLASS B COMMON STOCK
www.melloninvestor.com	Class B Common Stock is quoted on the OTC bulletin board.

LOST CERTIFICATES CERTIFICATE	CERTIFIED PUBLIC ACCOUNTANTS
REPLACEMENT	BDO Seidman LLP, Bethesda, Maryland
Mellon Investors Services, L.L.C.
Lost Securities Department	LEGAL COUNSEL
P.O. Box 3317	Blank Rome LLP, Philadelphia, Pennsylvania
South Hackensack, NH 07606-1917

Exhibit 14

HANOVER FOODS CORPORATION

CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

I.	Introduction


	This Code of Ethics for Senior Financial Officers (the “ Code ”) applies to Senior Financial Officers of Hanover Foods Corporation and its subsidiaries (collectively, the “ Company ”). The term “ Senior Financial Officer ”, as used in this Code, means the Company’s Chief Executive Officer (i.e., the principal executive officer), Chief Financial Officer (i.e., the principal financial officer), Principal Accounting Officer, Controller and any other person performing similar functions.

	While this Code provides general guidance for appropriate conduct and avoidance of conflicts of interest, it does not supersede specific policies that are set forth in other Company policy statements.

	The purpose of this Code is to provide guidance to the Company’s Senior Financial Officers with regard to and to promote the following:


		•	honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

		•	full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “ SEC ”) and in other public communications made by the Company;

		•	compliance with applicable governmental laws, rules and regulations;

		•	prompt internal reporting to an appropriate person or persons identified in the Code of violations of the Code; and

•

accountability for adherence to the Code.

Each day, you are faced with making decisions that will affect the Company’s business. You are obligated to comply with the Code guidelines and should avoid even the appearance of unethical or unprofessional behavior. To that end, you should seek advice from the Company’s Counsel when faced with a situation that may violate or give the appearance of violating the Code, Company policies, laws, rules or regulations.


II.	Honest and Ethical Conduct


	The Company expects and requires ethical behavior from Senior Financial Officers. You are expected to act in the best interests of the Company. Further, you must engage in and promote honest and ethical conduct, including handling actual or apparent conflicts of interest in an ethical manner, and act with honesty and integrity.


III.	Conflicts of Interest

A conflict of interest exists when your personal interests interfere with, or give the appearance of interfering with, the interests of the Company. In the best interests of the Company, you must avoid actual or apparent conflicts between your personal interests and those of the Company, including gaining improper personal benefits as a result of your position. In addition, you should not use corporate assets or information for your personal gain.

Conflicts of interest may manifest themselves in many ways and may reach farther than just the person employed by the Company. In fact, many conflicts arise as a result of situations involving your relative.


IV.	Accuracy of Reporting


	As a publicly traded Company, the Company is required to comply with federal and state laws and regulations with respect to accuracy in the information it reports to the SEC and communicates to the public. The Company’s financial statements are relied upon both internally and externally by individuals making business or investment decisions. Accuracy and candor is critical to the financial health of the Company. As a result, Senior Financial Officers must act in good faith, responsibly, with due care and diligence in preparing the financial statements, reports and other documents filed or submitted to the SEC as well as other public communications made by the Company (collectively, “ SEC Reports and Public Documents ”).

	As a Senior Financial Officer, you must help ensure that SEC Reports and Public Documents fairly disclose the Company’s assets, liabilities and material transactions engaged in by the Company. You are responsible for the SEC Reports and Public Documents meeting the following requirements:


		•	SEC Reports and Public Documents must, in reasonable detail, accurately and fairly reflect the transactions engaged in by the Company and acquisitions and dispositions of the Company’s assets;

		•	SEC Reports and Public Documents must not contain any untrue statement of material fact that would make the statements in the SEC Reports and Public Documents misleading;

		•	Financial reports must be prepared in accordance with, or reconciled to, Generally Accepted Accounting Principles and applicable SEC rules, including the SEC accounting rules; and

•

SEC Reports and Public Documents must contain full, fair, accurate, timely and understandable disclosure.


	If you become aware of inaccuracies contained in the SEC Reports and Public Documents, or material omissions from the SEC Reports and Public Documents, you are required to immediately report such inaccuracies or omissions to the Chairman of the Company’s Audit Committee pursuant to the procedure outlined in Section VI.

	Finally, you are required to respect the confidentiality of information acquired in the course of the performance of your responsibilities.

V.	Compliance with Laws, Rules and Regulations


	The Company’s continued and current success largely depends upon its reputation for engaging in its business in an ethical and legal manner. Therefore, Senior Financial Officers must comply with both the letter and spirit of federal, state and local laws, rules and regulations applicable to the Company’s business.


VI.	Responsibility for Reporting


	The Company has established a reporting system that requires Senior Financial Officers to report violations of any of the policies set forth in this Code. These mandatory reporting obligations apply whether or not the reporting person was personally involved in the alleged violation of the policies set forth in this Code.

	Upon observing or learning of any violation of the policies set forth in this Code, Senior Financial Officers must report the same by writing a letter describing the suspected violation with as much detail as possible and sending the letter to the Chairman of the Audit Committee, Confidential – Conduct of Business Affairs at: 1486 York Street, P.O. Box 334, Hanover, PA 17331.

	The Senior Financial Officer is required to sign the letter, unless such complaint relates to questionable accounting or auditing matters described below. The letter will be treated confidentially by the Company unless disclosure is required or deemed advisable by the Company in connection with any actual or potential governmental investigation or unless advised by the Company’s outside counsel that disclosure would be in the interest of the Company. Anonymous letters will not normally be investigated, unless the correspondence concerns questionable accounting or auditing matters covered by the Whistle-Blower Policy.

	The Company will not investigate letters containing allegations of unspecified wrongdoing without verifiable evidentiary support. The report of an alleged violation of the Code must be factual, rather than speculative or conclusory, and must contain the following specific information to justify the commencement of an investigation: (i) the alleged event, including the date and location of such event, or issue that is the subject of the letter; (ii) the name of each person involved; and (iii) any additional information, documentation or other evidence available to support the reported violation.

	Once the Company receives notice of a suspected violation of this Code that complies with the foregoing requirements, the Company shall promptly begin an investigation. Such investigation shall be supervised by the Audit Committee. Once a violation is found to exist, the individual that violated the Code shall be subject to disciplinary action as described in Section VII of the Code.

	The system of receipt, retention, and treatment of complaints regarding accounting, internal accounting controls or auditing matters that ensures the confidential and anonymous submission of employees’ concerns regarding questionable accounting or auditing matters is covered by the separate Whistle-Blower Policy adopted by the Company. You can get a copy of such policy from the Company’s Counsel.

The Company will not condone any form of retribution upon any Senior Financial Officer who uses the reporting system in good faith to report suspected wrongdoers, unless the individual reporting the violation is one of the violators. The Company will not tolerate any harassment or intimidation of any Senior Financial Officer using the reporting system. The Company will also exercise disciplinary action against any Senior Financial Officer who is found to have intimidated or harassed a person who has reported a suspected violation in good faith.


VII.	Compliance; Administration


	As a condition of employment and continued employment, each Senior Financial Officer must accept the responsibility of complying with the foregoing policies and acknowledge his or her receipt of the Code by executing the Acknowledgement attached hereto.

	Any Senior Financial Officer who knowingly and willfully violates any of these policies is subject to disciplinary action including but not limited to suspension or termination of employment, and such other action, including legal action, as the Company believes to be appropriate under the circumstances. The Audit Committee will make the determination as to penalties applicable to Senior Financial Officers for Code violations.


VIII.	Amendments; Waiver


	The Company reserves the right to amend, waive or alter the policies set forth in the Code at any time. Any amendment to the Code or waiver or implicit waiver of any provision of the Code requires the approval of a majority of the Company’s non-management directors.

	Unless the SEC rules and regulations otherwise provide, amendments to and waivers of any provision of the Code must be promptly disclosed in accordance with SEC regulations, including an explanation of why the waiver or implicit waiver was granted. Unless the SEC rules and regulations otherwise provide, the term “ waiver ” means the Company’s approval of a material departure from a provision of the Code; and the term “ implicit waiver ” means the Company’s failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to the Company’s executive officer.

Adopted: August 25, 2004.

Exhibit 21

SUBSIDIARIES OF REGISTRANT

		PERCENTAGE	STATE OF
NAME OF PARENT	NAME OF SUBSIDIARY	OWNERSHIP	INCORPORATION

Hanover	Tri-Co. Foods Corp. (“Tri-Co”)	100%	Pennsylvania

Hanover	Spring Glen Fresh Foods, Inc.	100%	Pennsylvania

Hanover	Consumers Packing Company	100%	Pennsylvania

Hanover	Hanover Insurance Company Ltd.	100%	Grand Cayman,
			B.W.I.

Hanover	Nittany Corporation	100%	Delaware

Hanover	Bickel’s Snack Foods, Inc.	100%	Pennsylvania

Hanover	Aunt Kitty’s Foods, Inc.	100%	New Jersey

Tri-Co	Sunwise Corporation	100%	Florida

Tri-Co	Mayapac, S.A.	100%	Republic of
			Guatemala

Exhibit 31.1

CERTIFICATION

I , John A. Warehime, certify that:

I have reviewed this Form 10-K (Amendment No. 1) of Hanover Foods Corporation;

2.	Based on my knowledge, this 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 report;

3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

	b)	(Intentionally Omitted )

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 30, 2004

	/s/ John A. Warehime

	John A. Warehime
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I , Gary T. Knisely, certify that:

I have reviewed this Form 10-K (Amendment No. 1) of Hanover Foods Corporation;

2.	Based on my knowledge, this 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 report;

3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

	b)	(Intentionally Omitted)

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 30, 2004

	/s/ Gary T. Knisely

	Gary T. Knisely
	Chief Financial Officer

Exhibit 32.1

HANOVER FOODS CORPORATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ( Section 1350 of Chapter 63 of Title 18 of the United States Code), each of the undersigned officers of Hanover Foods Corporation (the “Company”), does hereby certify with respect to the Annual Report of the Company on Form 10-K (Amendment No. 1) for the period ended May 30, 2004 (the “Report”) that:

	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 30, 2004

	/s/ John A. Warehime

	John A.Warehime
	Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

Exhibit 32.2

HANOVER FOODS CORPORATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 30, 2004

	/s/ Gary T. Knisely

	Gary T. Knisely
	Chief Financial Officer

Exhibit 99.1

HANOVER FOODS CORPORATION
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
Adopted August 25, 2004

Purpose

There shall be a committee of the board of directors (the “Board”) to be known as the audit committee of Hanover Foods Corporation (the “Company”). The audit committee’s purpose is to:

(A) oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company; and

(B) prepare an audit committee report as required by the rules of the Securities and Exchange Commission (“SEC”).

Composition

The Audit Committee shall have at least two (2) members, each of whom must meet the following conditions: (i) be independent as defined under Rule 4200(a)(15) of The Nasdaq Stock Market, Inc. (except as set forth in Rule 4350 (d)(2)(B)); (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (subject to the exemptions provided in Rule 10A-3(c)); (iii) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (iv) be able to read and understand fundamental financial statements, including a Company’s balance sheet, income statement, and cash flow statement. Additionally, the Company must have at least one member of the audit committee who has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

The Board shall elect or appoint a chairperson of the audit committee; the chairperson will have authority to act on behalf of the audit committee between meetings.

The audit committee shall meet at least four times per year on a quarterly basis, or more frequently as circumstances require. One or more meetings may be conducted in whole or in part by telephone conference call or similar means if it is impracticable to obtain the personal presence of each audit committee member. The Company shall make available to the audit committee, at its meetings and otherwise, such individuals and entities as may be designated from time to time by the audit committee, such as members of management including (but not limited to) the internal audit and accounting staff, the independent auditors, inside and outside counsel, and other individuals or entities (whether or not employed by the Company and including any corporate governance employees and individuals or entities performing internal audit services as independent contractors).

The audit committee shall keep written minutes of its meetings, which minutes shall be maintained with the books and records of the Company.

A member of the audit committee shall promptly notify the audit committee and the Board if the member is no longer an independent director and such member shall be removed from the audit committee unless the Board determines that an exception to the independent director requirement is available under the applicable NASDAQ rules with respect to such member’s continued membership and that an exception should be made.

Duties and Responsibilities

The duties and responsibilities of the audit committee shall be as follows:

	•	be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, and each such registered public accounting firm must report directly to the audit committee;

	•	establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submissions by Company employees of concerns regarding questionable accounting or auditing matters;

	•	have the authority to engage independent counsel and other advisers, as it determines necessary to carry out its duties;

	•	receive appropriate funding from the Company, as determined by the audit committee in its capacity as a committee of the Board, for payment of: (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; (ii) compensation to any advisers employed by the audit committee; and (iii) ordinary administrative expenses of the audit committee that are necessary or appropriate in carrying out its duties;

	•	ensure its receipt from the outside auditors of a formal written statement delineating all relationships between the auditor and the Company, consistent with Independence Standards Board Standard 1, and actively engage in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor and for taking, or recommending that the full Board take, appropriate action to oversee the independence of the outside auditor;

	•	report to the Board;

	•	comply with all preapproval requirements of Section 10A(i) of the Exchange Act and all SEC rules relating to the administration by the audit committee of the auditor engagement to the extent necessary to maintain the independence of the auditor as set forth in 17 C.F.R. § 210.2-01(c)(7);

	•	make such other recommendations to the Board on such matters, within the scope of its function, as may come to its attention and which in its discretion warrant consideration by the Board; and

	•	act as a qualified legal compliance committee as defined in 17 C.F.R. § 205.2.

Delegation

Any duties and responsibilities of the audit committee, including, but not limited to, the authority to preapprove all audit and permitted non-audit services of the auditor, may be delegated to one or more members of the audit committee or a subcommittee of the audit committee. The decisions of any member to whom authority is delegated to preapprove an audit or permitted non-audit service of the auditor shall be presented to the full audit committee at each of its scheduled meetings.

Limitations

The audit committee is responsible for the duties and responsibilities set forth in this charter, but its role is oversight and therefore it is not responsible for either the preparation of the Company’s financial statements or the auditing of the Company’s financial statements. The members of the audit committee are not employees of the Company and may not be accountants or auditors by profession or experts in accounting or auditing. Management has the responsibility for preparing the financial statements and implementing internal controls and the independent auditors have the responsibility for auditing the financial statements and monitoring the effectiveness of the internal controls, subject, in each case, to the oversight of the audit committee described in this charter. The review of the financial statements by the audit committee is not of the same character or quality as the audit performed by the independent auditors. The oversight exercised by the audit committee is not a guarantee that the financial statements will be free from mistake or fraud. In carrying out its responsibilities, the audit committee believes its policies and procedures should remain flexible in order to best react to a changing environment.

Exhibit 99.2

HANOVER FOODS CORPORATION
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
Adopted August 25, 2004

This Nominating and Corporate Governance Committee Charter (the “Charter”) has been adopted by the Board of Directors (the “Board”) of Hanover Foods Corporation (the “Company”).

Purpose

The Nominating and Corporate Governance Committee (the “Committee”) of the Board is responsible for developing and recommending to the Board a set of corporate governance policies for the Company, establishing criteria for selecting new directors, and identifying, screening and recruiting new directors. The Committee will also recommend to the Board nominees for directors and for committee membership.

Composition

The Committee shall be comprised of three or more members, all of whom must qualify as independent directors (“Independent Directors”) under the Corporate Governance Rules of The Nasdaq Stock Market, Inc. (“NASDAQ”).

Notwithstanding this independence requirement, if the Committee is comprised of at least three members, one director, who is not independent as defined in Rule 4200 of the NASDAQ Corporate Governance Rules, and is not a current officer or employee of the Company or a Family Member (as defined in Rule 4200 of the NASDAQ Corporate Governance Rules) of such person, may be appointed to the Committee if the Board, under exceptional and limited circumstances, determines that such individual’s membership on the committee is required by the best interests of the Company and its shareholders, and the Board discloses, in the next annual meeting proxy statement subsequent to such determination (or in Form 10-K if the Company does not file a proxy statement), the nature of the relationship and the reasons for the determination. A member appointed under this exception may not serve longer than two years.

The Committee members shall be appointed by the Board. The Board shall appoint one member of the Committee as chairperson. The chairperson shall be responsible for leadership of the Committee, including overseeing the agenda, presiding over the meetings and reporting to the Board. If the Committee chairperson is not present at a meeting, the remaining members of the Committee may designate an acting chairperson.

A member shall promptly notify the Committee and the Board if the member is no longer an Independent Director and such member shall be removed from the Committee unless the Board determines that an exception to the Independent Director requirement is available under the NASDAQ Corporate Governance Rules with respect to such member’s continued membership on the Committee.

Meetings and Procedures

Unless specified otherwise in the Company’s Charter, Bylaws and applicable state law, the following shall apply:

•	The Committee shall fix its own rules of procedure, which shall be consistent with the Bylaws of the Company and this Charter.

•	The Committee shall meet at least annually and more frequently as circumstances require.

•	The chairperson of the Committee or a majority of the members of the Committee may call special meetings of the Committee.

•	The chairperson, in consultation with other members of the Committee, shall set the length of each meeting and the agenda of items to be addressed at each meeting and shall circulate the agenda to each member of the Committee in advance of each meeting.

•	A majority of the members of the Committee shall constitute a quorum.

•	The Committee may request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee and/or provide such pertinent information as the Committee requests, except that no director of the Company shall participate in discussions or attend any portion of a meeting of the Committee at which that director’s recommendation for nomination or committee selection is being discussed.

•	The Committee shall keep written minutes of its meetings, which minutes shall be maintained by the Company with the books and records of the Company. The chairperson may designate an officer or employee of the Company to serve as secretary to the Committee.

Responsibilities and Duties of the Committee

The Committee has the following duties and responsibilities:

Selection of Director Nominees and Committee Membership

•	Determine what types of backgrounds are needed to help strengthen and balance the Board and establish the process for identifying and evaluating nominees for director, including but not limited to establishing criteria for selecting new directors.

•	Determine the minimum qualifications that must be met by the Committee recommended candidates.

•	Conduct background and qualifications checks of persons the Committee wishes to recommend to the Board as candidates or to fill vacancies.

•	Conduct director evaluations prior to recommendation of incumbent directors for election.

•	Recommend to the Board the slate of nominees of directors to be proposed for election at the shareholders’ meeting and recommend to the Board individuals to be considered by the Board to fill vacancies. Approvals should follow a review by the Committee of the performance and contribution of fellow directors as well as the qualifications of proposed new directors.

•	Recommend to the Board those directors to be selected for membership on the various Board committees. Recommendations should consider the qualifications for membership on each committee, whether the candidate will be able to devote the requisite time to the Committee, the extent to which there should be a policy of periodic rotation of directors among the committees, and any limitations on the number of consecutive years a director should serve on any one Board committee.

•	Recommend director and committee member/chair compensation for those directors who are not also salaried officers of the Company to the board.

•	Establish policies regarding the consideration of director candidates recommended by shareholders.

•	Establish procedures to be followed by shareholders in submitting recommendations for director candidates.

Development and Implementation of Policies Regarding Corporate Governance Matters

•	Recommend to the Board policies to enhance the Board’s effectiveness, including with respect to the distribution of information to Board members, the size and composition of the Board, and the frequency and structure of Board meetings.

•	Develop and review periodically, and at least annually, the corporate governance policies of the Company to ensure that they are appropriate for the Company and that policies of the Company comply with applicable laws, regulations and listing standards, and recommend any desirable changes to the Board.

•	Consider any other corporate governance issues that arise from time to time, and recommend appropriate actions to the Board.

•	Assist management in the review of director and officer liability insurance requirements and the alternative methods available for satisfying them.

Other Matters

•	Report to the Board.

•	Perform such other duties and responsibilities as may be assigned to the Committee, from time to time, by the Board.

Investigations and Studies; Outside Advisors

The Committee may conduct or authorize investigations into or studies of matters within the scope of the Committee’s duties and responsibilities, and may retain, at the Company’s expense, such experts and other professionals as it deems necessary. The Committee shall have the sole authority to retain or terminate any search firm to be used to identify and evaluate director candidates, including sole authority to approve the search firm’s fees and other retention terms, such fees to be borne by the Company.