Amendment #1 to Form 10-K

/s/ Dale F. Morrison

Dale F. Morrison

Attorney-in-fact

10-K/A 1 d10ka.htm AMENDMENT #1 TO FORM 10-K Amendment #1 to Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

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 December 31, 2002

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

For the transition period from to

Commission file number 001-14255

AURORA FOODS INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

94-3303521

(State or Other Jurisdiction

of Incorporation or Organization)

(IRS Employer

Identification No.)

11432 Lackland Road, St. Louis, MO 63146

(Address of Principal Executive Office, Including Zip Code)

(314) 801-2300

(Registrant’s Telephone Number, Including Area Code)

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

Title of Each Class

Name of Each Exchange on

Which Registered

Common Stock, par value $0.01 per share

OTC Bulletin Board

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

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 x 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 x

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2002, based upon the closing price of the Common Stock as reported on the New York Stock Exchange on such date, was approximately $60,019,471.

Indicate the number of shares outstanding of each of the registrant’s classes of Common Stock as of the latest practicable date.

Shares Outstanding

March 17, 2003

Common Stock, $0.01 par value

77,155,022

Documents incorporated by reference:

Proxy Statement filed with the Securities and Exchange Commission in connection with the 2003 Annual Meeting of Stockholders is incorporated herein by reference in Parts II and III.

Explanatory Note

This annual report on Form 10-K/A (this “Form 10-K/A”) is being filed to amend Items 6, 7, 8, 14 and 15 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, which was originally filed with the SEC on March 26, 2003, (the “Original Form 10-K”). Accordingly, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Form 10-K/A contains the complete text of Items 6, 7, 8, 14 and 15, as amended, as well as certain currently dated certifications.

On August 14, 2003, the Company announced that its financial results for the years ended December 31, 2002 and 2001, and interim quarters, would be restated to reflect adjustments with regard to deferred taxes. The Company reevaluated its deferred tax accounting and determined that its valuation allowance for net deferred tax assets, which had been recorded by the Company at December 31, 2002, should have been recorded at December 31, 2001, and that the Company should have provided for ongoing deferred tax liabilities subsequent to January 1, 2002 (the effective date of the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (FAS 142)) for certain of the differences between the book and tax amortization of the Company’s goodwill and indefinite lived intangibles as defined by FAS 142. The impact of the adjustments is as follows:

•

For the year ended December 31, 2001, income tax expense and the net loss increased by $65.4 million.

•

For the year ended December 31, 2002, tax expense decreased by $30.9 million; the expense recorded for the cumulative effect of the change in accounting principle increased by $60.8 million; and the net loss increased by $29.9 million.

The foregoing adjustments do not affect previously recorded net sales, operating income (loss) or past or expected future cash tax obligations. While provision for this deferred tax liability is required by existing accounting literature, these potential taxes may only become payable in the event that the Company sells a brand at some future date for an amount in excess of both the tax basis of the brand at that time and the unexpired and unused net operating tax loss carryforwards (NOL). At December 31, 2002, the Company’s NOL was in excess of $600 million and expires at various times through the year 2022, primarily after 2017. This balance does not reflect any potential future limitations on utilization of the NOL resulting from transactions currently being contemplated by the Company, as described in Note 28—Subsequent Events, to the Consolidated Financial Statements included in this Form 10-K/A, nor any tax planning techniques available to the Company.

The amendments contained herein reflect changes resulting from the foregoing adjustments with regard to deferred taxes. The Company has not updated the information contained herein for events and transactions occurring subsequent to March 26, 2003, the filing date of the Original Form 10-K, except to reflect the restatement of the Company’s financial statements for the years ended December 31, 2002 and 2001, and except as set forth under “Subsequent Events” in the Management’s Discussion and Analysis and in Note 28 – Subsequent Events to the Consolidated Financial Statements. Events may have taken place that might have been reflected in the Original Form 10-K if they had taken place prior to the date of the original filing. The Company recommends that this report be read in conjunction with the Company’s reports filed subsequent to the original filing date.

In addition to the restatement adjustments, certain reclassifications have been made in this Form 10-K/A. In the consolidated statements of cash flows for the years ended December 31, 2002, 2001, and 2000, the change in accounts receivable sold has been reclassified from a financing activity to an operating activity, and in the consolidated statements of stockholders’ equity (deficit) for the years ended December 31, 2002, 2001, 2000, the cumulative preferred dividends have been reclassified from a change to the accumulated deficit to a change to additional paid-in capital.

AURORA FOODS INC.

2002 FORM 10-K/A ANNUAL REPORT

TABLE OF CONTENTS


Item 6	Selected Financial Data	4

Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5

Item 8	Financial Statements and Supplementary Data	25

Item 14	Controls and Procedures	26

Item 15	Exhibits, Financial Statement Schedules and Reports on Form 8-K	26

	Signatures	27

ITEM 6: SELECTED FINANCIAL DATA

The selected financial data presented below, as of and for the years ended December 31, 2002, 2001, 2000, 1999 and 1998 is derived from the Company’s audited financial statements. The selected financial data should be read in conjunction with the Company’s financial statements and notes thereto included elsewhere in this Form 10-K/A. The comparability of the selected financial data presented below is significantly affected by changes in accounting principles in 2000 and 2002, the merger of VDK with the Company and by the acquisitions and related financings completed by the Company during its history. See “Business—Business History,” included in the Original Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Years Ended December 31,
	2002 As Restated (1)			2001 As Restated (1)			2000			1999			1998 (2)
	(in thousands, except per share data)
Net sales	$	771,869		$	842,141		$	821,014		$	726,092		$	560,078
Gross profit		277,426			347,443			332,429			301,156			241,143
Operating income (loss)		(54,988	)		92,852			24,965			64,061			6,492
Net loss before cumulative effect of change in accounting and extrordinary loss		(284,933	)		(82,981	)		(56,091	)		(4,449	)		(59,918	)
Net loss		(513,083	)		(82,981	)		(68,252	)		(4,449	)		(69,129	)
Total assets		1,251,422			1,656,678			1,794,286			1,851,116			1,448,442
Total debt		1,086,639			1,041,901			1,105,428			1,079,220			708,092
Basic and diluted loss per share available to common stockholders:
Before cumulative effect of change in accounting and extraordinary loss	$	(3.90	)	$	(1.16	)	$	(0.81	)	$	(0.07	)	$	(1.12	)
Net loss per share available to common stockholders		(7.00	)		(1.16	)		(0.99	)		(0.07	)		(1.29	)

(1)

The selected financial data for 2002 and 2001 has been restated to reflect certain adjustments with regard to deferred taxes. See Note 2 to the Consolidated Financial Statements in Item 8 of this Form 10-K/A.

(2)

The selected financial data for 1998 has been restated for matters relating to previous management not properly recording liabilities that existed for certain trade promotion and marketing activities and other expenses and overstating certain assets. In addition, certain activities were improperly recognized as sales. See “Item 1. Significant Events and Item 3. Legal Proceedings” in the Original Form 10-K.

ITEM 7:

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

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the historical financial information included in the Consolidated Financial Statements and notes thereto. Unless otherwise noted, fiscal years in this discussion refer to the Company’s December-ending fiscal years.

Restatement

The Company reevaluated its deferred tax accounting and determined that its valuation allowance for net deferred tax assets, which had been recorded by the Company at December 31, 2002, should have been recorded at December 31, 2001, and that the Company should have provided for ongoing deferred tax liabilities subsequent to January 1, 2002 (the effective date of the adoption of FAS 142) for certain of the differences between the book and tax amortization of the Company’s goodwill and indefinite lived intangibles as defined by FAS 142. The impact of the adjustments for the year ended December 31, 2001, was to increase income tax expense and net loss by $65.4 million. For the year ended December 31, 2002, the impact was to decrease tax expense by $30.9 million, increase the expense recorded for the cumulative effect of the change in accounting principle by $60.8 million, all of which increased the net loss by $29.9 million. These adjustments do not affect previously recorded net sales, operating income (loss) or past or expected future cash tax obligations. While provision for this deferred tax liability is required by existing accounting literature, these potential taxes may only become payable in the event that the Company sells a brand at some future date for an amount in excess of both the tax basis of the brand at that time and the unexpired and unused net operating tax loss carryforwards (NOL). At December 31, 2002, the Company’s NOL was in excess of $600 million and expires at various times through the year 2022, primarily after 2017. This balance does not reflect any potential future limitations on utilization of the NOL resulting from transactions currently being contemplated by the Company, as described in Note 28 — Subsequent Events, to the Consolidated Financial Statements included in this Form 10-K/A, nor any tax planning techniques available to the Company.

Critical Accounting Policies and Estimates

The accounting policies utilized by the Company in the preparation of the Consolidated Financial Statements reflecting its financial position and results of operations necessarily require management to make estimates and use assumptions that affect the reported amounts in these financial statements and as a result they are subject to an inherent degree of uncertainty. Actual amounts may differ from those estimates under different assumptions or conditions and as additional information becomes available in future periods. The Company’s accounting policies are in accordance with U.S. generally accepted accounting principles (GAAP). The most significant accounting policies that involve a higher degree of judgment and complexity and that management believes are important to a more complete understanding of its financial position and results of operations are outlined below. Additional accounting policies that are also used in the preparation of the Company’s financial statements are outlined in the notes to the Company’s Consolidated Financial Statements included in this Form 10-K/A.

Customer returns, allowances and trade promotional costs. Trade promotions and allowances represent significant expenditures for the Company and are critical to the support of the Company’s business. Allowances and promotional expenses are given to customers to promote the sale of the Company’s products. Such costs include, for example, amounts paid to obtain favorable display positions in retailers’ stores, amounts paid to incent retailers to offer temporary price reductions in the sale of the Company’s products to consumers and amounts paid to customers for shelf space in retail stores (slotting fees). The total of all returns, allowances, price discounts and trade promotions (included in net sales) recorded during 2002 was approximately $324 million, compared to $307 million during 2001. These expenses have been reflected as a reduction of net sales in accordance with EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). Amounts for customer returns, allowances and trade promotion are calculated, using estimated performance for specific events and recorded when the product is sold or in the period during which the promotions occur, depending on the nature of the allowance and event. Settlement of these liabilities typically occurs in subsequent periods through payment to a customer or deduction taken by a customer from amounts otherwise due to the Company. As a result, the amounts are dependent on the relative success of the events and the actions and level of deductions taken by our customers for amounts they determine are due to them. Final resolution of amounts appropriately deducted by customers may take extended periods of time.

Consumer coupons. Costs associated with the redemption of consumer coupons are recorded at the later of the time coupons are circulated or the related products are sold by the Company, and are reflected as a reduction of net sales. The total cost for redemption of consumer coupons was approximately $11.2 million in 2002, compared to approximately $14.2 million in 2001. The Company’s liability for coupon redemption costs at the end of a period is based upon redemption estimates using historical trends experienced by the Company. Costs associated with the production and insertion of the Company’s consumer coupons are recorded as a component of consumer promotion expense.

Inventories are valued at the lower of cost or market value and have been reduced by an estimated allowance for excess, obsolete and unsaleable inventories. The estimate is based on managements’ review of inventories on hand and its age, compared to estimated future usage and sales.

Goodwill, intangible and other long-lived assets. Goodwill and other intangible assets are accounted for in accordance with Statement of Financial Accounting Standards No. 142 (“FAS 142”), Goodwill and Other Intangible Assets. FAS 142 requires the cessation of amortization of goodwill and other indefinite-lived intangibles. The Company performs annual impairment tests for these assets as well as interim impairment tests in the event of certain triggering events. At the adoption of FAS 142 on January 1, 2002, the Company determined that, in addition to goodwill, the Company’s tradenames are also indefinite-lived assets. The remaining intangible assets consisting primarily of formulas and recipes, and customer lists are classified as finite-lived assets and are being amortized over their remaining useful lives. The Company periodically assesses the net realizable value of its other noncurrent assets, including property, plant and equipment, and recognizes an impairment if the recorded value of these assets exceeds the undiscounted cash flows expected in future periods.

Derivative financial instruments have been used by the Company, as required by its senior secured debt agreement, to limit its exposure to significant increases in interest rates. The fair value of these derivatives, representing a liability to the Company of $15.8 million, based on price quotations from JPMorgan Chase Bank, the counterparty to the arrangements, has been reflected as a liability in the Company’s balance sheet as of December 31, 2002. Changes in interest rates subsequent to December 31, 2002 will impact the recorded amounts of liability and expense in future periods and will also impact the amount of this liability which will ultimately be required to be paid in cash.

Deferred tax assets have been recorded by the Company in prior periods, which primarily represent net operating loss carry forwards. Income tax expense primarily includes non-cash tax adjustments resulting from the Company establishing a valuation allowance against its deferred tax assets, as the Company is no longer able to reasonably estimate the period of reversal for deferred tax liabilities relating to certain goodwill and indefinite lived intangible assets as the result of the adoption of FAS 142. As a result, the Company may not rely on the reversal, if any, of deferred tax liabilities associated with these assets to realize the deferred tax assets. Due to cumulative losses as of December 31, 2001, the Company could not rely, for accounting purposes, on forecasts of future earnings as a means to realize the deferred tax assets. Accordingly, the Company has determined that, pursuant to the provisions of FAS 109, deferred tax valuation allowances are required on those deferred tax assets. The Company also continues to record deferred tax liabilities for the differences between the book and tax bases of certain goodwill and indefinite lived intangible assets.

Revenue recognition. Revenue is recognized upon shipment of product and transfer of title to customers.

Accounting Changes

Effective as of January 1, 2000, the Company adopted the consensus reached in EITF 00-14, Accounting for Certain Sales Incentives. This consensus had the effect of accelerating the recognition of certain marketing expenses as well as requiring that certain items previously classified as distribution, promotion and marketing expenses now be classified as reductions of revenue. As a result of this change in accounting, the cumulative after tax effect of the change on prior years (to December 31, 1999) of $12,161,000 has been recognized as an expense in the consolidated statement of operations for the year ended December 31, 2000.

Effective January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and recorded a cumulative adjustment from adoption, net of tax, of $2,277,000 in Other Comprehensive Loss. See Note 17 to the Consolidated Financial Statements included in this Form 10-K/A.

Effective January 1, 2002, the Company adopted the consensus reached in EITF 00-25 and 01-09, which required that certain items, which had been classified as trade promotions expense in prior years, be reclassified as reductions of net sales. Adoption of the consensus had no impact on cash flow or the reported amounts of operating income for any period. Following this change, all payments made by the Company to direct and indirect customers to promote and facilitate the sale of the Company’s products are reflected as reductions of net sales. Prior year amounts in the accompanying consolidated statement of operations have been reclassified to conform with this new presentation.

	Net Sales After Reclassification (in thousands)
	2001		2000
Quarter ending:
March 31	$	230,068	$	227,607
June 30		181,607		172,915
September 30		200,838		197,541
December 31		229,628		222,951

Calendar Year	$	842,141	$	821,014

On January 1, 2002, the Company adopted FAS 142. FAS 142 generally requires that (1) recorded amounts of goodwill no longer be amortized, on a prospective basis, (2) the amount of goodwill recorded on the balance sheet of the Company be evaluated annually for impairment using a two-step method, (3) other identifiable intangible assets be categorized as to whether they have indefinite or finite lives, (4) intangibles having indefinite lives no longer be amortized on a prospective basis, and (5) the amount of intangibles having indefinite lives on the balance sheet of the Company be evaluated annually for impairment using a one-step method.

During the first quarter of 2002, the Company determined that all identifiable intangibles have definite lives with the exception of all of the Company’s tradenames. Amortization of the tradenames ceased January 1, 2002 and the carrying values were tested for impairment as of that date using a one-step test comparing the fair value of the asset to its net carrying value. The Company determined the fair value of the tradenames based on valuations performed by outside parties using the excess earnings approach. The fair value of all tradenames exceeded their net carrying value except for the Lender’s and Celeste tradenames. The net carrying value for these two tradenames was in excess of their fair value by $155.6 million, which was recorded, net of tax of $12.0 million, as a cumulative effect of a change in accounting principle.

The two-step method used to evaluate recorded amounts of goodwill for possible impairment involves comparing the total fair value of each reporting unit, as defined, to the recorded book value of the reporting unit. If the book value of the reporting unit exceeds the fair value of the reporting unit, a second step is required. The second step involves comparing the fair value of the reporting unit less the fair value of all identifiable net assets that exist (the “residual”) to the book value of goodwill. Where the residual is less than the book value of goodwill for the reporting unit, an adjustment of the book value down to the residual is required.

Results of the first step of the Company’s impairment test of goodwill, completed during the second quarter of 2002, indicated goodwill impairment in two of the Company’s reporting units. Independent valuations using the discounted cash flow and market comparable approaches indicated the fair value of each reporting unit exceeded the book value for each reporting unit except for the Company’s seafood and Chef’s Choice businesses, primarily in the retail segment, due principally to changes in business conditions and performance relative to expectations at the time of acquisition. Based on the results of the first step, the Company recorded an estimated goodwill impairment charge, as of January 1, 2002, for the seafood and Chef’s Choice reporting units, in the statement of operations as a cumulative effect of a change in accounting principle. The results from the first quarter of 2002 were restated in the second quarter of 2002 to reflect this estimated charge.

The Company completed the second step of its goodwill impairment test for the seafood and Chef’s Choice reporting units during the fourth quarter of 2002. The results of the second step indicated that the book value of goodwill for the seafood and Chef’s Choice reporting units, as of January 1, 2002, exceeded the fair value of those two reporting units, less the fair value of all identifiable net assets, by $94.1 million. Consequently, the Company has recorded an additional charge in the statement of operations as a cumulative effect of a change in accounting principle. The final goodwill impairment charge of $94.1 million, net of tax of $9.5 million, has been recorded in the statement of operations as a cumulative effect of a change in accounting principle effective as of January 1, 2002. The results from the first quarter of 2002, previously restated in the Company’s Form 10-Q for the quarter ended June 30, 2002, are further restated below, in accordance with the transitional provision of FAS 142, to reflect the final goodwill impairment charge associated with the adoption of FAS 142.

The adoption of FAS 142 resulted in total impairment charges to goodwill and tradenames of $249.7 million, which has been recorded, net of tax of $21.5 million, as a cumulative effect of a change in accounting principle, effective as of January 1, 2002.

The following table summarizes the restated results for the quarter ended March 31, 2002 (in thousands except per share amounts):

	As Reported			Transitional Restatement in 2002 (1)			As Restated (2)
Net loss:
Net loss before cumulative effect of change in accounting principle	$	(12,924	)	$	(12,924	)	$	(125,691	)
Cumulative effect of change in accounting, net of tax		(94,893	)		(167,379	)		(228,150	)

Net loss		(107,817	)		(180,303	)		(353,841	)
Preferred dividends		(331	)		(331	)		(331	)

Net loss available to common stockholders	$	(108,148	)	$	(180,634	)	$	(354,172	)

Basic and diluted loss per share available to common stockholders:
Loss before cumulative effect of change in accounting	$	(0.19	)	$	(0.19	)	$	(1.76	)
Cumulative effect of change in accounting, net of tax		(1.32	)		(2.33	)		(3.18	)

Net loss available to common stockholders	$	(1.51	)	$	(2.52	)	$	(4.94	)

(1)

The selected financial data reflects the restated amounts recorded pursuant to the transitional adoption provisions of FAS 142, as previously reported.

(2)

The selected financial data reflects the additional changes due to the restatement for matters relating to the accounting for deferred taxes. See Note 2 to the Consolidated Financial Statements.

Effective January 1, 2002, with the adoption of FAS 142, the Company reclassified $1.6 million of other intangibles to goodwill to comply with new intangible asset classification guidelines in FAS 142.

The following schedule shows net loss and net loss per share adjusted to exclude the Company’s amortization expense related to goodwill and indefinite lived intangibles (net of tax effects) as if such amortization expense had been discontinued in 2001 and 2000 (in thousands):

	Fiscal year ended December 31,
	2002			2001			2000
	(As restated)			(As restated)
Reported net loss available to common stockholders before cumulative effect of change in accounting	$	(286,286	)	$	(84,234	)	$	(56,424	)
Add back:
Goodwill amortization		—			20,074			12,991
Intangible amortization		—			13,265			8,490

Adjusted net loss available to common stockholders	$	(286,286	)	$	(50,895	)	$	(34,944	)

Basic and diluted income (loss) per share available to common stockholders:
Reported net loss	$	(3.90	)	$	(1.16	)	$	(0.81	)
Add back:
Goodwill amortization		—			0.28			0.19
Intangible amortization		—			0.18			0.12

Adjusted net loss	$	(3.90	)	$	(0.70	)	$	(0.50	)

Results of Operations

All data for 2002 and 2001 has been presented on a restated basis. See Note 2 to the Consolidated Financial Statements included in this Form 10-K/A for discussion on the restatement.

The following tables set forth the results of operations for the periods indicated as well as line items as a percentage of net sales. Certain amounts from prior years have been reclassified to conform to the Company’s current year presentation.

Consolidated Statements of Operations

(in thousands except per share amounts)

	Years Ended December 31,
	2002			2001			2000
	(As restated)			(As restated)
Net sales	$	771,869		$	842,141		$	821,014
Cost of goods sold		(494,443	)		(494,698	)		(488,585	)

Gross profit		277,426			347,443			332,429

Brokerage, distribution and marketing expenses:
Brokerage and distribution		(117,050	)		(117,739	)		(117,654	)
Consumer marketing		(25,709	)		(37,213	)		(37,654	)

Total brokerage, distribution and marketing expenses		(142,759	)		(154,952	)		(155,308	)
Amortization of intangibles		(10,348	)		(44,670	)		(44,819	)
Selling, general and administrative expenses		(58,991	)		(58,035	)		(50,080	)
Goodwill and tradename impairment charges		(67,091	)		—			—
Plant closure and asset impairment charges		(53,225	)		—			—
Other financial, legal and accounting income (expense)		—			3,789			(47,352	)
Columbus consolidation costs		—			(723	)		(6,868	)
Transition expenses		—			—			(3,037	)

Total operating expenses		(332,414	)		(254,591	)		(307,464	)

Operating (loss) income		(54,988	)		92,852			24,965
Interest and financing expenses:
Interest expense, net		(92,531	)		(103,150	)		(109,890	)
Adjustment of value of derivatives		(12,050	)		(10,641	)		—
Issuance of warrants		(1,779	)		—			—
Amortization of deferred financing expense		(7,667	)		(3,468	)		(3,016	)

Total interest and financing expenses		(114,027	)		(117,259	)		(112,906	)
Loss before income taxes and cumulative effect of change in accounting		(169,015	)		(24,407	)		(87,941	)
Income tax (expense) benefit		(115,918	)		(58,574	)		31,850

Net loss before cumulative effect of change in accounting		(284,933	)		(82,981	)		(56,091	)
Cumulative effect of change in accounting, net of tax of $21,466, $0 and $5,722, respectively		(228,150	)		—			(12,161	)

Net loss		(513,083	)		(82,981	)		(68,252	)
Preferred dividends		(1,353	)		(1,253	)		(333	)

Net loss available to common stockholders	$	(514,436	)	$	(84,234	)	$	(68,585	)

Loss per share available to common stockholders	$	(7.00	)	$	(1.16	)	$	(0.99	)

Consolidated Statements of Operations

(as a percentage of Net Sales)

	Years Ended December 31,
	2002		2001		2000
	(As restated)		(As restated)
Net sales	100.0	%	100.0	%	100.0	%
Cost of goods sold	(64.1	)	(58.8	)	(59.5	)

Gross profit	35.9		41.2		40.5

Brokerage distribution and marketing expenses:
Brokerage and distribution	(15.2	)	(14.0	)	(14.3	)
Consumer marketing	(3.3	)	(4.4	)	(4.6	)

Total brokerage, distribution and marketing expenses	(18.5	)	(18.4	)	(18.9	)
Amortization of goodwill and other intangibles	(1.3	)	(5.3	)	(5.5	)
Selling, general and administrative expenses	(7.6	)	(6.9	)	(6.1	)
Goodwill and tradename impairment charges	(8.7	)	—		—
Plant closure and asset impairment charges	(6.9	)	—		—
Other financial, legal and accounting income (expense)	—		0.5		(5.8	)
Columbus consolidation cost	—		(0.1	)	(0.8	)
Transition expenses	—		—		(0.4	)

Total operating expenses	(43.0	)	(30.2	)	(37.5	)

Operating (loss) income	(7.1	)	11.0		3.0
Interest and financing expenses:
Interest expense, net	(12.0	)	(12.2	)	(13.3	)
Adjustment of value of derivatives	(1.6	)	(1.3	)	—
Issuance of warrants	(0.2	)	—		—
Amortization of deferred financing expense	(1.0	)	(0.4	)	(0.4	)

Total interest and financing expenses	(14.8	)	(13.9	)	(13.7	)

Loss before income taxes and cumulative effect of change in accounting	(21.9	)	(2.9	)	(10.7	)
Income tax (expense) benefit	(15.0	)	(7.0	)	3.9

Net loss before cumulative effect of change in accounting	(36.9	)	(9.9	)	(6.8	)
Cumulative effect of change in accounting, net of tax	(29.6	)	—		(1.5	)

Net loss	(66.5	)%	(9.9	)%	(8.3	)%

In 2002 and 2001, the Company managed its business in three operating segments, which are based on the distribution of its products: Retail, Food Service and Other distribution channels, as described in Note 25 to the Consolidated Financial Statements included in this Form 10-K/A. This organization structure was put in place following the Company’s consolidation of administration in St. Louis in late 2000. The following discussion and analysis of the results of operations, comparing 2002 to 2001 and 2001 to 2000, is based on those segments and that organization structure where appropriate. Amounts for calendar 2000 have been recast from the previously reported segmentation for comparative purposes. References in the discussion to market, category or segment sales, market shares percentages and market positions reflect United States retail supermarket information for the 52-week period ending in late December 2002, 2001 and 2000, as gathered by Information Resources Incorporated (“IRI”). It should be noted that beginning in fiscal 2001, this IRI information no longer includes sales by Wal-Mart and its affiliates who accounted for approximately 18% and 14% of the Company’s net sales in 2002 and 2001, respectively.

Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

Results for the year ended December 31, 2002 include pretax adjustments of $20.1 million recorded during the first quarter of 2002 principally from changes in estimates. These adjustments consisted primarily of net sales adjustments of $17.7 million, principally for trade promotion costs, along with a charge to cost of sales of approximately $1 million for unresolved inventory disputes and $1.1 million charged to selling, general and administrative costs, principally associated with an executive’s severance. The trade promotion adjustments were a result of updated evaluations of the Company’s reserves and assumptions for such costs. Settlement of trade promotion costs has historically occurred when a customer deducts, from amounts otherwise due to the Company, amounts the customer determines are due to it. Final resolution of the amounts appropriately deducted has taken extended periods of time. The Company is in the process of changing its promotion payment strategies to reduce both the amounts that are settled through subsequent deduction by its customers and the resulting estimation required in establishing appropriate reserves for incurred costs.

Operating results by segment were as follows (in thousands):

	Years Ended December 31
	2002			2001
Net sales:
Retail	$	604,082		$	675,890
Food Service		60,571			60,741
Other		107,216			105,510

Total	$	771,869		$	842,141

Segment contribution and operating income:
Retail	$	171,533		$	211,926
Food Service		20,936			23,875
Other		26,572			29,506

Segment contribution		219,041			265,307
Fixed manufacturing costs		(84,374	)		(72,816	)
Amortization of goodwill and other intangibles		(10,348	)		(44,670	)
Selling, general and administrative expenses		(58,991	)		(58,035	)
Goodwill and tradename impairment charges		(67,091	)		—
Plant closure and asset impairment charges		(53,225	)		—
Other financial, legal, accounting, consolidation items, net		—			3,066

Operating (loss) income	$	(54,988	)	$	92,852

Net Sales in 2002 decreased $70.3 million, or 8.3% from 2001, as a result of increased trade spending levels, the first quarter adjustments discussed above and unfavorable mix of products and distribution channel sales as a result of higher sales of lower price products. Net sales in 2002 as compared to 2001 were impacted by retail volume decreases of approximately 2.4% in seafood products, bagels, frozen pizza, skillet meals and syrups, which were offset in part by increased volume sales of frozen breakfast and baking products. The seafood sales decline resulted from stronger than

expected industry sales of private label shrimp, which reduced sales and consumption of traditional fish products during the Lent season. Shrimp prices were significantly below historical levels. These seafood declines in the Mrs. Paul’s brand were offset by sales of its new shrimp bowls meals, resulting in no volume change for the brand. However, the Company reduced its seafood consumer marketing and advertising in 2002 and increased trade spending, primarily to place and promote the new shrimp bowls, which lowered net sales. Lender’s bagel volume was down 12.4% as increased sales of refrigerated bagels were more than offset by lower frozen and fresh sales. The decline in frozen pizza sales is due to the Company not offering the magnitude of certain promotional events in 2002, as compared to 2001. Skillet meals net sales were lower due to significant market segment contraction as a result of increased competition from other meal segments. Sales of syrup products decreased from the prior year on slightly lower volume, unfavorable product mix and increased trade expenses, which are reflected in net sales. Retail frozen breakfast products volume increased 7.8% primarily due to increased pancake and waffle sales and favorable product pricing in comparison to major competitors. Duncan Hines volumes increased 7.5%, however net sales dollars were relatively flat due to product mix and increased promotional costs.

Food service net sales decreased $0.2 million from prior year levels primarily as a result of a decline in sales of bagel products offset in part by increased sales of frozen breakfast products. Net sales in other distribution channels increased $1.7 million, primarily due to increased sales of baking and syrup products in drug, discount, and convenience stores and increased private label seafood and bagel sales. This was offset in part by lower volume sales of higher than average per unit seafood products in club stores, principally due to distribution losses.

Gross Profit decreased $70.0 million or 20.2% to $277.4 million in 2002 from $347.4 million in 2001. In addition to the previously described first quarter adjustments, gross profit in 2002 as compared to 2001 was impacted by the decline in net sales described above. In addition, gross profit was impacted by a shift in the mix of sales to lower margin products, increased inventory obsolescence costs and additional depreciation expenses associated with capital expenditures, offset in part by reduced costs in syrup production as production was moved from contract manufacturers to a Company owned facility, reduced overall raw materials prices and reduced manufacturing costs as a result of closing the West Seneca facility. The Company recorded expenses of $10.8 million in 2002 for excess and obsolete inventory, as compared to $2.9 million in 2001. These charges were recorded primarily in the third and fourth quarters, due to inventory which had become aged, primarily due to certain distribution losses in seafood and declining sales of certain Chef’s Choice products, as well as the Company’s transition plan to reduce operating complexity, reduce inventories and eliminate a significant number of low volume product offerings. Depreciation expense in 2002 increased to $28.0 million, an increase of approximately $1.3 million over 2001, primarily due to capital expenditures. The cost of raw materials was lower with price decreases in meats, dairy, vegetables, bread, corrugate packaging materials and significant cost savings on purchases of seafood and shrimp raw materials, offset in part by higher costs of flour, oils and shortening, flavorings and plastic packaging materials. The 2001 results included one-time gains associated with the renegotiation of employee benefits at the West Seneca, New York facility, and with the termination of an unprofitable contract production agreement. Gross profit as a percentage of net sales declined from 41.2% in 2001 to 35.9% in 2002, as cost of goods sold remained relatively flat and net sales declined as described above.

Brokerage and Distribution expenses decreased $0.7 million in 2002 to $117.1 million, due to decreases in brokerage expenses of approximately $1.8 million as the Company increased the level of off-invoice trade allowances in 2002 which lowered brokerage commissions, offset in part by increased warehousing costs of $1.2 million as average inventory levels increased during 2002 as compared to 2001.

Consumer Marketing expenses, which include the costs of advertising and other events and expenses to promote the Company’s products directly with the consumer, decreased $11.5 million or 30.9% to $25.7 million in 2002 from $37.2 million in 2001. This decrease was due to the lower levels of spending in 2002 on seafood, bagel and syrup products that was redeployed to trade spending reflected in net sales.

Amortization Expense decreased $34.3 million due to the elimination of amortization of goodwill and certain other intangible assets following the adoption of FAS 142. See Note 3 to the Consolidated Financial Statements included in this Form 10-K/A.

Selling, General and Administrative expenses increased $1.0 million to $59.0 million in 2002 from $58.0 million in 2001. The increase was principally due to severance costs associated with a former executive officer, additional expense associated with an arbitration settlement and increased compensation related expenses due to increased headcount as compared to 2001. These amounts were offset in part by decreases in expenses for incentive compensation, market research and share data as the Company reduced expenditures for these items and negotiated lower rates, decreased depreciation and decreases in expenses for relocation and consulting services.

Goodwill and Tradename Impairment Charges. The Company completed its annual impairment tests for goodwill and other indefinite-lived intangible assets as of December 31, 2002. Based on the results of those tests, the Company recorded a charge of $67.1 million for goodwill and tradename impairment for three of its business units. See Note 8 the Consolidated Financial Statements included in this Form 10-K/A.

Plant Closure and Asset Impairment Charges. During the second quarter, the Company closed its West Seneca, New York, Lender’s bagel manufacturing facility and recorded charges of $32.4 million in 2002. During the fourth quarter of 2002, the Company announced its intention to close its Yuba City, California facility and recorded a charge of $6.7 million. During the fourth quarter of 2002, the Company completed a strategic assessment of its existing capacity in relation to the Company’s future operational plans. Based upon that assessment, the Company recorded a charge of approximately $14.1 million in the statement of operations for fixed assets determined to be permanently impaired. The impaired fixed assets represent a broad range of fixed assets across all business lines located at various facilities. See Note 13 to the Consolidated Financial Statements included in this Form 10-K/A.

Operating Income decreased $147.8 million in 2002 as compared to 2001. Operating income in 2002 was impacted negatively by the goodwill and tradename impairment charges and plant closure and asset impairment charges, offset in part by reduced amortization expense in 2002 resulting from the adoption of FAS 142. Excluding the impact of those items, operating income declined $61.8 million in 2002 as compared to 2001, which is primarily due to increased trade spending levels and the impact of the first quarter charge.

Interest and Financing Expenses. Net interest expense, decreased to $92.5 million in 2002 from $103.2 million in 2001 primarily due to lower interest rates on variable rate debt as compared to the prior year. This benefit was offset in part by increases in the margin that the Company pays above floating market rates pursuant to its senior secured debt agreement, as amended, and higher levels of indebtedness from the additional financing obtained in June 2002.

The benefit of lower interest rates to the Company is partially limited by the Company’s interest rate swap agreement and interest rate collar agreement. The interest rate swap agreement functions to lock the interest rate on $150 million of debt at a LIBOR rate of 6.01% plus the applicable margin paid by the Company on its senior secured debt. The interest rate collar agreement functions to lock the interest rate on $150 million of debt at a LIBOR rate of 6.5% plus the applicable margin paid by the Company on its senior secured debt when the three-month LIBOR rate is less than 4.55% or between 5.38% and 7.40%.

Net market adjustments associated with the Company’s derivative instruments, which were not effective as hedges as determined by FAS 133, resulted in $12.1 million of expense in 2002, compared to $10.6 million in 2001. See Note 17 to the Consolidated Financial Statements included in this Form 10-K/A.

During 2002, the Company expensed $1.8 million related to the value of warrants issued on May 1, 2002. See Note 10 to the Consolidated Financial Statements included in this Form 10-K/A.

Amortization of deferred financing expenses increased $4.2 million to $7.7 million in 2002, compared to $3.5 million in 2001. During the second quarter of 2002, the Company expensed approximately $1.9 million of previously deferred financing costs related to credit agreement amendments which were replaced by the June 27, 2002 amendment. During the fourth quarter, the Company expensed approximately $1.9 million of deferred financing costs related to the June 27, 2002 credit agreement amendment that was replaced by the February 21, 2003 amendment.

Income Tax Expense, as restated. The Company recorded income tax expense of $115.9 million in 2002 as compared to $58.6 million in 2001. The increase was due primarily to non-cash tax adjustments to increase the existing valuation allowance against the deferred tax assets, as the Company is no longer able to reasonably estimate the period of reversal, if any, for deferred tax liabilities related to certain goodwill and indefinite lived intangible assets as the result of the adoption of FAS 142. As a result, the Company may not rely on the reversal of deferred tax liabilities associated with these assets as a means to realize the deferred tax assets, which represent net operating loss carry forwards. Accordingly, the Company has determined that, pursuant to the provisions of FAS 109, deferred tax valuation allowances are required on those deferred tax assets. The Company continues to record deferred tax liabilities for the differences between the book and tax bases of certain goodwill and indefinite lived intangible assets. See Notes 2 and 18 to the Consolidated Financial Statements included in this Form 10-K/A.

Cumulative Effect of Change in Accounting. Effective January 1, 2002, the Company adopted FAS 142, Goodwill and Other Intangible Assets. As a result, the Company recorded a cumulative effect of a change in accounting principle of $228.2 million, net of tax in the accompanying statement of operations. See Note 3 to the Consolidated Financial Statements included in this Form 10-K/A.

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

Operating results by segment were as follows (in thousands):

	Years Ended December 31
	2001			2000
Net sales:
Retail	$	675,890		$	676,901
Food Service		60,741			58,258
Other		105,510			85,855

Total	$	842,141		$	821,014

Segment contribution and operating income:
Retail	$	211,926		$	208,957
Food Service		23,875			21,390
Other		29,506			23,829

Segment contribution		265,307			254,176
Fixed manufacturing costs		(72,816	)		(77,055	)
Amortization of goodwill and other intangibles		(44,670	)		(44,819	)
Selling, general and administrative expenses		(58,035	)		(50,080	)
Other financial, legal, accounting, consolidation and transition income (expense)		3,066			(57,257	)

Operating income	$	92,852		$	24,965

Net Sales grew $21.1 million in 2001, or 2.6% from 2000, with overall total unit volume growth of 5.2% in 2001 from prior year levels. Net sales dollars grew slower than unit volume increases due to the relatively stronger sales growth in the lower priced food service and other distribution segments. The retail segment decrease of 0.1% in net sales in 2001 resulted from a net unit volume increase of 3.8%, offset by increased trade promotions spending, primarily in seafood, frozen breakfast and bagels. Net sales and volume increased in baking mixes and frosting and breakfast products, offset primarily by lower net sales for seafood, bagels and syrups. Retail baking mixes and frosting net sales increased 11.6% from the prior year, with strong volume increases across the product lines pushing Duncan Hines from the #3 position into the #2 position in the United States baking mix and frosting category. The increases resulted from new product introduction, new consumer advertising and promotion as well as improved trade promotion planning and execution. The volume gains were offset in part by a slight shift in the Company’s mix of unit sales to lower priced products, which lowered the overall net sales per unit. Retail net sales of breakfast product rose 1.9% in 2001 from the prior year, and volumes increased 3.2%, principally due to increased pancake sales. Aunt Jemima branded products moved from #3 to #2 in volume and dollar sales in the frozen breakfast category. Retail seafood sales volume in 2001 increased 3.9% from the prior year principally due to the introduction of new shrimp products, although net sales declined 0.6% from the prior year due to increased trade promotions spending. Retail net sales of bagels declined 17.5% in 2001 from 2000, primarily due to consumption declines in the frozen category. Trade promotions spending increased for bagels in the second half of 2001 as brand support strategies changed in response to the declining volumes. Syrup and mix net sales in 2001 declined 3.1% from prior year levels, as the Company reduced certain aggressive promotional practices utilized in prior years, which had increased market shares, but which had significantly reduced the overall profitability for the syrup brands. This decline was also in line with the trends in the market category.

Total food service net sales increased 4.3% in 2001 from 2000 levels due to strong volume gains in frozen breakfast, syrup and bagels. Net sales through other distribution channels increased $19.7 million or 22.9% to $105.5 million in 2001 from $85.8 million in 2000. The increases were primarily the result of syrup and baking mix and frosting volume increases in club stores and increased export sales, along with product mix changes to relatively higher priced products.

Gross Profit increased $15.0 million or 4.5% to $347.4 million in 2001 from $332.4 million in 2000. Overall variable margins increased due to plant efficiencies. The net cost of raw materials was generally stable with costs for the increased sales of higher cost shrimp products and higher costs of cheese offset by lower sugar costs. Gross profit was favorably impacted by lower fixed manufacturing costs due to improved plant efficiencies and gains associated with the cancellation

of an unprofitable contract production agreement and the renegotiation of employee benefits at the West Seneca, New York facility, offset in part by increased consulting costs associated with obtaining the plant efficiencies. Depreciation expense of $26.7 million increased approximately $3.1 million in 2001 from 2000 amounts due to capital expenditures and a shortening of the estimated lives of certain assets associated with syrup production assets at contract manufacturing facilities, as the Company anticipates moving production to its facility in St. Elmo, Illinois.

Brokerage and Distribution expenses increased $0.1 million in 2001 to $117.7 million, but decreased to 14.0% of net sales in 2001 from 14.3% of net sales in 2000. Freight and warehousing expenses decreased on a per unit basis, as the Company continued to work to improve its distribution economics. In addition, total brokerage costs in 2001 declined from 2000 reflecting the full year effect of the Company’s consolidation to a national retail broker in the second quarter of 2000. During the second quarter of 2001, this broker filed for bankruptcy and the business was absorbed by Acosta, which the Company selected as its new national retail broker. The change in brokers did cause some temporary disruption on selected brands, but did not have a significant impact on overall sales. The change did, however, result in delays in processing customer trade promotion payments and deductions.

Consumer Marketing expenses, which include the costs of advertising and other events and expenses to promote the Company’s products directly with the consumer, were essentially unchanged in 2001 from prior year levels. Increased spending in 2001 as compared to 2000 to support bagels and baking mixes and frosting was offset by reductions in the support for syrups which had been higher in 2000, to support new product introduction.

Selling, General and Administrative expenses increased $7.9 million to $58.0 million in 2001 from $50.1 million in 2000. The increase was principally due to external consulting fees paid to support product, production and internal system initiatives along with salary, variable compensation and related costs associated with an increase in the number of corporate employees needed to support the business. Bonus expense increased approximately $3.4 million, reflecting higher payments for improved operating performance.

Other Financial, Legal and Accounting income in 2001 of $3.8 million reflects a gain related to the receipt of shares of common stock from former management, valued in excess of amounts required to be distributed, net of other related costs. The shares received and required distribution by the Company are part of the settlement reached following the investigation in 2000 and early 2001 into the Company’s accounting practices in 1998 and 1999, the resulting restatement of results for those periods, related litigation and governmental proceedings, defaults under its loan agreements, indenture and related matters. (See Part I, Item 3: Legal Proceedings in the Original Form 10-K and Note 14 to the Consolidated Financial Statements included in this Form 10-K/A.) During 2000, the Company incurred financial, legal and accounting expenses, including charges to obtain waivers of its events of default and charges related to amending its financing facilities. Such costs totaled $47.4 million in 2000. These costs included a $17.7 million non-cash charge associated with the issuance of common stock to certain holders of the Company’s senior subordinated debt.

Columbus Consolidation Costs. During the third quarter of 2000, the Company consolidated its administrative office and functions in St. Louis, Missouri and closed its office in Columbus, Ohio. Expenses totaling $0.7 million and $6.9 million in 2001 and 2000, respectively, represent amounts for the involuntary termination of approximately 50 sales, marketing, finance, information systems, purchasing and customer service employees of $2.7 million, a non-cash charge for abandoned leasehold improvements and capitalized software that will no longer be used of $3.1 million, and estimated unrecovered office lease costs after consolidation and other items of $1.8 million. All payments related to the consolidation have been made with the exception of $0.6 million, related to unused office space.

Transition Expenses. During 2000, the Company incurred approximately $3.0 million primarily related to the integration of the Chef’s Choice and Lender’s businesses and the dry grocery administrative consolidation. These expenses represent one-time costs incurred to integrate operations and acquired businesses.

Operating Income increased $67.9 million to $92.9 million in 2001 from $25.0 million in 2000. Operating income in 2000 was significantly affected by the $47.4 million of other financial, legal and accounting expenses and the Columbus consolidation costs and transition expenses. Before giving effect to other financial, legal and accounting items, Columbus consolidation costs and transition expenses, operating income increased to $89.8 million in 2001 from $82.2 million in 2000.

Interest and Financing Expenses. Interest expense, net of interest income, decreased $6.6 million in 2001 to $103.0 million from $109.6 million in 2000 as the Company benefited from lower market interest rates on its floating rate senior debt and lower outstanding balances. This benefit was offset in part by increases in the margin that the Company pays above floating market rates pursuant to its senior secured debt agreement, as amended.

collar agreement functions to lock the interest rate on $150 million of debt at a LIBOR rate of 6.5% plus the applicable margin paid by the Company on its senior secured debt when the three-month LIBOR rate is less than 4.55% or between 5.38% and 7.40%.

During 2001, in accordance with the new accounting standard applicable to derivative instruments and hedging activities, the Company recorded expense of $10.6 million as the adjustment to the value of certain of its interest rate derivative agreements which are not effective as interest rate hedges. Approximately $1.6 million of this amount was paid in cash in 2001 and the balance of approximately $9.0 million will either be paid in cash or reversed and reflected as income in future periods, depending on future changes in prevailing market interest rates and the terms of the derivatives.

Income Tax Expense, as restated. The Company recorded income tax expense in 2001 of $58.6 million as compared to a benefit of $31.9 million in 2000. The increase was due primarily to non-cash tax adjustments to establish a valuation allowance against the deferred tax assets, as the Company cannot rely, for accounting purposes, on forecasts of future earnings as a means to realize the deferred tax assets. Accordingly, the Company has determined that, pursuant to the provisions of FAS 109, deferred tax valuation allowances are required on those assets. Therefore, the Company established a valuation allowance of $66.4 million on its deferred tax assets during the fourth quarter of 2001.

Plant Closure Charges

On May 2, 2002, the Company announced its intention to close its West Seneca, New York, Lender’s bagel manufacturing facility. As a result of this decision, production at West Seneca ceased on May 31, 2002, with the formal closing on July 2, 2002. The closing resulted in the elimination of all 204 jobs. The Company anticipates annual savings of $8.0 million related to closing this facility. Impacted employees received severance pay in accordance with the Company’s policies and union agreements. The Company recorded charges of $32.4 million during 2002 in connection with the shutdown of the West Seneca facility. The non-cash portion of the charges was approximately $28.2 million and is attributable to the write-down of property, plant and equipment, with the remaining $4.2 million of cash costs related to severance and other employee related costs of $3.0 million, and other costs necessary to maintain and dispose of the facility of $1.2 million. As of December 31, 2002, the Company had paid approximately $2.9 million of severance and other employee related costs and $0.6 million of other costs for disposal of the facility. The remaining costs of $0.7 million are included in accrued expenses at December 31, 2002 and are expected to be paid in early fiscal 2003. The Company completed the sale of the West Seneca facility in December 2002, receiving net cash proceeds from the sale of approximately $2.4 million.

On October 30, 2002, the Company announced its intention to close its Yuba City, California facility where the Company manufactured specialty seafood and Chef’s Choice products. As a result of this decision, production at Yuba City facility ceased in early 2003. The closing resulted in the elimination of all 155 jobs. The Company anticipates annual savings of $4.0 million related to closing this facility. Impacted employees received severance pay in accordance with the Company’s policies. As a result the Company recorded a charge of $6.7 million during the fourth quarter of 2002. The non-cash portion of the charge of approximately $4.9 million is attributable to the write-down of property, plant and equipment. The remaining $1.8 million of cash costs is related to severance and other employee related costs of $0.9 million and other costs necessary to maintain and dispose of the facility of $0.9 million. As of December 31, 2002, the Company had not paid any cash costs related to the closing of this facility. These costs are included in accrued expenses at December 31, 2002 and the Company expects to pay a majority of the remaining costs in fiscal 2003.

Liquidity and Capital Resources

For the year ended December 31, 2002 the Company used cash of $15.9 million from operating activities compared to $89.3 million for the year ended December 31, 2001. The $105.2 million decline in cash generation primarily resulted from poorer operating performance in 2002 and a $54.9 million net swing in cash used for working capital. The Company’s operating loss of $55.0 million in 2002 included non-cash charges of $154.2 million for depreciation and amortization, goodwill and tradename impairment charges and plant closure and asset impairment charges. The 2001 operating income of $92.8 million included depreciation and amortization charges of $76.7 million. The reduction in operating income, net of the above non-cash charges, was $70.3 million. This decline was primarily due to higher trade spending in 2002 and the first quarter adjustments. The Company anticipates that operating earnings will grow in 2003 primarily as a result of improved trade spending efficiency and cost reductions, offset in part by anticipated price increases for certain raw materials and costs of fuel.

The Company used $23.1 million for working capital in 2002, as compared to the $31.8 million generated in 2001. The net swing in cash used for accounts payable of $50.3 million accounted for a majority of the change in cash used in 2002.

Accounts payable balances declined by $27.4 million as production levels in the latter part of 2002 were significantly lower than in 2001. In addition, in 2002 the Company utilized its revolving credit agreement to reduce its accounts payable balance. Reduction of accrued expenses, primarily for bonus accruals in 2002 and promotional and coupon marketing programs in 2001 was a significant use of cash in both years. Conversely, reductions in accounts receivable served as a significant source of liquidity. Looking ahead, reductions in inventory levels are expected to generate liquidity, however no significant annual changes in other working capital items is anticipated. Historical seasonal changes in working capital requirements are still to be expected.

Net cash used in investing activities for the year ended December 31, 2002 was $18.9 million compared to $24.9 million during 2001. In 2002, capital expenditures were $23.1 million, of which $8.1 million related to the Company’s St. Elmo, Illinois syrup production facility and distribution center. In 2002 the Company received proceeds of $4.2 million from the sales of assets, primarily related to its West Seneca, New York facility which was closed during the year. Capital expenditures for 2001 totaled $25.0 million, of which approximately $10 million represented an investment in the St. Elmo facility. The Company anticipates that capital expenditures for 2003 will be slightly lower than in 2002.

In light of the lower amount of cash provided by operations in 2002, on June 27, 2002, the Company secured commitments for $62.6 million, before discounts, of additional financing. The financing consisted of $37.6 million (before discount of $2.6 million) from the Company’s senior secured lenders and $25.0 million (before a cash discount of $0.75 million) from certain entities affiliated with the Company’s major shareholders. These funds were used for general operating purposes including providing working capital. At December 31, 2002, the Company’s debt principally consisted of $663.9 million of senior secured debt, $400 million of subordinated notes and the $25.0 million of senior unsecured notes. During 2002 the Company made $38.0 million in scheduled amortization payments on its senior secured debt and increased its borrowings under the revolver by $25.9 million.

The Company used the cash generated from operations in 2001 to reduce its debt. During 2001, the Company made $33.0 million in scheduled amortization payments on its senior debt and reduced its borrowings under the revolver by $32.3 million. In addition, it reduced its sales of receivables by a net $5.3 million to $33.3 million at December 31, 2001.

The Company’s principal future sources of liquidity, in addition to cash generated by operations, are its revolving credit facility under its senior secured lending agreement and its ongoing sale of receivables under its receivable sales facility.

The Company and its lenders amended the senior secured lending facility on February 26, 2002 to provide for revised financial covenants for the Company through March 31, 2003, to affirm the right of the Company to continue to sell receivables under the receivable sales agreement, and to provide flexibility for the Company to undertake a potential refinancing of its receivable sales facility. The amended covenants provided more operating latitude to the Company relative to those under which the Company operated in 2001. There was no requirement for asset sales, nor was there a penalty for the failure to sell assets. The restrictive covenants, as defined for 2002, did not permit additional indebtedness, except for nominal amounts and obligations incurred in the normal course of business, limited capital expenditures to $30.0 million, did not permit the payment of cash dividends and required the Company to maintain ratios of interest and fixed charge coverages and total and senior debt leverage.

In March 2002, the Company received a waiver of a specific technical provision of the senior secured debt agreement which would have otherwise required the Company to prepay approximately $20 million of this facility.

As discussed above, on June 27, 2002, the Company secured commitments for $62.6 million of additional financing and further amended the senior secured debt agreement. The amendment to the senior secured debt agreement revised certain of the financial covenants for future periods through September 30, 2003, and provided for the exclusion of fees and expenses associated with the amendment for purposes of the financial covenant calculations at June 30, 2002 and future periods. The amendment also provided for an excess leverage fee of 1.5% of average borrowings under the term loans and revolving credit facility for the period September 30, 2002 through September 30, 2003 and additional pay-in-kind interest of 1% per year on the average borrowings under the term loans and revolving credit facility from the date of the amendment until the date net cash proceeds of $200 million are received, in each case, payable only in the event the Company did not realize net cash proceeds of $200 million from the sale of assets prior to September 30, 2003. The amendment also reduced the maximum amount of receivables subject to sale under the receivable sales agreement from $42.0 million to $30.0 million.

At December 31, 2002, the Company was not in compliance with certain financial covenants of its senior secured debt agreement.

On February 21, 2003 the Senior Secured Debt Facility was further amended. The amendment included provisions that:

•

further amended the financial covenants for periods through September 30, 2004, which amended or established covenants related to operating performance and certain expense levels, reduced the allowable capital expenditures for 2003 to $20 million and eliminated the financial covenants associated with interest and fixed charge coverage and total and senior debt leverage;

•

waived certain existing defaults of financial covenants;

•

affirmed the ability of the Company to continue to sell accounts receivable up to a maximum of $30 million through September 30, 2003;

•

increased the interest rate spread on borrowings made pursuant to the facility by 0.75%, until such time as the Company has received at least $275.0 million of net cash proceeds from the sale of assets, at which time the increase will be reduced to 0.50%;

•

provided for an excess leverage fee of 3.50% of the aggregate amount of term loan and revolving credit facility borrowings outstanding on the amendment date. Such fee is to be paid out of net cash proceeds from the sales of assets and will not be required if the Company receives net cash proceeds of at least $100.0 million by June 30, 2003 and an additional $125.0 million by September 30, 2003, or failing to meet the June 30, 2003 requirement, if aggregate net cash proceeds of $325.0 million are received by September 30, 2003;

•

provided for an additional fee of 1.75% of the average term loan and revolving credit facility borrowings from the amendment date through February 10, 2004, if the Company has not received an aggregate of $325.0 million from the sale of assets by March 31, 2004;

•

provided for the exclusion of certain expenses, not to exceed $18 million, recorded by the Company in the fourth quarter of 2002 for purposes of the financial covenants at December 31, 2002.

With the waiver and amendment of the senior secured debt agreement on February 21, 2003, the Company was in compliance with the senior secured debt agreement, as amended, and anticipates remaining in compliance throughout fiscal 2003.

During 2002, the Company engaged Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. as joint financial advisors to assist it in reviewing a range of strategic alternatives, including the sale of one or more of the Company’s lines of business, with the net cash proceeds from any such sale being used to repay senior secured debt. J.P. Morgan Securities Inc. is an affiliate of JP Morgan Chase Bank, Administrative Agent and lead Lender under the Company’s senior secured debt agreements. The focus of the divestiture process has been on the Company’s frozen foods businesses, including Van de Kamp’s and Mrs. Paul’s frozen seafood, Aunt Jemima frozen breakfast, Celeste frozen pizza and Chef’s Choice frozen skillet meals. The divestiture process is proceeding according to plan. The Company is in the process of receiving and evaluating final bids for the various frozen foods businesses, and expects to complete one or more asset sales in the near future. Due to the uncertainty inherent in the divestiture process, the Company cannot assure that it will be able to reach final agreements to sell one or more of its lines of business, nor can it guarantee that cash proceeds from the asset sales, if they were to occur, would be sufficient to meet all required debt repayments. Also see Notes 1 and 10 to the Consolidated Financial Statements included in this Form 10-K/A.

The Company was helped by the declining interest rate environment in 2002. Because of the structure of its interest rate hedges, the Company receives a portion of the benefit from declining interest rates and is only subject to a portion of the effect of interest rate increases. Cash interest expense excluding bank fees in 2002 fell 6.7 percent to $94.1 million as compared to $100.9 million in 2001.

The second major source of effective financing for the Company is its receivable sales facility. In April 2000, the Company entered into an agreement to sell, on a periodic basis, specified accounts receivable in amounts of up to $60 million. The incremental liquidity provided by this receivable sales facility was required to deal with the extraordinary costs resulting from the restatements. The facility has subsequently been amended to reduce the maximum amount of receivable sales to $30 million and currently extends to September 30, 2003. Under terms of the receivable sales agreement, receivables are sold at a discount that effectively yields an interest rate to the purchaser of prime plus 2.5% to 3.0%. The Company sells receivables on a weekly or twice weekly basis and generates the ability to sell additional receivables as previously sold receivables are collected. As such, the receivables sale facility effectively acts in a manner similar to a secured revolving credit facility, although it is reflected on the balance sheet as a reduction in accounts receivable and not

as debt, since the credit risk associated with the collection of accounts receivable sold has been transferred to the purchaser. Pursuant to terms of the February 21, 2003 amendment to the senior secured debt facility, the first $25.0 million of proceeds from sales of assets or businesses in excess of $200.0 million can be retained by the Company to eliminate the liquidity provided by sales of receivables pursuant to this agreement. During 2002, the Company reduced the net amounts sold under the receivable sales facility by $18.5 million dollars. Also see Note 21 to the Consolidated Financial Statements included in this Form 10-K/A.

As of March 17, 2003 the Company has $19.4 million available for borrowings under its revolving credit agreement and has sold a net $15.9 million of accounts receivable.

The Company remains highly leveraged. At March 17, 2003, the Company had outstanding approximately $1.08 billion in aggregate principal indebtedness for borrowed money. The degree to which the Company is leveraged results in significant cash interest expense and principal repayment obligations and such interest expense may increase with respect to its senior secured credit facilities based on changes in prevailing interest rates. This leverage may, among other things, affect the ability of the Company to obtain additional financing, or adjust to changing market conditions. Absent the previously noted waivers and amendments to the Company’s senior secured debt agreement and the additional financing obtained in 2002, the Company would not have been able to remain in compliance with provisions of its debt agreements or fund its debt service obligations.

Based on the Company’s plans, management believes that cash generated from operations as well as cash available under its revolving credit agreement and its receivable sales facility will be adequate in 2003 to fund its operating and capital expenditure requirements and its debt service obligations. The Company’s ability to access its available liquidity under the revolver and receivable sale facility are dependent on the Company’s continued compliance with the covenants in the senior secured debt agreement. Demand for the food products that the Company sells is historically stable, and the Company believes that it will grow its operating earnings as costs continue to be reduced as a result of the 2002 plant closings and from future operating efficiencies, as well as from improvements in its trade spending efficiency, offset in part by increased prices for certain raw materials commodities and fuel costs in 2003. Capital expenditures are anticipated to decline from 2002 levels, and the Company expects overall working capital requirements to decline. Even with the expected continued favorable market interest rates, cash interest expense is likely to remain about flat as debt amortization payments continue to reduce debt, offset by increases in the Company’s effective interest rates due to the higher interest rate spread paid by the Company as a result of the February 21, 2003 amendment to the senior secured debt agreement. Cash generated from asset sales will be used to pay down senior secured debt.

Also see Note 28 to the Consolidated Financial Statements included in this Form 10-K/A.

Commitments and Contractual Obligations

A summary of the non-cancelable contractual obligations of the Company as of December 31, 2002 is as follows (in thousands):

	Payments Due by period
	Total		Less than 1 Year		1-3 years		4-5 years		After 5 years
Contractual Obligations:
Long-Term Debt at face value (1)	$	1,088,860	$	43,150	$	230,007	$	615,703	$	200,000
Capital Lease Obligations		3,475		368		736		800		1,571
Operating Leases		14,960		2,222		3,614		3,154		5,970
Derivative Instruments		15,822		9,428		6,394		—		—
Unconditional Purchase Obligations		67,839		67,839		—		—		—
Accounts payable, accrued expenses and other long-term obligations		105,603		104,830		240		115		418
Other		7,014		5,805		1,209		—		—

Contractual Cash Obligations		1,303,573		233,642		242,200		619,772		207,959
Less Amounts Reflected on the December 31, 2002 Balance Sheet		1,212,118		157,517		236,898		616,204		201,499

Contractual Obligations not Reflected on the December 31, 2002 Balance Sheet	$	91,455	$	76,125	$	5,302	$	3,568	$	6,460

(1)

Long-Term Debt at face value includes scheduled principal repayments and excludes interest payments.

Contingencies

See “Item 3. Legal Proceedings,” in the Original Form 10-K which is incorporated herein by reference.

Interest Rate Agreements

In accordance with the senior bank facilities, the Company was required to enter into interest rate protection agreements to the extent necessary to provide that, when combined with the Company’s senior subordinated notes, at least 50% of the Company’s aggregate indebtedness is subject to either a fixed interest rate or interest rate protection agreements.

At December 31, 2002, the Company was party to two interest rate agreements. The counterparty to each of the agreements is JP Morgan Chase Bank. On March 17, 1998, the Company entered into a three-year interest rate swap agreement (the “Swap”) with a notional principal amount of $150.0 million, which granted the counterparty the option to renew the agreement for one additional year. The rate is set quarterly, and was last reset on December 17, 2002, prior to expiration of the agreement on March 17, 2003, resulting in a net liability to the Company of 4.6% for the following quarter, which required a payment of $1.7 million on March 17, 2003. On November 30, 1998, the Company amended the Swap whereby the counterparty received the option to further extend the termination date an additional year to March 17, 2003 and the applicable rate was decreased from 5.81% to 5.37%. On April 28, 2000, the Company further amended the Swap whereby the applicable rate was increased from 5.37% to 6.01%. Under the Swap, the Company would receive payments from the counterparty if the three-month LIBOR rate exceeds 6.01% and make payments to the counterparty if the three-month LIBOR rate is less than 6.01%. On March 15, 2001, the counterparty exercised its option to extend the term of the Swap to March 17, 2003.

On April 13, 1999, the Company entered into a bond fixed to floating interest rate collar agreement, which was amended on April 28, 2000 (the “Bond Swap”), with a notional principal amount of $200.0 million. The Bond Swap expired on July 1, 2002.

on February 18, 2003, resulting in a net liability to the Company of 5.2% for the following quarter which will require a payment of $1.9 million on May 16, 2003. Under the Collar, the Company would receive payments from the counterparty if the three-month LIBOR rate is between 6.50% and 7.50% or exceeds 8.25%. The Company would make payments if the three-month LIBOR rate is less than 4.95%.

During 2002, the Company made net payments under interest rate agreements aggregating $13.2 million. During 2001, the Company made net payments of $3.9 million and in 2000 received net payments of $0.9 million.

Risks associated with the interest rate agreements include those associated with changes in market value and interest rates. At December 31, 2002, the fair value of the Company’s interest rate agreements was a liability of $15.8 million.

Impact of New Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“FAS 146”). FAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force has set forth. The scope of FAS 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. FAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company will account for any divestiture activities in fiscal 2003 or future periods in accordance with FAS 146.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure (“FAS 148”). FAS 148 amends SFAS No. 123, Accounting for Stock-Based Compensation (“FAS 123”), to provide alternative methods of transition when an entity changes from the intrinsic value method to the fair-value method of accounting for stock-based employee compensation. FAS 148 amends the disclosure requirements of FAS 123 to require more prominent and more frequent disclosure about the effects of stock based compensation by requiring pro forma data to be presented more prominently and in a more user-friendly format in the footnotes to the financial statements. In addition, FAS 148 requires that the information be included in interim as well as annual financial statements. The transition guidance and annual disclosure provisions of FAS 148 are effective for fiscal years ending after December 15, 2002. The Company intends to continue accounting for stock-based employee compensation using the intrinsic value method and does not believe FAS 148 will have a material impact on the Company’s financial position and results of operations, apart from the additional disclosure requirements of FAS 148.

In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and Interpretation of FASB Statements Nos. 5, 57 and 107 and recession of FASB Interpretation No. 34. FIN 45 requires: (1) the guarantor of debt to recognize a liability, at the inception of the guarantee, for the fair value of the obligation undertaken in issuing this guarantee, (2) indirect guarantees of debt to be recognized in the financial statements of the guarantor and (3) the guarantor to disclose the background and nature of the guarantee, the maximum potential amount to be paid under the guarantee, the carrying value of the liability associated with the guarantee and any recourse of the guarantor to recover amounts paid under the guarantee from third parties. FIN 45 rescinds all the provisions of FIN 34, Disclosure of Indirect Guarantees of Indebtedness of Others; as it has been incorporated into the provisions of FIN 45. The provisions of FIN 45 are effective for all guarantees issued or modified subsequent to December 31, 2002. The disclosure requirements of FIN 45 are effective for the financial statements of interim and annual periods ending after December 15, 2002. The Company does not have any significant commitments within the scope of FIN 45, except as disclosed in the footnotes to the Consolidated Financial Statements included in this Form 10-K/A.

Subsequent Events

In February 2003, the Company amended its amended and restated senior secured credit agreement dated November 1, 1999 (as amended, supplemented or otherwise modified from time to time, the “Senior Secured Debt Facility”) to provide (1) an excess leverage fee of 3.5% of the aggregate amount of the term loan borrowings outstanding and the revolving credit facility on the amendment date. Such fee will not be required if the Company receives net cash proceeds from the sale of assets of at least $100.0 million by June 30, 2003, and an additional $125.0 million by September 30, 2003, or failing to meet the June 30, 2003 requirement, if aggregate net cash proceeds of $325.0 million are received by September 30, 2003, (2) an asset sale fee of 1.75% of the average term loan borrowings outstanding and the revolving credit facility from the amendment date through February 10, 2004, if the Company has not received an aggregate of $325.0 million

from the sale of assets by March 31, 2004, and (3) that any excess leverage or asset sale fees that become payable will be paid at the earlier of certain events of default, the time of sale of assets, or on June 30, 2005. As of June 30, 2003, the Company had not received any net cash proceeds from the sale of assets. Since the Company had not yet met the requirements that would allow the Company to avoid paying these fees, the potential fees are being accrued over the remaining life of the Senior Secured Debt Facility as excess leverage fees in interest and financing expenses.

In April 2003, the Company announced that it had restructured its corporate organization and reduced its corporate staff by approximately 75 positions through terminations and the elimination of open positions. Affected employees will receive severance pay in accordance with the Company’s policies. In addition, retention bonuses will be awarded to certain key employees who remain with the Company through June 1, 2004. The Company expects the restructuring and staff reductions to result in a charge of approximately $7.0 million over future quarters and estimates that the cash impact in 2003 will be approximately $5.0 million.

At the Company’s May 6, 2003 Annual Meeting of Stockholders, all nominees for the Board of Directors were elected, authorization to grant the Board of Directors the authority to effect a reverse stock split at one of three ratios as described in the proxy was approved and the proposed amendment to the Company’s 2000 Equity Incentive Plan to increase the number of shares of common stock for issuance under the Plan and to increase the number of shares that may be granted to any participant in any one calendar year was approved.

In May 2003, the Company’s production facility in Jackson, Tennessee, was damaged by a tornado. The damage is covered by insurance and has not resulted in any significant impact on shipments, customer service or production.

In July 2003, the Company announced that it was undertaking a comprehensive financial restructuring (the “Restructuring”), designed to reduce the Company’s outstanding indebtedness, strengthen its balance sheet and improve its liquidity. As part of the Restructuring, the Company entered into a definitive agreement with J.W. Childs Equity Partners, L.P. III (“J.W. Childs”), an affiliate of J.W. Childs Associates, L.P., pursuant to which J.W. Childs will make a $200 million investment in the Company for a 65.6% equity interest in the reorganized Company. The equity transaction is expected to be effected through a pre-negotiated bankruptcy reorganization case under Chapter 11 of the U.S. Bankruptcy Code to commence during the second half of 2003. The Company believes its liquidity is sufficient to fund its operations up to the projected bankruptcy filing.

The definitive agreement with J.W. Childs contemplated that the Restructuring would include the following proposed elements:

•

The Company’s existing senior lenders would be paid in full, receiving approximately $458 million in cash and approximately $197 million in new senior unsecured notes with a 10-year maturity. The Company and J.W. Childs would intend to raise approximately $441 million of new bank financing in connection with the Restructuring, including a $50 million revolving credit facility, and would seek to effect a high yield offering in an amount sufficient to pay cash to the senior lenders in lieu of the new senior unsecured notes. The definitive agreement contemplates that the Company’s existing senior lenders would waive any right to the excess leverage fee and the asset sale fee, which are provided for in the Company’s credit agreement.

•

The Company’s existing accounts receivable sales facility would be terminated.

•

Holders of the Company’s 12% senior unsecured notes due 2006 would be paid in full, receiving approximately $29 million of new senior unsecured notes with a 10-year maturity, unless J.W. Childs effects a high yield offering in an amount sufficient to pay cash in lieu of such unsecured notes.

•

Holders of the Company’s outstanding 8.75% senior subordinated notes issued July 1, 1998 (the “1998 Notes”) and 9.875% senior subordinated notes issued February 10, 1997 and July 1, 1997 (the “1997 Notes” and together with the 1998 Notes, the “Senior Subordinated Notes”), would receive a 50% recovery through cash in the aggregate amount of approximately $110 million and approximately 29.5% (approximately $90 million) of the common stock of the reorganized Company.

•

Existing common and preferred stockholders would receive approximately 4.9% (approximately $15 million) of common stock of the reorganized Company, and the existing common and preferred shares would be cancelled in connection with the Restructuring.

shipments made to the Company on agreed terms. In excess of 125 vendors with estimated annual purchases of $250 million are participating in the vendor lien program.

Consummation of the Restructuring is subject to a number of conditions, including the consent of the Company’s senior lenders and bondholders to the plan of reorganization, bankruptcy court approval of the plan of reorganization, completion of the refinancing of the Company’s existing indebtedness, and customary regulatory approvals. Subject to the satisfaction of these conditions, the Company expects to complete the Restructuring in the fourth quarter of 2003.

Since the date of the announcement of the definitive agreement with J. W. Childs, the Company has engaged, and continues to engage, in discussions with J. W. Childs, the Company’s senior lending group and bondholders regarding the terms of the Restructuring. However, no assurance can be given that these discussions will lead to an agreement, that the conditions to closing the Restructuring will be satisfied, or that the Restructuring will ultimately be consummated. Moreover, if the Restructuring is consummated, it could be consummated on terms materially different than the terms contemplated by the definitive agreement with J. W. Childs.

The Company will determine whether to continue with its previously announced divestiture process after the Restructuring is complete. As of June 30, 2003, the Company had incurred and deferred in other assets approximately $2.3 million of related legal, accounting and investment banking costs related to the divesture process. Such costs have been expensed during the second quarter of 2003 due to the uncertainty that a divesture transaction will be completed.

In connection with the Restructuring, the Company elected not to pay the $8.8 million interest payment due on July 1, 2003 on the 1998 Notes, which resulted in a default under its debt agreements. The Company entered into an Amendment and Forbearance, dated as of June 30, 2003 (the “June Bank Amendment”), with lenders holding more than 51% of the term loan and revolving credit facility borrowings under the Senior Secured Debt Facility. The June Bank Amendment included a forbearance by the senior lenders under the Senior Secured Debt Facility providing that such lenders would not exercise any remedies available under any of the Loan Documents (as such term is defined in the Senior Secured Debt Facility) solely as a result of any potential or actual event of default arising under the terms of the Senior Secured Debt Facility by virtue of the Company’s failure to make the scheduled interest payment on the 1998 Notes. As a result of this non-payment, the Company reclassified all outstanding debt to current liabilities as of June 30, 2003.

Subsequently, in connection with the Restructuring, the Company elected not to pay the $9.8 million interest payment due on August 15, 2003 on the 1997 Notes, which resulted in a default under its debt agreements. Subsequent to entering into the June Bank Amendment, the Company entered into two other forbearance agreements with the senior lenders with respect to its election to withhold payment of interest when due on each series of its outstanding Senior Subordinated Notes. On July 30, 2003, the Company entered into an Amendment, Forbearance and Waiver (the “July Bank Amendment”) that (i) extended the original forbearance granted under the June Bank Amendment, (ii) provided for the forbearance by the senior lenders from exercising remedies under the Senior Secured Debt Facility arising from the potential failure to pay interest on the Senior Subordinated Notes and (iii) provided for a waiver of any default under the Senior Secured Debt Facility arising from the failure by the Company to conduct certain conference calls with, and provide certain progress reports to, the senior lenders with respect to the Company’s asset sales. Additionally, on July 31, 2003, the Company entered into a forbearance agreement with noteholders possessing a majority in outstanding principal amount of the Senior Subordinated Notes whereby such noteholders agreed to forbear from exercising any remedies available to them under any of the indentures governing the Senior Subordinated Notes solely as a result of any potential or actual event of default arising by virtue of the Company’s failure to make any scheduled interest payments on the Senior Subordinated Notes. By their terms, both forbearance agreements expired on September 15, 2003. See the above disclosures of the continuing discussions with J.W. Childs, the Company’s senior lending group and bondholders.

The restatement (as discussed in Note 2 to the Consolidated Financial Statements in this Form 10-K/A) would have resulted in a technical default under the Senior Secured Debt Facility. However, on August 14, 2003, the Company entered into a Waiver and Forbearance with lenders holding more than 51% of the term loan and revolving credit facility borrowings under the Senior Secured Debt Facility, which (i) extended the forbearance granted under both the June Bank Amendment and the July Bank Amendment through September 15, 2003, and (ii) provided for a waiver of any default under the Senior Secured Debt Facility arising in connection with any failure by the Company to deliver financial statements prepared in conformity with GAAP (as a result of the restatement) and without a “going concern” qualification for the fiscal years ended December 31, 2002 and 2001, as well as interim months and quarters.

Houlihan Lokey Howard & Zukin. In addition, certain holders of the Senior Subordinated Notes have also agreed to be bound by confidentiality agreements in connection with their role as members of the unofficial committee.

In connection with the Restructuring, the Company has entered into certain engagement letters with advisors and counsel acting on behalf of the holders of the Senior Subordinated Notes pursuant to which the Company is obligated to reimburse such advisors and counsel for their reasonable fees and expenses arising from their involvement with the Restructuring. Similarly, the Company is obligated under the terms of the Senior Secured Debt Facility to reimburse the reasonable fees and expenses of the advisors and counsel acting on behalf of the senior lenders party to the Senior Secured Debt Facility in connection with their involvement in the Restructuring.

On July 2, 2003, the New York Stock Exchange (“NYSE”) announced that it was suspending the listing of the Company’s common stock as a direct result of the Company’s announcement regarding the Restructuring. On August 15, 2003, the SEC granted the application of the NYSE for removal. The Company’s common stock is now quoted on the OTC Bulletin Board under the ticker symbol “AURF”.

In light of the Restructuring and the delisting of the common stock, the Company’s proposal for a reverse stock split is not being pursued.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Securities and Exchange Commission and in reports to the Company’s stockholders. Certain statements, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” “estimates” and words of similar import constitute “forward-looking statements” and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors could include, among others: the Company’s ability to successfully complete the amount and timing of required asset divestitures; changes in interest rates; the availability of funding for operations; the ability of the Company to service its high level of indebtedness; the ability of management to implement a successful strategy; the ability of the Company to develop and maintain effective internal controls; the ability of the Company to successfully integrate the Company’s brands; the ability of the Company to reduce expenses; the ability of the Company to retain key personnel; the ability of the Company to retain key customers; the ability of the Company to successfully introduce new products; the Company’s success in increasing volume; the effectiveness of the Company’s advertising campaigns; the ability of the Company to successfully leverage its brands; the ability of the Company to develop and maintain effective distribution channels; the ability of the Company to grow and maintain its market share; the actions of the Company’s competitors; general economic and business conditions; industry trends; demographics; raw material costs; terms and development of capital; the ultimate outcome of asserted and unasserted claims against the Company; and changes in, or the failure or inability to comply with, governmental rules and regulations, including, without limitation, FDA and environmental rules and regulations. Given these uncertainties, undue reliance should not be placed on such forward-looking statements. Unless otherwise required by law, the Company disclaims an obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained herein to reflect future events or developments.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to Item 15, which is incorporated herein by reference.

PART IV

ITEM 14: CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s interim chief executive officer and chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s interim chief executive officer and chief financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective.

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter of 2002 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

Documents filed as part of this report:

Financial Statements—See the Index to Consolidated Financial Statements and Financial Statement Schedule at page F-1 of this report.

The following supplemental schedule for the years ended December 31, 2002, 2001 and 2000:

Schedule II—Valuation Reserves

All other supplemental schedules are omitted because of the absence of the conditions under which they are required.

Exhibits—See the Exhibit Index included in this Form 10-K/A. For a listing of all management contracts and compensatory plans or arrangements required to be filed as Exhibits to the Form 10-K, see the exhibits listed under Exhibit Nos. 10.8 through 10.20, 10.23 through 10.31, and 10.52 of the Exhibit Index.

(b)

Reports on Form 8-K during the quarter ended December 31, 2002:

November 13, 2002		Certification required pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which accompanied the Quarterly Report on Form 10-Q filed by the Company on November 13, 2002.

November 22, 2002		Press release dated November 21, 2002 announcing that the Company had named Thomas M. Hudgins to the Company’s Board of Directors.

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.

	AURORA FOODS INC.

Date: September 16, 2003	By:	/s/ Dale F. Morrison
		Dale F. Morrison
		Chairman of the Board and
		Interim Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ William R. McManaman
		William R. McManaman
		Executive Vice President and
		Chief Financial Officer
		(Principal Accounting and Financial 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 indicated on September 16, 2003.

Signature		Title

* William B. Connell		Director

* Richard C. Dresdale		Director

* Andrea Geisser		Director

/s/ ROBERT B. HELLMAN, JR. Robert B. Hellman, Jr.		Director

Signature		Title

* Thomas M. Hudgins		Director

* Stephen L. Key		Director

* Peter Lamm		Director

* George E. McCown		Director

* Dale F. Morrison		Chairman of the Board and Interim Chief Executive Officer (Principal Executive Officer)

* John E. Murphy		Director

Index to Consolidated Financial Statements and Financial Statement Schedule

1.	Consolidated Financial Statements of the Company

	Report of Independent Accountants	F-2
	Consolidated Balance Sheets	F-3
	Consolidated Statements of Operations	F-4
	Consolidated Statements of Comprehensive Income	F-5
	Consolidated Statements of Changes in Stockholders’ Equity	F-6
	Consolidated Statements of Cash Flows	F-7
	Notes to Consolidated Financial Statements	F-8
2.	Financial Statement Schedule
	Schedule II — Valuation Reserves	F-48
3.	Exhibits

F-1

Report of Independent Accountants

To the Board of Directors and Stockholders

of Aurora Foods Inc.

In our opinion, the consolidated financial statements listed in the index on page F-1 present fairly, in all material respects, the financial position of Aurora Foods Inc. and its subsidiary at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index on page F-1 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform audits 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, and effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards. No. 133, Accounting for Derivative Instruments and Hedging Activities.

As discussed in Note 2 to the consolidated financial statements, the Company restated its December 31, 2002 and 2001 consolidated financial statements for the accounting for deferred income taxes.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 28 to the consolidated financial statements, the Company has announced the intention to file for bankruptcy reorganization and is undertaking a comprehensive financial restructuring that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 28. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP

St. Louis, Missouri

February 25, 2003, except for Notes 2, 18, 27 and 28,

as to which the date is as of September 16, 2003

F-2

AURORA FOODS INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands except per share amounts)

	December 31,
	2002			2001
	(As restated— See Note 2)			(As restated— See Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	12,904		$	184
Accounts receivable, net of allowance of $412 and $588, respectively		34,944			57,927
Inventories (Note 6)		94,680			99,560
Prepaid expenses and other assets		2,984			5,524

Total current assets		145,512			163,195
Property, plant and equipment, net (Note 7)		171,570			232,650
Goodwill and other intangible assets, net (Note 8)		903,870			1,229,652
Other assets		30,470			31,181

Total assets	$	1,251,422		$	1,656,678

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current maturities of long term debt (Note 10)	$	43,259		$	37,970
Accounts payable		45,596			73,001
Accumulated preferred dividends payable		2,939			1,586
Accrued liabilities (Note 9)		60,408			80,417

Total current liabilities		152,202			192,974
Deferred tax liabilities (Note 18)		94,491			—
Other liabilities		15,421			16,683
Long term debt (Note 10)		1,021,429			1,003,931
Long term debt from related parties (Notes 10 and 21)		21,951			—

Total liabilities		1,305,494			1,213,588

Commitments and contingent liabilities (Notes 4, 5, 14 and 22)
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value; 25,000,000 shares authorized; 3,750,000 shares, Series A Convertible Cumulative, issued and outstanding, with a liquidation preference value of $ 17,939 and $16,586, respectively (Note 11)		37			37
Common stock, $0.01 par value; 250,000,000 shares authorized; 77,155,622 and 74,254,467 shares issued, respectively (Note 24)		772			743
Paid-in capital		681,834			683,996
Treasury stock (Notes 22 and 24)		—			(13,266	)
Accumulated other comprehensive loss		(56	)		(4,804	)
Promissory notes		—			(40	)
Accumulated deficit		(736,659	)		(223,576	)

Total stockholders’ equity (deficit)		(54,072	)		443,090

Total liabilities and stockholders’ equity (deficit)	$	1,251,422		$	1,656,678

See accompanying notes to consolidated financial statements.

F-3

AURORA FOODS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

	Years Ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Net sales	$	771,869		$	842,141		$	821,014
Cost of goods sold		(494,443	)		(494,698	)		(488,585	)

Gross profit		277,426			347,443			332,429

Brokerage, distribution and marketing expenses:
Brokerage and distribution		(117,050	)		(117,739	)		(117,654	)
Consumer marketing		(25,709	)		(37,213	)		(37,654	)

Total brokerage, distribution and marketing expenses		(142,759	)		(154,952	)		(155,308	)
Amortization of intangibles		(10,348	)		(44,670	)		(44,819	)
Selling, general and administrative expenses		(58,991	)		(58,035	)		(50,080	)
Goodwill and tradename impairment charges (Note 8)		(67,091	)		—			—
Plant closure and asset impairment charges (Note 13)		(53,225	)		—			—
Other financial, legal and accounting income (expenses) (Note 14)		—			3,789			(47,352	)
Columbus consolidation costs (Note 16)		—			(723	)		(6,868	)
Transition expenses (Note 15)		—			—			(3,037	)

Total operating expenses		(332,414	)		(254,591	)		(307,464	)

Operating (loss) income		(54,988	)		92,852			24,965
Interest and financing expenses:
Interest expense, net		(92,531	)		(103,150	)		(109,890	)
Adjustment of value of derivatives		(12,050	)		(10,641	)		—
Issuance of warrants		(1,779	)		—			—
Amortization of deferred financing expense		(7,667	)		(3,468	)		(3,016	)

Total interest and financing expenses		(114,027	)		(117,259	)		(112,906	)

Loss before income taxes and cumulative effect of change in accounting		(169,015	)		(24,407	)		(87,941	)
Income tax (expense) benefit (Note 18)		(115,918	)		(58,574	)		31,850

Net loss before cumulative effect of change in accounting		(284,933	)		(82,981	)		(56,091	)
Cumulative effect of change in accounting, net of tax of $21,466, $0 and $5,722, respectively (Note 3)		(228,150	)		—			(12,161	)

Net loss		(513,083	)		(82,981	)		(68,252	)
Preferred dividends (Note 11)		(1,353	)		(1,253	)		(333	)

Net loss available to common stockholders	$	(514,436	)	$	(84,234	)	$	(68,585	)

Basic and diluted loss per share available to common stockholders before cumulative effect of change in accounting	$	(3.90	)	$	(1.16	)	$	(0.81	)
Cumulative effect of change in accounting		(3.10	)		—			(0.18	)

Basic and diluted loss per share available to common stockholders	$	(7.00	)	$	(1.16	)	$	(0.99	)

Weighted average number of shares outstanding		73,511			72,499			69,041

See accompanying notes to consolidated financial statements.

F-4

AURORA FOODS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Years Ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Net loss	$	(513,083	)	$	(82,981	)	$	(68,252	)
Other comprehensive income (loss) (Note 17):
Adoption of FAS133 for hedging activities, net of tax of $1,396		—			(2,277	)		—
Losses deferred on qualifying cash flow hedges respectively		(1,542	)		(4,060	)		—
Reclassification adjustment for cash flow hedging losses recognized in net loss		6,290			1,533			—

Total other comprehensive income (loss)		4,748			(4,804	)		—

Total comprehensive loss	$	(508,335	)	$	(87,785	)	$	(68,252	)

See accompanying notes to consolidated financial statements.

F-5

AURORA FOODS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands)

	Preferred Stock		Common Stock		Additional Paid-in Capital			Promissory Notes			Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at December 31, 1999	$	—	$	670	$	648,254		$	(323	)	$	—		$	(72,343	)	$	—		$	576,258
Issuance of preferred stock (Note 11)		37		—		14,963			—			—			—			—			15,000
Cumulative preferred dividends (Note 11)		—		—		(333	)		—			—			—			—			(333	)
Common stock issued to senior subordinated noteholders (Note 10)		—		70		21,644			—			—			—			—			21,714
Employee stock purchases (Note 23)		—		1		394			—			—			—			—			395
Retirements of stock		—		—		(164	)		—			—			—			—			(164	)
Payment on officer promissory notes		—		—		—			96			—			—			—			96
Net loss		—		—		—			—			—			(68,252	)		—			(68,252	)

Balance at December 31, 2000		37		741		684,758			(227	)		—			(140,595	)		—			544,714
Receipt of shares from former management (Notes 14 and 22)		—		—		—			—			(15,653	)		—			—			(15,653	)
Distribution of shares to shareholder class (Notes 14 and 22)		—		—		113			—			2,387			—			—			2,500
Employee stock purchases, restricted stock awards and stock options exercised (Note 23)		—		2		378			—			—			—			—			380
Cumulative preferred dividends (Note 11)		—		—		(1,253	)		—			—			—			—			(1,253	)
Payment on officer promissory notes		—		—		—			187			—			—			—			187
Net loss (as restated, See Note 2)		—		—		—			—			—			(82,981	)		—			(82,981	)
Adoption of FAS 133 (Note 17)		—		—		—			—			—			—			(2,277	)		(2,277	)
Other comprehensive loss (Note 17)		—		—		—			—			—			—			(2,527	)		(2,527	)

Balance at December 31, 2001 (as restated — See Note 2)		37		743		683,996			(40	)		(13,266	)		(223,576	)		(4,804	)		443,090
Issuance of warrants		—		—		4,362			—			—			—			—			4,362
Employee stock purchases, restricted stock awards, stock options exercised and other (Note 23)		—		2		622			40			—			—			—			664
Distribution of shares to shareholder class (Notes 14 and 22)		—		27		(5,793	)		—			13,266			—			—			7,500
Cumulative preferred dividends (Note 11)		—		—		(1,353	)		—			—			—			—			(1,353	)
Net loss (as restated — See Note 2)		—		—		—			—			—			(513,083	)		—			(513,083	)
Other comprehensive gain (Note 17)		—		—		—			—			—			—			4,748			4,748

Balance at December 31, 2002 (as restated — See Note 2)	$	37	$	772	$	681,834		$	—		$	—		$	(736,659	)	$	(56	)	$	(54,072	)

See accompanying notes to consolidated financial statements.

F-6

AURORA FOODS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Cash flows from operating activities:
Net loss	$	(513,083	)	$	(82,981	)	$	(68,252	)
Cumulative effect of change in accounting, net of tax		228,150			—			12,161
Adjustments to reconcile net loss to cash from operating activities:
Depreciation		29,558			28,746			25,627
Amortization		18,324			47,905			47,708
Deferred income taxes		115,918			58,574			(31,850	)
Issuance of warrants		1,779			—			—
Non-cash plant closure and asset impairment charges		47,156			—			—
Intangible asset impairment charges		67,091			—			—
Non-cash restructuring cost		—			—			3,094
Recognition of loss on derivatives		12,050			10,641			—
Receipt of shares from former management		—			(15,653	)		—
Recognition of liability to shareholder class		—			10,000			—
Non-cash other financial, legal and accounting expense		—			—			17,714
(Gain) loss on disposal of fixed assets and other, net		309			273			(303	)
Change in operating assets and liabilities:
Accounts receivable		41,083			29,964			(26,768	)
Accounts receivable sold		(18,467	)		(5,263	)		38,565
Inventories		5,527			4,759			18,352
Prepaid expenses and other current assets		(5,183	)		1,151			15,211
Accounts payable		(27,405	)		22,878			(37,707	)
Accrued liabilities		(11,116	)		(15,356	)		(30,924	)
Other non-current liabilities		(7,558	)		(6,356	)		(576	)

Net cash provided by (used by) operating activities		(15,867	)		89,282			(17,948	)

Cash flows from investing activities:
Additions to property, plant and equipment		(20,161	)		(20,113	)		(12,780	)
Additions to other non-current assets		(2,911	)		(4,873	)		(4,034	)
Proceeds from sale of assets		4,190			66			1,176
Payment for acquisition of businesses		—			—			(7,984	)

Net cash used in investing activities		(18,882	)		(24,920	)		(23,622	)

Cash flows from financing activities:
Proceeds (repayments) from senior secured revolving debt facility		25,900			(32,300	)		54,400
Repayment of debt		(38,039	)		(32,966	)		(27,980	)
Proceeds from senior secured financing		35,000			—			—
Proceeds from senior unsecured financing from related parties (Note 10)		24,250			—			—
Issuance of preferred stock		—			—			15,000
Capital contributions, repayment of officer promissory notes and other		358			563			492
Debt issuance and equity offering costs		—			—			(132	)

Net cash provided by (used by) financing activities		47,469			(64,703	)		41,780

Increase (decrease) in cash and cash equivalents		12,720			(341	)		210
Cash and cash equivalents, beginning of period		184			525			315

Cash and cash equivalents, end of period	$	12,904		$	184		$	525

See accompanying notes to consolidated financial statements.

F-7

AURORA FOODS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—The Company

Operations

Aurora Foods Inc. (the “Company”) produces and markets branded food products that are sold across the United States. The Company groups its business in three operating segments: retail, food service and other distribution channels. Many of the Company’s brands are sold through each of the segments. The retail distribution segment includes all of the Company’s brands and products sold to customers who sell or distribute these products to consumers through supermarkets, grocery stores and normal grocery retail outlets. The food service segment includes both branded and non-branded products sold to customers such as restaurants, business/industry and schools. The other distribution channels segment includes sales of branded and private label products to club stores, the military, mass merchandisers, convenience, drug and chain stores, as well as exports from the United States.

The principal trademarks owned or licensed by the Company are Duncan Hines^®, Lender’s^®, Log Cabin^®, Mrs. Butterworth’s^®, Van de Kamp’s^®, Mrs. Paul’s^®, Aunt Jemima^®, Celeste^®, and Chef’s Choice^®.

The Company produces its Van de Kamp’s and Mrs. Paul’s frozen seafood products primarily at its Erie, Pennsylvania, and Jackson, Tennessee manufacturing facilities. The Company produces its Aunt Jemima frozen breakfast products at its Jackson, Tennessee and Erie, Pennsylvania facilities and its Celeste^® frozen pizza products at the Jackson, Tennessee facility. The Company produces its Lender’s frozen, refrigerated and fresh bagel products at its Mattoon, Illinois facility. The Company’s Chef’s Choice products were packaged at the Yuba City, California facility, but production is scheduled to be moved to contract manufacturers due to the closure of the Yuba City facility in early 2003. Duncan Hines cake mixes, brownie mixes, specialty mixes and frosting products are produced by contract manufacturers. The Company’s syrup products are primarily produced in the Company’s manufacturing and distribution facility in St. Elmo, Illinois.

Divestiture Activities

As part of the agreements to obtain additional financing in 2002 and to amend the provisions of the Company’s senior debt facilities during 2002 and early 2003, the Company has agreed to make repayments of a portion of its outstanding senior secured borrowings from the net cash proceeds received from sales of assets or businesses owned by the Company. Required repayments from sales of assets or businesses are $100 million by June 30, 2003, an additional $125 million by September 30, 2003, and an additional $100 million by March 31, 2004. Failure to meet the required repayments of senior secured debt would result in significant cash and interest rate penalties for the Company.

Due to the uncertainty inherent in the divestiture process, the Company cannot assure that it will be able to reach final agreements to sell one or more of its lines of business, nor can it guarantee that cash proceeds from the asset sales, if they were to occur, would be sufficient to meet all required debt repayments. Also see Note 10.

Liquidity

The Company remains highly leveraged. At December 31, 2002, the Company has outstanding approximately $1.09 billion in aggregate principal amount of indebtedness for borrowed money. The degree to which the Company is leveraged results in significant cash interest expense and principal repayment obligations and such interest expense may increase with respect to its senior secured credit facility based upon changes in prevailing interest rates. This leverage may, among other

F-8

things, affect the ability of the Company to obtain additional financing, or adjust to changing market conditions. Absent the previously noted waivers and amendments to the Company’s senior secured debt agreement and the additional financing obtained in 2002 (See Note 10), the Company would not have been able to remain in compliance with provisions of its debt agreements or fund its debt service obligations.

Based on the Company’s plans, management believes that cash generated from operations as well as cash available under its revolving credit agreement and its receivable sales facility will be adequate in 2003 to fund its operating and capital expenditure requirements and its debt service obligations. The Company’s ability to access its available liquidity under the revolver and receivable sale facility are dependent on the Company’s continued compliance with the covenants in the senior secured debt agreement. Demand for the food products that the Company sells is historically stable, and the Company believes that it will grow its operating earnings as costs continue to be reduced as a result of the 2002 plant closings and from future operating efficiencies, as well as from improvements in its trade spending efficiency, offset in part by increased prices for certain raw materials commodities and fuel costs in 2003. Capital expenditures are anticipated to decrease from 2002 levels, and the Company expects overall working capital requirements to decline. Even with the expected continued favorable market interest rates, cash interest expense is likely to remain about flat as debt amortization payments continue to reduce debt, offset by increases in the Company’s effective interest rates due to the higher interest rate spread paid by the Company as a result of the February 21, 2003 amendment to the senior secured debt agreement. Cash generated from asset sales will be used to pay down senior secured debt. Also see Note 28—Subsequent Events.

Note 2—Restatements of Consolidated Financial Results

The Company reevaluated its deferred tax accounting in August 2003, and determined that its valuation allowance for net deferred tax assets, which had been recorded by the Company at December 31, 2002, should have been recorded at December 31, 2001, and that the Company should have provided for ongoing deferred tax liabilities subsequent to January 1, 2002 (the effective date of the adoption of FAS 142) for certain of the differences between the book and tax amortization of the Company’s goodwill and indefinite lived intangibles as defined by FAS 142. The impact of the adjustments for the year ended December 31, 2001, was to increase income tax expense and net loss by $65.4 million. For the year ended December 31, 2002, the impact was to decrease tax expense by $30.9 million, increase the expense recorded for the cumulative effect of the change in accounting principle by $60.8 million, all of which increased the net loss by $29.9 million. These adjustments do not affect previously recorded net sales, operating income (loss) or past or expected future cash tax obligations. While provision for this deferred tax liability is required by existing accounting literature, these potential taxes may only become payable in the event that the Company sells a brand at some future date for an amount in excess of both the tax basis of the brand at that time and the unexpired and unused net operating tax loss carryforwards (NOL). At December 31, 2002, the Company’s NOL was in excess of $600 million and expires at various times through the year 2022, primarily after 2017. This balance does not reflect any potential future limitations on utilization of the NOL resulting from transactions currently being contemplated by the Company, as described in Note 28 — Subsequent Events nor any tax planning techniques available to the Company.

The following table sets forth the consolidated balance sheets for the Company, showing previously reported and restated amounts, as of December 31, 2002 and 2001:

F-9

	December 31, 2002						December 31, 2001
	As previously reported			As restated			As previously reported			As restated
ASSETS
Current assets:
Cash and cash equilalents	$	12,904		$	12,904		$	184		$	184
Accounts receivable, net		34,944			34,944			57,927			57,927
Inventories		94,680			94,680			99,560			99,560
Prepaid expenses and other assets		2,984			2,984			5,524			5,524
Current deferred tax assets		—			—			18,563			—

Total current assets		145,512			145,512			181,758			163,195
Property, plant and equipment, net		171,570			171,570			232,650			232,650
Deferred tax assets		—			—			47,799			—
Goodwill and other intangible assets, net		903,870			903,870			1,229,652			1,229,652
Other assets		30,470			30,470			31,181			31,181

Total assets	$	1,251,422		$	1,251,422		$	1,723,040		$	1,656,678

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Current maturities of long term debt	$	43,259		$	43,259		$	37,970		$	37,970
Accounts payable		45,596			45,596			73,001			73,001
Accumulated preferred dividends payable		2,939			2,939			1,586			1,586
Accrued liabilities		60,408			60,408			80,417			80,417

Total current liabilities		152,202			152,202			192,974			192,974
Deferred tax liabilities		—			94,491			—			—
Other liabilities		15,421			15,421			16,683			16,683
Long term debt		1,021,429			1,021,429			1,003,931			1,003,931
Long term debt from related parties		21,951			21,951			—			—

Total liabilities		1,211,003			1,305,494			1,213,588			1,213,588
Stockholders’ equity (deficit):
Preferred stock		37			37			37			37
Common stock		772			772			743			743
Paid-in capital		684,773			681,834			685,582			683,996
Treasury stock		—			—			(13,266	)		(13,266	)
Accumulated other comprehensive loss		(900	)		(56	)		(3,844	)		(4,804	)
Promissory notes		—			—			(40	)		(40	)
Accumulated deficit		(644,263	)		(736,659	)		(159,760	)		(223,576	)

Total stockholders’ equity (deficit)		40,419			(54,072	)		509,452			443,090

Total liabilities and stockholders’ equity (deficit )	$	1,251,422		$	1,251,422		$	1,723,040		$	1,656,678

F-10

The following table sets forth the consolidated statement of operations for the Company, showing previously reported and restated amount for the years ended December 31, 2002 and 2001:

	December 31, 2002						December 31, 2001
	As previously reported			As restated			As previously reported			As restated
Loss before income taxes and cumulative effect of change in accounting	$	(169,015	)	$	(169,015	)	$	(24,407	)	$	(24,407	)
Income tax (expense) benefit		(146,756	)		(115,918	)		6,828			(58,574	)

Net loss before cumulative effect of change in accounting		(315,771	)		(284,933	)		(17,579	)		(82,981	)
Cumulative effect of change in accounting, net of tax of $82,237, $21,466 (as restated), $0 and $0, respectively		(167,379	)		(228,150	)		—			—

Net loss		(483,150	)		(513,083	)		(17,579	)		(82,981	)
Preferred dividends		(1,353	)		(1,353	)		(1,253	)		(1,253	)

Net loss available to common stockholders	$	(484,503	)	$	(514,436	)	$	(18,832	)	$	(84,234	)

Basic and diluted loss per share available to common stockholders before cumulative effect of change in accounting	$	(4.31	)	$	(3.90	)	$	(0.26	)	$	(1.16	)
Cumulative effect of change in accounting		(2.28	)		(3.10	)		—			—

Basic and diluted loss per share available to common stockholders	$	(6.59	)	$	(7.00	)	$	(0.26	)	$	(1.16	)

Note 3—Significant Accounting Policies and Change in Accounting Principles

The policies utilized by the Company in the preparation of the consolidated financial statements conform to generally accepted accounting principles and require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual amounts could differ from these estimates and assumptions. The Company uses the accrual basis of accounting in the preparation of its financial statements. Certain prior year amounts have been reclassified to conform with the current year’s presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany transactions are eliminated.

Accounting Changes

Effective as of January 1, 2000, the Company adopted the consensus reached in EITF 00-14, Accounting for Certain Sales Incentives. This consensus had the effect of accelerating the recognition of certain marketing expenses as well as requiring that certain items previously classified as distribution, promotion and marketing expenses now be classified as reductions of net sales. As a result of this change in accounting, the cumulative after tax effect of the change on prior years (to December 31, 1999) of $12.1 million has been recognized as an expense in the Statement of Operations for the year ended December 31, 2000.

Effective January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and recorded a cumulative adjustment from adoption, net of tax, of $2.3 million in Other Comprehensive Loss. See Note 17.

Effective January 1, 2002, the Company adopted the consensus reached in EITF 00-25 and 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), which required that

F-11

certain items which had been classified as trade promotions expense in prior years be reclassified as reductions of net sales. Adoption of the consensus had no impact on cash flow or the reported amounts of operating income for any period. Following this change, all payments made by the Company to direct and indirect customers to promote and facilitate the sale of the Company’s products are reflected as reductions of net sales. Prior year amounts in the accompanying statement of operations have been reclassified to conform with this new presentation.

Net sales for 2001 and 2000 were reduced by approximately $194.0 million and $179.1 million, respectively, as a result of the adoption of this standard.

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 (“FAS 142”), Goodwill and Other Intangible Assets. FAS 142 generally requires that (1) recorded amounts of goodwill no longer be amortized, on a prospective basis, (2) the amount of goodwill recorded on the balance sheet of the Company be evaluated annually for impairment using a two-step method, (3) other identifiable intangible assets be categorized as to whether they have indefinite or finite lives, (4) intangibles having indefinite lives no longer be amortized on a prospective basis, and (5) the amount of intangibles having indefinite lives on the balance sheet of the Company be evaluated annually for impairment using a one-step method.

Results of the first step of the Company’s impairment test of goodwill, completed during the second quarter of 2002, indicated goodwill impairment in two of the Company’s reporting units. Independent valuations using the excess earnings and market comparable approaches indicated the fair value of each reporting unit exceeded the book value for each reporting unit except for the Company’s seafood and Chef’s Choice businesses, primarily in the retail segment, due principally to changes in business conditions and performance relative to expectations at the time of acquisition. Based on the results of the first step, the Company recorded an estimated goodwill impairment charge, as of January 1, 2002, for the seafood and Chef’s Choice reporting units, in the statement of operations as a cumulative effect of a change in accounting principle.

The adoption of FAS 142 resulted in total impairment charges to goodwill and tradenames of $249.6 million, which has been recorded, net of tax of $21.5 million, as a cumulative effect of a change in accounting principle, effective as of January 1, 2002.

F-12

	Fiscal year ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Reported net loss available to common stockholders before cumulative effect of change in accounting	$	(286,286	)	$	(84,234	)	$	(56,424	)
Add back:
Goodwill amortization		—			20,074			12,991
Intangible amortization		—			13,265			8,490

Adjusted net loss available to common stockholders before cumulative effect of change in accounting	$	(286,286	)	$	(50,895	)	$	(34,944	)

Basic and diluted loss per share available to common stockholders:
Reported net loss before cumulative effect of change in accounting	$	(3.90	)	$	(1.16	)	$	(0.81	)
Add back:
Goodwill amortization		—			0.28			0.19
Intangible amortization		—			0.18			0.12

Adjusted net loss before cumulative effect of change in accounting	$	(3.90	)	$	(0.70	)	$	(0.50	)

Impact of New Accounting Pronouncements

F-13

obligation undertaken in issuing this guarantee, (2) indirect guarantees of debt to be recognized in the financial statements of the guarantor and (3) the guarantor to disclose the background and nature of the guarantee, the maximum potential amount to be paid under the guarantee, the carrying value of the liability associated with the guarantee and any recourse of the guarantor to recover amounts paid under the guarantee from third parties. FIN 45 rescinds all the provisions of FIN 34, Disclosure of Indirect Guarantees of Indebtedness of Others; as it has been incorporated into the provisions of FIN 45. The provisions of FIN 45 are effective for all guarantees issued or modified subsequent to December 31, 2002. The disclosure requirements of FIN 45 are effective for the financial statements of interim and annual periods ending after December 15, 2002. The Company does not have any significant commitments within the scope of FIN 45, except as disclosed in the footnotes to the consolidated financial statements.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with original maturities of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or market value and have been reduced by an estimated allowance for excess, obsolete and unsaleable inventories. The estimate is based on managements’ review of inventories on hand and its age, compared to estimated future usage and sales. Cost is determined using the first-in first-out (FIFO) method. Inventories include the cost of raw materials, packaging, labor and manufacturing overhead, spare parts and distribution costs incurred prior to sale.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the individual assets ranging from two to thirty years. Costs that improve an asset or extend its useful life are capitalized, while repairs and maintenance costs are expensed as incurred. Depreciation expense for the years ended December 31, 2002, 2001 and 2000 was $29.6 million, $28.7 million and $25.6 million, respectively.

Depreciable lives for major classes of assets are as follows:

Computers		3-5 years
Furniture and fixtures		2-8 years
Machinery and equipment		3-15 years
Buildings and improvements		20-30 years

Goodwill and Other Intangible Assets

Goodwill and other intangible assets include goodwill, trademarks and various identifiable intangible assets purchased by the Company and are accounted for in accordance with FAS 142. FAS 142 requires the cessation of amortization of goodwill and other indefinite-lived intangibles as of January 1, 2002. The Company performs annual impairment tests for these assets as well as interim impairment tests in the event of certain triggering events. At the adoption of FAS 142 on January 1, 2002, the Company determined that, in addition to goodwill, the Company’s tradenames are also indefinite-lived assets. Prior to this determination, the Company had amortized its tradenames over 40 years. The remaining intangible assets consisting primarily of formulas and recipes, and customer lists are classified as finite-lived assets and are being amortized over their remaining useful life. Amortization of other intangible assets, excluding amortization of amounts included in other assets, charged against income for the year ended December 31, 2002 was $6.5 million. Amortization of goodwill and other intangible assets, excluding amortization of amounts included in other assets, charged against income for the years ended December 31, 2001 and 2000 was $39.8 million and $39.9 million, respectively.

Long-Lived Assets

The Company periodically assesses the net realizable value of its noncurrent assets and recognizes an impairment when the recorded value of these assets exceed the undiscounted cash flows expected in future periods. Such assessments in 2002 resulted in an adjustment to the value of fixed assets. See Note 13.

F-14

Other Assets

Other assets consist of deferred loan acquisition costs, systems software, packaging design and plates, and other miscellaneous assets. Deferred loan acquisition costs are being amortized using the effective interest method over the terms of the respective debt. Software and packaging design costs are amortized over 5 years and 3 years, respectively, on a straight line basis. Aggregate amortization of deferred loan acquisition costs and other assets charged against income for the years ended December 31, 2002, 2001 and 2000 was $7.7 million, $8.4 million and $7.9 million, respectively.

Revenue Recognition

Revenue is recognized upon shipment of product and transfer of title to customers. Sales and returns and allowances are included in net sales. Amounts billed to customers for freight and handling are included in net sales. The costs of freight and handling are included in brokerage and distribution expense. Such amounts were $82.4 million, $81.0 million and $80.9 million in 2002, 2001 and 2000, respectively.

Disclosure About Fair Value of Financial Instruments

The estimated fair market value of the Company’s senior secured debt, senior unsecured debt and senior subordinated notes at December 31, 2002, based on market prices, was $565.9 million, $16.9 million and $200.0 million, respectively. See Note 10. The fair value of the Company’s interest rate agreements was a liability of $15.8 million and is reflected in other liabilities in the December 31, 2002 consolidated balance sheet. See Note 17. The book value of the Company’s current assets and current liabilities approximates their fair value.

Derivative Instruments

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137 and SFAS No. 138 (collectively the Statement), on January 1, 2001. As required by the Statement, the Company records all derivative instruments on the balance sheet at their fair value. Changes in the fair value of the derivative instruments are recorded in current earnings or deferred in other comprehensive income, depending on whether a derivative is designated as and is effective as a hedge and on the type of hedging transaction. See Note 17.

Concentration of Credit Risk

The Company sells its products to retail supermarkets and grocery stores, foodservice operators and other distribution channels. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and had no significant concentration of credit risk at December 31, 2002.

Significant Customers

Sales to one of the Company’s customers and its affiliates were approximately 18% and 14% of net sales in 2002 and 2001, respectively.

Income Taxes

Deferred tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between the carrying amounts, for financial statement purposes, and the tax bases of assets and liabilities. A valuation allowance is recorded on deferred tax assets if the Company believes that it is more likely than not that the deferred tax assets will not be realized. A valuation allowance was recorded in 2002 and 2001. See Note 18.

F-15

Advertising Expenses

Advertising expenses are included in consumer marketing and include the costs to produce, distribute and run print media, television and radio advertising for the Company’s products. Such costs are expensed ratably over the calendar year when first used in relation to sales volume.

Trade Promotion Costs

Costs of trade promotions include the costs paid to retailers to promote the Company’s products and are recorded as a reduction of sales. Such costs include amounts paid to customers for space in retailers’ stores (“slotting fees”), amounts paid to provide in-store samples of the Company’s products to consumers, amounts paid to incent retailers to offer temporary price reductions in the sale of the Company’s products to consumers and amounts paid to obtain favorable display positions in the retailers’ stores. These incentives are offered to customers in lump sum payments and as rate per unit allowances as dictated by industry norms. The Company expenses slotting fees in the calendar year incurred and expenses other trade promotions in the period during which the promotions occur. The expense recorded necessarily requires management to make estimates and assumptions as to the success of the promotion and the related amounts which will be due to or deducted by the Company’s customers in subsequent periods.

Consumer Coupons

Costs associated with the redemption of consumer coupons are recorded at the later of the time coupons are circulated or the related products are sold by the Company, and are reflected as a reduction of net sales. The Company’s liability for coupon redemption costs at the end of a period is based upon redemption estimates using historical trends experienced by the Company. Costs associated with the production and insertion of the Company’s consumer coupons are recorded as a component of consumer promotion expense.

Stock Based Compensation

At December 31, 2002, the Company has two stock-based employee compensation plans, which are more fully described in Note 22. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 (“APB 25”), Accounting for Stock Issued to Employees, and its related interpretations. No stock-based employee compensation costs is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share for the three years ended December 31, if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (“FAS 123”), Accounting for Stock Based Compensation, to stock-based employee compensation (in thousands, except per share).

	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Reported net loss available to common stockholders	$	(514,436	)	$	(84,234	)	$	(68,585	)

Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax effects in 2000		(3,620	)		(5,105	)		(1,734	)

Pro forma net loss available to common stockholders	$	(518,056	)	$	(89,339	)	$	(70,319	)

Reported basic and diluted loss per share available to common stockholders	$	(7.00	)	$	(1.16	)	$	(0.99	)

Pro forma basic and diluted loss per share available to common stockholders	$	(7.05	)	$	(1.23	)	$	(1.02	)

F-16

Other Comprehensive Income

Other comprehensive income relates to cash flow hedges recorded in accordance with FAS 133. Accumulated other comprehensive income at December 31, 2002 and 2001 is solely related to the deferral of gains and losses associated with the cash flow hedges.

Note 4—Supplemental Cash Flow Disclosure

Cash interest payments, net of amounts capitalized, in the years ended December 31, 2002, 2001 and 2000, were $97.8 million, $105.0 million and $111.7 million, respectively. No cash income taxes were paid in the years ended December 31, 2002 and 2001, while $0.2 million of cash income taxes were paid in the year ended December 31, 2000. Cumulative preferred stock dividends unpaid at December 31, 2002 were $2.9 million. Additions to deferred financing costs in 2000, in the amount of $4.0 million, were paid in common stock. See Note 10. During the third quarter of 2001, the Company entered into a 10 year lease of a facility for its product development center. This lease has been treated as a capital lease for accounting purposes. Accordingly, the present value of the minimum lease payments of $2.0 million was recorded as property, plant and equipment and as a capitalized lease obligation, the remaining balance of which has been included in debt in the accompanying consolidated balance sheet at December 31, 2002. During May 2001, the Company distributed 465,342 shares of its common stock as settlement for the first $2.5 million of the common stock component of the stockholder settlement, described in Note 13. On September 6, 2002, the Company distributed 5,319,149 shares of common stock to the settlement class as settlement for the remaining $7.5 million of the common stock portion of the stockholder settlement.

Note 5—Sale of Accounts Receivable

In April 2000, the Company entered into an agreement to sell, on a periodic basis, specified accounts receivable in amounts of up to $60 million. The facility has subsequently been amended to reduce the maximum amount of receivable sales to $30 million and currently extends to September 30, 2003. Under terms of the receivable sales agreement, receivables are sold at a discount that effectively yields an interest rate to the purchaser of prime plus 2.5% to 3.0%. The Company sells receivables on a weekly or twice weekly basis and has the ability to sell additional receivables as previously sold receivables are collected. As such, the receivables sale facility effectively acts in a manner similar to a secured revolving credit facility, although it is reflected on the balance sheet as a reduction in accounts receivable and not as debt since the credit risk associated with the collection of accounts receivable sold has been transferred to the purchaser. As of December 31, 2002 and 2001, the Company had received a net $14.8 million and $33.3 million, respectively, from the sale of accounts receivable. The total discount on amounts sold in 2002 and 2001 was approximately $2.3 million and $3.4 million, respectively, and is included in interest expense.

Note 6—Inventories

Inventories, net of reserves of $9.9 million and $3.3 million, respectively, consist of the following (in thousands):

	December 31,
	2002		2001
Raw materials	$	11,966	$	17,507
Work in process		281		98
Finished goods		75,480		74,686
Packaging and other supplies		6,953		7,269

	$	94,680	$	99,560

At December 31, 2002, the Company had commitments to buy raw materials of $66.8 million in 2003 and had no commitments beyond 2003.

During the third and fourth quarters of 2002, the Company recorded additional charges for excess and obsolete inventory of approximately $9.0 million. These charges related to inventory which had become aged, primarily due to certain distribution losses in seafood and declining sales of certain Chef’s Choice products, as well as the Company’s transition plans to reduce operating complexity, to reduce inventories and eliminate a significant number of low volume product offerings.

F-17

Note 7—Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

	December 31,
	2002			2001
Land	$	3,518		$	3,703
Buildings and improvements		31,061			31,930
Machinery and equipment		230,283			252,194
Furniture and fixtures		3,932			3,886
Capital lease		1,972			1,972
Computer equipment		4,466			3,940
Construction in progress		1,852			12,306

		277,084			309,931
Less accumulated depreciation		(105,514	)		(77,281	)

	$	171,570		$	232,650

During 2002, 2001 and 2000, the Company capitalized interest costs of $0.2 million, $0.1 million and $0.2 million, respectively. At December 31, 2002, the Company did not have any significant commitments for facility construction or machinery and equipment purchases. In the fourth quarter of 2002, the Company recorded a charge for permanently impaired fixed assets. See Note 13.

Note 8—Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist of the following (in thousands):

	December 31,
	2002			2001
Goodwill	$	634,346		$	798,263
Trademarks		362,231			493,187
Other intangibles		49,164			87,594

		1,045,741			1,379,044
Less accumulated amortization		(141,871	)		(149,392	)

	$	903,870		$	1,229,652

The following table summarizes the intangibles as of December 31, 2002 (in thousands):

	Carrying Value
	Gross		Accumulated Amortization		Net
Intangible assets subject to amortization:
Recipes and formulations	$	32,779	$	19,838	$	12,941
Chef’s Choice tradename		8,769		769		8,000
Other		16,385		10,887		5,498

Total	$	57,933	$	31,494		26,439

Trademarks not subject to amortization						317,747


Net carrying value of intangible assets					$	344,186

F-18

Amortization of other intangible assets, charged against income for the year ended December 31, 2002 was $6.5 million. The following table summarizes the estimated annual amortization expense of other intangible assets for each of the next five years (in millions).

Year	Annual Amortization
2003	$	8.7
2004		7.7
2005		5.2
2006		1.7
2007		1.7

The Company has set December 31 as the date that it performs its annual impairment test of goodwill and other indefinite-lived intangible assets. Independent valuations completed as of December 31, 2002, using the excess earnings and market comparable approaches indicated that the book value of the goodwill for the Company’s Lender’s, Celeste and Chef’s Choice reporting units exceeded the fair value of the goodwill for those reporting units by approximately $64.7 million, primarily in the retail segment. In addition, the December 31, 2002 impairment tests indicated that the book value of the Chef’s Choice tradename exceeded its fair value by approximately $2.4 million. Based on these results, the Company recorded a charge for goodwill and tradename impairment in the statement of operations of $67.1 million. The decline in the fair value of these business units was primarily due to increased competition within the categories in which these brands compete, declining operating results and cash flows during 2002, and revised long term plans for these brands.

Due to the impairment of the Chef’s Choice tradename and the increased competition within the home meal replacement category, the Company determined that the life of the Chef’s Choice tradename should be changed to a finite life of three years.

Note 9—Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	December 31,
	2002		2001
Marketing and promotion expenses	$	14,168	$	21,063
Interest		19,021		17,403
Brokerage and distribution expenses		6,804		13,753
Employee related expenses		13,424		15,800
Legal and professional		976		1,796
Liability to shareholder class (Note 22)		—		7,500
Plant closing expenses (Note 13)		2,544		—
Other		3,471		3,102

	$	60,408	$	80,417

F-19

Note 10—Long Term Debt

Long term debt consists of the following (dollars in thousands):

	December 31,
	2002			2001
SENIOR SECURED DEBT

Senior secured tranche A debt; weighted average interest rate of 5.30% at December 31, 2002; principal due in quarterly installments through June 30, 2005; floating interest rate at the prime rate plus 2.75%, or alternatively, the one, three or six month Eurodollar rate plus 3.75% payable monthly or at the termination of the Eurodollar contract interest period	$	108,814		$	143,437

Senior secured tranche B debt; weighted average interest rate of 5.79% at December 31, 2002; principal due in quarterly installments through September 30, 2006; before unamortized discount on Supplemental Tranche B of $2,354 at December 31, 2002 and $0 at December 31, 2001; floating interest rate at the prime rate plus 3.25%, or alternatively, the one, three or six month Eurodollar rate plus 4.25% payable monthly or at the termination of the Eurodollar contract interest period		401,446			367,228

Senior secured revolving debt; weighted average interest rate of 5.78% at December 31, 2002; principal due June 30, 2005; floating interest rate at the prime rate plus 2.75%, or alternatively, the one, three or six month Eurodollar rate 3.75% payable monthly or at the termination of the Eurodollar contract interest period		153,600			127,700

SENIOR UNSECURED PROMMISORY NOTES

Senior unsecured promissory notes issued to related parties June 27, 2002 at a par value of $25,000 less a discount of $3,333; before unamortized discount of $3,049 at December 31, 2002; interest rate of 12% payable each January 1 and July 1; matures October 1, 2006		25,000			—

SENIOR SUBORDINATED NOTES

Senior subordinated notes issued July 1, 1998 at par value of $200,000; coupon interest rate of 8.75% with interest payable each January 1 and July 1, matures July 1, 2008		200,000			200,000

Senior subordinated notes issued July 1, 1997 at par value of $100,000 plus premium of $2,500; net of unamortized premium of $1,349 and $1,605 at December 31, 2002 and December 31, 2001, respectively; coupon interest rate of 9.875% with interest payable each August 15 and February 15; matures on February 15, 2007		100,000			100,000

Senior subordinated notes issued February 10, 1997 at par value of $100,000; coupon interest rate of 9.875% with interest payable each August 15 and February 15; matures on February 15, 2007		100,000			100,000

		1,088,860			1,038,365

Capitalized lease obligations		1,833			1,931

		1,090,693			1,040,296

Less: Unamortized discount on Supplemental Tranche B senior secured debt		(2,354	)		—

Less: Unamortized discount on senior unsecured promissory notes		(3,049	)		—

Add: Unamortized premium on senior subordinated notes		1,349			1,605

		1,086,639			1,041,901
Less: Current maturities of long term debt		(43,259	)		(37,970	)

Long term debt	$	1,043,380		$	1,003,931

F-20

Annual principal payments for the next five years and thereafter consist of the following (dollars in thousands):

2003	$	43,259
2004		48,218
2005		182,047
2006		415,868
2007		200,222
Thereafter		201,079

Total	$	1,090,693

Senior Secured Debt

The Company’s amended and restated senior secured credit agreement dated November 1, 1999, (as amended, supplemented or otherwise modified from time to time, the “Senior Secured Debt Facility”), with a group of lending institutions provided for term borrowings of $600 million, with quarterly repayments of principal and a $175 million revolving credit facility, subject to reductions for outstanding letters of credit. At December 31, 2002, adjusting for outstanding letters of credit of $8.0 million, the Company had unused borrowing availability of $13.4 million on the revolving debt facility. The Agreement requires a commitment fee of 0.50% per annum payable monthly on the unused portions of the revolving debt facility. Borrowings under the agreement are collateralized by substantially all of the assets of the Company.

The Agreement, as amended, included restrictive covenants, which for 2002, did not permit additional indebtedness, except for nominal amounts and obligations incurred in the normal course of business, limited capital expenditures to $30.0 million, did not permit the payment of cash dividends and required the Company to maintain ratios of interest and fixed charge coverage and total and senior debt leverage.

The Senior Secured Debt Facility which had been amended in 2000, was further amended on February 7, 2001. The amendment included provisions that:

•

further amended the financial covenants for 2001;

•

increased the interest rate spread on borrowings made pursuant to the facility by 0.25%;

•

affirmed the ability of the Company to continue to sell accounts receivable up to a maximum of $60 million; and

•

provided for a further increase in the interest rate spread of 0.25% in the event that the Company did not realize net cash proceeds of $90 million from the sale of assets prior to June 30, 2001.

During the third quarter of 2001, the Company’s senior secured debt agreement was amended to provide that for third quarter covenant purposes, the proceeds from an asset sale anticipated to occur in October 2001 would be applied as if it had occurred in the third quarter. In the event that the asset sale did not occur, the lending agreement was further amended to reset the senior leverage covenant, in return for a contingent fee, in the event that the Company would not otherwise have met its senior leverage covenant. The asset sale did not occur and the amendment was necessary to keep the Company within the senior leverage covenant. Consequently, the Company paid a $428,000 fee in October 2001 to reset the third quarter covenant.

In December 2001 the Company obtained a waiver of its December 31, 2001 maximum leverage and maximum senior leverage financial covenants, subject to meeting newly set maximum amounts, which the Company met.

In February 2002, the Company’s senior secured debt agreement was amended, with provisions to allow for the potential issuance of additional senior subordinated notes to replace the current receivables purchase facility and to further amend the financial covenants for periods through March 31, 2003.

On May 1, 2002, the senior secured debt agreement was further amended to revise certain of the financial covenants for future interim periods in 2002 and to provide for the exclusion of (1) approximately $20.1 million of expenses recorded by the Company in the quarter ended March 31, 2002, and (2) fees and expenses associated with the provisions of the amendment, for purposes of the financial covenant calculations at March 31, 2002 and future periods. In addition, the Company provided a revised 2002 business plan to the Administrative Agent, met with the lenders to discuss the Company’s business and assisted a consultant, chosen by the Administrative Agent and at the Company’s expense, in reviewing the Company’s business plan and trade promotion systems along with cash flow projections and liquidity. As a

F-21

condition to the amendment, certain entities affiliated with Fenway Partners, Inc. and McCown De Leeuw & Co., Inc. (the “Investors”) entered into a Revolving Loan Subordinated Participation Agreement, pursuant to which they agreed to purchase, on a subordinated basis, a participation of $10 million of the Company’s outstanding revolving loans. The Company issued 718,230 warrants to purchase common stock of the Company at $0.01 per share to these entities affiliated with the Investors as consideration for their willingness to enter into this Participation Agreement. The number of warrants issued for this service was subject to adjustment by the Special Committee of the Board of Directors, in consultation with outside advisors, and was not to exceed 1% of the number of shares of common stock outstanding on May 1, 2002. The warrants expire on April 30, 2012. The warrants were valued on May 1, 2002 at $4.3 million and were expensed during the second quarter as the Revolving Loan Subordinated Participation Agreement was cancelled by the June 27, 2002 credit agreement amendment and the additional financing described below. In August 2002, the Special Committee of the Board of Directors reduced the number of warrants from 718,230 to 300,000, and as a result, the Company recorded a reduction of expense in the third quarter of approximately $2.5 million.

On June 27, 2002, the Company secured commitments for $62.6 million of additional financing and further amended the senior secured debt agreement. The financing package included $37.6 million of Supplemental Tranche B financing that was obtained from new term loans under an amendment to the Company’s existing credit facility with various lenders. The terms and conditions of this financing are identical to the Tranche B Term Loans under the Company’s existing senior credit facility. These Supplemental Tranche B loans were purchased at a discount of approximately $2.6 million. The Company received $35.0 million in proceeds from this additional financing on July 2, 2002. The remaining portion of the financing package consisted of $25 million of Senior Unsecured Promissory Notes issued to the Investors, described below. The Company used the new capital to reduce debt under the senior secured revolving debt facility and for working capital purposes.

The June 27, 2002 amendment to the senior secured debt agreement revised certain of the financial covenants for future periods through September 30, 2003, and provided for the exclusion of fees and expenses associated with the amendment for purposes of the financial covenant calculations at June 30, 2002 and future periods. The amendment also provided for an excess leverage fee of 1.5% of average borrowings under the term loans and revolving credit facility for the period September 30, 2002 through September 30, 2003 and additional pay-in-kind interest of 1% per year on the average borrowings under the term loans and revolving credit facility from the date of the amendment until the date net cash proceeds of $200 million are received, in each case, payable only in the event the Company did not realize net cash proceeds of $200 million from the sale of assets prior to September 30, 2003. The amendment also reduced the maximum amount of receivables subject to sale under the receivable sales agreement from $42.0 million to $30.0 million.

At December 31, 2002, the Company was not in compliance with certain financial covenants of its senior secured debt agreement.

On February 21, 2003 the Senior Secured Debt Facility was further amended. The amendment included provisions that:

•

Further amended the financial covenants for periods through September 30, 2004, which amended or established covenants related to operating performance and certain expense levels, reduced the allowable capital expenditures for 2003 to $20 million and eliminated the financial covenants associated with interest and fixed charge coverage and total and senior debt leverage;

•

waived certain existing defaults of financial covenants;

•

affirmed the ability of the Company to continue to sell accounts receivable up to a maximum of $30 million through September 30, 2003;

•

provided for an excess leverage fee of 3.50% of the aggregate amount of term loan and revolving credit facility borrowings outstanding on the amendment date. Such fee is to be paid out of net cash proceeds from the sale of assets and will not be required if the Company receives net cash proceeds of at least $100.0 million by June 30, 2003 and an additional $125.0 million by September 30, 2003, or failing to meet the June 30, 2003 requirement, if aggregate net cash proceeds of $325.0 million are received by September 30, 2003;

F-22

•

provided for the exclusion of certain expenses, not to exceed $18 million, recorded by the Company in the fourth quarter of 2002 for purposes of the financial covenants at December 31, 2002.

With the waiver and amendment discussed above, the Company is in compliance with the provisions of the senior secured debt agreement, as amended, and anticipates remaining in compliance throughout fiscal 2003. The Company’s ability to access its available liquidity under the revolver and receivable sale facility are dependent on the Company’s continued compliance with the covenants in the senior secured debt agreement.

Senior Unsecured Promissory Notes

The Company’s additional financing package completed on June 27, 2002 included $25 million of financing in the form of senior unsecured promissory notes (the “Notes”) from certain entities affiliated with the Investors. The Notes mature October 1, 2006, and accrue interest at the rate of 12% per annum, payable semi-annually. Any unpaid interest will accrue at a default rate of the applicable interest rate plus 2% per annum and will be payable at maturity. The Notes were purchased at a discount of $750,000. In addition to the cash discount, as part of the senior unsecured note agreement, the Investors received warrants from the Company to purchase 2.1 million shares of common stock of the Company at $0.01 per share. The warrants were issued on July 8, 2002 and expire on July 7, 2012. A value of approximately $2.6 million was assigned to the warrants, which was recorded as additional debt discount in the third quarter of 2002, and is being amortized as additional interest expense over the life of the debt. The Company received $15 million, less applicable discount, from the Investors on June 27, 2002, with the remaining $10 million, less applicable discount, received on July 2, 2002. In consideration of the $25 million financing provided by the Investors, the Revolving Loan Subordinated Participation Agreement, entered into on May 1, 2002 was terminated. The Company did not pay the cash interest due on the Senior Unsecured Promissory Notes at January 1, 2003, and as a result, the unpaid interest will accrue at the default rate mentioned above.

Senior Subordinated Notes

On February 10, 1997, the Company issued $100.0 million of senior subordinated notes. On July 1, 1997, the Company issued $100.0 million of senior subordinated notes at a premium in the amount of $2.5 million. The unamortized balance of the premium on these at December 31, 2002 and 2001 was $1.3 million and $1.6 million, respectively.

The Company may redeem the two notes issued in 1997 at any time after February 15, 2002, at the redemption price together with accrued and unpaid interest. Upon a Change in Control (as defined), the Company had the option at any time prior to February 15, 2002 to redeem the Notes at a redemption price of 100% plus the Applicable Premium (as defined), together with accrued and unpaid interest. If the Company has not redeemed the Notes and if a Change of Control occurs after February 15, 2002, the Company is required to offer to repurchase the Notes at a price equal to 101% together with accrued and unpaid interest.

On July 1, 1998, the Company issued $200.0 million of senior subordinated notes (the “1998 Notes”). The Company may redeem the 1998 Notes at any time after July 1, 2003, at the redemption price together with accrued and unpaid interest. In addition, the Company may redeem $70.0 million of the 1998 Notes at any time prior to July 1, 2003 subject to certain requirements, with the cash proceeds received from one or more Subsequent Equity Offerings (as defined), at a redemption price of 108.75% together with accrued and unpaid interest. Upon a Change in Control (as defined), the Company has the option at any time prior to July 1, 2003, to redeem the 1998 Notes at a redemption price of 100% plus the Applicable Premium (as defined), together with accrued and unpaid interest. If the Company has not redeemed the 1998 Notes and if a Change of Control occurs after July 1, 2003, the Company is required to offer to repurchase the 1998 Notes at a price equal to 101% together with accrued and unpaid interest.

The senior subordinated note indentures include restrictive covenants, which limit additional borrowings, cash dividends, sale of assets, mergers and the sale of stock. As a result of the adjustments to the Company’s unaudited interim financial results for the first, second and third quarters of 1999 and the third quarter of 1998, and adjustments to its audited financial results for the year ended December 1998, the Company was in default under its indentures.

During the third quarter of 2000, the Company solicited and received sufficient consents from holders of its senior subordinated notes to amend certain provisions and waive certain events of default under its indentures. As a result of the Consent Solicitation, the senior subordinated indentures were amended to, among other things, increase the redemption

F-23

price payable upon optional redemption of the notes by the Company, allow the Company to refinance its outstanding debt, and permit the Company to incur additional indebtedness. Pursuant to the terms of the Consent Solicitation, the Company issued, effective September 20, 2000, an aggregate of 6,965,736 shares of common stock to the senior subordinated note holders who participated in the consent solicitation.

The common stock issued in connection with the consent solicitation noted above was valued by the Company at the closing market price on September 20, 2000, less a 12.5% discount to reflect that the shares are subject to transfer restrictions under securities laws. The total increase to common stock and paid-in-capital of $21,714,000 was allocated, based on independent valuations, to other assets as deferred financing costs ($4 million), with the balance ($17,714,000) recorded as other financial, legal and accounting expense in the accompanying Statement of Operations.

Interest Rate Agreements

See Note 17.

Note 11—Preferred Stock

In September 2000, the Company issued to certain entities affiliated with current stockholders, in exchange for $15 million, 3,750,000 shares of Series A Convertible Cumulative Preferred Stock (“Series A Preferred Stock”), in connection with the senior subordinated noteholders consent solicitation (see Note 10). The shares have a par value of $0.01 per share, pay a cumulative dividend in arrears of 8% and have a liquidation preference value of the greater of (i) $4.00 per share, plus accumulated dividends, if any, plus any unpaid dividends since the last dividend payment date or (ii) the amount payable with respect to the number of shares of Common Stock into which the shares of Preferred Stock plus accumulated dividends, if any, plus any unpaid dividends since the last dividend payment date could be converted (assuming the conversion of all outstanding shares of Preferred Stock immediately prior to the liquidation). The Series A Preferred Stock is convertible into the number of shares of Common Stock equal to $4.00 plus accumulated dividends, if any and unpaid dividends since the last payment date, divided by the initial conversion price of $3.35 (the “Conversion Price”). The Conversion Price is subject to adjustment for equity issuances by the Company at a price per share less than the Conversion Price. The issuance of warrants on May 1, 2002 (as adjusted) and July 8, 2002, as described in Note 9, activated certain anti-dilution provisions of the Company’s convertible preferred stock. Due to the issuance of warrants, the conversion price used in the calculation to convert the preferred stock liquidation preference value into shares of the Company’s common stock, if converted, was reduced from $3.35 per share to $3.24 per share. Based on the liquidation preference value at December 31, 2002, these changes would result in the issuance of approximately 5.5 million additional common shares, if converted. The Series A Preferred Stock converts at the Company’s option into shares of Common Stock in the event the Common Stock trades for 10 consecutive days at a price that is in excess of 200% of the Conversion Price. Preferred dividends, to the extent they are paid, will be paid in the form of additional Preferred Stock until such time as the restrictions on payments of dividends contained in the senior secured debt agreements are no longer in effect, at which time the Company will consider how future dividends will be paid. Unpaid accumulated preferred dividends at December 31, 2002 and 2001 were $2.9 million and $1.6 million, respectively.

Note 12—Common Stock Warrants

On May 1, 2002, the Company issued 300,000 warrants, as adjusted, to purchase common stock of the Company at $0.01 per share to entities affiliated with the Investors as consideration for their willingness to enter into the Revolving Loan Subordinated Participation Agreement. The warrants expire on April 30, 2012. See Note 10.

As part of the senior unsecured promissory note agreement, entities affiliated with the Investors received warrants from the Company to purchase 2.1 million shares of common stock of the Company at $0.01 per share. The warrants were issued on July 8, 2002 and expire on July 7, 2012. See Note 10.

Note 13—Plant Closure and Asset Impairment Charges

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approximately $28.2 million and is attributable to the write-down of property, plant and equipment, with the remaining $4.2 million of cash costs related to severance and other employee related costs of $3.0 million, and other costs necessary to maintain and dispose of the facility of $1.2 million. As of December 31, 2002, the Company had paid approximately $2.9 million of severance and other employee related costs and $0.6 million of other costs for disposal of the facility. The remaining costs of $0.7 million are included in accrued expenses at December 31, 2002 and are expected to be paid in early fiscal 2003. The Company completed the sale of the West Seneca facility in December 2002, receiving net cash proceeds from the sale of approximately $2.4 million.

On October 30, 2002, the Company announced its intention to close its Yuba City, California facility where the Company manufactured specialty seafood and Chef’s Choice products. As a result of this decision, production at Yuba City facility ceased in early 2003. The closing resulted in the elimination of all 155 jobs. Impacted employees received severance pay in accordance with the Company’s policies. As a result the Company recorded a charge of $6.7 million during the fourth quarter of 2002. The non-cash portion of the charge of approximately $4.9 million is attributable to the write-down of property, plant and equipment. The remaining $1.8 million of cash costs is related to severance and other employee related costs of $0.9 million and other costs necessary to maintain and dispose of the facility of $0.9 million. As of December 31, 2002, the Company had not paid any cash costs related to the closing of this facility. These costs are included in accrued expenses at December 31, 2002 and the Company expects to pay a majority of the remaining costs in fiscal 2003.

During the fourth quarter of 2002, the Company completed a strategic assessment of its existing capacity in relation to the Company’s future operational plans. Based upon that assessment, the Company recorded a charge of approximately $14.1 million for fixed assets determined to be permanently impaired. The impaired fixed assets represent a broad range of fixed assets across all business lines located at various facilities. Assets determined to be impaired were written down to their estimated realizable value, and the Company has undertaken a process to dispose of these impaired assets. The ultimate salvage value of these assets, net of disposal costs, is not expected to be significant.

Note 14—Other Financial, Legal and Accounting Expenses

As a result of the investigation into the Company’s accounting practices, the resulting restatement of its 1998 and 1999 financial statements, litigation, governmental proceedings, defaults under its loan agreements and related matters (see Notes 10 and 22), the Company has received shares of common stock from former management, recorded settlement obligations and has incurred legal and accounting expenses, charges to obtain waivers on its events of default and charges related to amending its financing facilities. Such costs, totaled $47.4 million in 2000, including a non-cash $17.7 million charge associated with the issuance of common stock to certain holders of the Company’s senior subordinated debt. On January 16, 2001, the Company announced that it reached a preliminary agreement to settle the securities class action and derivative lawsuits pending against the Company and its former management team in the U.S. District Court in the Northern District of California. On March 1, 2001, Stipulations of Settlement for the Securities class action and derivative lawsuits were entered into in the U.S. District Court in the Northern District of California to fully resolve, discharge and settle the claims made in each respective lawsuit. On May 11, 2001, the United States District Court for the Northern District of California approved the settlement.

Under the terms of the agreement, Aurora was required to pay the class members $26 million in cash and $10 million in common stock of the Company. On March 2, 2001, the Company entered into definitive settlement agreements with certain members of former management to transfer to the Company between approximately 3 million and 3.6 million shares of common stock of the Company, in consideration for a resolution of any civil claims that the Company may have, and partially conditioned upon future events and circumstances. The cash component of the settlement was funded entirely by the Company’s insurance in the fourth quarter of 2001. During the second quarter of 2001, in connection with the settlement of the securities class action and derivative lawsuits, the Company received 3,051,303 shares, valued at $15.7 million, of the Company’s common stock from former management. These shares served as a partial recovery of losses and were recorded as Treasury Stock at an amount equal to the market value of the shares of $5.13 per share at the date the settlement was confirmed by the court. In addition, the Company recorded a liability for the value of the shares required to be distributed to members of the shareholder class in the amount of $10.0 million and recorded accruals of $1.9 million for estimated remaining costs to be incurred to complete all of the Company’s obligations under terms of the settlement agreements. As a result, a pretax net gain of approximately $3.8 million was recorded. During May 2001, the Company distributed 465,342 shares of its common stock as settlement for the first $2.5 million of the common stock component of the settlement. On September 6, 2002, the Company distributed 5,319,149 shares of common stock to the settlement class as settlement for the remaining $7.5 million of the common stock portion of the settlement, following completion of the

F-25

claims processing by the third-party claims administrator appointed by the court. This distribution was comprised of the remaining 2,586,041 shares held in treasury that had been received from former management, and 2,733,108 additional shares issued by the Company. This distribution, in conjunction with the distribution of 465,342 shares in May 2001, finalized the Company’s obligations under the shareholder settlement agreement.

Note 15—Transition Expenses

Transition expenses consist of one-time costs incurred to establish the Company’s operations and integrate acquired businesses and operations, including relocation expenses, recruiting fees, sales support and other unique transitional expenses. Transition expenses for the year ended December 31, 2000 were approximately $3.0 million.

Note 16—Columbus Office Consolidation

During the third quarter of 2000, the Company consolidated its administrative offices and functions in St. Louis, Missouri and closed its office in Columbus, Ohio. The Columbus office had been responsible for administration of the Company’s dry grocery segment. Charges to expense of $0.7 million and $6.9 million were recorded in 2001 and 2000, respectively, for costs associated with this closing and has been presented separately as Columbus consolidation costs in the accompanying Statements of Operations. The primary components of the charges were amounts for the involuntary termination of approximately 50 sales, marketing, finance, information systems, purchasing and customer service employees of $2.7 million, a non-cash charge for abandoned leasehold improvements and capitalized software that will no longer be used of $3.1 million, and estimated unrecovered office lease costs after consolidation and other items of $1.8 million. All payments related to the consolidation have been made with the exception of $0.3 million of remaining reserves included in accrued expenses at December 31, 2002 for unused office space.

Note 17—Derivative Instruments

The Company maintains an interest rate risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest rate volatility. The Company’s specific goals are (1) to convert a portion of its variable-rate debt to fixed-rate debt and (2) to offset a portion of the unrealized appreciation or depreciation in the market value of its fixed-rate debt caused by interest rate fluctuations.

In accordance with the senior bank facilities, the Company was required through November 1, 2002, to use derivative instruments to the extent necessary to provide that, when combined with the Company’s senior subordinated notes, at least 50% of the Company’s aggregate indebtedness is subject to either a fixed interest rate or interest rate protection agreements.

The Company entered into two types of derivative contracts: (1) the hedge of the fair value of a recognized asset or liability (“fair value hedge”) and (2) the hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). The Company recognizes all derivatives on the balance sheet at their fair value. Changes in the fair value of derivatives that are highly effective and have been designated and qualify as a fair value hedges are recorded in current period earnings, along with gains or losses on the related hedged assets or liabilities. Changes in the fair value of derivatives that are highly effective and have been designated and qualify as cash flow hedges are recorded in other comprehensive income, until earnings are affected by the variability of cash flows.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet. The Company also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of hedged items.

When the Company determines that a derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item, the Company will discontinue hedge accounting prospectively. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in its fair value. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective cash flow hedge, the derivative will continue to be carried on the balance sheet at its fair value, with changes in its fair value recognized in current period earnings.

The Company does not use derivative financial instruments for trading or speculative purposes. In accordance with the senior bank facilities, the Company was required to enter into interest rate protection agreements to the extent necessary to

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provide that, when combined with the Company’s senior subordinated notes, at least 50% of the Company’s aggregate indebtedness is subject to either a fixed interest rate or interest rate protection agreements.

At December 31, 2002, the Company was party to two interest rate agreements. The counterparty to each of the agreements is JP Morgan Chase Bank. On March 17, 1998, the Company entered into a three-year interest rate swap agreement (the “Swap”) with a notional principal amount of $150.0 million, which granted the counterparty the option to renew the agreement for one additional year. The rate is set quarterly, with the last reset on December 17, 2002, prior to expiration of the agreement on March 17, 2003, resulting in a net liability to the Company of 4.6% for the following quarter, which will require a payment of $1.7 million on March 17, 2003. On November 30, 1998, the Company amended the Swap whereby the counterparty received the option to further extend the termination date an additional year to March 17, 2003, and the applicable rate was decreased from 5.81% to 5.37%. On April 28, 2000, the Company further amended the Swap whereby the applicable rate was increased from 5.37% to 6.01%. Under the Swap, the Company would receive payments from the counterparty if the three-month LIBOR rate exceeds 6.01% and make payments to the counterparty if the three-month LIBOR rate is less than 6.01%. On March 15, 2001, the counterparty exercised its option to extend the term of the Swap to March 17, 2003.

On November 15, 1999, the Company entered into a five-year interest rate collar agreement, which was amended on April 28, 2000 (the “Collar”), with a notional principal amount of $150.0 million. The rate is set quarterly, with the last reset date occurring on February 18, 2003, resulting in a net liability to the Company of 5.2% for the following quarter which will require a payment of $1.9 million on May 16, 2003. Under the Collar, the Company would receive payments from the counterparty if the three-month LIBOR rate is between 6.50% and 7.50% or exceeds 8.25%. The Company would make payments if the three-month LIBOR rate is less than 4.95%.

During 2002 and 2001, the Company made payments under interest rate agreements of $13.2 million and $3.9 million, respectively. During 2000, the Company received net payments of $0.9 million.

During fiscal year 2002, the Company recognized a net loss of $12.1 million related to its ineffective interest rate collar agreement (reported as adjustment of value of derivatives in the Consolidated Statements of Operations). Recorded amounts related to the Company’s fair value hedge in 2002 were immaterial. At December 31, 2002, the Company estimates that, because of the repricing of variable rate debt, deferred net losses of $1.5 million on derivative instruments accumulated in other comprehensive income will be reclassified to earnings during the next twelve months.

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Note 18—Income Taxes

The provision for income taxes is summarized as follows (in thousands):

	Years Ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Current tax liability (benefit):
Federal	$	—		$	—		$	—
State		—			—			(177	)

Total current benefit		—			—			(177	)
Deferred tax liability (benefit):
Federal		(55,688	)		(7,893	)		(28,675	)
Federal valuation allowance		154,022			55,481			—
State		(9,960	)		1,065			(2,998	)
State valuation allowance		27,544			9,921			—

Total deferred expense (benefit)		115,918			58,574			(31,673	)

Total income tax expense (benefit)	$	115,918		$	58,574		$	(31,850	)

Deferred tax assets (liabilities), representing the tax effects of the difference between amounts recognized for book and tax purposes, consist of the following:

	December 31,
	2002			2001
	(As restated—See Note 2)
Deferred tax assets:
Accounts receivable	$	399		$	1,976
Inventory		4,272			1,246
Accrued expenses		10,019			15,341
Derivative instruments		5,986			5,900
State tax credit		1,350			1,350
Goodwill and other intangible assets		65,352			—
Loss carryforwards		245,612			170,367

		332,990			196,180
Valuation allowance		(301,142	)		(66,362	)

Net deferred tax assets		31,848			129,818

Deferred tax liabilities:
Goodwill and other intangible assets		(94,491	)		(100,140	)
Depreciation		(27,907	)		(28,645	)
Other		(3,941	)		(1,033	)

Deferred tax liabilities		(126,339	)		(129,818	)

Net deferred tax liability	$	(94,491	)	$	—

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At December 31, 2002, the Company had a federal net operating loss carry forward of approximately $621.0 million. The net operating loss can be used to offset future taxable income and expires in 2010 through 2022. The Company is a loss corporation as defined in section 382 of the Internal Revenue Code. Therefore, if certain substantial changes of the Company’s ownership should occur, there could be significant annual limitations of the amount of net operating loss carryforwards which can be utilized. The operating loss carryforward and the respective years of expiration are as follows (in thousands):

NOL Expires	Loss Amount
2010		2,430
2011		10,227
2012		13,432
2018		94,293
2019		103,406
2020		166,463
2021		52,394
2022		178,346

	$	620,991

Effective as of December 31, 2001, management determined that it was no longer more likely than not that the Company would be able to realize its deferred tax assets. This conclusion was reached due to recent cumulative pretax losses and the financial reporting requirements of FAS 109. As a result, the Company cannot anticipate future earnings as a means to realize the deferred tax assets. Accordingly, the Company has determined that, pursuant to the provisions of FAS 109, deferred tax valuation allowances are required on those deferred tax assets. The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences (in thousands):

	Years Ended December 31,
	2002			2001			2000
	(as restated— See Note 2)			(as restated— See Note 2)
Income tax benefit at U.S. statutory rate	$	(59,155	)	$	(8,543	)	$	(30,779	)
Increase (decrease) in tax resulting from:
Non-deductible goodwill		38			943			950
State taxes, net of federal taxes		(6,466	)		692			(2,064	)
Other, net		(65	)		80			43
Valuation allowance		181,566			65,402			—

Total income tax (benefit) expense	$	115,918		$	58,574		$	(31,850	)

Note 19—Leases

The Company leases certain facilities, machinery and equipment under operating and capital lease agreements with varying terms and conditions. The leases are noncancellable and expire on various dates through 2011. Obligations pursuant to the capital lease of the Company’s product development facility are included in the Consolidated Balance Sheet as part of debt (see Note 10). Operating lease commitments associated with the Company’s unused office space in Columbus, Ohio, in excess of estimated sublease revenue, have been expensed as part of Columbus consolidation costs in the accompanying consolidated statements of operations.

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Future annual minimum lease payments under these leases are summarized as follows (in thousands):

	Operating Leases
Years ending December 31,	Total Commitments		Sublease Rentals			Net Commitments		Capital Lease Commitments
2003	$	2,539	$	(317	)	$	2,222	$	368
2004		1,977		(79	)		1,898		368
2005		1,716		—			1,716		368
2006		1,554		—			1,554		381
2007		1,600		—			1,600		419
Thereafter		5,970		—			5,970		1,571

	$	15,356	$	(396	)	$	14,960		3,475

Less amounts representing:
Executory Costs		(594	)
Interest		(1,048	)

	$	1,833

Rent expense for the years ended December 31, 2002, 2001 and 2000 was $2.4 million, $1.8 million and $1.9 million, respectively.

Note 20—Savings and Benefit Plans

The Company offers a retirement savings plan to employees in the form of a 401(k) plan. Under the 401(k) plan, employee contributions of up to 6% of total compensation, subject to certain tax law limitations, are matched by Company contributions of up to 5% of total compensation, which are fully vested at the time of contribution. Additional contributions of 4% of eligible compensation are made on behalf of all employees on an annual basis. These contributions vest ratably over the first five years of employment. None of the contributions to the Company’s retirement savings plan are in the form of the Company’s common stock. Company employees have the opportunity to purchase limited amounts of the Company’s common stock through the Employee Stock Purchase Plan (see Note 22) and are not restricted in their sale of such stock except during applicable insider trading black-out periods. The Company recorded expense for the 401(k) and the additional contributions for the years ended December 31, 2002, 2001 and 2000, of $4.8 million, $4.5 million and $4.0 million, respectively.

Note 21—Related Party Transactions

On April 19, 2000, Aurora Foods Inc. (the “Company”) entered into an agreement pursuant to which The Chase Manhattan Bank, now JP Morgan Chase Bank, agreed to purchase from time to time certain of the Company’s accounts receivable. The agreement was last amended as of June 28, 2002. The agreement currently provides that the amount of purchased and uncollected accounts receivable outstanding at any given time is not to exceed $30 million. Funds affiliated with Fenway Partners, Inc. (“Fenway”), whose partners include Messrs. Richard C. Dresdale, Andrea Geisser and Peter Lamm (all directors of the Company), McCown De Leeuw & Co., Inc. (“MDC”), whose managing directors include Messrs. George E. McCown, David E. De Leeuw and John E. Murphy (all directors of the Company), and UBS Capital LLC (“UBS Capital”) (Mr. Charles J. Delaney, a director of the Company and formerly president of UBS Capital Americas) have agreed to participate, on a subordinated basis, in not less than 15% of this accounts receivable transaction. The purchase price is calculated to include a customary discount to the amount of the receivables purchased. The Company has agreed to pay customary fees in connection with this accounts receivable transaction.

On September 20, 2000, the Company issued 3,750,000 shares of its Series A Convertible Cumulative Preferred Stock (“Series A Preferred Stock”) to certain existing stockholders including funds affiliated with Fenway, MDC and UBS Capital at a price of $4.00 per share for an aggregate offering price of $15,000,000. The Series A Preferred Stock is convertible into the number of shares of Common Stock equal to $4.00 plus accumulated dividends, if any, and unpaid dividends since the last dividend payment date divided by the initial conversion price of $3.35 (the “Conversion Price”). The Conversion Price is subject to adjustment for equity issuances by the Company at a price per share less than the Conversion Price. The issuance of warrants on May 1, 2002 (as adjusted) and July 8, 2002, as described in Note 10,

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activated certain anti-dilution provisions of the Company’s convertible preferred stock. Due to the issuance of warrants, the conversion price used in the calculation to convert the preferred stock liquidation preference value into shares of the Company’s common stock, if converted, was reduced from $3.35 per share to $3.24 per share. The Series A Preferred Stock converts at the Company’s option into shares of Common Stock in the event the Common Stock trades for 10 consecutive days at a price that is in excess of 200% of the Conversion Price. See Note 11.

In connection with the May 1, 2002 amendment to the Company’s senior secured debt agreement, certain entities affiliated with Fenway Partners, Inc. and McCown De Leeuw & Co. (the “Investors”) agreed to purchase on a subordinated basis, a participation of $10 million of the Company’s outstanding revolving loans. The Company issued 718,230 warrants to purchase common stock of the Company at $0.01 per share to these entities affiliated with the Investors as consideration for their willingness to enter into this Participation Agreement. The number of warrants issued for this service was subject to adjustment by the Special Committee of the Board of Directors, in consultation with outside advisors, and was not to exceed 1% of the number of shares of common stock outstanding on May 1, 2002. The warrants expire on April 30, 2012. The warrants were valued on May 1, 2002 at $4.3 million and were expensed during the second quarter of 2002 as the Revolving Loan Subordinated Participation Agreement was cancelled by the June 27, 2002 credit agreement amendment and the additional financing. In August 2002, the Special Committee of the Board of Directors reduced the number of warrants from 718,230 to 300,000, and as a result, the Company recorded a reduction of expense in the third quarter of 2002 of approximately $2.5 million. See Note 10.

On June 27, 2002, the Company secured commitments for $62.6 million of additional financing and further amended the senior secured debt agreement. The financing package included $25 million in the form of senior unsecured promissory notes (the “Notes”) from certain entities affiliated with the Investors. The Notes mature October 1, 2006, and accrue interest at the rate of 12% per annum, payable semi-annually. Any unpaid interest will accrue at a default rate of the applicable interest rate plus 2% per annum and will be payable at maturity. The Notes were purchased at a discount of $750,000. In addition to the discount, as part of the senior unsecured note agreement the Investors received warrants from the Company to purchase 2.1 million shares of common stock of the Company at $0.01 per share. The warrants were issued on July 8, 2002 and expire on July 7, 2012. A value of approximately $2.6 million was assigned to the warrants which was recorded as additional debt discount in the third quarter of 2002, and is being amortized as additional interest expense over the life of the debt. The Company received $15 million, less applicable discount, from the Investors on June 27, 2002, with the remaining $10 million, less applicable discount, received on July 2, 2002. In consideration of the $25 million financing provided by the Investors, the Revolving Loan Subordinated Participation Agreement, entered into on May 1, 2002 was terminated. See Note 10.

On August 28, 2002, Dale F. Morrison became the Chairman of the Board and interim Chief Executive Officer of the Company. Mr. Morrison is employed by Fenway Partners Resources, Inc. Fenway Partners Resources, Inc. is affiliated with Fenway Partners Capital Fund, L.P. and Fenway Partners Capital Fund II, L.P., which are shareholders of the Company. Mr. Morrison earned $70,455, for his work with the Company from August 28, 2002 to December 31, 2002. This salary was paid to Mr. Morrison by Fenway Partners Resources, Inc., as a consultant to the Company. Fenway Partners Resources, Inc. charged to the Company the $70,455 it paid to Mr. Morrison for his services.

The Company entered into agreements in 1998 pursuant to which it agreed to pay transaction fees to each of Fenway, MDC III and Dartford of 0.333% of the acquisition price for future acquisitions by the Company. The Dartford agreement terminated upon the resignation of Mr. Wilson on February 17, 2000. The acquisition price is the sum of (i) the cash purchase price actually received by the seller, (ii) the fair market value of any equity securities issued by the seller, (iii) the face value of any debt securities issued to the seller less any discounts, (iv) the amount of liabilities assumed by the Company plus (v) the fair market value of any other property or consideration paid in connection with the acquisition, with installment or deferred payments to be calculated using the present value thereof.

The Company and certain stockholders of the Company have entered into the Securityholders Agreement, which provides for certain rights, including registration rights of the stockholders.

On July 7, 1999, Mr. Thomas O. Ellinwood, Executive Vice President, Aurora Brands, in connection with the tax liability associated with certain equity issuances to him, executed a secured promissory note payable on demand by the Company in the amount of $501,571 in favor of the company. If Mr. Ellinwood sells his shares of the Company’s Common Stock, he must repay his note. The interest payable on the note is reset annually on July 1st. The interest rate for the year ending June 30, 2003 is 2.84%. The entire amount of the note remains outstanding as of December 31, 2002.

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Note 22—Commitments And Contingent Liabilities

Litigation

During 2000, the Company was served with eighteen complaints in purported class action lawsuits filed in the U.S. District Court for the Northern District of California. The complaints received by the Company alleged that, among other things, as a result of accounting irregularities, the Company’s previously issued financial statements were materially false and misleading and thus constituted violations of federal securities laws by the Company and the directors and officers who resigned on February 17, 2000 (Ian R. Wilson, James B. Ardrey, Ray Chung and M. Laurie Cummings). The actions (the “Securities Actions”) alleged that the defendants violated Sections 10(b) and/or Section 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder. The Securities Actions complaints sought damages in unspecified amounts. These Securities Actions purported to be brought on behalf of purchasers of the Company’s securities during various periods, all of which fell between October 28, 1998 and April 2, 2000.

On April 14, 2000, certain of the Company’s current and former directors were named as defendants in a derivative lawsuit filed in the Superior Court of the State of California, in the County of San Francisco, alleging breach of fiduciary duty, mismanagement and related causes of action based upon the Company’s restatement of its financial statements. The case was then removed to federal court in San Francisco.

On January 16, 2001 the Company announced that it reached a preliminary agreement to settle the securities class action and derivative lawsuits pending against the Company and its former management team in the U.S. District Court in the Northern District of California. On March 1, 2001, Stipulations of Settlement for the Securities class action and derivative lawsuits were entered into in the U.S. District Court in the Northern District of California to fully resolve, discharge and settle the claims made in each respective lawsuit. On May 11, 2001, the United States District Court for the Northern District of California approved the settlement.

Pursuant to the settlement and the definitive agreements, the Company received 3,051,303 shares of its common stock from former management. During May, 2001, the Company distributed 465,342 shares of its common stock as settlement for the first $2.5 million of the common stock component of the settlement. On September 6, 2002, the Company distributed 5,319,149 shares of common stock to the settlement class as settlement for the remaining $7.5 million of the common stock portion of the settlement, following completion of the claims processing by the third-party claims administrator appointed by the court. This distribution was comprised of the remaining 2,586,041 shares held in treasury that had been received from former management, and 2,733,108 additional shares issued by the Company. This distribution, in conjunction with the distribution of 465,342 shares in May 2001, finalized the Company’s obligations under the shareholder settlement agreement. In addition, the Company has agreed to implement certain remedial measures, including the adoption of an audit committee charter, the reorganization of the Company’s finance department, the establishment of an internal audit function and the institution of a compliance program, as consideration for resolution of the derivative litigation.

The staff of the Securities and Exchange Commission (the “SEC”) and the United States Attorney for the Southern District of New York (the “U.S. Attorney”) also initiated investigations relating to the events that resulted in the restatement of the Company’s financial statements for prior periods (“Prior Events”). The SEC and the U.S. Attorney requested that the Company provide certain documents relating to the Company’s historical financial statements. On September 5, 2000, the Company received a subpoena from the SEC to produce documents in connection with the Prior Events. The SEC also requested certain information regarding some of the Company’s former officers and employees, correspondence with the Company’s auditors and documents related to financial statements, accounting policies and certain transactions and business arrangements.

The Company has substantially implemented the requirements of each of the settlements with the shareholder class, the U.S. Attorney and the SEC.

F-32

On January 23, 2001 the U.S. Attorney announced indictments alleging financial accounting fraud against members of former management and certain former employees of the Company. Each of the individuals indicted pled guilty to the charges against them. The U.S. Attorney did not bring charges against the Company.

In a cooperation agreement with the U.S. Attorney, the Company confirmed that it would implement an extensive compliance program, which includes an internal audit function, a corporate code of conduct, a comprehensive policies and procedures manual, employee training and education on policies and procedures and adequate disciplinary mechanisms for violations of policies and procedures.

In addition, the Company consented to the entry of an order by the SEC requiring compliance with requirements for accurate and timely reporting of quarterly and annual financial results, and the maintenance of internal control procedures in connection with a civil action by the SEC concerning accounting irregularities at the Company in 1998 and 1999. Aurora did not either admit or deny any wrongdoing, and the SEC did not seek any monetary penalty. The Company also committed to continue to cooperate with the SEC in connection with its actions against certain former members of management and former employees.

During the first quarter of 2002, the Company lost a dispute in arbitration associated with termination of a contract in 2000 and recorded additional expense of approximately $730,000. The total award and related costs of approximately $1.5 million were paid in April 2002.

The Company is a defendant in an action filed by a former employee in the U. S. District Court in the Eastern District of Missouri. The plaintiff alleged breach of contract, fraud and negligent misrepresentation as well as state law securities claims, and alleged damages in the amount of $3.7 million. In the first quarter of 2002, the plaintiff’s federal and state securities law claims were dismissed and the remaining claims were remanded to the Circuit Court for the City of St. Louis. Since the remand, the plaintiff has added a claim for breach of fiduciary duty. The case is set for trial in September 2003. The Company intends to defend the claims vigorously.

The Company is also subject to litigation in the ordinary course of business.

In the opinion of management, it is remote that the ultimate outcome of any existing litigation will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Commitments and Contingencies

As permitted under Delaware law, the Company has agreements with no specified term whereby the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has Director and Officer insurance policies that limit its exposure and enables the Company to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes that the estimated fair value of the contingent commitments represented by these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31, 2002.

Note 23—Stock Option and Employee Stock Purchase Plans

The Company has stock option plans and an employee stock purchase plan as described below. The Company applies APB 25 and its related interpretations in accounting for its plans. No compensation cost has been recognized for its stock option plans because grants have been made at exercise prices at or above fair market value of the common stock on the date of grant.

The Company has two stock option plans, the 1998 Long Term Incentive Plan (the “1998 Option Plan”) and the 2000 Equity Incentive Plan (the “2000 Incentive Plan”). Under the 1998 Option Plan, the Company is authorized to grant both incentive and non-qualified stock options to purchase common stock up to an aggregate amount of 3,500,000 shares. During 2002, 2,589,500 options were granted pursuant to the plan, which vest ratably over a three or four year period. A total of 104,300 shares remained available as of December 31, 2002. No incentive stock options may be granted with an exercise price less than fair market value of the stock on the date of grant; non-qualified stock options may be granted at any price but, in general, are not granted with an exercise price less than the fair market value of the stock on the date of grant. Options are generally granted with a term of ten years and vest ratably over three years beginning on either the first or third anniversary of the date of grant.

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The terms of the 2000 Incentive Plan provide for the grant of up to 7 million options, stock appreciation rights, restricted stock, unrestricted stock, deferred stock or performance awards or a combination thereof. During 2002, 274,500 options were granted pursuant to the plan at option prices equal to fair market value at the dates of grant, which vest ratably over a three or four year period. A total of 1,443,333 shares remained available for grant at December 31, 2002.

Presented below is a summary of stock option plans activity for the years shown:

	Options Outstanding		Wtd. Avg. Exercise Price		Options Exercisable	Wtd. Avg. Exercise Price
December 31, 1999	2,284,021		$	20.15	650,552	$	20.91
Granted	5,181,375			3.86
Forfeited	(1,210,321	)		18.76

December 31, 2000	6,255,075			6.93	1,166,300		14.29
Granted	2,086,225			4.17
Exercised	(33,371	)		4.98
Forfeited	(869,612	)		9.92

December 31, 2001	7,438,317			5.98	2,617,132		9.37
Granted	2,864,000			1.92
Exercised	(102,253	)		3.88
Forfeited	(1,383,321	)		4.52

December 31, 2002	8,816,743		$	4.68	4,528,390	$	6.88

The following table provides additional information for options outstanding at December 31, 2002:

Range of Prices	Number	Wtd. Avg. Remaining Life	Wtd. Avg. Exercise Price
$0.30 - 2.10	2,306,500	8.5	$	0.83
2.11 - 4.20	5,292,876	5.7		3.81
4.21 - 6.30	356,167	8.5		5.14
6.31 - 8.40	10,000	8.3		6.67
14.70 - 16.80	65,250	5.6		16.29
16.81 - 18.90	80,000	0.0		17.00
18.91 - 21.00	705,950	5.2		21.00

$2.10 - 21.00	8,816,743	6.4	$	4.68

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The following table provides additional information for options exercisable at December 31, 2002:

Range of Prices	Number	Wtd. Avg. Exercise Price
$0.30 - 2.10	125,000	$	0.42
2.11 - 4.20	3,434,018		3.85
4.21 - 6.30	111,505		5.17
6.31 - 8.40	6,667		6.67
14.70 - 16.80	65,250		16.29
16.81 - 18.90	80,000		17.00
18.91 - 21.00	705,950		21.00

$2.10 - 21.00	4,528,390	$	6.88

The fair value of options granted, which is hypothetically amortized to expense over the option vesting period in determining the pro forma impact, has been estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2002		2001		2000

Expected life of option	7 yrs.		7 yrs.		5 yrs.

Risk-free interest rate	4.0	%	4.6	%	5.1% to 6.7%

Expected volatility of Aurora Foods common stock	100	%	80	%	88%

Expected dividend yield on Aurora Foods common stock	0.0	%	0.0	%	0.0%

The weighted average fair value of options granted during 2002, 2001 and 2000 determined using the Black-Scholes model is as follows:

	2002		2001		2000
Fair value of each option granted	$	1.00	$	3.15	$	2.80

Total number of options granted (in millions)		2.86		2.09		5.18

Total fair value of all options granted (in millions)	$	2.86	$	6.57	$	14.50

The Company has adopted a stock purchase plan, the 1998 Employee Stock Purchase Plan (the “1998 Purchase Plan”) covering an aggregate of 400,000 shares of common stock. Under the 1998 Purchase Plan, as amended, eligible employees have the right to purchase common stock at 85% of the fair market value of the common stock on the commencement date of each six month offering period. Purchases are made from accumulated payroll deductions of up to 15% of such employee’s earnings, limited to 2,000 shares during a calendar year. During the years ended December 31, 2002, 2001 and 2000, 13,094, 99,414 and 149,963 shares were purchased at weighted average prices of $1.65, $2.81 and $2.65 per share, respectively.

Note 24—Earnings Per Share and Number of Common Shares Outstanding

Basic earnings per share represents the income available to common stockholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted earnings per share represents the income

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available to common stockholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period. Potentially dilutive common shares consist of stock options (the dilutive impact is calculated by applying the “treasury stock method”), the outstanding Convertible Cumulative Preferred Stock and the common stock warrants which were approximately 8.2 million, 7.2 million and 4.7 million for the years ended December 31, 2002, 2001 and 2000, respectively. The Company has had net losses available to common stockholders in each year, therefore the impact of these potentially dilutive common shares has been antidilutive.

The table below summarizes the numerator and denominator for the basic and diluted loss per share calculations (in thousands except per share amounts):

	Years Ended December 31,
	2002 (as restated—See Note 2)			2001 (as restated— See Note 2)			2000
Numerator:
Net loss available to common stockholders before cumulative effect of accounting change	$	(286,286	)	$	(84,234	)	$	(56,424	)
Cumulative effect of accounting change, net of tax		(228,150	)		—			(12,161	)

Net loss available to common stockholders	$	(514,436	)	$	(84,234	)	$	(68,585	)

Denominator—Basic shares:
Average common shares outstanding		73,511			72,499			69,041

Basic loss per share	$	(7.00	)	$	(1.16	)	$	(0.99	)

Denominator—Diluted shares:
Average common shares outstanding		73,511			72,499			69,041
Dilutive effect of common stock equivalents		—			—			—

Total diluted shares		73,511			72,499			69,041

Diluted loss per share	$	(7.00	)	$	(1.16	)	$	(0.99	)

The number of shares of common stock outstanding and the changes during the years ended December 31, 2002, 2001 and 2000 were as follows (in thousands):

	Common Stock Issued		Treasury Stock		Net Outstanding
Shares at December 31, 1999	67,050		—		67,050

Common stock issued to subordinated noteholders	6,966		—		6,966
Employee stock purchases	150		—		150
Retirement of stock	(42	)	—		(42	)

Shares at December 31, 2000	74,124		—		74,124

Receipt of shares from former management	—		(3,051	)	(3,051	)
Distribution of shares to shareholder class	—		465		465
Employee stock purchases	99		—		99
Restricted stock awards and stock options exercised	31		—		31

Shares at December 31, 2001	74,254		(2,586	)	71,668

Distribution of shares to shareholder class	2,733		2,586		5,319
Employee stock purchases	13		—		13
Restricted stock awards and stock options exercised	155		—		155

Shares at December 31, 2002	77,155		—		77,155

F-36

Note 25—Segment Information

The Company groups its business in three operating segments: retail, food service and other distribution channels. Many of the Company’s brands are sold through each of the segments. The retail distribution segment includes all of the Company’s brands and products sold to customers who sell or distribute these products to consumers through supermarkets, grocery stores and normal grocery retail outlets. The food service segment includes both branded and non-branded products sold to customers such as restaurants, business/industry and schools. The other distribution channels segment includes sales of branded and private label products to club stores, the military, mass merchandisers, convenience, drug and chain stores, as well as exports from the United States.

The Company’s segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment contribution differs from operating income as presented in its primary financial statements and a reconciliation of the segmented and consolidated results is provided in the following table. Interest expense, financing costs and income tax amounts are not allocated to the operating segments.

The Company’s assets are not managed or maintained on a segmented basis. Property, plant and equipment is used in the production and packaging of products for each of the segments. Cash, accounts receivable, prepaid expenses, other assets and deferred tax assets are maintained and managed on a consolidated basis and generally do not pertain to any particular segment. Inventories include primarily raw materials and packaged finished goods, which in most circumstances are sold through any or all of the segments. The Company’s goodwill and other intangible assets, which include its trademarks, are used by and pertain to the activities and brands sold across all of its segments. As no segmentation of the Company’s assets, depreciation expense (included in fixed manufacturing costs and general and administrative expenses) or capital expenditures is maintained by the Company, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.

Sales to one of the Company’s customers in the retail segment were approximately 19% and 13% of retail net sales in 2002 and 2001, respectively.

The following table presents a summary of operations by segment for the years ended December 31, 2002, 2001 and 2000 (in thousands):

	Years Ended December 31
	2002			2001			2000
Net sales:
Retail	$	604,082		$	675,890		$	676,901
Food Service		60,571			60,741			58,258
Other		107,216			105,510			85,855

Total	$	771,869		$	842,141		$	821,014

Segment contribution and operating (loss) income:
Retail	$	171,533		$	211,926		$	208,957
Food Service		20,936			23,875			21,390
Other		26,572			29,506			23,829

Segment contribution		219,041			265,307			254,176
Fixed manufacturing costs		(84,374	)		(72,816	)		(77,055	)
Amortization of goodwill and other intangibles		(10,348	)		(44,670	)		(44,819	)
Selling, general and administrative expenses		(58,991	)		(58,035	)		(50,080	)
Goodwill and tradename impairment charges		(67,091	)		—			—
Plant closure and asset impairment charges		(53,225	)		—			—
Other financial, legal, accounting, consolidation and transition income (expense)		—			3,066			(57,257	)

Operating (loss) income	$	(54,988	)	$	92,852		$	24,965

The following supplemental information provides net sales by product line across all segments (in thousands):

F-37

	Actual Years Ended December 31,
	2002(1)		2001		2000
Net sales:
Baking mixes and frostings	$	234,489	$	224,518	$	192,962
Seafood		129,170		172,000		168,784
Syrup and mixes		116,765		123,453		119,010
Breakfast products		106,732		99,414		96,252
Bagels		98,417		117,468		136,540
All other		86,296		105,288		107,466

	$	771,869	$	842,141	$	821,014

(1)

The 2002 net sales by product line includes an allocation of $17.7 million in net sales adjustments, principally for trade promotion costs, recorded in the first quarter of 2002. The trade promotion adjustments were a result of updated evaluations of the Company’s reserves and assumptions for such costs. The allocation of these items to product lines was completed using ratable allocations based on historical trade promotion levels.

Note 26—Quarterly Financial Data (Unaudited)

The information in this footnote has been revised from the information previously reported to reflect the Company’s restatement of its financial statements for the years ended December 31, 2002 and 2001. The restatement does not affect previously recorded net sales, gross profit or operating income (loss). See Note 2 for description of the restatement.

Unaudited quarterly financial data for the years ended December 31, 2002 and 2001 are as follows (in thousands, except per share data):

	Three months ended
	March 31,			June 30,			September 30,			December 31,
Year ended December 31, 2002:
Net sales	$	198,072		$	176,544		$	184,893		$	212,360
Gross profit		63,613			64,453			71,671			77,689
Operating income (loss)		3,016			(16,509	)		27,360			(68,855	)
Net loss before cumulative effect of accounting change (as restated)		(125,691	)		(55,730	)		(5,822	)		(97,690	)
Net loss (as restated)		(353,841	)		(55,730	)		(5,822	)		(97,690	)
Basic and diluted loss per share available to common stockholders (as restated)	$	(4.94	)	$	(0.78	)	$	(0.08	)	$	(1.27	)

Year ended December 31, 2001:
Net sales	$	230,068		$	181,607		$	200,838		$	229,628
Gross profit		96,134			72,703			86,529			92,077
Operating income		17,282			18,404			28,436			28,730
Net loss (as restated for period ended December 31)		(7,757	)		(8,998	)		(3,206	)		(63,020	)
Basic and diluted loss per share available to common stockholders (as restated for period ended December 31)	$	(0.11	)	$	(0.13	)	$	(0.05	)	$	(0.88	)

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The following table summarizes the restated results for the quarter ended March 31, 2002 due to the adoption of FAS 142 (in thousands except per share amounts):

	As Reported			Transitional Restatement in 2002 (1)			As Restated (2)
Net loss:
Net loss before cumulative effect of change in accounting principle	$	(12,924	)	$	(12,924	)	$	(125,691	)
Cumulative effect of change in accounting, net of tax		(94,893	)		(167,379	)		(228,150	)

Net loss		(107,817	)		(180,303	)		(353,841	)
Preferred dividends		(331	)		(331	)		(331	)

Net loss available to common stockholders	$	(108,148	)	$	(180,634	)	$	(354,172	)

Basic and diluted loss per share available to common stockholders:
Loss before cumulative effect of accounting change	$	(0.19	)	$	(0.19	)	$	(1.76	)
Cumulative effect of change in accounting, net of tax		(1.32	)		(2.33	)		(3.18	)

Net loss available to common stockholders	$	(1.51	)	$	(2.52	)	$	(4.94	)

(1)

The selected financial data reflects the restated amounts recorded pursuant to the transitional adoption provisions of FAS 142, as previously reported.

(2)

The selected financial data reflects the additional changes due to the restatement for matters relating to the accounting for deferred taxes. See Note 2 to the Consolidated Financial Statements.

Significant Adjustments in Quarterly Periods

Several significant items impacted the quarterly results of 2002. Results for the first quarter of 2002 include adjustments of $20.1 million principally from changes in estimates. These adjustments consisted primarily of net sales adjustments of $17.7 million, principally for trade promotion costs, along with a charge to cost of sales of approximately $1 million for unresolved inventory disputes and $1.1 million charged to selling, general and administrative costs, principally associated with an executive’s severance. The Company also recorded charges of approximately $29.9 million in the second quarter of 2002 related to plant closure charges for the West Seneca facility and charges of approximately $23.3 million in the fourth quarter of 2002 related to plant closure charges for the West Seneca and Yuba City facilities and impaired fixed assets, as described in Note 13. As described in Note 6, the Company recorded additional charges of approximately $8.0 million in the fourth quarter for excess and obsolete inventory items. In addition, in the fourth quarter the Company completed its annual review of the carrying value of goodwill and indefinite-lived intangibles, recording a charge for impaired goodwill and tradenames of approximately $67.1 million, as described in Note 8. As described in Note 2 and 18, the Company also recorded a valuation allowance on its deferred tax assets as of December 31, 2001, as management determined that it was more likely than not that the Company would not be able to realize those assets.

The following table reconciles the Company’s previously filed 2002 quarterly data herein for the restatement as described in Note 2 (in thousands):

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	Three Months Ended
	March 31, 2002						June 30, 2002						September 30, 2002						December 31, 2002
	As previously reported			As restated			As previously reported			As restated			As previously reported			As restated			As previously reported			As restated
Loss before income taxes and cumulative effect of change in accounting	$	(21,173	)	$	(21,173	)	$	(50,670	)	$	(50,670	)	$	(845	)	$	(845	)	$	(96,327	)	$	(96,327	)
Income tax benefit (expense)		8,249			(104,518	)		19,614			(5,060	)		289			(4,977	)		(174,908	)		(1,363	)

Net loss before cumulative effect of accounting change		(12,924	)		(125,691	)		(31,056	)		(55,730	)		(556	)		(5,822	)		(271,235	)		(97,690	)
Cumulative effect of change in accounting, net of tax of $81,237 and $21,466, as restated		(167,379	)		(228,150	)		—			—			—			—			—			—

Net loss		(180,303	)		(353,841	)		(31,056	)		(55,730	)		(556	)		(5,822	)		(271,235	)		(97,690	)
Preferred dividends		(331	)		(331	)		(332	)		(332	)		(344	)		(344	)		(346	)		(346	)

Net loss available to common stockholders	$	(180,634	)	$	(354,172	)	$	(31,388	)	$	(56,062	)	$	(900	)	$	(6,166	)	$	(271,581	)	$	(98,036	)

Basic and diluted net loss available to common stockholders before cumulative effect of change in accounting	$	(0.19	)	$	(1.76	)	$	(0.44	)	$	(0.78	)	$	(0.01	)	$	(0.08	)	$	(3.52	)	$	(1.27	)
Cumulative effect of change of acounting		(2.33	)		(3.18	)		—			—			—			—			—			—

Basic and diluted net loss per share available to common stockholders	$	(2.52	)	$	(4.94	)	$	(0.44	)	$	(0.78	)	$	(0.01	)	$	(0.08	)	$	(3.52	)	$	(1.27	)

F-40

The following table reconciles the Company’s previously filed December 31, 2001, quarterly data herein for the restatement described in Note 2 (in thousands):

	Three Months Ended December 31, 2001
	As previously reported			As restated
Income before income taxes	$	4,698		$	4,698
Income tax expense		(2,316	)		(67,718	)

Net loss		2,382			(63,020	)
Preferred dividends		(320	)		(320	)

Net income (loss) available to common stockholders	$	2,062		$	(63,340	)

Basic and diluted net earnings (loss) per share available to common stockholders	$	0.03		$	(0.88	)

Note 27—Condensed Financial Statements of Subsidiary

Sea Coast is the Company’s only subsidiary and is a guarantor of all of the Company’s indebtedness, except the senior unsecured promissory notes. As a result, the condensed financial statements as of December 31, 2002 and 2001, and for the years ended December 31, 2002, 2001 and 2000, are included below:

F-41

SEA COAST FOODS, INC.

BALANCE SHEET

(dollars in thousands)

	December 31,
	2002			2001
	(As restated— See Note 2)			(As restated— See Note 2)
ASSETS
Current assets:
Accounts receivable (net of allowance of $34 and $100, respectively)	$	1,845		$	2,098
Inventories		13,764			13,786

Total current assets		15,609			15,884
Property, plant and equipment, net		—			980
Goodwill and intangible assets, net		8,000			54,234
Other assets		168			1,491

Total assets	$	23,777		$	72,589


LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	206		$	1,750
Accrued expenses		443			1,224

Total current liabilities		649			2,974
Due to parent		74,695			69,434

Total liabilities		75,344			72,408

Stockholder’s equity:
Common stock		1			1
Paid-in capital		200			200
Retained earnings		(51,768	)		(20	)

Total stockholder’s equity		(51,567	)		181

Total liabilities and stockholder’s equity	$	23,777		$	72,589

F-42

SEA COAST FOODS, INC.

STATEMENT OF OPERATIONS

(dollars in thousands)

	Years ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Net sales	$	40,156		$	52,456		$	55,940
Cost of goods sold		(30,363	)		(39,616	)		(40,617	)

Gross profit		9,793			12,840			15,323

Brokerage, distribution and marketing expenses:
Brokerage and distribution		(4,573	)		(6,292	)		(6,142	)
Consumer marketing		(1,003	)		(612	)		(1,153	)

Total brokerage, distribution and marketing expenses		(5,576	)		(6,904	)		(7,295	)
Amortization of goodwill and other intangibles		—			(1,829	)		(1,604	)
Selling, general and administrative expenses		(2,528	)		(3,156	)		(2,554	)
Goodwill and tradname impairment charges		(8,936	)		—			—
Asset impairment charge		(1,045	)		—			—

Total operating expenses		(18,085	)		(11,889	)		(11,453	)

Operating (loss) income		(8,292	)		951			3,870
Interest expense, net		(6,099	)		(6,252	)		(6,417	)

Loss before income taxes		(14,391	)		(5,301	)		(2,547	)
Income tax (expense) benefit		(59	)		1,430			377

Net loss before cumulative effect of change in accounting		(14,450	)		(3,871	)		(2,170	)
Cumulative effect of change in accounting		(37,298	)		—			—

Net loss	$	(51,748	)	$	(3,871	)	$	(2,170	)

F-43

SEA COAST FOODS, INC.

STATEMENT OF CASH FLOWS

(dollars in thousands)

	Years ended December 31,
	2002			2001			2000
	(As restated— See Note 2)			(As restated— See Note 2)
Cash flows from operating activities:
Net loss	$	(51,748	)	$	(3,871	)	$	(2,170	)
Cumulative effect of change in accounting		37,298			—			—
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		164			2,151			1,901
Deferred taxes		—			167			(104	)
Asset impairment charges		1,045			—			—
Intangible asset impairment charges		8,936			—			—
Change in assets and liabilities:
Decrease in receivables		253			1,821			970
Decrease (increase) in inventories		22			(3,371	)		2,030
Decrease in prepaid expenses and other assets		1,323			16			85
Decrease in accounts payable		(1,544	)		(366	)		(625	)
Decrease in accrued expenses		(781	)		(60	)		(97	)

Net cash (used in) provided by operating activities		(5,032	)		(3,513	)		1,990

Cash flow used in investing activities:
Asset additions		(229	)		(1,107	)		(364	)
Payment for acquisition of business		—			—			(7,954	)

Net cash used for investing activities		(229	)		(1,107	)		(8,318	)

Cash flows from financing activities:
Debt issuance costs		—			—			(132	)
Intercompany borrowings		5,261			4,620			6,460

Net cash provided from financing activities		5,261			4,620			6,328

Net change in cash		—			—			—
Beginning cash and cash equivalents		—			—			—

Ending cash and cash equivalents	$	—		$	—		$	—

Note 28—Subsequent Events

In February 2003, the Company amended the Senior Secured Debt Facility to provide (1) an excess leverage fee of 3.5% of the aggregate amount of the term loan borrowings outstanding and the revolving credit facility on the amendment date. Such fee will not be required if the Company receives net cash proceeds from the sale of assets of at least $100.0 million by June 30, 2003, and an additional $125.0 million by September 30, 2003, or failing to meet the June 30, 2003 requirement, if aggregate net cash proceeds of $325.0 million are received by September 30, 2003, (2) an asset sale fee of 1.75% of the average term loan borrowings outstanding and the revolving credit facility from the amendment date through February 10, 2004, if the Company has not received an aggregate of $325.0 million from the sale of assets by March 31, 2004, and (3) that any excess leverage or asset sale fees that become payable will be paid at the earlier of certain events of default, the time of sale of assets, or on June 30, 2005. As of June 30, 2003, the Company had not received any net cash proceeds from the sale of assets. Since the Company had not yet met the requirements that would allow the Company to avoid paying these fees, the potential fees are being accrued over the remaining life of the Senior Secured Debt Facility as excess leverage fees in interest and financing expenses.

F-44

The definitive agreement with J. W. Childs contemplated that the Restructuring would include the following proposed elements:

•

The Company’s existing accounts receivable sales facility would be terminated.

•

Holders of the Company’s outstanding 1998 Notes and 9.875% senior subordinated notes issued on February 10, 1997, and July 1, 1997 (the “1997 Notes” and together with the 1998 Notes, the “Senior Subordinated Notes”), would receive a 50% recovery through cash in the aggregate amount of approximately $110 million and approximately 29.5% (approximately $90 million) of the common stock of the reorganized Company.

•

The Company also launched, with the support of its senior lenders, a vendor lien program under which the Company offered vendors and carriers of its goods the ability to obtain a junior lien on substantially all of the Company’s assets for shipments made to the Company on agreed terms. In excess of 125 vendors with estimated annual purchases of $250 million are participating in the vendor lien program.

F-45

The restatement (as discussed in Note 2) would have resulted in a technical default under the Senior Secured Debt Facility. However, on August 14, 2003, the Company entered into a Waiver and Forbearance with lenders holding more than 51% of the term loan and revolving credit facility borrowings under the Senior Secured Debt Facility, which (i) extended the forbearance granted under both the June Bank Amendment and the July Bank Amendment through September 15, 2003, and (ii) provided for a waiver of any default under the Senior Secured Debt Facility arising in connection with any failure by the Company to deliver financial statements prepared in conformity with GAAP (as a result of the restatement) and without a “going concern” qualification for the fiscal years ended December 31, 2002 and 2001, as well as interim months and quarters.

To facilitate the Restructuring, the Company has entered into certain confidentiality agreements with representatives of an ad hoc unofficial committee of certain holders of the Senior Subordinated Notes, including Debevoise & Plimpton and Houlihan Lokey Howard & Zukin. In addition, certain holders of the Senior Subordinated Notes have also agreed to be bound by confidentiality agreements in connection with their role as members of the unofficial committee.

F-46

In light of the Restructuring and the delisting of the common stock, the Company’s proposal for a reverse stock split is not being pursued.

F-47

Schedule II

Aurora Foods Inc.

Valuation and Qualifying Accounts

Description	Balance at Beginning of Period		Additions				Write-offs			Balance at End of Period
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Write-offs			Balance at End of Period
Allowance for doubtful accounts
Year ended December 31, 2000	$	1,311,000	$	185,000	$	240,000	$	(1,011,000	)	$	725,000

Year ended December 31, 2001	$	725,000	$	379,000	$	—	$	(516,000	)	$	588,000

Year ended December 31, 2002	$	588,000	$	50,000	$	—	$	(226,000	)	$	412,000

Inventory obsolescence reserve
Year ended December 31, 2000	$	1,195,000	$	3,999,000	$	—	$	(1,580,000	)	$	3,614,000

Year ended December 31, 2001	$	3,614,000	$	2,906,000	$	—	$	(3,260,000	)	$	3,260,000

Year ended December 31, 2002	$	3,260,000	$	10,798,000	$	—	$	(4,128,000	)	$	9,930,000

Deferred tax asset valuation allowance (as restated—See Note 2)
Year ended December 31, 2000	$	—	$	—	$	—	$	—		$	—

Year ended December 31, 2001	$	—	$	65,402,000	$	960,000	$	—		$	66,362,000

Year ended December 31, 2002	$	66,362,000	$	181,566,000	$	53,214,000	$	—		$	301,142,000

F-48

EXHIBIT INDEX

Exhibit Number		Exhibit

3.1		Certificate of Incorporation of Aurora Foods Inc., as amended. (Incorporated by reference to Exhibit 3.1 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

3.2		Amended and Restated By-laws of Aurora Foods Inc. (Incorporated by reference to Exhibit 3.2 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2000).

3.3		Certificate of Designation for the Company’s Series A Preferred Stock filed with the Secretary of State of Delaware on September 7, 2000. (Incorporated by reference to Exhibit 3.1 to the Aurora Foods Inc. Form 8-K filed on September 21, 2000).

4.1		Indenture dated as of February 10, 1997, governing the 9⁷/8% Series B Senior Subordinated Notes due 2007 by and between Aurora Foods Inc. and Wilmington Trust Company. (Incorporated by reference to Exhibit 4.1 to the Aurora Foods Inc. Registration Statement on Form S-4 filed on August 21, 1997, File No. 333-24715 (“Aurora S-4”)).

4.2		Specimen Certificate of 9⁷/8% Series B Senior Subordinated Notes due 2007 (included in Exhibit 4.1 hereto). (Incorporated by reference to Exhibit 4.2 to the Aurora S-4).

4.3		Form of Note Guarantee to be issued by future subsidiaries of Aurora Foods Inc. pursuant to the Indenture governing the 9⁷/8% Series B Senior Subordinated Notes due 2007 (included in Exhibit 4.1 hereto). (Incorporated by reference to Exhibit 4.4 to the Aurora S-4).

4.4		Supplemental Indenture dated as of September 20, 2000, governing the 9⁷/8% Series B Senior Subordinated Notes due 2007 between the Company, Sea Coast Foods, Inc. and Wilmington Trust Company, as trustee, amending the Indenture dated as of February 10, 1997, as amended. (Incorporated by reference to Exhibit 4.2 to Aurora Foods Inc.’s Form 8-K filed September 21, 2000).

4.5		Indenture dated as of July 1, 1997, governing the 9⁷/8% Series C Senior Subordinated Notes due 2007 by and between Aurora Foods Inc. and Wilmington Trust Company. (Incorporated by reference to Exhibit 4.6 to the Aurora S-4).

4.6		Specimen Certificate of 9⁷/8% Series C Senior Subordinated Notes due 2007 (included in Exhibit 4.5 hereto). (Incorporated by reference to Exhibit 4.3 to the Aurora S-4).

4.7		Form of Note Guarantee to be issued by future subsidiaries of Aurora Foods Inc. pursuant to the Indenture governing the 9 ⁷/8% Series C Senior Subordinated Notes due 2007 (included in Exhibit 4.5 hereto). (Incorporated by reference to Exhibit 4.8 to the Aurora S-4).

4.8		Supplemental Indenture dated as of April 1, 1999, governing the 9⁷/8% Series C Senior Subordinated Notes due 2007 among Sea Coast Foods, Inc., Aurora Foods Inc. and Wilmington Trust Company, as Trustee. (Incorporated by reference to Exhibit 4.11 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 1999.)

4.9		Supplemental Indenture dated as of September 20, 2000, governing the 9⁷/8% Series C Senior Subordinated Notes due 2007 between the Company, Sea Coast Foods, Inc. and Wilmington Trust Company, as trustee, amending the Indenture dated as of July 1, 1997, as amended. (Incorporated by reference to Exhibit 4.3 to Aurora Foods Inc.’s Form 8-K filed September 21, 2000).

4.10		Indenture dated as of July 1, 1998, governing the 8³/4% Senior Subordinated Notes due 2008 by and between Aurora Foods Inc. and Wilmington Trust Company. (Incorporated by reference to Exhibit 4.13 to the Aurora Foods Inc. Registration Statement on Form S-1 filed on April 22, 1998, as amended, File No. 333-50681 (the “S-1”)).

4.11		Specimen Certificate of 8³/4% Senior Subordinated Notes due 2008. (Incorporated by reference to Exhibit 4.9 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 1999.)

4.12		Supplemental Indenture dated as of April 1, 1999, governing the 8³/4% Senior Subordinated Notes due 2008 among Sea Coast Foods, Inc., Aurora Foods Inc. and Wilmington Trust Company, as Trustee. (Incorporated by reference to Exhibit 4.13 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 1999.)

4.13		Supplemental Indenture dated as of September 20, 2000, governing the 8³/4% Senior Subordinated Notes due 2008 between the Company, Sea Coast Foods, Inc. and Wilmington Trust Company, as trustee, amending the

F-49


		Indenture dated as of July 1, 1998, as amended. (Incorporated by reference to Exhibit 4.1 to Aurora Foods Inc.’s Form 8-K filed September 21, 2000).

4.14		Specimen Certificate of the Common Stock. (Incorporated by reference to Exhibit 4.1 to the S-1).

4.15		Specimen Certificate of the Series A Preferred Stock (included in Exhibit 3.3 hereto). (Incorporated by reference to the Aurora Foods Inc. Form 8-K filed on September 21, 2000.)

4.16		Securityholders Agreement, dated as of April 8, 1998, by and among Aurora/VDK LLC, MBW Investors LLC, VDK Foods LLC and the other parties signatory thereto. (Incorporated by reference to Exhibit 4.2 to the S-1).

4.17		Amendment of Securityholders Agreement among Aurora Foods Inc. and the parties listed on the signature page thereto. (Incorporated by reference to Exhibit 4.14 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2000).

4.18		Amendment, dated as of May 1, 2002, to the Securityholders Agreement dated April 8, 1998 as amended, between the Company and the parties named therein. (Incorporated by reference to Exhibit 4.2 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

4.19		Amendment, dated as of June 27, 2002, to the Securityholders Agreement dated April 8, 1998 as amended, between the Company and the parties named therein. (Incorporated by reference to Exhibit 4.4 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

4.20		Warrant Issuance Agreement dated as of May 1, 2002, among Aurora Foods Inc. and the parties listed therein, as Warrantholders. (Incorporated by reference to Exhibit 4.1 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

4.21		Warrant Issuance Agreement dated as of May 1, 2002, among Aurora Foods Inc. and the parties listed therein, as Warrantholders, with amended Exhibit A, effective as of October 7, 2002. (Incorporated by reference to Exhibit 4.1 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2002).

4.22		Note Purchase Agreement between Aurora Foods Inc. and the Purchasers listed therein, dated as of June 27, 2002. (Incorporated by reference to Exhibit 4.3 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

10.1		License Agreement, dated as of February 21, 1979, between General Host Corporation and VDK Acquisition Corporation. (Incorporated by reference to Exhibit 10.27 to the Van de Kamp’s S-4).

10.2		License Agreement, dated as of October 14, 1978, between General Host Corporation and Van de Kamp’s Dutch Bakeries. (Incorporated by reference to Exhibit 10.28 to the Van de Kamp’s S-4).

10.3		Trademark License Agreement, dated July 9, 1996 among Quaker Oats, The Quaker Oats Company of Canada Limited and Van de Kamp’s, Inc. (Incorporated by reference to Exhibit H to Exhibit 2.1 to Van de Kamp’s, Inc.’s Form 8-K dated July 9, 1996).

10.4		Production Agreement, dated as of June 4, 1998, by and between Aurora Foods Inc. and Gilster-Mary Lee Corporation. (Incorporated by reference to Exhibit 10.48 to the S-1).

10.5		Amendment dated August 14, 2002 to Production Agreement, dated as of June 4, 1998, by and between Aurora Foods Inc. and Gilster-Mary Lee Corporation (Confidential treatment for a portion of this document has been requested by Aurora Foods Inc. The location of the omissions is denoted as follows: “…”.). (Incorporated by reference to Exhibit 10.3 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2002).

10.6		Advisory Agreement, made as of April 8, 1998, among Aurora/VDK LLC, Van de Kamp’s, Inc., VDK Holdings, Inc., Aurora Foods Inc. and Aurora Foods Holdings Inc. and MDC Management Company III, L.P. (Incorporated by reference to Exhibit 10.34 to the S-1).

10.7		Advisory Agreement, made as of April 8, 1998, between Fenway Partners, Inc. and Aurora/VDK LLC, Van de Kamp’s, Inc., VDK Holdings, Inc., Aurora Foods Inc. and Aurora Foods Holdings Inc. (Incorporated by reference to Exhibit 10.35 to the S-1).

10.8		Indemnity Agreement, dated as of July 1, 1998, between Clive A. Apsey and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.50 to the S-1).

10.9		Indemnity Agreement, dated as of July 1, 1998, between David E. De Leeuw and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.52 to the S-1).

F-50


10.10		Indemnity Agreement, dated as of July 1, 1998, between Charles J. Delaney and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.53 to the S-1).

10.11		Indemnity Agreement, dated as of July 1, 1998, between Richard C. Dresdale and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.54 to the S-1).

10.12		Indemnity Agreement, dated as of July 1, 1998, between Andrea Geisser and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.55 to the S-1).

10.13		Indemnity Agreement, dated as of July 1, 1998, between Peter Lamm and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.56 to the S-1).

10.14		Indemnity Agreement, dated as of June 5, 2001, between Stephen L. Key and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.15 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.15		Indemnity Agreement, dated as of June 5, 2001, between William B. Connell and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.16 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.16		Indemnity Agreement, dated as of June 5, 2001, between Jack Murphy and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.17 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.17		Indemnity Agreement, dated as of July 23, 2002, between Dale Morrison and Aurora Foods Inc. (***)

10.18		Indemnity Agreement, dated as of November 20, 2002, between Thomas Hudgins and Aurora Foods Inc. (***)

10.19		Indemnity Agreement, dated as of July 1, 1998, between Ian R. Wilson and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.46 to the S-1).

10.20		Indemnity Agreement, dated as of July 1, 1998, between James B. Ardrey and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.49 to the S-1).

10.21		Registration Rights Agreement dated as of January 31, 2001 by and among Aurora Foods Inc., and the Holders listed on Schedule A thereto. (Incorporated by reference to Exhibit 10.42 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2000).

10.22		Securities Purchase Agreement for Series A Preferred Stock dated as of September 20, 2000 between the Company and the Purchasers listed on the signature pages thereto. (Incorporated by reference to Exhibit 2.1 to Aurora Foods Inc. Form 8-K filed on September 21, 2000).

10.23		Employment Agreement dated as of March 21, 2000, between Aurora Foods Inc. and Christopher T. Sortwell. (Incorporated by reference to Exhibit 10.39 to Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2000).

10.24		Employment Agreement dated as of March 27, 2000, between Aurora Foods Inc. and James T. Smith. (Incorporated by reference to Exhibit 10.40 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2000).

10.25		Employment Agreement dated as of March 27, 2000, between Aurora Foods Inc. and Paul Graven. (Incorporated by reference to Exhibit 10.41 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2000).

10.26		Severance, Confidentiality and Non-Competition Agreement dated as of July 23, 2002, between Aurora Foods Inc. and Thomas Ellinwood. (***)

10.27		Employment Agreement dated as of April 1, 2002, between Aurora Foods Inc. and William R. McManaman. (***)

10.28		Letter effective as of October 21, 2002, between Aurora Foods Inc. and Eric Brenk. (***)

10.29		1998 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.48 to the Aurora Foods Inc. Form 10-K for the fiscal year ended December 31, 1998).

10.30		1998 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.50 to the Aurora Foods Inc. Form 10-K for the fiscal year ended December 31, 1998).

10.31		Aurora Foods Inc. 2000 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.43 to The Aurora Foods Inc. Form 10-K for the fiscal year ended December 31, 2000).

F-51


10.32		Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent (Incorporated by reference to Exhibit 10.1 to the Aurora Foods Inc. Form 8-K dated November 1, 1999).

10.33		First Amendment, Forbearance and Waiver, dated as of March 29, 2000, to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.36 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2000).

10.34		Amendment, dated as of April 28, 2000, to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.35 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2000).

10.35		Amendment and Waiver, dated as of February 7, 2001 to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.45 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2001).

10.36		Amendment and Waiver, dated as of April 16, 2001 to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.32 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.37		Amendment and Waiver, dated as of October 1, 2001 to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.47 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2001).

10.38		Waiver, dated as of December 21, 2001, to the Fifth Amended and Restated Credit Agreement dated as of November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication agent, and UBS AG, Stamford Branch, as Documentation agent. (Incorporated by reference to Exhibit 10.34 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.39		Amendment and Waiver, dated as of February 26, 2002 to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.35 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.40		Waiver, dated as of March 22, 2002, to the Fifth Amended and Restated Credit Agreement dated as of November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.1 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2002).

10.41		Amendment, dated as of May 1, 2002 to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.2 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2002).

10.42		Amendment, dated as of June 27, 2002, to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication

F-52


		Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.1 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

10.43		Amendment, dated as of February 21, 2003, to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, JP Morgan Chase Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Confidential treatment for a portion of this document has been requested by Aurora Foods Inc. The location of the omissions is denoted as follows “…”). (***)

10.44		Supplemental Tranche B Joinder Agreement, dated July 2, 2002, by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.3 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

10.45		Consent and Waiver, dated as of July 26, 2002, to the Fifth Amended and Restated Credit Agreement dated November 1, 1999 and entered into by and among Aurora Foods Inc., as Borrower, the Lenders listed therein, the Chase Manhattan Bank, as Administrative Agent for the Lenders, National Westminster Bank PLC, as Syndication Agent, and UBS AG, Stamford Branch, as Documentation Agent. (Incorporated by reference to Exhibit 10.1 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2002).

10.46		Receivables Purchase Agreement, dated as of April 19, 2000, and entered into by and between Aurora Foods Inc., as Seller, and the Chase Manhattan Bank, as borrower. (Incorporated by reference to Exhibit 10.38 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2000.)

10.47		Amendment, dated February 7, 2001 to the Receivables Purchase Agreement, dated as of April 19, 2000, and entered into by and between Aurora Foods Inc., as Seller, and the Chase Manhattan Bank, as borrower. (Incorporated by reference to Exhibit 10.46 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2001.)

10.48		Amendment, dated December 19, 2001 to the Receivables Purchase Agreement, dated as of April 19, 2000, and entered into by and between Aurora Foods Inc., as Seller, and the Chase Manhattan Bank, as borrower. (Incorporated by reference to Exhibit 10.38 to the Aurora Foods Inc. Form 10-K for the year ended December 31, 2001).

10.49		Amendment, dated March 28, 2002 to the Receivables Purchase Agreement, dated as of April 19, 2000, and entered into by and between Aurora Foods Inc., as Seller, and JP Morgan Chase Bank, as Borrower. (Incorporated by reference to Exhibit 10.3 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2002).

10.50		Amendment, dated June 28, 2002, to the Receivables Purchase Agreement, dated as of April 19, 2000, and entered into by and between Aurora Foods Inc., as Seller, and JP Morgan Chase Bank, as Borrower. (Incorporated by reference to Exhibit 10.2 to the Aurora Foods Inc. Form 10-Q for the quarter ended June 30, 2002).

10.51		Collective Bargaining Agreement between Aurora Foods Inc. and Bakery, Confectionery, Tobacco Workers and Grain Millers’ International Union of America Local # 429 dated January 12, 2001. (Incorporated by reference to Exhibit 10.44 to the Aurora Foods Inc. Form 10-Q for the quarter ended March 31, 2001).

10.52		Executive Long Term Incentive Plan, dated as of January 1, 2002. (Incorporated by reference to Exhibit 10.2 to the Aurora Foods Inc. Form 10-Q for the quarter ended September 30, 2002).

21.1		Subsidiary of Aurora Foods Inc. (Incorporated by reference to Exhibit 21.1 to Aurora Foods Inc. Form 10-K for the year ended December 31, 1999.)

23.1		Consent of PricewaterhouseCoopers LLP. (*)

24.1		Power of Attorney. (***)

31.1		Certification of Chairman of the Board and Interim Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. (*)

31.2		Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. (*)

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32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (**)

(*)

Filed herewith.

(**)

Furnished herewith.

(***)

Filed as Exhibits to the Original Form 10-K.

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