<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

         For the Quarterly Period Ended March 1, 1998

                                       OR

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

                        Commission File Number -- 0-17896

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

Commonwealth of Pennsylvania                                 23-0670710
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

1486 York Road, P.O. Box 334, Hanover, PA                    17331
(Address of principal executive offices)                     (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing for the past 90
days.

Yes      [X]      No       [ ]

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

                       Class                     Outstanding at March 1, 1998

         Class A Common Stock, $25 par value             291,166 shares
         Class B Common Stock, $25 par value             426,912 shares
<PAGE>   2

                   HANOVER FOODS CORPORATION AND SUBSIDIARIES

                                    FORM 10-Q

                  For the Thirty-Nine Weeks Ended March 1, 1998


Index
                                                                            Page
Part I -- Financial Information

   Item 1 -- Financial Statements:

         Condensed Consolidated Balance Sheets
            March 1, 1998 (Unaudited) and June 1, 1997.......................3-4

         Condensed Consolidated Statements of Operations
            (Unaudited), Thirteen Weeks and Thirty-Nine Weeks Ended
            March 1, 1998 and March 2, 1997................................    5

         Condensed Consolidated Statements of Stockholders'
            Equity (Unaudited), Periods Ended March 1, 1998
            and June 1, 1997...............................................    6

         Condensed Consolidated Statements of Cash Flows
            (Unaudited), Thirty-Nine Weeks Ended March 1, 1998
            and March 2, 1997..............................................    7

         Notes to Condensed Consolidated Financial Statements
            (Unaudited).................................................... 8-12

   Item 2 -- Management's Discussion and Analysis of Financial
                  Condition and Results of Operations......................13-17

Part II -- Other Information

   Item 1 -- Legal Proceedings.............................................18-22

   Items 2-5 -- None.......................................................   23

   Item 6 -- Exhibits and Reports on Form 8-K..............................24-26

<PAGE>   3
                         PART I -- FINANCIAL INFORMATION
                          Item 1. Financial Statements
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
ASSETS                                               March 1, 1998        June 1, 1997
                                                      (Unaudited)
--------------------------------------------------------------------------------------
<S>                                                    <C>                <C>         
Current Assets:
   Cash and Short-Term Cash Investments                $  3,962,000       $  3,312,000
   Accounts and Notes Receivable, Net                    26,330,000         22,954,000
   Accounts Receivable from Related Parties, Net            235,000            890,000
   Inventories                                           50,535,000         41,424,000
   Prepaid Expenses                                       2,551,000          2,064,000
   Deferred Income Taxes                                    733,000            733,000
--------------------------------------------------------------------------------------
Total Current Assets                                     84,346,000         71,377,000
--------------------------------------------------------------------------------------
Property, Plant and Equipment, at Cost:
   Land and Buildings                                    34,942,000         33,398,000
   Machinery and Equipment                               86,189,000         82,037,000
   Leasehold Improvements                                   359,000            349,000
--------------------------------------------------------------------------------------
                                                        121,490,000        115,784,000
   Less Accumulated Depreciation and
      Amortization                                       71,125,000         66,822,000
--------------------------------------------------------------------------------------
                                                         50,365,000         48,962,000
   Construction in Progress                                 384,000            760,000
--------------------------------------------------------------------------------------
Total Property, Plant and Equipment                      50,749,000         49,722,000
--------------------------------------------------------------------------------------
Other Assets and Deferred Charges:
   Intangible Assets, Less Accumulated
      Amortization of $2,029,000 and $2,019,000             530,000            441,000

Other Assets                                              1,872,000          2,491,000
--------------------------------------------------------------------------------------
Total Assets                                           $137,497,000       $124,031,000
--------------------------------------------------------------------------------------
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        3
<PAGE>   4

          PART I -- FINANCIAL INFORMATION Item 1. Financial Statements
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                  
--------------------------------------------------------------------------------------------------
  LIABILITIES AND STOCKHOLDERS' EQUITY                      March 1, 1998 (Unaudited) June 1, 1997
--------------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C>          
Current Liabilities:
   Notes Payable - Banks                                        $  22,182,000        $  24,114,000
   Accounts Payable                                                23,192,000           21,038,000
   Accrued Expenses                                                13,206,000            6,511,000
   Current Maturities of Long-Term Debt                             1,859,000            2,234,000
   Income Taxes Payable                                             1,039,000              358,000
--------------------------------------------------------------------------------------------------
Total Current Liabilities                                          61,478,000           54,255,000
--------------------------------------------------------------------------------------------------
Long-Term Debt, Less Current Maturities                            16,145,000           16,219,000
Other Long-Term Liabilities                                         1,349,000            1,226,000
Deferred Income Taxes                                               5,273,000            5,174,000
--------------------------------------------------------------------------------------------------
Total Liabilities                                                  84,245,000           76,874,000
--------------------------------------------------------------------------------------------------
Stockholders' Equity:
   8.25% cumulative convertible preferred, $25 par value;
      issuable in series, 120,000 shares authorized;
      31,536 shares issued, 15,044 shares outstanding                 788,000              788,000
   4.40% cumulative convertible preferred, $25 par value;
      issuable in series, 10,000 shares authorized; 10,000
      shares issued and outstanding at March 1, 1998                  250,000                - 0 -
   Common stock, Class A, non-voting, $25 par value;
      800,000 shares authorized, 349,234 shares issued,
      291,106 shares at March 1, 1998 and 292,354
      shares at June 1, 1997 outstanding                            8,729,000            8,729,000
   Common stock, Class B, voting, $25 par value;
      880,000 shares authorized, 493,123 shares issued,
      426,912 shares at March 1, 1998 and 427,131
      shares at June 1, 1997 outstanding                           12,328,000           12,328,000
   Capital Paid in Excess of Par Value                              2,143,000            1,623,000
   Retained Earnings                                               37,146,000           31,570,000
   Treasury Stock, at Cost                                         (7,973,000)          (7,887,000)
   Other Reserves                                                    (159,000)               6,000
--------------------------------------------------------------------------------------------------
Total Stockholders' Equity                                         53,252,000           47,157,000
--------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                      $ 137,497,000        $ 124,031,000
--------------------------------------------------------------------------------------------------
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>   5
                         PART I -- FINANCIAL INFORMATION
                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                        Thirty-Nine Weeks Ended              Thirteen Weeks Ended
                                       March 1,           March 2,          March 1,          March 2,
                                         1998               1997              1998              1997
--------------------------------------------------------------------------------------------------------
<S>                                  <C>                <C>                <C>               <C>        
Net Sales                            $191,925,000       $190,935,000       $67,923,000       $65,780,000
Cost of Goods Sold                    144,413,000        145,407,000        50,535,000        50,713,000
--------------------------------------------------------------------------------------------------------
Gross Profit                           47,512,000         45,528,000        17,388,000        15,067,000

Selling Expenses                       27,470,000         25,995,000        10,143,000         8,430,000
Administrative Expenses                 7,452,000          7,893,000         2,952,000         3,168,000
--------------------------------------------------------------------------------------------------------
Operating Profit                       12,590,000         11,640,000         4,293,000         3,469,000
Interest Expense                        2,410,000          2,957,000           708,000           996,000
Other Expenses, Net                       245,000            584,000           170,000           178,000
--------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes            9,935,000          8,099,000         3,415,000         2,295,000
Income Taxes                            3,740,000          3,060,000         1,259,000           821,000
--------------------------------------------------------------------------------------------------------
Net Earnings                            6,195,000          5,039,000         2,156,000         1,474,000
Dividends on Preferred Stock               26,000             23,000            10,000             7,000
--------------------------------------------------------------------------------------------------------
Net Earnings Applicable
  to Common Stock                    $  6,169,000       $  5,016,000       $ 2,146,000       $ 1,467,000
--------------------------------------------------------------------------------------------------------
Earnings Per Share:
   Net Earnings, Basic               $       8.58       $       6.96       $      2.98       $      2.03
   Net Earnings, Diluted                     8.55               6.93              2.97              2.03
   Dividends Per Share, Common              0.825              0.825             0.275             0.275
   Average Shares Outstanding,
       Basic                              718,609            720,556           719,037           720,556
   Average Shares Outstanding,
       Diluted                            724,347            727,160           724,775           727,160
--------------------------------------------------------------------------------------------------------
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        5
<PAGE>   6
                         PART I -- FINANCIAL INFORMATION

                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
            Condensed Consolidated Statements of Stockholders' Equity
                                    Unaudited


<TABLE>
<CAPTION>
                                                               Cumulative
                                                          Convertible Preferred
                                                                  Stock                   Common Stock          Common Stock        
                                                            Series A,  B and C              Class A                Class B          
                                         Total                                                                                      
                                       Stockholders'                                                                                
                                         Equity             Shares       Amount        Shares       Amount    Shares       Amount   
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                  <C>        <C>             <C>        <C>         <C>        <C>        
Balance, June 1, 1997                  $ 47,157,000         31,536     $   788,000     349,210    $8,729,000  493,123    $12,328,000

Net Earnings for  the Year                6,195,000                                                                                 

Cash Dividends Per Share:

   Preferred Stock                          (26,000)                                                                                
   Common Stock                            (593,000)                                                                                

Redemption of Common Stock

   (Class A 1,494 Shares and
   Class B 292 Shares)                      (86,000)                                                                                

Issuance of Preferred Stock Class C         770,000         10,000         250,000                                                  
Unrealized Loss on Investments             (165,000)                                                                                
------------------------------------------------------------------------------------------------------------------------------------

Balance, March 1, 1998                 $ 53,252,000         41,536     $ 1,038,000     349,210    $8,729,000  493,123    $12,328,000
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                       
                                       
                                                                                            Treasury
                                                                                             Stock
                                         Capital Paid
                                         in Excess of      Retained
                                          Par Value        Earnings     Shares        Amount         Other
-------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>            <C>        <C>             <C>       
Balance, June 1, 1997                      $1,623,000    $31,570,000    138,952    $(7,887,000)    $   6,000

Net Earnings for  the Year                                 6,195,000

Cash Dividends Per Share:

   Preferred Stock                                           (26,000)
   Common Stock                                             (593,000)

Redemption of Common Stock

   (Class A 1,494 Shares and
   Class B 292 Shares)                                                    1,786        (86,000)

Issuance of Preferred Stock Class C           520,000
Unrealized Loss on Investments                                                                      (165,000)
-------------------------------------------------------------------------------------------------------------

Balance, March 1, 1998                     $2,143,000    $37,146,000    140,738    $(7,973,000)    $(159,000)
=============================================================================================================
</TABLE>









     See accompanying notes to condensed consolidated financial statements.

                                        6
<PAGE>   7
                         PART I -- FINANCIAL INFORMATION
                          Item 1. Financial Statements
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
           Condensed Consolidated Statements of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                         Thirty-Nine Week Period Ended:                       March 1, 1998   March 2, 1997
-----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>        
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities:
   Net Earnings                                                                 $ 6,195,000     $ 5,039,000
   Adjustments to Reconcile Net Earnings to Net
      Cash Used in Operating Activities:
         Depreciation and Amortization                                            4,313,000       4,097,000
         Deferred Income Taxes                                                       99,000          36,000
   Changes in Assets and Liabilities:
         Accounts Receivable                                                     (2,721,000)     (7,492,000)
         Inventory                                                               (9,111,000)     (4,700,000)
         Prepaid Items                                                             (487,000)        509,000
         Accounts Payable and Accrued Expenses                                    8,849,000       3,845,000
         Income Taxes Payable                                                       681,000          96,000
         Other Liabilities                                                          123,000         304,000
-----------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                         7,941,000       1,734,000
-----------------------------------------------------------------------------------------------------------
Investing Activities:
   (Increase) Decrease in Other Non-Current Assets                                  355,000         597,000
   Acquisitions of Property, Plant and Equipment                                 (5,330,000)     (4,228,000)
-----------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities                                            (4,975,000)     (3,631,000)
-----------------------------------------------------------------------------------------------------------
Financing Activities:
   Increase (Decrease) in Notes Payable                                          (1,932,000)      5,822,000
   Payments on Long-Term Debt and Capital Leases                                   (449,000)       (742,000)
   Payment of Dividends                                                            (619,000)       (618,000)
   Redemption of Common Stock                                                       (86,000)       (117,000)
   Issuance of 4.4% Preferred Stock                                                 770,000           - 0 -
-----------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities                              (2,316,000)      4,345,000
-----------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                           650,000       2,448,000
Cash and Cash Equivalents, Beginning of Period                                    3,312,000       1,112,000
-----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period                                        $ 3,962,000     $ 3,560,000
-----------------------------------------------------------------------------------------------------------
</TABLE>

    See accompanying notes to condensed consolidated financial statements. 

                                       7
<PAGE>   8
                         PART I -- FINANCIAL INFORMATION
                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                         March 1, 1998 and March 2, 1997
                                   (Unaudited)
--------------------------------------------------------------------------------

(1)      BASIS OF PRESENTATION

         The condensed consolidated financial statements of the Registrant
         included herein have been prepared, without audit, pursuant to the
         rules and regulations of the Securities and Exchange Commission.
         Although, certain information normally included in financial statements
         prepared in accordance with generally accepted accounting principles
         has been omitted, the Registrant believes that the disclosures are
         adequate to make the information presented not misleading.

         The Corporation's fiscal year ends at the close of operations on the
         Sunday nearest to May 31. Accordingly, these financial statements
         reflect activity for the thirteen and thirty-nine week periods of March
         1, 1998 and March 2, 1997.

         It is suggested that these condensed consolidated financial statements
         be read in conjunction with the consolidated financial statements and
         the notes thereto included in Form 10-K for the Corporation's fiscal
         year ended June 1, 1997.

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

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

(2)      SHORT-TERM BORROWINGS

         The Corporation and its subsidiaries maintain short-term unsecured
         lines of credit with various banks providing credit availability
         amounting to $90.0 million of which $22,182,000 was borrowed at March
         1, 1998. The average cost of funds during the period ended March 1,
         1998 was 6.10%.


                                        8
<PAGE>   9
                         PART I -- FINANCIAL INFORMATION
                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

(3)      LONG-TERM DEBT

         The long-term debt of the Corporation and its subsidiaries consist of:

<TABLE>
<CAPTION>
                                                                March 1, 1998        June 1, 1997
-------------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C>
8.74% unsecured senior notes payable
   to an insurance company, due
   fiscal years ending 1995-2007                                 $17,857,000          $17,857,000

Installment obligation payable to a related
   party, due in equal annual installments
   in fiscal years ending 1996-2000
    interest at prime rate (8.50% at
   March 1, 1998)                                                    147,000              221,000

6.33% installment obligation payable to a
   related party, due fiscal years ending
   1996-1998                                                           - 0 -              375,000
-------------------------------------------------------------------------------------------------
                                                                  18,004,000           18,453,000

Less current maturities                                            1,859,000            2,234,000
-------------------------------------------------------------------------------------------------
Net Long Term Debt                                                16,145,000           16,219,000
-------------------------------------------------------------------------------------------------
</TABLE>

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

The Corporation is in compliance with the restrictive provisions in the
agreements.


                                                9
<PAGE>   10
                         PART I -- FINANCIAL INFORMATION
                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                     Notes to Condensed Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

(4)      RELATED PARTY TRANSACTIONS

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

<TABLE>
<CAPTION>
                                          Thirty-Nine Weeks Ended                    Thirteen Weeks Ended
                                        March 1,            March 2,            March 1,             March 2,
                                          1998                1997                1998                1997
-------------------------------------------------------------------------------------------------------------
<S>                                    <C>                 <C>                 <C>                 <C>
Revenues:

   Park 100 Foods, Inc.                $3,559,000          $1,362,000          $1,094,000          $  638,000

Corporate Charges:

   Snyder's of Hanover, Inc.              135,000             131,000              47,000              44,000

Expenditures:

   Park 100 Foods, Inc.                   165,000             240,000              23,000              79,000
   Patty & John's, Inc.                         0              10,000                   0                   0
   The Cannery Press, Inc.                      0              14,000                   0              14,000
   ARWCO Corporation                       15,000              11,000               5,000               4,000
   Warehime Enterprises, Inc.              97,000             177,000              95,000             130,000
   John A. & Patricia M
      Warehime                             45,000              37,000              15,000              14,000
   James G. Sturgill                       59,000              95,000              19,000              50,000
   Lippy Brothers, Inc.                   304,000           1,044,000             235,000             865,000
-------------------------------------------------------------------------------------------------------------
</TABLE>

                                       10
<PAGE>   11
                         PART I -- FINANCIAL INFORMATION
                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                     Notes to Condensed Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

The respective March 1, 1998 and June 1, 1997 account balances with related
companies are as follows:

<TABLE>
<CAPTION>
                                                       March 1, 1998     June 1, 1997
-------------------------------------------------------------------------------------
<S>                                                    <C>               <C>
Accounts Receivable:

   Snyder's of Hanover, Inc.                             $ 33,000          $ 15,000
   Park 100 Foods, Inc.                                   209,000           906,000


Accounts Payable:

   Park 100 Foods, Inc.                                     7,000            30,000
   Warehime Enterprises, Inc.                               - 0 -             1,000

Notes Payable:

   Warehime Enterprises, Inc.                               - 0 -           375,000
   Cyril T. Noel                                          147,000           221,000

-------------------------------------------------------------------------------------
</TABLE>

(5)      The Company adopted Statement of Financial Accounting Standards No.
         128, "Earnings Per Share" effective with the period ended March 1,
         1998, and restated all prior earnings per share amounts to conform to
         the provisions thereof.


                                       11
<PAGE>   12
                         PART I -- FINANCIAL INFORMATION
                     Item 1. Financial Statements, Continued
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

(6)      CONTINGENCIES

         LEGAL MATTERS

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

         See "Legal Proceedings" for a further description of certain legal
         proceedings in which the Corporation is currently involved.


                                       12
<PAGE>   13
                         PART I -- FINANCIAL INFORMATION
                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

The following comments should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in the Corporation's Annual Report on Form 10-K for the fiscal year
ended June 1, 1997.

GENERAL

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

RESULTS OF OPERATIONS

NET SALES

Consolidated net sales were $191.9 million for the thirty-nine week period ended
March 1, 1998. This represents a decrease of .5% over the thirty-nine week
period ended March 2, 1997 consolidated net sales of $190.9 million.
Consolidated net sales were $67.9 million for the thirteen week period ended
March 1, 1998, a 3.3% increase from consolidated net sales of $65.8 million for
the corresponding period in the prior year. The increase was due to increases in
canned and frozen branded sales as well as prepared salad sales.


COST OF GOODS SOLD

Cost of goods sold were $144.4 million, or 75.2% of consolidated net sales in
the thirty-nine week period ended March 1, 1998 as compared to $145.4 million,
or 76.1% of consolidated net sales, for the corresponding period in 1997. Cost
of goods sold was $50.5 million, or 74.4% of


                                       13
<PAGE>   14
                         PART I -- FINANCIAL INFORMATION
                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

consolidated net sales, for the thirteen week period March 1, 1998 as compared
to 50.7 million, or 77.1% of consolidated net sales, for the corresponding
period in 1997. The decrease in cost of goods sold as a percentage of net sales
for the thirteen week period ended March 1, 1998 resulted from a decrease in
costs of operations, offset by a decrease in the average selling prices per case
of product. The cost of goods sold as a percentage of net sales for the
thirty-nine week period ended March 1, 1998 decreased due to reduced operation
costs.

SELLING EXPENSES

Selling expenses were $27.5 million, or 14.3% of consolidated net sales, for the
thirty-nine week period ended March 1, 1998 as compared to $26.0 million or
13.6% of consolidated net sales during the corresponding period in 1997. Selling
expenses were $10.1 million or 14.9% of consolidated net sales for the thirteen
week period ended March 1, 1998 compared to $8.4 million, or 12.8% of
consolidated net sales, during the corresponding period in 1997. The increase in
selling expenses reflects increased expenses related to branded promotional
programs during the periods reported.

ADMINISTRATIVE EXPENSES

Administration expenses as a percentage of consolidated net sales were 3.9% for
the thirty-nine week period ended March 1, 1998 compared to 4.1% for the
corresponding period of 1997. Administrative expenses as a percentage of
consolidated net sales were 4.3% for the thirty-nine week period ended March 1,
1998 compared to 4.8% of consolidated net sales during the corresponding period
in 1997. This decrease is attributed to decreases in outside professional
services, both legal and financial.

INTEREST EXPENSE

Interest expense was $2,410,000 for the thirty-nine week period ended March 1,
1998 as compared to $2,957,000 for the same period in 1997. Interest expense was
$0.7 million for the thirteen week period ended March 1, 1998 compared to $1.0
million for the same period in 1997. The decrease is mainly due to lower average
short-term borrowings during the current period, as well as lower borrowing
rates.


                                       14
<PAGE>   15
                         PART I -- FINANCIAL INFORMATION
                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

OTHER EXPENSES, NET

Other expenses, net was $245,000 for the thirty-nine week period ended March 1,
1998 as compared to $584,000 for the same period in 1997. Other expenses, net
was $170,000 in income for the thirteen week period ended March 1, 1998 compared
to expense of $178,000 for the same period in 1997. Gain on sale of investments,
foreign exchange gain and increased interest earned attributed to the decreased
expenses during both the thirty-nine and thirteen week periods compared to the
prior periods.

LIQUIDITY AND CAPITAL RESOURCES

Management's discussion of the Corporation's financial condition should be read
in conjunction with the condensed consolidated statements of cash flows
appearing on page 7 of this report.

OPERATING ACTIVITIES

Cash used by operating activities for the thirty-nine week period ended March 1,
1998 was $7.8 million as compared to $1.7 million during the same period of
1997. The combination of increased net earnings, inventory levels and accounts
receivable levels, offset by increases in accounts payable and accrued expenses,
increased cash flow. By comparison the same period in 1997 consumed more cash
for increased accounts receivable offset by less cash consumed for increased
inventory levels and less cash generated from net earnings, increased accounts
payable and accrued expenses.

INVESTING ACTIVITIES

During the thirty-nine week period ended March 1, 1998, the Corporation spent
approximately $5.3 million for the purchase of land and plant upgrades and
expansions. This compares to $4.2 million spent during the same period last year
for capital projects.


                                       15
<PAGE>   16
                         PART I -- FINANCIAL INFORMATION
                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

FINANCING ACTIVITIES

The decrease in notes payable of approximately $1.9 million during the
thirty-nine week period ended March 1, 1998 represents lower borrowings made
against available seasonal lines of credit from financial institutions for use
in operations.

The Corporation issued $.8 million in preferred stock during the thirteen week
period ending March 1,1998.

The Corporation has available seasonal lines-of-credit from financial
institutions in the amount of $90.0 million of which $22.2 million was utilized
as of March 1, 1998. Additional borrowings are permitted within parameters in
existing debt agreements. Management believes these credit facilities provide
adequate cash availability for seasonal operating requirements.

NEW ACCOUNTING STANDARDS

In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, and
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. These Statements establish standards for reporting and display of
comprehensive income and its components and for reporting information about
business segments and products in financial statements.
These Statements are effective for fiscal years beginning after December 15,
1997.

In January 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. This Statements establishes new
disclosure requirements relating to pension and other postretirement benefits
and is effective for fiscal years beginning after December 15, 1997.

Adoption of the above statements is not expected to have a material affect on
the Corporation's financial statements.


                                       16
<PAGE>   17
                         PART I -- FINANCIAL INFORMATION
                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

YEAR 2000

Many existing computer programs, including those utilized by the Company, use
only two digits to identify a year in the date field. These programs were
designed and developed without considering the impact of the upcoming change in
the century. If not corrected, any computer applications could fail or create
erroneous results by or at the Year 2000 (the "Year 2000 Issue"). The Company
has evaluated the costs associated with addressing the Year 2000 Issue to be
$350,000 and has determined that such cost is not reasonably likely to
materially affect the Company's future financial results.

FORWARD LOOKING STATEMENTS

When used in this Form 10-Q, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "projected," or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, including but not
limited to quarterly fluctuations in operating results, competition, state and
federal regulation, environmental considerations, Year 2000 remediation plans,
and foreign operations. Such factors, which are discussed in the Form 10-Q,
could affect the Corporation's financial performance and could cause the
Corporation's actual results for future periods to differ materially from any
opinion or statements expressed herein with respect to future periods. As a
result, the Corporation wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made.


                                       17
<PAGE>   18
                          PART II -- OTHER INFORMATION
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

1        Legal Proceedings

         1995 Warehime Family Litigation

         On February 1, 1995, Michael A. Warehime, J. William Warehime and
         Elizabeth W. Stick, three Class B shareholders of the Corporation,
         filed a compliant in the Court of Common Pleas of York County,
         Pennsylvania against the Corporation and John A. Warehime (Chairman of
         the Corporation), in his capacity as voting trustee of two voting
         trusts entitling him to vote approximately 52% of the Class B common
         stock. The Court has dismissed various claims and parties in the
         lawsuit and the only remaining parties are Michael A. Warehime as
         plaintiff and John A. Warehime as defendant. The only remaining claims
         are (i) a claim for breach of fiduciary duty based on exercise of
         powers beyond those granted by certain voting trust agreements; (ii) a
         claim for breach of fiduciary duty for use of the voting trusts in a
         manner harmful to their beneficiaries; (iii) and a count requesting
         removal of John A. Warehime as the voting trustee of the voting trusts.

         Derivative Action

         On September 13, 1996, certain Class A common stockholders filed a
         complaint in equity against six of the Corporation's directors and the
         estate of a former director in the Court of Common Pleas of York
         County, Pennsylvania. The suit also named the Corporation as a nominal
         defendant. The suit sought various forms of relief including, but not
         limited to, rescission of the board's April 28, 1995 approval of John
         A. Warehime's 1995 Employment Agreement and the board's February 10,
         1995 adjustment of directors' fees. (Since the filing of this lawsuit,
         John A. Warehime's 1995 Employment Agreement was amended. See Note 6 to
         Consolidated Financial Statements contained in the Form 10-K Report of
         the Corporation for the fiscal year ended June 1, 1997.) In addition,
         the plaintiffs sought costs and fees incident to bringing suit. On
         November 4, 1996, the complaint was amended to add additional
         plaintiffs. On June 24, 1997, the Court dismissed the amended complaint
         for failure to make a prior demand. An appeal has been filed from the
         Court's June 24, 1997 Order. On May 12, 1997, a written demand was
         received by the Corporation from the attorney for those Class A common
         stockholders containing similar allegations and the allegations raised
         by the Class A Common stockholders were investigated by a special
         independent committee of the Board of Directors and found to be without
         merit.


                                       18
<PAGE>   19
                          PART II -- OTHER INFORMATION
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

         1997 Warehime Family Litigation

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

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

         The Amended and Restated Articles create a Series C Convertible
         Preferred Stock and authorize the Board of Directors to issue up to
         10,000 shares of such stock to the trustees of the Corporation's 401(k)
         Savings Plan (or a similar employee benefit plan). At least a majority
         of the trustees of the Corporation's 401(k) Savings Plan (or similar
         employee benefit plan), who are appointed by the Board of Directors,
         must be "disinterested directors" of the Corporation. If the Class B
         shareholders named above cannot unanimously agree in writing on the
         composition of the Board of Directors or on other matters specified
         below, the Amended and Restated Articles permit each of the 10,000
         shares of Series C Convertible Preferred Stock the right to cast 35
         votes in the election of directors, and each share of Class A Common
         Stock would have one-tenth (1/10) of a vote per share, thereby enabling
         them to influence the ultimate result of the election by the Class B
         shares. The Amended and Restated Articles also permit the trustees and
         the Class A shareholders to similarly vote on proposals to remove
         directors, and in connection with any proposal (not previously approved
         by the Board of Directors) to further amend the Articles of
         Incorporation or By-laws or to effectuate a merger, consolidation,
         division, or


                                       19
<PAGE>   20
                          PART II -- OTHER INFORMATION
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

         sale of substantially all of the assets of the Corporation. The voting
         power of the Series C Convertible Preferred Stock would cease five (5)
         years after its issuance. Under the Amended and Restated Articles, each
         of the shares of Series C Convertible Preferred Stock is convertible
         into one share of Class A Common Stock and is not entitled to vote
         except in the event that the Class B shareholders previously named
         cannot agree in writing on the composition of the Board of Directors or
         on the important matters specified above.

         The Amended and Restated Articles also classified the terms of the
         Board of Directors commencing with the election at the 1997 annual
         shareholders meeting and permit directors to be elected for four year
         terms as permitted by Pennsylvania law.

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

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


                                       20
<PAGE>   21
                          PART II -- OTHER INFORMATION

                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

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

         Other Litigation

         On December 12, 1996, OSHA cited the Corporation with two violations of
         OSHA regulations arising out of accidents which occurred at its
         Clayton, Delaware plant. The proposed penalty for each violation is
         $70,000. On December 18, 1996, the Corporation filed its Notice of
         Contest, contesting both alleged violations and the proposed penalties.
         On September 22, 1997, pursuant to a final order of the U.S.
         Occupational Safety and Health Review Commission, the two violations
         were settled between the parties without admission of liability for
         $4,750 and $35,000, respectively.

         On March 24, 1997, OSHA cited the Corporation with twenty-two
         violations of OSHA regulations arising out of plant inspections which
         occurred at its Clayton, Delaware plant.

         The proposed penalty for said violations is $498,000. On April 11,
         1997, the Corporation filed its Notice of Contest, contesting all of
         the alleged violations and the proposed penalties. On September 22,
         1997, pursuant to a final order of the U.S. Occupational Safety and
         Health Review Commission, three of the twenty-two violations were
         settled between the parties without admission of liability for a total
         of $65,000. In January 1998, the Corporation and OSHA settled the
         remaining citations, by which the Corporation paid, without admission
         of liability, the sum of $95,000. The settlement was approved by OSHA
         on February 20, 1998.


                                       21
<PAGE>   22
                          PART II -- OTHER INFORMATION
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
--------------------------------------------------------------------------------

2-5      None

6        Exhibits and Reports on 8-K.

         (a)      Exhibits

                  11  -  Computation of Earnings Per Share
                  27  -  Financial Data Schedule

         (b)      Reports on Form 8-K:

                  No reports on Form 8-K have been filed during the period from
                  which this report is filed.


                                       22
<PAGE>   23
                                   SIGNATURES

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


Date:    April 14, 1998

                                        HANOVER FOODS CORPORATION

                                        BY       /s/ Gary T. Knisely
                                                 -------------------------------
                                                 Gary T. Knisely
                                                 Executive Vice President

                                        BY       /s/ Pietro Giraffa
                                                 -------------------------------
                                                 Pietro Giraffa, Controller


                                       23