<PAGE>   1
================================================================================

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

                   -------------------------------------------

                                    FORM 10-Q

                  --------------------------------------------

(Mark One)
  [ X ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
                               EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1998
                                       OR
  [   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM ______________ TO _______________

                         COMMISSION FILE NUMBER 1-08574



                               UNITED FOODS, INC.
             (Exact name of registrant as specified in its charter)



                DELAWARE                                 74-1264568
        (State of Incorporation)            (I.R.S. Employer Identification No.)

     TEN PICTSWEET DRIVE, BELLS, TN                        38006
(Address of principal executive offices)                 (Zip Code)

        Registrants telephone number, including area code: (901) 422-7600

         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
                                              ----      ----
 
      On December 31, 1998, 2,617,243 shares of Class A Common Stock and
4,192,686 shares of Class B Common Stock of United Foods, Inc. were outstanding.

================================================================================





<PAGE>   2



                                      INDEX

<TABLE>
<CAPTION>

                                                                               PAGE
                                                                               ----
<S>               <C>                                                          <C>
     Part I:      Financial Information:

       Item 1:    Financial Statements:

                     Balance Sheets                                             2-3

                     Statements of Operations                                     4

                     Statements of Cash Flows                                   5-6

                     Notes to Financial Statements                              7-8

       Item 2:    Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                9-13

     Part II:     Other Information and Signatures

       Item 4:    Submission of Matters to a Vote of Security Holders            14

       Item 5:    Other Information                                              14

       Item 6:    Exhibits and Reports on Form 8-K                               14

     Signatures                                                                  15
</TABLE>






                                       1
<PAGE>   3


                         PART I - FINANCIAL INFORMATION
                          ITEM 1 - FINANCIAL STATEMENTS

                               UNITED FOODS, INC.
                                 BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                  NOVEMBER 30,    FEBRUARY 28,
                                                      1998           1998
                                                  ------------    -----------
                                                   Unaudited
                                                  ------------
<S>                                               <C>             <C>
ASSETS

Current Assets:
   Cash                                            $     861       $     646
   Accounts Receivable                                21,121          19,263
   Inventories (Note 3)                               43,208          37,344
   Prepaid Expenses and Miscellaneous                  2,041           3,935
   Deferred Income Taxes (Note 4)                      1,249           1,249
                                                   ---------       ---------
       Total Current Assets                           68,480          62,437
                                                   ---------       ---------

Property and Equipment:
   Land and Land Improvements                         10,368           9,968
   Buildings and Leasehold Improvements               22,780          21,399
   Machinery, Equipment and Improvements              99,347          94,870
                                                   ---------       ---------
                                                     132,495         126,237

   Less Accumulated Depreciation                     (79,309)        (74,151)
                                                   ---------       ---------

       Net Property and Equipment                     53,186          52,086
                                                   ---------       ---------

Other Assets                                           2,056           1,361
                                                   ---------       ---------

         Total Assets                              $ 123,722       $ 115,884
                                                   =========       =========
</TABLE>











See accompanying notes to financial statements.




                                       2

<PAGE>   4



                               UNITED FOODS, INC.
                                 BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                         NOVEMBER 30,    FEBRUARY 28,
                                                             1998            1998
                                                         ------------    -----------
                                                           Unaudited
                                                         ------------
<S>                                                      <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts Payable                                        $  18,159       $ 12,191
   Accruals                                                   10,504          6,594
   Income Taxes Payable  (Note 4)                                (45)            46
   Current Maturities of Long-term Debt                        3,503          4,427
                                                           ---------       --------
         Total Current Liabilities                            32,121         23,258

Long-term Debt, Less Current Maturities                       40,712         42,168

Deferred Income Taxes (Note 4)                                 4,710          4,710
                                                           ---------       --------

         Total Liabilities                                    77,543         70,136
                                                           ---------       --------

Commitments and Contingencies

Stockholders' Equity (Note 7):
   Common Stock, Class A (Notes 5 and 6)                       2,616          2,616
   Common Stock, Class B, Convertible (Notes 5 and 6)          4,194          4,194
   Additional Paid-in Capital                                  3,993          3,993
   Retained Earnings                                          35,376         34,945
                                                           ---------       --------

         Total Stockholders' Equity                           46,179         45,748
                                                           ---------       --------


         Total Liabilities and Stockholders' Equity        $ 123,722       $115,884
                                                           =========       ========
</TABLE>







See accompanying notes to financial statements.




                                       3

<PAGE>   5



                               UNITED FOODS, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                               FOR THE THREE MONTHS               FOR THE NINE MONTHS
                                                                ENDED NOVEMBER 30,                 ENDED NOVEMBER 30,
                                                          ----------------------------        ----------------------------
                                                              1998             1997               1998              1997
                                                          -----------      -----------        ----------        ----------
<S>                                                       <C>              <C>                <C>               <C> 
Gross Sales and Services Less Discounts, Returns
  and Allowances                                          $    55,525      $    51,407        $  151,347        $  140,949

Costs of Sales and Services (Note 3)                           44,680           41,978           123,173           115,769
                                                          -----------      -----------       -----------       -----------

  Gross Profit                                                 10,845            9,429            28,174            25,180

Selling, Administrative and General Expenses                    8,749            8,180            24,624            23,078
                                                          -----------      -----------       -----------       -----------

  Operating Income                                              2,096            1,249             3,550             2,102
                                                          -----------      -----------       -----------       -----------

Interest Income (Expense) - Net                                (1,023)          (1,084)           (2,855)           (2,870)

Miscellaneous Income (Expense) - Net                                1               11                 5                52
                                                          -----------      -----------       -----------       -----------

  Total Other Income and (Expense)                             (1,022)          (1,073)           (2,850)           (2,818)
                                                          -----------      -----------       -----------       -----------

Income (Loss) Before Income Tax Benefit                         1,074              176               700              (716)

Income Tax Expense (Benefit) (Note 4)                             413               68               269              (275)
                                                          -----------      -----------       -----------       -----------

  Net Income (Loss)                                       $       661      $       108       $       431        $     (441)
                                                          ===========      ===========       ===========        ==========

Weighted Average Common Shares Outstanding
  (Notes 5 and 6)                                               6,810            6,810             6,810             8,730
                                                          ===========      ===========       ===========       ===========

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
  (NOTES 5 AND 6)                                         $       .10      $       .02       $       .06       $      (.05)
                                                          ===========      ===========       ===========       ===========

Cash Dividends Per Common Share:
  Class A                                                     $-0-              $-0-            $-0-               $-0-
  Class B                                                     $-0-              $-0-            $-0-               $-0-

</TABLE>












See accompanying notes to financial statements.






                                       4

<PAGE>   6


                               UNITED FOODS, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     FOR THE NINE
                                                               MONTHS ENDED NOVEMBER 30,
                                                               -------------------------
                                                                 1998            1997
                                                               -------         --------
<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                           $   431         $   (441)
   Adjustments to reconcile net income (loss) to net cash
     provided by operations:
     Depreciation and amortization                               5,234            5,551
     Provision for losses on accounts receivable                   133              132
     Gain on disposal of property and equipment                    (15)             (50)
     Deferred income taxes                                          --             (688)
     Change in assets and liabilities:
       Accounts and notes receivable                            (1,991)          (2,594)
       Inventories                                              (5,864)         (12,232)
       Prepaid expenses and miscellaneous                        1,894            1,690
       Other assets                                               (695)             (18)
       Accounts payable and accruals                             9,938           16,865
       Income taxes                                                (91)            (307)
                                                               -------         --------
         Net cash provided by operations                         8,974            7,908
                                                               -------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                         (6,396)          (3,729)
   Proceeds from sale of other property and equipment               17               92
                                                               -------         --------
     Net cash used by investing activities                      (6,379)          (3,637)
                                                               -------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term borrowings                            1,487              608
   Payments of long-term debt                                   (3,409)          (3,512)
   Revolving credit borrowings increase (decrease)                (458)           5,736
   Purchase of treasury stock                                       --          (10,167)
                                                               -------         --------
     Net cash used by financing activities                      (2,380)          (7,335)
                                                               -------         --------

NET INCREASE (DECREASE) IN CASH FOR THE PERIOD                     215           (3,064)

CASH AND CASH EQUIVALENTS, beginning of period                     646            3,772
                                                               -------         --------

CASH AND CASH EQUIVALENTS, end of period                       $   861         $    708
                                                               =======         ========
</TABLE>



See accompanying notes to financial statements.




                                       5

<PAGE>   7



                               UNITED FOODS, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
                                   (CONCLUDED)

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     FOR THE NINE
                                                               MONTHS ENDED NOVEMBER 30,
                                                               -------------------------
                                                                 1998            1997
                                                               -------         --------  
<S>                                                            <C>             <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
   Cash paid during the nine months for:
     Interest                                                  $ 2,456         $  2,446
     Income taxes                                              $   301         $    744

NON-CASH INVESTING AND FINANCING ACTIVITIES: 

   Capital expenditures of $168, $228, $32 and $0 are 
   included in accounts payable at November 30, 1998, 
   February 28, 1998, November 30, 1997 and
   February 28, 1997, respectively.
</TABLE>










See accompanying notes to financial statements.




                                       6

<PAGE>   8



                               UNITED FOODS, INC.
                          NOTES TO FINANCIAL STATEMENTS

1.   The interim financial statements should be read in conjunction with the
     Company's Annual Report on Form 10-K for the year ended February 28, 1998.
     Significant accounting policies and other disclosures normally provided
     have been omitted since such items are disclosed therein.

     In the opinion of the Company, the accompanying unaudited financial
     statements contain all adjustments (consisting of only normal recurring
     accruals) necessary to present fairly its financial position as of November
     30, 1998 and its results of operations for the three and nine months ended
     November 30, 1998 and 1997, and its cash flows for the nine months ended
     November 30, 1998 and 1997.

2.   The results of operations for the three and nine months ended November 30, 
     1998 and 1997 are not necessarily indicative of the results to be expected
     for the fiscal year.

3.   Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                         NOVEMBER 30, 1998       FEBRUARY 28, 1998
                                         -----------------       -----------------
     <S>                                 <C>                     <C>
     Finished products                    $     38,210,000        $    31,607,000
     Raw materials                               2,671,000              2,303,000
     Growing crops                               1,973,000              2,644,000
     Merchandise and supplies                      354,000                790,000
                                          ----------------        ---------------

                                          $     43,208,000        $    37,344,000
                                          ================        ===============
</TABLE>

     Substantially all of the Company's inventories are valued at the lower of
     cost (first-in, first-out) or market at each fiscal year end. However, due
     to the seasonality of vegetable processing, the gross profit method, at the
     estimated annual rate, is used to determine frozen vegetable cost of goods
     sold in interim financial statements.

4.   Taxes on income consist of the current and deferred taxes required to be
     recognized for the periods presented in accordance with the provisions of
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes."

5.   Each Class B common share is convertible into one share of Class A common
     stock at the holder's election. Holders of the Class A common stock are
     entitled to a preference dividend of $.025 per share for any quarter and
     each preceding quarter of the Company's fiscal year before the holders of
     the Class B common stock are entitled to any regular cash dividend. Class A
     shareholders have the right to elect a number of directors that equal at
     least 25% of the members of the board of directors. In addition, on matters
     requiring the classes to vote together, the Class A holders are entitled to
     1/10 vote per share and holders of Class B common stock are entitled to one
     vote per share.

     On May 19, 1997, the Company initiated a cash tender offer for up to one
     million shares of its Class A and Class B Common Stock at a price of $2.50
     per share. On June 17, 1997, the Company amended the cash tender offer by
     extending the Expiration Date to July 3, 1997 and by increasing the number
     of shares it offered to purchase from 1,000,000 shares of its Class A and
     Class B Common Stock to up to 2,500,000 shares of its Class A Common Stock
     and up to 1,500,000 shares of its Class B Common Stock, each at $2.50 per
     share. A total of approximately 2,641,299 shares of Class A Common Stock
     and 1,720,932 shares of Class B Common Stock were validly tendered and not
     withdrawn in response to the offer, as amended. The purchase of shares was
     prorated in accordance with the terms of the offer, as amended, for each
     class of common stock.

6.   Basic and diluted earnings per share of common stock have been computed
     based upon the weighted average number of shares outstanding during the
     three and nine months ended November 30, 1998 and November 30, 1997.

7.   On September 16, 1998, the Company received an offer from its chairman and
     chief executive officer, James I. Tankersley, and his wife and children
     (the "Tankersley Group") to acquire the shares of the Company's common
     stock that are not owned by the Tankersley Group for $3.00 per share.



                                       7
<PAGE>   9

     On receiving the proposal, the Board of Directors of the Company appointed
     two outside directors to a special transaction committee. The Board
     designated the committee for the purpose of evaluating and making
     recommendations with respect to the proposal. As of the date of this report
     the special transaction committee and the Tankersley Group are engaged in
     negotiations regarding the proposal.






















                                       8
<PAGE>   10


                  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and earnings as of
and during the periods included in the accompanying balance sheets and
statements of income.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q and other reports and statements issued on
behalf of the Company may include forward-looking statements in reliance on the
safe harbor provided by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to substantial risks and
uncertainties, including those discussed below, and actual results may differ
materially from those contained in any such forward-looking statement. The
review of factors pursuant to the Private Securities Litigation Reform Act of
1995 should not be construed as exhaustive. Further, the Company undertakes no
obligation to update or revise any such forward-looking statements to reflect
subsequent events or circumstances.

The Company's liquidity, capital resources and results of operations may be
affected from time to time by a number of factors and risks, including, but not
limited to: trends in the economy as a whole, which may affect consumer
confidence and consumer demand for the types of food products sold by the
Company; competitive pressures from domestic and foreign processors and
distributors of fresh, dry, frozen and canned food products which may affect the
nature and viability of the Company's business strategy; competitive pressures
from imported food products; unpredictable changes in growing conditions
inherent in agriculture; other agricultural risks, including those associated
with pesticides, herbicides and disease control and crop protection efforts; the
Company's ability to maintain and expand its distribution base; the Company's
ability to maintain and improve its plants, equipment and technological systems;
changes in the Company's customer base as the result of competition and/or
consolidation of retail grocery chains; risks associated with governmental
regulation and taxation, including the existence or effects of tariffs;
availability and cost of labor employed; changes in industry capacity and
production; the availability, costs and terms of financing, including the risk
of rising interest rates; availability of trade credit and terms with vendors;
the Company's use of financial leverage and the potential impact of such
leverage on the Company's ability to execute its operating strategies; the
ability to maintain gross profit margins; the seasonal nature of the Company's
business and the ability of the Company to predict consumer demand as a whole,
as well as demand for specific items; costs associated with the storage,
shipping, handling and control of inventory; potential adverse publicity for the
food industry or certain of the Company's food products; the ability of the
Company and significant third parties with whom it does business to effect
conversions to new technological systems, including becoming Year 2000
compliant; and the impact of the offer of James I. Tankersley and his wife and
children referred to herein.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of cash are operations and external committed
credit facilities. At November 30, 1998, the Company's revolving credit
facilities totaled $21,000,000, of which $12,010,000 was available. The
Company's sources of liquidity are expected to meet adequately the requirements
for the upcoming year and the foreseeable future; however, new financing
alternatives are constantly evaluated to determine their practicality and
availability in order to provide the Company with sufficient and timely funding
at the least possible cost. The Company's $18,000,000 revolving credit facility
currently matures in fiscal 2002. The Company's $3,000,000 revolving credit
facility was canceled upon the closing of a term loan during December 1998.
One-year extensions of maturity dates of the $18,000,000 revolving credit
facility will be considered by the lender annually. If annual extensions are not
granted, the Company will then investigate revolving credit facilities with
other lenders and believes it can replace any current revolving credit facility
within its remaining 24-month term.

The Company closed on two term loans during December 1998. One term loan in the
amount of $15,000,000 has a ten year term, provides for monthly principal and
interest payments based on a twelve year amortization, with an interest rate of
6.8% per annum and is secured by the Company's mushroom farms located in
California, Utah and Oregon. The other term loan in the amount of $10,000,000
has a ten year term, provides for monthly principal and interest payments based
on a fifteen year amortization, with an interest rate of 6.8% per annum and is
secured by the Company's Santa Maria, California vegetable processing facility.
The proceeds of the loans were used to repay the balances outstanding under
existing mortgages on these properties totaling approximately $9 million, to
repay the outstanding balance of $3 million on the Company's $3 million
revolving credit note, and to fully repay the outstanding balance of other
revolving credit borrowings.




                                       9

<PAGE>   11




In March 1998, the Company entered into a $10 million credit facility to 
support the acquisition of trucks, tractors and similar equipment. The facility 
is evidenced by a master security agreement providing for a series of separate 
loans. Each loan will be secured by specific equipment and will be amortized 
over 3 to 7 years, depending on the type of equipment. Interest will be 160 
basis points over the yield for treasuries with a maturity equal to the 
amortization period of the equipment being financed.

Operations provided net cash of $8,974,000 during the nine months ended November
30, 1998 and $7,908,000 during the same period of the prior year. Changes in
inventories resulted in a cash decrease of $5,864,000 during the nine months
ended November 30, 1998 as compared with a decrease of $12,232,000 during the
same period of the prior year. The change results primarily from changes in the
timing of product deliveries under the reciprocal supply agreements, as well as
from the effect of adverse weather conditions during the nine months ended
November 30, 1998, which resulted in less than expected packs. Changes in
accounts payable and accruals result primarily from the changes in inventories
previously mentioned.

Investing activities used cash of $6,379,000 for the nine months ended November
30, 1998 compared with cash used of $3,637,000 during the same period of the
prior year, primarily as the result of increased capital expenditures.

Financing activities used cash of $2,380,000 for the nine months ended November
30, 1998 as compared with cash used of $7,335,000 during the same period of the
prior year. Borrowings under the Company's revolving credit agreements during
the nine months ended November 30, 1997 were required to fund stock purchases
described below.

On May 19, 1997, the Company initiated a cash tender offer for up to 1,000,000
shares of its Class A and Class B Common Stock at a price of $2.50 per share. On
June 17, 1997, the Company amended the cash tender offer by extending the
Expiration Date to July 3, 1997 and by increasing the number of shares it
offered to purchase from 1,000,000 shares of its Class A and Class B Common
Stock to up to 2,500,000 shares of its Class A Common Stock and up to 1,500,000
shares of its Class B Common Stock, each at a price of $2.50 per share. A total
of approximately 2,641,299 shares of Class A Common Stock and approximately
1,720,932 shares of Class B Common Stock were validly tendered and not withdrawn
in response to the offer, as amended. The purchases of shares were prorated in
accordance with the terms of the offer, as amended, for each class of Common
Stock. The purchase, which totaled approximately $10,167,000, including
expenses, was funded with borrowings from the Company's revolving credit
facilities and available cash.

On September 16, 1998, the Company received an offer from its chairman and chief
executive officer, James I. Tankersley, and his wife and children (the
"Tankersley Group") to acquire the shares of the Company's common stock that are
not owned by the Tankersley Group for $3.00 per share. On receiving the
proposal, the Board of Directors of the Company appointed two outside directors
to a special transaction committee. The Board designated the committee for the
purpose of evaluating and making recommendations with respect to the proposal
and the committee has engaged counsel and a financial advisor to assist it in
its review of the proposal. The Company will bear the costs of the committee and
its advisors. The Tankersley Group and the special transaction committee are
currently engaged in negotiations regarding the proposal.

Working capital at November 30, 1998 was $36,359,000, and was $39,179,000 at
February 28, 1998. The decrease results primarily from the changes in
inventories and accounts payable, previously mentioned.

The Company's ratio of debt to equity was 1.68 to 1 at November 30, 1998 and 
1.53 to 1 at February 28, 1998. The increase results primarily from the changes
in accounts payable, previously mentioned.

CAPITAL EXPENDITURES

Capital expenditures for fiscal 1999 are estimated to be approximately
$14,500,000, which is approximately $7,500,000 more than depreciation expense
projected for fiscal 1999. Capital expenditures anticipated for fiscal 1999
include the purchase of certain farm land, certain handling equipment, rolling
stock, vehicles, and composting equipment, as well as for improvements to the
Company's plants, equipment and technological systems. These expenditures are
expected to be funded from operating cash flow, the Company's revolving credit
facility, and the $10,000,000 credit facility, previously mentioned. The
Company's capital plan may change from time to time and the actual amount spent
may vary materially from amounts anticipated herein.




                                       10

<PAGE>   12



YEAR 2000 ISSUES

The Company has developed a comprehensive strategy for updating its systems for
Year 2000 ("Y2K") compliance. The Company's information technology ("IT")
systems include in-house developed software, as well as software purchased from
outside parties. All software has been identified and assessed to determine the
extent of renovations required in order to be Y2K compliant. Renovations to
programs that utilize in-house developed computer code are complete and the
Company anticipates that the renovations will be validated before the end of the
Company's current fiscal year. Also, the Company believes vendor developed
software will be made Y2K compliant before the end of the Company's current
fiscal year through vendor-provided updates or replacement with other Y2K
compliant hardware and software.

The Company has identified significant non-IT systems which may be impacted by
the Y2K problem, including those relating to production, processing, storage and
communication equipment, and is in the process of determining through inquiries
of equipment suppliers, as well as testing of such equipment, the extent of
renovations required, if any. The Company believes the assessment will be
completed before the end of the Company's current fiscal year, and that
renovation, validation and implementation will be completed early in the next
fiscal year.

The Company has identified third parties with which it has a significant
relationship that, in the event of a Y2K failure, could have a material impact
on the Company's financial position or operating results. The third parties
include energy and utility suppliers, creditors, material and product suppliers,
communication vendors, including value-added network vendors, and the Company's
significant customers. These relationships, especially those associated with
certain suppliers and customers, are material to the Company and a Y2K failure
for one or more of these parties could result in a material adverse effect on
the Company's operating results and financial position. The Company is making
inquiries of these third parties to assess their Y2K readiness. The Company
expects that this process will be on-going throughout the current and next
fiscal year.

The Company expects that the costs to address the Y2K issues will total
approximately $600,000, of which approximately $450,000 (approximately 30% of
the current year management information systems budget) will be spent in the
current fiscal year, with the remainder being spent during the first two
quarters of fiscal 2000. These costs include salary and fringe benefits for
personnel, hardware and software costs, and consulting and travel expenses
associated, directly or indirectly, with addressing Y2K issues. Y2K issues have
received a high priority within the Company and, as a result, certain other IT
projects have been delayed. While such non-Y2K projects are expected to enhance
operational efficiencies and improve the quality of information available to
management, the delay of such projects is not expected to have a material impact
on the Company's operations.

The worst case Y2K scenarios could include such insignificant matters as a minor
interruption in production or shipping resulting from unanticipated problems
encountered in the IT systems of the Company, or any of the significant third
parties with whom the Company does business. The pervasiveness of the Y2K issue
makes it likely that previously unidentified issues will require remediation
during the normal course of business. In such a case, the Company anticipates
that transactions could be processed manually while IT and other systems are
repaired, and that such interruptions would have a minor effect on the Company's
operations. On the other hand, a worst case Y2K scenario could be as
catastrophic as an extended loss of utility service resulting from interruptions
at the point of power generation, long-line transmission, or local distribution
to the Company's processing and storage facilities. Such an interruption could
result in an inability to provide products to the Company's customers, as well
as impairment of the Company's fresh and frozen inventories, resulting in a
material adverse effect on the Company's operating results and financial
position.

RESULTS OF OPERATIONS

OVERVIEW AND TRENDS

The Company's product line is made up of agricultural products which are subject
to the cyclical conditions and risks inherent in the agricultural industry. The
Company bears part of the growing risks and all of the processing and marketing
risks of these agricultural products. Weather abnormalities and excess
inventories sometimes cause substantial reductions in the annual volume of
product processed in the Company's facilities. When this happens, the unit cost
of that year's production will increase substantially, resulting in reduced
profit margins for one or more years. On the other hand, when bumper crops occur
unit costs will decrease but selling prices will, in general, be depressed.

The Company is faced with strong competition in the marketplace from large brand
name competitors, private regional U.S. growers and processors, and
privately-owned Mexican and Canadian growers and processors. These competitive
pressures, 




                                       11

<PAGE>   13



coupled with low overall growth, have led to weak market pricing, and
a substantial increase in trade spending required for the Company to maintain
its market position. These factors have adversely impacted earnings in certain
prior periods and, as a result, certain discretionary repair and maintenance
projects were deferred to later periods. The Company anticipates that these
competitive conditions will continue.

The Company believes that recently imposed interim tariffs on imported canned
mushrooms from certain countries has had the effect of increasing prices and
profitability for this portion of the Company's product line. In cases
involving imported canned mushrooms from Chile, India, Indonesia and China, the
tariff has been approved for a five year period. 

The Company believes that, in order to address the intense competition within
its industry, it must improve its operational efficiency, lower its costs,
improve its customer service and provide value-added services to its customers.
Accordingly, the Company intends to continue to invest in maintaining and
expanding its distribution base and to make substantial expenditures to maintain
and improve its plants, equipment and technological systems. The Company
believes these expenditures are necessary to keep its business competitive and
will fund such spending during periods when earnings are available. As a result,
the Company believes that its future net income may be adversely affected during
certain periods.

In addition to general inflation and the growing, processing and marketing risks
described above, the Company is facing significant costs associated with
governmental regulation, the loss of land and water available for agriculture in
California and the increasing competition due to worldwide facilitation of
trade, notwithstanding the impact of the previously mentioned tariff on certain
imported canned mushrooms. As a result of these factors, the Company's earnings
are subject to fluctuations and will continue to be so for the foreseeable
future.

The effect on the Company's operations and its ability to withstand the costs of
evolving healthcare, OSHA, EPA, taxation and other governmental regulations is
unknown.

REVENUES

Net sales and service revenues increased $4,118,000 (8.0%) and $10,398,000
(7.4%) for the three and nine month periods ended November 30, 1998,
respectively, as compared with the same periods of the prior year. Sales volume
increased 13.7% and 7.8 % and the average selling price per pound decreased 3.7%
and increased 1.0% for the three and nine month periods ended November 30, 1998,
respectively, as compared with the same periods of the prior year. The average
selling price per pound was significantly impacted by changes in the mix of
sales made to other food processors. Excluding the effect of sales to other food
processors, the average selling price per pound increased .9% and 1.6% for the
quarter and year-to-date periods, respectively, as compared with the same
periods of the prior year due to increased prices for certain of the Company's
food products. Sales allowances increased $1,511,000 (13.7%) and $3,880,000
(13.6%) for the three and nine month periods ended November 30, 1998,
respectively, as compared with the same periods of the prior year. The increases
result primarily from increased sales volume, previously mentioned, as well as
competitive market conditions and the Company's efforts to maintain its market
share.

COST OF SALES AND SERVICES

Cost of sales and services increased $2,702,000 (6.4%) and $7,404,000 (6.4%) for
the three and nine month periods ended November 30, 1998, respectively, as
compared with the same periods of the prior year. The changes result primarily
from increased sales volumes, previously mentioned, and changes in sales mix
associated with sales to other food processors. Gross profit increased
$1,416,000 (15.0%) and $2,994,000 (13.0%) for the three and nine month periods
ended November 30, 1998, respectively, as compared with the same periods of the
prior year. The increase results primarily from margin realized on additional
sales volumes and improved sales prices, previously mentioned. The gross profit
method, at the estimated annual gross profit rate is used to determine frozen
vegetable cost of goods sold in interim financial statements. (See Note 3 -
Notes to Financial Statements.)

SELLING, ADMINISTRATIVE AND GENERAL EXPENSES

Selling, general and administrative expenses increased $569,000 (7.0%) and
$1,546,000 (6.7%) for the three and nine month periods ended November 30, 1998,
as compared with the same periods of the prior year. Storage expense increased
$482,000 (18.4%) and $1,006,000 (14.7%) for the quarter and year-to-date
periods, as compared with the same periods of the prior year, 



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<PAGE>   14



primarily as the result of repairs to the Company's cold storage facilities.
Other selling, general and administrative expenses increased $87,000 (1.6%) and
$540,000 (3.3%), primarily as the result of increased general and administrative
expenses, including cost associated with becoming Y2K compliant.

INTEREST EXPENSE

Interest expense - net decreased $61,000 (5.6%) and $15,000 (.5%) for the three
and nine months ended November 30, 1998, as compared with the same periods of
the prior year, primarily as the result of changes in average borrowings and
cash and short term investments and slightly lower interest rates.

TAXES ON INCOME

Taxes on income for the three and nine months ended November 30, 1998 and 1997
consist of current and deferred taxes provided at the estimated effective
federal and state tax rates expected to be recognized for the respective
periods. (See Note 4 - Notes to Financial Statements.)































                                       13




<PAGE>   15





                           PART II - OTHER INFORMATION


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) - EXHIBITS

See Exhibit Table.

(b) - REPORTS ON FORM 8-K

On September 17, 1998, the Company filed a report on Form 8-K, reporting under 
Item 5 the fact that the Company had received an offer from its chairman, James 
I. Tankersley, and his wife and children to acquire the shares of the Company's 
common stock that are not owned by Mr. Tankersley, his wife or his children for 
$3.00 per share.


















                                       14

<PAGE>   16






                                   SIGNATURES



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




                                         UNITED FOODS, INC.



Date:  January 13, 1999                  By  /s/    Carl W. Gruenewald, II  
       ----------------                      -----------------------------------
                                             Carl W. Gruenewald, II
                                             Senior Vice President,
                                             Chief Financial Officer & Treasurer







                                       15
<PAGE>   17


                               UNITED FOODS, INC.

                                 EXHIBITS TABLE

<TABLE>
<CAPTION>
  EXHIBIT                                      EXHIBIT
   NUMBER                                    DESCRIPTION                                             
  -------    --------------------------------------------------------------------------------------- 
<S>          <C>                                                                                     
    10.1     Promissory Note in the principal amount of $10,000,000 and Deed of Trust between United 
             Foods, Inc. and Monumental Life Insurance Company, dated December 15, 1998.

    10.2     Promissory Note in the principal amount of $15,000,000 and Deeds of Trust between United
             Foods, Inc. and Monumental Life Insurance Company, dated December 15, 1998.

    27       Financial Data Schedule (For SEC use only).                                             

</TABLE>

























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