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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q/A

AMENDMENT NO. 1



(Mark One)

|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2003



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 001-14255



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AURORA FOODS INC.

(Exact Name of Registrant as Specified in Its Charter)



|DELAWARE                                                       |  | 94-3303521                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)



11432 Lackland
Road, St. Louis, MO 63146

(Address of Principal Executive Office, Including Zip Code)



(314) 801-2300

(Registrants Telephone Number, Including Area Code)



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Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes  x    No ̈



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



Indicate the number of shares outstanding of each of the registrants classes of common stock as of the latest practicable date.



|                              |  | Shares outstanding as ofMay 6, 2003
|----------------------------- |  | -----------------------------------
|Common stock, $0.01 par value |  | 77,155,022                         



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Explanatory Note



This quarterly report on Form 10-Q/A (this Form 10-Q/A) is being filed to amend and restate in its entirety the
Companys quarterly report on Form 10-Q for the three months ended March 31, 2003, which was filed with the SEC on May 14, 2003 (the Original Form 10-Q). Items 1, 2 and 4 of Part I and Item 6 of Part II are the only items of the
Original Form 10-Q that are being amended by this Form 10-Q/A. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Form10-Q/A includes certain currently dated certifications.



On August 14, 2003, the Company announced that its financial results for the
years ended December 31, 2002 and 2001, and interim quarters, would be restated to reflect certain adjustments with regard to deferred taxes. The Company reevaluated its deferred tax accounting and determined that its valuation allowance for net
deferred tax assets, which had been recorded by the Company at December 31, 2002, should have been recorded at December 31, 2001, and that the Company should have provided for ongoing deferred tax liabilities subsequent to January 1, 2002 (the
effective date of the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (FAS 142)) for certain of the differences between the book and tax amortization of the Companys goodwill and indefinite
lived intangibles as defined by FAS 142. These non-cash adjustments of $3.6 million and $112.8 million for the three months ended March 31, 2003 and 2002, respectively, are the result of the Company having to establish a valuation allowance against
its deferred tax assets and the establishment of certain deferred tax liabilities, as it is no longer able to reasonably estimate the period of reversal for deferred tax liabilities related to certain goodwill and other indefinite lived intangible
assets as a result of the adoption of FAS 142. Due to cumulative losses as of December 31, 2001, the Company could not rely, for accounting purposes, on forecasts of future earnings as a means to realize its deferred tax assets. Accordingly, the
Company has determined that, pursuant to FAS 109, deferred tax valuation allowances are required on those deferred tax assets.



The foregoing adjustments do not affect previously recorded net sales, operating income (loss) or past or expected future cash tax obligations. While
provision for this deferred tax liability is required by existing accounting literature, these potential taxes may only become payable in the event that the Company sells a brand at some future date for an amount in excess of both the tax basis of
the brand at that time and the unexpired and unused net operating tax loss carryforwards (NOL). At December 31, 2002, the Companys NOL was in excess of $600 million and expires at various times through the year 2022, primarily after 2017. This
balance does not reflect any potential future limitations on utilization of the NOL resulting from transactions currently being contemplated by the Company, as described in Note 15Subsequent Events, to the Consolidated Financial Statements
included in this Form 10-Q/A, nor any tax planning techniques available to the Company.



The amendments contained herein reflect changes resulting from the foregoing adjustments with regard to deferred taxes. The Company has not updated the information contained herein for events and transactions
occurring subsequent to May 14, 2003, the filing date of the Original Form 10-Q, except to reflect the restatement of the Companys financial statements for the three months ended March 31, 2003 and 2002, and except as set forth under
Subsequent Events in the Managements Discussion and Analysis and in Note 15  Subsequent Events to the Consolidated Financial Statements included herein. Events may have taken place that might have been reflected in the
Original Form 10-Q if they had taken place prior to the date of the original filing. The Company recommends that this report be read in conjunction with the Companys reports filed subsequent to the original filing date.



In addition to the restatement adjustments, certain reclassifications have
been made in this Form 10-Q/A. In the consolidated statements of cash flows for the periods ended March 31, 2003 and 2002, the change in accounts receivable sold has been reclassified from a financing activity to an operating activity, and in the
consolidated statements of stockholders equity (deficit) for the period ended March 31, 2003, the cumulative preferred dividends have been reclassified from a charge to the accumulated deficit to a charge to additional paid-in capital.



PART I - FINANCIAL INFORMATION



ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS



See pages 3 through 20.



2



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AURORA FOODS INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands except per share amounts)



|                                                                                                                                                                                                                    |  | March 31, 2003             |           |   | December 31, 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | - | ----------------- | -
|                                                                                                                                                                                                                    |  | (unaudited)                |           |   |                   |  
|                                                                                                                                                                                                                    |  | (as restated - see Note 2) |          
|ASSETS                                                                                                                                                                                                              |  |                            |           |   |                   |  
|Current assets:                                                                                                                                                                                                     |  |                            |           |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                           |  | $                          | 625       |   |                   | $
|Accounts receivable, net of $1,325 and $412 allowance, respectively                                                                                                                                                 |  |                            | 40,868    |   |                   |  
|Inventories                                                                                                                                                                                                         |  |                            | 72,240    |   |                   |  
|Prepaid expenses and other assets                                                                                                                                                                                   |  |                            | 6,087     |   |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Total current assets                                                                                                                                                                                                |  |                            | 119,820   |   |                   |  
|Property, plant and equipment, net                                                                                                                                                                                  |  |                            | 167,832   |   |                   |  
|Goodwill and other intangible assets, net                                                                                                                                                                           |  |                            | 901,553   |   |                   |  
|Other assets                                                                                                                                                                                                        |  |                            | 32,873    |   |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Total assets                                                                                                                                                                                                        |  | $                          | 1,222,078 |   |                   | $
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                                                      |  |                            |           |   |                   |  
|Current liabilities:                                                                                                                                                                                                |  |                            |           |   |                   |  
|Current maturities of long-term debt                                                                                                                                                                                |  | $                          | 43,269    |   |                   | $
|Accounts payable                                                                                                                                                                                                    |  |                            | 30,066    |   |                   |  
|Accumulated preferred dividends payable                                                                                                                                                                             |  |                            | 3,297     |   |                   |  
|Accrued liabilities                                                                                                                                                                                                 |  |                            | 65,941    |   |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Total current liabilities                                                                                                                                                                                           |  |                            | 142,573   |   |                   |  
|Deferred tax liabilities                                                                                                                                                                                            |  |                            | 99,529    |   |                   |  
|Senior secured term debt                                                                                                                                                                                            |  |                            | 454,113   |   |                   |  
|Senior secured revolving debt facility                                                                                                                                                                              |  |                            | 148,100   |   |                   |  
|Senior unsecured debt from related parties                                                                                                                                                                          |  |                            | 22,102    |   |                   |  
|Senior subordinated notes                                                                                                                                                                                           |  |                            | 401,279   |   |                   |  
|Capital lease obligations                                                                                                                                                                                           |  |                            | 1,737     |   |                   |  
|Other liabilities                                                                                                                                                                                                   |  |                            | 14,968    |   |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Total liabilities                                                                                                                                                                                                   |  |                            | 1,284,401 |   |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Commitments and contingent liabilities                                                                                                                                                                              |  |                            |           |   |                   |  
|                                                                                                                                                                                                                    |  |                           
|Stockholders equity (deficit):                                                                                                                                                                                     |  |                            |           |   |                   |  
|Preferred stock, $0.01 par value; 25,000,000 shares authorized; 3,750,000 shares, Series A Convertible Cumulative, issued and
outstanding, with a liquidation preference value of $18,297 and $17,939, respectively |  |                            | 37        |   |                   |  
|Common stock, $0.01 par value; 250,000,000 shares authorized; 77,155,022 and 77,155,622 shares issued,
respectively                                                                                                 |  |                            | 772       |   |                   |  
|Paid-in capital                                                                                                                                                                                                     |  |                            | 681,476   |   |                   |  
|Accumulated deficit                                                                                                                                                                                                 |  |                            | (744,608  | ) |                   |  
|Accumulated other comprehensive loss                                                                                                                                                                                |  |                            |          |   |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Total stockholders equity (deficit)                                                                                                                                                                                |  |                            | (62,323   | ) |                   |  
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  
|Total liabilities and stockholders equity (deficit)                                                                                                                                                                |  | $                          | 1,222,078 |   |                   | $
|                                                                                                                                                                                                                    |  |                            |           |   |                   |  



See accompanying notes
to consolidated financial statements.



3



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AURORA FOODS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)



|                                                                                                                   |  | Three Months EndedMarch 31, |         
|------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | --------
|                                                                                                                   |  | 2003                        |         
|                                                                                                                   |  | (as restated - see Note 2)  |         
|Net sales                                                                                                          |  | $                           | 190,207 
|Cost of goods sold                                                                                                 |  |                             | (117,877
|                                                                                                                   |  |                             |         
|Gross profit                                                                                                       |  |                             | 72,330  
|                                                                                                                   |  |                             |         
|Brokerage, distribution and marketing expenses:                                                                    |  |                             |         
|Brokerage and distribution                                                                                         |  |                             | (26,757 
|Consumer marketing                                                                                                 |  |                             | (4,778  
|                                                                                                                   |  |                             |         
|Total brokerage, distribution and marketing expenses                                                               |  |                             | (31,535 
|Amortization of intangibles                                                                                        |  |                             | (3,299  
|Selling, general and administrative expenses                                                                       |  |                             | (15,690 
|                                                                                                                   |  |                             |         
|Total operating expenses                                                                                           |  |                             | (50,524 
|                                                                                                                   |  |                             |         
|Operating income                                                                                                   |  |                             | 21,806  
|Interest and financing expenses:                                                                                   |  |                             |         
|Interest expense, net                                                                                              |  |                             | (24,021 
|Adjustment to value of derivatives                                                                                 |  |                             | (893    
|Amortization of discount, premium and financing costs                                                              |  |                             | (1,199  
|                                                                                                                   |  |                             |         
|Total interest and financing expenses                                                                              |  |                             | (26,113 
|                                                                                                                   |  |                             |         
|Loss before income taxes and cumulative effect of change in accounting                                             |  |                             | (4,307  
|Income tax expense                                                                                                 |  |                             | (3,642  
|                                                                                                                   |  |                             |         
|Net loss before cumulative effect of change in accounting                                                          |  |                             | (7,949  
|Cumulative effect of change in accounting, net of tax of $21,446                                                   |  |                             |        
|                                                                                                                   |  |                             |         
|Net loss                                                                                                           |  |                             | (7,949  
|Preferred dividends                                                                                                |  |                             | (358    
|                                                                                                                   |  |                             |         
|Net loss available to common stockholders                                                                          |  | $                           | (8,307  
|                                                                                                                   |  |                             |         
|Basic and diluted loss per share available to common stockholders before cumulative effect of change in accounting |  | $                           | (0.11   
|Cumulative effect of change in accounting, net of tax                                                              |  |                             |        
|                                                                                                                   |  |                             |         
|Basic and diluted loss per share available to common stockholders                                                  |  | $                           | (0.11   
|                                                                                                                   |  |                             |         
|Weighted average number of shares outstanding                                                                      |  |                             | 77,155  
|                                                                                                                   |  |                             |         



See accompanying notes
to consolidated financial statements.



4



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AURORA FOODS INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT)

(in thousands)

(unaudited)



|                                                        |  | PreferredStock |    | CommonStock |   | AdditionalPaid-inCapital |  |   | AccumulatedDeficit |   |  | AccumulatedOtherComprehensiveLoss |          |   | Total |  
|------------------------------------------------------- |  | -------------- | -- | ----------- | - | ------------------------ |  | - | ------------------ | - |  | --------------------------------- | -------- | - | ----- | -
|Balance at December 31, 2002 (as restated - See Note 2) |  | $              | 37 |             | $ | 772                      |  | $ | 681,834            |   |  | $                                 | (736,659 | ) |       | $
|Net loss                                                |  |                |   |             |   |                         |  |   |                   |   |  |                                   | (7,949   | ) |       |  
|Cumulative preferred dividends                          |  |                |   |             |   |                         |  |   | (358               | ) |  |                                   |         |   |       |  
|Net deferred hedging adjustment                         |  |                |   |             |   |                         |  |   |                   |   |  |                                   |         |   |       |  
|                                                        |  |                |    |             |   |                          |  |   |                    |   |  |                                   |          |   |       |  
|Balance at March 31, 2003 (as restated - See Note 2)    |  | $              | 37 |             | $ | 772                      |  | $ | 681,476            |   |  | $                                 | (744,608 | ) |       | $
|                                                        |  |                |    |             |   |                          |  |   |                    |   |  |                                   |          |   |       |  



See accompanying notes
to consolidated financial statements.



5



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AURORA FOODS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                     |  | Three Months Ended March 31, |        
|-------------------------------------------------------------------- |  | ---------------------------- | -------
|                                                                     |  | 2003                         |        
|                                                                     |  | (as restated - see Note 2)   |        
|Cash flows from operations:                                          |  |                              |        
|Net loss                                                             |  | $                            | (7,949 
|Cumulative effect of change in accounting, net of tax                |  |                              |       
|Adjustments to reconcile net loss to cash from operating activities: |  |                              |        
|Depreciation                                                         |  |                              | 5,394  
|Amortization                                                         |  |                              | 4,498  
|Deferred income taxes                                                |  |                              | 3,642  
|Recognition of loss on derivatives                                   |  |                              | 893    
|Non-cash interest expense                                            |  |                              | 1,415  
|Other, net                                                           |  |                              | (15    
|Changes to operating assets and liabilities:                         |  |                              |        
|Accounts receivable                                                  |  |                              | (7,346 
|Accounts receivable sold                                             |  |                              | 1,421  
|Inventories                                                          |  |                              | 22,440 
|Prepaid expenses and other assets                                    |  |                              | (7,213 
|Accounts payable                                                     |  |                              | (15,530
|Accrued expenses                                                     |  |                              | 5,616  
|Other non-current liabilities                                        |  |                              | (1,309 
|                                                                     |  |                              |        
|Net cash provided by operations                                      |  |                              | 5,957  
|                                                                     |  |                              |        
|Cash flows from investing activities:                                |  |                              |        
|Asset additions                                                      |  |                              | (1,920 
|                                                                     |  |                              |        
|Net cash used for investment activities                              |  |                              | (1,920 
|                                                                     |  |                              |        
|Cash flows from financing activities:                                |  |                              |        
|Senior secured revolving (repayments) borrowings, net                |  |                              | (5,500 
|Repayment of borrowings                                              |  |                              | (10,788
|Other, net                                                           |  |                              | (28    
|                                                                     |  |                              |        
|Net cash (used for) provided by financing activities                 |  |                              | (16,316
|                                                                     |  |                              |        
|(Decrease) increase in cash and cash equivalents                     |  |                              | (12,279
|Cash and cash equivalents, beginning of period                       |  |                              | 12,904 
|                                                                     |  |                              |        
|Cash and cash equivalents, end of period                             |  | $                            | 625    
|                                                                     |  |                              |        



See accompanying notes
to consolidated financial statements.



6



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AURORA FOODS INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2003

(unaudited)



NOTE 1  BASIS OF PRESENTATION



Interim Financial Statements



The interim financial statements of the Company included herein have not been audited by independent accountants. The statements include all adjustments,
including normal recurring accruals, which management considers necessary for a fair presentation of the financial position and operating results of the Company for the periods presented. The statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of results to be expected for an entire year. Certain prior period amounts have been reclassified to conform to the
current periods presentation.



For further information,
reference should be made to the financial statements of the Company and notes thereto included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2002, however, certain amounts in the prior period financial statements
relating to income taxes have been restated, as discussed in Note 2  Restatement and the Form 10-K/A filed by the Company on the date hereof.



The Company



The Company has acquired premium, well recognized brands with strong brand equity that had been undermarketed, undermanaged, non-core businesses to their
previous corporate parents. The Companys objective has been to renew the growth of its brands by giving them the focus, strategic direction, product development, and dedicated sales and marketing resources they had lacked. Each of the
Companys brands is a leading brand with significant market share and strong consumer awareness. The Company primarily competes in the following three industry segments: retail, food service and other distribution channels. The Companys
products are sold nationwide, primarily through food brokers to supermarkets, wholesale and retail grocery accounts and other retail channels, as well as food service distribution channels (restaurant chains, business/industry and schools) and club
store, private label and military customers. Distribution is either directly to the customer or through independent wholesalers and distributors.



Divestitures



The Companys previously announced divestiture process is continuing with interested parties. Due to the uncertainty inherent in the divestiture
process, the Company cannot assure that it will be able to reach final agreements to sell one or more of its lines of business, nor can it guarantee that cash proceeds from the asset sales, if they were to occur, would be sufficient to meet all
required debt repayments. Also see Note 11.



As of March 31,
2003, the Company had incurred and deferred in other assets approximately $1.8 million of related legal, accounting and investment banking costs related to this process. Such costs will be included in the costs of a divestiture or expensed if no
divestiture is completed.



Liquidity



The Company continues to be highly leveraged. As of March 31, 2003, the
Company had outstanding, approximately $1.07 billion in aggregate principal indebtedness for borrowed money, and had approximately $27.0 million of cash and available borrowing capacity under its revolving credit and accounts receivable sales
facilities. The degree to which the Company is leveraged results in significant cash interest expense and principal repayment obligations and such interest expense may increase with respect to its senior secured credit facilities based on



7



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changes in prevailing interest rates. This leverage may, among other things, affect the ability of the Company to fund its operating and capital expenditure
requirements, obtain additional financing, or adjust to changing market conditions. Based on the Companys plans, management believes that cash generated from operations as well as cash available under its revolving credit agreement and its
receivable sales facility will be adequate in 2003 to fund its operating and capital expenditure requirements and its debt service obligations. Also see Note 15  Subsequent Events.



Accounting Changes



On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 (FAS 142), Goodwill and Other Intangible Assets.
FAS 142 generally requires that (1) recorded amounts of goodwill no longer be amortized on a prospective basis, (2) the amount of goodwill recorded on the balance sheet of the Company be evaluated annually for impairment using a two-step method, (3)
other identifiable intangible assets be categorized as to whether they have indefinite or finite lives, (4) intangibles having indefinite lives no longer be amortized on a prospective basis, and (5) the amount of intangibles having indefinite lives
on the balance sheet of the Company be evaluated annually for impairment using a one-step method. As a result, the Company recorded an impairment charge of $228.2 million, net of tax of $21.5 million, effective January 1, 2002.



Stock Option Plans



At March 31, 2003, the Company has two stock-based employee compensation plans. The Company accounts for those plans under
the recognition and measurement principles of Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and its related interpretations. No stock-based employee compensation costs are reflected in net
income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (FAS 123), Accounting for Stock Based Compensation, to stock-based employee compensation (in thousands, except per share).



|                                                                                                        |  | Three months endedMarch 31, |       
|------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                                                        |  | 2003                        |       
|                                                                                                        |  | (as restated - see Note 2)  |       
|Reported net loss available to common stockholders                                                      |  | $                           | (8,307
|Total stock-based employee compensation expense determined under fair value based method for all awards |  |                             | (686  
|                                                                                                        |  |                             |       
|Pro forma net loss available to common stockholders                                                     |  | $                           | (8,993
|                                                                                                        |  |                             |       
|Reported basic and diluted loss per share available to common stockholders                              |  | $                           | (0.11 
|                                                                                                        |  |                             |       
|Pro forma basic and diluted loss per share available to common stockholders                             |  | $                           | (0.12 
|                                                                                                        |  |                             |       



NOTE 2  RESTATEMENT



The Company reevaluated its deferred tax accounting in
August 2003, and determined that its valuation allowance for net deferred tax assets, which had been recorded by the Company at December 31, 2002, should have been recorded at December 31, 2001, and that the Company should have provided for ongoing
deferred tax liabilities subsequent to January 1, 2002 (the effective date of the adoption of FAS 142) for certain of the differences between the book and tax amortization of the Companys goodwill and indefinite lived intangibles as defined by
FAS 142. The impact on the statement of operations for the three months ended March 31, 2003 and 2002 was to increase income tax expense and the net loss by $3.6 million and $112.8 million, respectively. For the year ended December 31, 2002, the
impact was to decrease tax expense by $30.9 million, increase the expense recorded for the



8



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cumulative effect of the change in accounting principle by $60.8 million, all of which increased the net loss by $29.9 million. The impact of the adjustments
for the year ended December 31, 2001, was to increase income tax expense and net loss by $65.4 million. These adjustments do not affect previously recorded net sales, operating income (loss) or past or expected future cash tax obligations. While
provision for this deferred tax liability is required by existing accounting literature, these potential taxes may only become payable in the event that the Company sells a brand at some future date for an amount in excess of both the tax basis of
the brand at that time and the unexpired and unused net operating tax loss carryforwards (NOL). At December 31, 2002, the Companys NOL was in excess of $600 million and expires at various times through the year 2022, primarily after 2017. This
balance does not reflect any potential future limitations on utilization of the NOL resulting from transactions currently being contemplated by the Company, as described in Note 15  Subsequent Events nor any tax planning techniques available
to the Company. The effect of the restatement on the periods presented in this Form 10-Q/A is summarized below:



|                                                      |  | March 31, 2003        |           |   | December 31, 2002 |  
|----------------------------------------------------- |  | --------------------- | --------- | - | ----------------- | -
|                                                      |  | As previouslyreported |           |   | As restated       |  
|ASSETS                                                |  |                       |           |   |                   |  
|Current assets:                                       |  |                       |           |   |                   |  
|Cash and cash equivalents                             |  | $                     | 625       |   |                   | $
|Accounts receivable, net                              |  |                       | 40,868    |   |                   |  
|Inventories                                           |  |                       | 72,240    |   |                   |  
|Prepaid expenses and other assets                     |  |                       | 6,087     |   |                   |  
|                                                      |  |                       |           |   |                   |  
|Total current assets                                  |  |                       | 119,820   |   |                   |  
|Property, plant and equipment, net                    |  |                       | 167,832   |   |                   |  
|Goodwill and other intangible assets, net             |  |                       | 901,553   |   |                   |  
|Other assets                                          |  |                       | 32,321    |   |                   |  
|                                                      |  |                       |           |   |                   |  
|Total assets                                          |  | $                     | 1,221,526 |   |                   | $
|                                                      |  |                       |           |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)        |  |                       |           |   |                   |  
|                                                      |  |                       |           |  
|Current liabilities:                                  |  |                       |           |   |                   |  
|Current maturities of long term debt                  |  | $                     | 43,269    |   |                   | $
|Accounts payable                                      |  |                       | 30,066    |   |                   |  
|Accumulated preferred dividends payable               |  |                       | 3,297     |   |                   |  
|Accrued liabilities                                   |  |                       | 65,941    |   |                   |  
|                                                      |  |                       |           |   |                   |  
|Total current liabilities                             |  |                       | 142,573   |   |                   |  
|Deferred tax liabilities                              |  |                       |          |   |                   |  
|Other liabilities                                     |  |                       | 14,968    |   |                   |  
|Long term debt                                        |  |                       | 1,005,229 |   |                   |  
|Long term debt from related parties                   |  |                       | 22,102    |   |                   |  
|                                                      |  |                       |           |   |                   |  
|Total liabilities                                     |  |                       | 1,184,872 |   |                   |  
|Stockholders equity (deficit):                       |  |                       |           |   |                   |  
|Preferred stock                                       |  |                       | 37        |   |                   |  
|Common stock                                          |  |                       | 772       |   |                   |  
|Paid-in capital                                       |  |                       | 684,773   |   |                   |  
|Accumulated other comprehensive loss                  |  |                       |          |   |                   |  
|Accumulated deficit                                   |  |                       | (648,928  | ) |                   |  
|                                                      |  |                       |           |   |                   |  
|Total stockholders equity (deficit)                  |  |                       | 36,654    |   |                   |  
|                                                      |  |                       |           |   |                   |  
|Total liabilities and stockholders equity (deficit ) |  | $                     | 1,221,526 |   |                   | $
|                                                      |  |                       |           |   |                   |  



9



---

|                                                                                                             |  | Three Months Ended March 31, |       
|------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------
|                                                                                                             |  | 2003                         |       
|                                                                                                             |  | As previouslyreported        |       
|Loss before income taxes and cumulative effect of change in accounting                                       |  | $                            | (4,307
|Income tax benefit (expense)                                                                                 |  |                              |      
|                                                                                                             |  |                              |       
|Net loss before cumulative effect of accounting change                                                       |  |                              | (4,307
|Cumulative effect of change in accounting, net of tax of $81,237 and $21,466, as restated                    |  |                              |      
|                                                                                                             |  |                              |       
|Net loss                                                                                                     |  |                              | (4,307
|Preferred dividends                                                                                          |  |                              | (358  
|                                                                                                             |  |                              |       
|Net loss available to common stockholders                                                                    |  | $                            | (4,665
|                                                                                                             |  |                              |       
|Basic and diluted net loss available to common stockholders before cumulative effect of change in accounting |  | $                            | (0.06 
|Cumulative effect of change of accounting                                                                    |  |                              |      
|                                                                                                             |  |                              |       
|Basic and diluted net loss per share available to common stockholders                                        |  | $                            | (0.06 
|                                                                                                             |  |                              |       



NOTE 3  ACCOUNTS RECEIVABLE



Accounts receivable at March 31, 2003 and December 31,
2002 are stated net of the proceeds received from the sale of accounts receivable pursuant to the Companys accounts receivable sales facility in the amounts of $16.3 million and $14.8 million, respectively. The Companys accounts
receivable sales facility currently ends on September 30, 2003.



NOTE 4
 INVENTORIES



Inventories net of reserves of $5.4
million and $9.9 million, respectively, consist of the following (in thousands):



|                             |  | March 31, 2003 |        | December 31, 2002
|---------------------------- |  | -------------- | ------ | -----------------
|                             |  | (unaudited)    |        |                  
|Raw materials                |  | $              | 8,827  |                  
|Work in process              |  |                | 223    |                  
|Finished goods               |  |                | 56,111 |                  
|Packaging and other supplies |  |                | 7,079  |                  
|                             |  |                |        |                  
|                             |  | $              | 72,240 |                  
|                             |  |                |        |                  



NOTE 5  EARNINGS PER SHARE
AND NUMBER OF COMMON SHARES OUTSTANDING



Basic earnings
per share represents the income available to common stockholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted earnings per share represents the income available to common stockholders
divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period. Potentially dilutive common shares consist
of stock options (the dilutive impact is calculated by applying the treasury stock method), the outstanding Convertible Cumulative Preferred Stock and common stock warrants. The Company has had net losses available to common stockholders
in each period, therefore the impact of these potentially dilutive common shares has been antidilutive and excluded from the



10



---

determination of diluted loss per share. The net loss available to common stockholders and the weighted average shares outstanding contained in the
statements of operations were used to compute both the basic and diluted loss per share.



Common shares outstanding



The number of shares of common stock outstanding and the transactions during the three month period ended March 31, 2003 were as follows:



|                                               |  | Common Stock Outstanding |  
|---------------------------------------------- |  | ------------------------ | -
|Shares at December 31, 2002                    |  | 77,155,622               |  
|Forfeiture of unvested restricted stock awards |  | (600                     | )
|                                               |  |                          |  
|Shares at March 31, 2003                       |  | 77,155,022               |  
|                                               |  |                          |  



NOTE 6  SEGMENT INFORMATION



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



The Companys definition of segment
contribution differs from operating income as presented in its primary financial statements and a reconciliation of the segmented and consolidated results is provided in the following table. Interest expense, financing costs and income tax amounts
are not allocated to the operating segments.



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



Results for the first quarter of 2002 include adjustments of $20.1 million
principally from changes in estimates. These adjustments consisted primarily of net sales adjustments of $17.7 million, principally for trade promotion costs, along with a charge to cost of sales of approximately $1 million for unresolved inventory
disputes and $1.1 million charged to selling, general and administrative costs, principally associated with executive severance.



11



---

The following table presents a summary of operations by segment (in thousands):



|                                               |  | Three months endedMarch 31, |        
|---------------------------------------------- |  | --------------------------- | -------
|                                               |  | 2003                        |        
|                                               |  | (unaudited)                 |        
|Net sales:                                     |  |                             |        
|Retail                                         |  | $                           | 146,428
|Foodservice                                    |  |                             | 14,314 
|Other                                          |  |                             | 29,465 
|                                               |  |                             |        
|Total                                          |  | $                           | 190,207
|                                               |  |                             |        
|Segment contribution and operating income:     |  |                             |        
|Retail                                         |  | $                           | 49,280 
|Foodservice                                    |  |                             | 5,545  
|Other                                          |  |                             | 7,295  
|                                               |  |                             |        
|Segment contribution                           |  |                             | 62,120 
|Fixed manufacturing costs                      |  |                             | (21,325
|Amortization of goodwill and other intangibles |  |                             | (3,299 
|Selling, general and administrative expenses   |  |                             | (15,690
|                                               |  |                             |        
|Operating income                               |  | $                           | 21,806 
|                                               |  |                             |        



NOTE 7  LITIGATION AND
CONTINGENCIES



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



The Company is also subject to litigation in the ordinary course of
business. In the opinion of management, the ultimate outcome of any existing litigation would not have a material adverse effect on the Companys financial condition, results of operations or cash flows.



NOTE 8  PREFERRED STOCK AND PREFERRED DIVIDENDS



Dividends on the outstanding Series A Convertible Cumulative Preferred Stock
are being accrued each period, but are not being paid in cash. Preferred dividends may be paid in additional preferred stock until such time as the restrictions on payment of dividends contained in the senior secured debt agreements are no longer in
effect, at which time the Company will determine whether future dividends will be paid in cash or additional shares of preferred stock.



NOTE 9  DERIVATIVE INSTRUMENTS



During the three month period ended March 31, 2003, the Company recorded additional expense of approximately $0.9 million associated with the change in
value of its interest rate collar agreement which the Company has determined is not an effective hedge under FAS 133. The change in value of this instrument was primarily due to lower expected future LIBOR rates used to compute the net liability to
the Company. This agreement expires in November 2004. At March 31, 2003, the Companys net liability reflected in the accompanying balance sheet associated with this interest rate derivative was approximately $13.1 million.



12



---

The Companys fixed to floating interest rate swap, agreement with a notional principal amount of
$150.0 million, expired on March 17, 2003, when the Company made a final payment to the counterparty of $1.7 million.



NOTE 10  OTHER COMPREHENSIVE INCOME (LOSS)



The components of total comprehensive income (loss) for the three month periods ended March 31, 2003 and 2002 were as follows (in thousands):



|                                                                              |  | Three months endedMarch 31, |       
|----------------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                              |  | 2003                        |       
|                                                                              |  | (as restated - see Note 2)  |       
|                                                                              |  | (unaudited)                 |       
|Net loss                                                                      |  | $                           | (7,949
|                                                                              |  |                             |       
|Other comprehensive income, net of tax:                                       |  |                             |       
|Income deferred on qualifying cash flow hedges                                |  |                             |      
|Reclassification adjustment for cash flow hedging losses realized in net loss |  |                             | 56    
|                                                                              |  |                             |       
|Total other comprehensive income                                              |  |                             | 56    
|                                                                              |  |                             |       
|Total comprehensive loss                                                      |  | $                           | (7,893
|                                                                              |  |                             |       



NOTE 11  DEBT



On February 21, 2003, the Companys amended and restated senior
credit agreement dated November 1, 1999 (as amended, supplemented, or otherwise modified from time to time, the Senior Secured Debt Facility) was amended, the terms of which are more fully described in the Companys annual report on
Form 10-K for the year ended December 31, 2002. Among other provisions, the amendment:



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



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



| |  |  | provided that any excess leverage or asset sale fees that become payable will be paid at the earlier of the time of sale of assets from cash proceeds, or on June 30, 2005.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If the Company fails to meet the asset proceeds
requirements above, the amounts payable to the senior lenders for the excess leverage and asset sale fees could total as much as approximately $36.0 million; $12.0 million for each of the three missed requirements. At March 31, 2003 the Company had
not received any net cash proceeds from the sale of assets. Since the Company has not yet met the requirements that would allow the Company to avoid paying these fees, the potential fees are being accrued over the remaining life of the senior
secured debt as additional interest expense. In the quarter ended March 31, 2003 the Company recorded interest expense and a non-current liability related to the fees of $1.4 million. If the Company does not meet the requirements to avoid payment of
the fees, the interest expense and liability recorded in 2003 will be approximately $10.9 million and the interest expense and additional liability to be recorded in 2004, 2005 and 2006 will be $12.0 million, $9.2 million and $3.5



13



---

million, respectively. At the time the Company meets any or all of the asset sale requirements, interest expense will be adjusted prospectively to reflect
the reduction in the fees to be paid.



At March 31, 2003, the
Company was in compliance with the provisions of the senior secured debt agreement and its other debt agreements.



NOTE 12  INCOME TAXES



No net income tax benefits associated with the pretax losses have been recorded. The Company records deferred tax liabilities for the differences between
the book and tax bases of certain goodwill and indefinite lived intangible assets. See Note 2  Restatement.



NOTE 13  PLANT CLOSURE RESERVES



In May 2002, the Company announced its intention to close its West Seneca, New York, Lenders bagel manufacturing facility. As a result of this
decision, production at West Seneca ceased on May 31, 2002, with the formal closing on July 2, 2002. The closing resulted in the elimination of all 204 jobs. Impacted employees received severance pay in accordance with the Companys policies
and union agreements. The Company recorded charges of $32.4 million during 2002 in connection with the shutdown of the West Seneca facility. The non-cash portion of the charges was approximately $28.2 million and is attributable to the write-down of
property, plant and equipment, with the remaining $4.2 million of cash costs related to severance and other employee related costs of $3.0 million, and other costs necessary to maintain and dispose of the facility of $1.2 million. During the quarter
ended March 31, 2003, the Company paid $0.1 million in severance and related costs and $0.5 million of other costs related to closing and sale of the facility. No adjustments were made to recorded liabilities and the remaining liability of $0.1
million is expected to be paid in the second quarter of 2003.



On October 30, 2002, the Company announced its intention to close its Yuba City, California facility where the Company manufactured specialty seafood and Chefs Choice products. As a result of this decision, production at the Yuba City
facility ceased in early 2003. The closing resulted in the elimination of all 155 jobs. Impacted employees received severance pay in accordance with the Companys policies. As a result the Company recorded a charge of $6.7 million during the
fourth quarter of 2002. The non-cash portion of the charge of approximately $4.9 million was attributable to the write-down of property, plant and equipment. The remaining $1.8 million of cash costs was related to severance and other employee
related costs of $0.9 million and other costs necessary to maintain and dispose of the facility of $0.9 million. During the quarter ended March 31, 2003, the Company paid $0.5 million in severance and other employee related costs and $0.1 million in
facility related costs. No adjustments were made to recorded liabilities and a majority of the remaining liability of $1.2 million is expected to be paid during 2003.



NOTE 14  CONDENSED FINANCIAL STATEMENTS OF SUBSIDIARY



Sea Coast is the Companys only subsidiary and is a guarantor of all of the Companys indebtedness, except the
senior unsecured promissory notes. As a result, the condensed financial statements as of March 31, 2003 and December 31, 2002, and for the three months ended March 31, 2003 and 2002, are included below:



14



---

SEA COAST FOODS, INC.

BALANCE SHEET

(dollars in thousands)



|                                                                    |  | March 31, 2003 |         |   | December 31, 2002         |  
|------------------------------------------------------------------- |  | -------------- | ------- | - | ------------------------- | -
|                                                                    |  | (unaudited)    |         |   | (As restated -See Note 2) |  
|ASSETS                                                              |  |                |         |   |                           |  
|Current assets:                                                     |  |                |         |   |                           |  
|Accounts receivable (net of allowance of $46 and $34, respectively) |  | $              | 1,979   |   |                           | $
|Inventories                                                         |  |                | 8,540   |   |                           |  
|Prepaid assets                                                      |  |                | 18      |   |                           |  
|                                                                    |  |                |         |   |                           |  
|Total current assets                                                |  |                | 10,537  |   |                           |  
|Goodwill and intangible assets, net                                 |  |                | 7,333   |   |                           |  
|Other assets                                                        |  |                | 171     |   |                           |  
|                                                                    |  |                |         |   |                           |  
|Total assets                                                        |  | $              | 18,041  |   |                           | $
|                                                                    |  |                |         |   |                           |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                      |  |                |         |   |                           |  
|Current liabilities:                                                |  |                |         |   |                           |  
|Accounts payable                                                    |  | $              | 224     |   |                           | $
|Accrued expenses                                                    |  |                | 623     |   |                           |  
|                                                                    |  |                |         |   |                           |  
|Total current liabilities                                           |  |                | 847     |   |                           |  
|Due to parent                                                       |  |                | 69,616  |   |                           |  
|                                                                    |  |                |         |   |                           |  
|Total liabilities                                                   |  |                | 70,463  |   |                           |  
|                                                                    |  |                |         |   |                           |  
|Stockholders equity (deficit):                                     |  |                |         |   |                           |  
|Common stock                                                        |  |                | 1       |   |                           |  
|Paid-in capital                                                     |  |                | 200     |   |                           |  
|Accumulated deficit                                                 |  |                | (52,623 | ) |                           |  
|                                                                    |  |                |         |   |                           |  
|Total stockholders equity (deficit)                                |  |                | (52,422 | ) |                           |  
|                                                                    |  |                |         |   |                           |  
|Total liabilities and stockholders equity (deficit)                |  | $              | 18,041  |   |                           | $
|                                                                    |  |                |         |   |                           |  



15



---

SEA COAST FOODS, INC.

STATEMENT OF OPERATIONS

(dollars in thousands)



|                                                          |  | Three Months Ended March 31, |       
|--------------------------------------------------------- |  | ---------------------------- | ------
|                                                          |  | 2003                         |       
|                                                          |  | (unaudited)                  |       
|Net sales                                                 |  | $                            | 9,236 
|Cost of goods sold                                        |  |                              | (5,913
|                                                          |  |                              |       
|Gross profit                                              |  |                              | 3,323 
|                                                          |  |                              |       
|Brokerage, distribution and marketing expenses:           |  |                              |       
|Brokerage and distribution                                |  |                              | (1,314
|Consumer marketing                                        |  |                              | (145  
|                                                          |  |                              |       
|Total brokerage, distribution and marketing expenses      |  |                              | (1,459
|Amortization of goodwill and other intangibles            |  |                              | (702  
|Selling, general and administrative expenses              |  |                              | (572  
|                                                          |  |                              |       
|Total operating expenses                                  |  |                              | (2,733
|                                                          |  |                              |       
|Operating income                                          |  |                              | 590   
|Interest expense, net                                     |  |                              | (1,445
|                                                          |  |                              |       
|Loss before income taxes                                  |  |                              | (855  
|Income tax expense                                        |  |                              |      
|                                                          |  |                              |       
|Net loss before cumulative effect of change in accounting |  |                              | (855  
|Cumulative effect of change in accounting                 |  |                              |      
|                                                          |  |                              |       
|Net loss                                                  |  | $                            | (855  
|                                                          |  |                              |       



16



---

SEA COAST FOODS, INC.

STATEMENT OF CASH FLOWS

(dollars in thousands)



|                                                                        |  | Three Months EndedMarch 31, |       
|----------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                        |  | 2003                        |       
|                                                                        |  | (unaudited)                 |       
|Cash flows from operating activities:                                   |  |                             |       
|Net loss                                                                |  | $                           | (855  
|Cumulative effect of change in accounting                               |  |                             |      
|Adjustments to reconcile net loss to cash used in operating activities: |  |                             |       
|Depreciation and amortization                                           |  |                             | 744   
|Change in assets and liabilities:                                       |  |                             |       
|Accounts receivable                                                     |  |                             | (134  
|Inventories                                                             |  |                             | 5,224 
|Prepaid expenses and other assets                                       |  |                             | (18   
|Accounts payable                                                        |  |                             | 18    
|Accrued expenses                                                        |  |                             | 180   
|                                                                        |  |                             |       
|Net cash (used in) provided by operating activities                     |  |                             | 5,159 
|                                                                        |  |                             |       
|Cash flow used in investing activities:                                 |  |                             |       
|Asset additions                                                         |  |                             | (38   
|                                                                        |  |                             |       
|Net cash used for investing activities                                  |  |                             | (38   
|                                                                        |  |                             |       
|Cash flows from financing activities:                                   |  |                             |       
|Intercompany borrowings (repayments)                                    |  |                             | (5,121
|                                                                        |  |                             |       
|Net cash provided from financing activities                             |  |                             | (5,121
|                                                                        |  |                             |       
|Net change in cash                                                      |  |                             |      
|Beginning cash and cash equivalents                                     |  |                             |      
|                                                                        |  |                             |       
|Ending cash and cash equivalents                                        |  | $                           |      
|                                                                        |  |                             |       



NOTE 15  SUBSEQUENT EVENTS



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



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



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



17



---

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



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



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



| |  | The Companys existing accounts receivable sales facility would be terminated.
|- |  | ------------------------------------------------------------------------------



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



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



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



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



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



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



The Company will determine
whether to continue with its previously announced divestiture process after the Restructuring is complete. As of June 30, 2003, the Company had incurred and deferred in other assets approximately $2.3 million



18



---

of related legal, accounting and investment banking costs related to the divesture process. Such costs have been expensed during the second quarter of 2003
due to the uncertainty that a divesture transaction will be completed.



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



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



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



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



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



On July 2, 2003, the New York Stock Exchange (NYSE) announced that it was suspending the listing of the Companys common stock as a result of the Companys announcement regarding the
Restructuring. On August 15,



19



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2003, the SEC granted the application of the NYSE for removal. The Companys common stock is now quoted on the OTC Bulletin Board under the ticker
symbol AURF.



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



20



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ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Reference is made to the Notes to Consolidated Financial Statements and
Managements Discussion and Analysis of Financial Condition and Results of Operations presented in the Companys Annual Report on Form 10-K and subsequent Form 10-K/A for the year ended December 31, 2002.



Restatements



The Company reevaluated its deferred tax accounting and determined that its valuation allowance for net deferred tax assets,
which had been recorded by the Company at December 31, 2002, should have been recorded at December 31, 2001, and that the Company should have provided for ongoing deferred tax liabilities subsequent to January 1, 2002 (the effective date of the
adoption of FAS 142) for certain of the differences between the book and tax amortization of the Companys goodwill and indefinite lived intangibles as defined by FAS 142. The impact of the adjustments for the year ended December 31, 2001, was
to increase income tax expense and net loss by $65.4 million. For the year ended December 31, 2002, the impact was to decrease tax expense by $30.9 million, increase the expense recorded for the cumulative effect of the change in accounting
principle by $60.8 million, all of which increased the net loss by $29.9 million. In addition, the impact on the statement of operations for the three months ended March 31, 2003, was to increase income tax expense and the net loss by $3.6 million.
These adjustments do not affect previously recorded net sales, operating income (loss) or past or expected future cash tax obligations. While provision for this deferred tax liability is required by existing accounting literature, these potential
taxes may only become payable in the event that the Company sells a brand at some future date for an amount in excess of both the tax basis of the brand at that time and the unexpired and unused net operating tax loss carryforwards (NOL). At
December 31, 2002, the Companys NOL was in excess of $600 million and expires at various times through the year 2022, primarily after 2017. This balance does not reflect any potential future limitations on utilization of the NOL resulting from
transactions currently being contemplated by the Company, as described in Note 15  Subsequent Events, to the Consolidated Financial Statements included in this Form 10-Q/A, nor any tax planning techniques available to the Company.



Results of Operations



The following discussion and analysis of the Companys financial
condition and results of operations should be read in conjunction with the historical financial information included in the Consolidated Financial Statements and Notes to the Consolidated Financial Statements in Item 1 included herein. Unless
otherwise noted, periods (2003 and 2002) in this discussion refer to the Companys three-month period ended on March 31.



The Company manages its business in three operating segments: retail, foodservice and other channels. The separate financial information of each segment
is presented consistently with the manner in which results are evaluated by the chief operating decision-maker in deciding how to allocate resources and in assessing performance.



Results for the first quarter of 2002 include adjustments of $20.1 million principally from changes in estimates. These
adjustments consisted primarily of net sales adjustments of $17.7 million, principally for trade promotion costs, along with a charge to cost of sales of approximately $1 million for unresolved inventory disputes and $1.1 million charged to selling,
general and administrative costs, principally associated with executive severance.



Net sales decreased $3.9 million or 2.0% to $190.2 million in 2003 from $194.1 million in 2002. The 2002 net sales included $17.7 million in net sales adjustments, principally for retail trade promotion costs
which were a result of updated evaluations of the Companys reserves and assumptions for such costs. Total unit volume was down 9.3% during the 2003 quarter versus the prior year. In the retail segment, volume declined 14.5% from the prior
year, primarily in seafood, baking and syrup. Seafood and baking sales were lower primarily as a result of the timing of the Easter holiday as compared to the prior year and due to increased competitive activity in baking. Syrup sales declined due
to the impact of a transition to an everyday low price strategy. Net sales in other distribution channels increased $4.0 million principally as a result of new distribution of certain seafood and bagel products.



Gross profit increased $12.6 million to $72.3 million in 2003 from
$59.7 million in the prior year. Gross profit in 2003 as compared to 2002 was impacted by the decline in net sales and the net sales adjustments described above. Overall raw material cost changes were not significant, as increases in certain
agricultural commodities were offset by declines in seafood costs. Manufacturing efficiencies and cost savings from plant closures and the move of



21



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syrup production from contract manufacturers to a Company owned facility in 2002 were partially offset by increased inventory reserves and fixed overhead
costs expensed as a result of the significant inventory decline.



Brokerage and distribution expenses decreased slightly from the prior year as higher per unit freight and warehousing costs, due to higher fuel costs and reduced inventory levels, were offset by reduced brokerage costs, principally
due to the lower sales.



Consumer marketing expenses
declined $4.9 million to $4.8 million in 2003 as compared to $9.7 million in 2002. This decrease was due largely to reduced spending on seafood due to the timing of the Easter holiday and the fact that prior year spending had been higher to support
the introduction of new products. In addition, coupon related costs were reduced for syrup products, following the Companys change in pricing strategy, and baking related advertising costs were eliminated.



Amortization expense increased $0.9 million, primarily due to
amortization of the Chefs Choice trademark, which was not being amortized during 2002. During the fourth quarter of 2002, the Company determined that this trademark had a finite life and it is being amortized over a three year period.



Selling, general and administrative expenses decreased
to $15.7 million in 2003 from $17.3 million in 2002 primarily due to costs of executive severance in the prior year and reduction in costs for product development and market research and share data, offset in part by a $0.9 million expense recorded
to increase the allowance for doubtful accounts.



Interest
and financing expenses. Total interest and financing expenses increased to $26.1 million in 2003 from $24.2 million last year primarily as a result of $1.4 million of interest expense associated with potential additional senior debt fees. See
Note 11 to the Consolidated Financial Statements included in this Form 10-Q/A. A slight decrease in the net market adjustment associated with the Companys derivative instrument, which was not effective as a hedge as determined by FAS 133, was
offset by a slight increase in the amortization of discount, premium and financing costs.



Income tax expensedecreased $100.9 million from $104.5 million to $3.6 million. The decrease is primarily due to a non-cash tax adjustment to increase the existing valuation allowance against the deferred tax
assets, as it was considered no longer reasonable to estimate the period of reversal, if any, for deferred tax liabilities related to certain goodwill and indefinite lived intangible assets as a result of the adoption of FAS 142. No income tax
benefit was recorded during 2003. The Company records deferred tax liabilities for differences between certain goodwill and indefinite lived assets.



Liquidity and Capital Resources



For the three months ended March 31, 2003, the Company generated $6.0 million from operations versus $0.3 million in the prior year. The cash provided by
operations was about flat as a $16.9 million improvement in the loss before income taxes and cumulative effect of change in accounting was offset by an $11.3 million change in cash used for working capital purposes, from $9.4 million provided by
working capital in 2002 to a use for working capital of $1.9 million in 2003.



Cash used for asset additions declined to $1.9 million in 2003 from $5.5 million in the first quarter of 2002. There were no major capital expenditures in 2003, while 2002 included expenditures related to the move of
syrup production to the Companys St. Elmo, Illinois facility.



During the quarter ended March 31, 2003, the Company repaid a total of $16.3 million of borrowings under its revolving credit facility and for scheduled senior secured debt repayments.



The Company continues to be highly leveraged. At May 6, 2003, the Company had
outstanding approximately $1.07 billion in aggregate principal indebtedness for borrowed money and had approximately $32.0 million of cash and available borrowing capacity under its revolving credit and accounts receivable sales facilities. The
degree to which the Company is leveraged results in significant cash interest expense and principal repayment



22



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obligations and such interest expense may increase with respect to its senior secured credit facilities based on changes in prevailing interest rates. This
leverage may, among other things, affect the ability of the Company to fund its operating and capital expenditure requirements, obtain additional financing, or adjust to changing market conditions. Based on the Companys plans, management
believes that cash generated from operations as well as cash available under its revolving credit agreement and its receivable sales facility will be adequate in 2003 to fund its operating and capital expenditure requirements and its debt service
obligations. Also see Note 15 to the Consolidated Financial Statements included in this Form 10-Q/A.



Interest Rate Agreements



At March 31, 2003, the Company was party to an interest rate collar agreement. On March 17, 2003, the Companys fixed to floating interest rate swap agreement with a notional principal amount of $150.0 million expired. Risks associated
with the interest rate collar agreement includes those associated with changes in the market value and interest rates. The Company has determined that the interest rate collar agreement is not effective as a hedge under FAS 133 and changes in its
fair value are recognized in current period earnings. The Company is generally a beneficiary of lower interest rates. To reduce the risk associated with rising interest rates, the Company has entered into swap and collar agreements, which have the
effect of fixing the interest rates or limiting this risk on a portion of its variable rate debt. Conversely, when interest rates decline, the Company benefits, but on a reduced basis on the amounts subject to these interest rate agreements. As the
Companys debt financing portfolio has not changed significantly since December 31, 2002, the risks associated with fluctuations in market interest rates have not changed significantly in 2003 except to the extent that $150 million of variable
rate debt is no longer subject to the interest rate swap which expired on March 17, 2003.



Plant Closure Reserves



In May 2002, the Company announced its intention to close its West Seneca, New York, Lenders bagel manufacturing facility. As a result of this decision, production at West Seneca ceased on May 31, 2002, with the formal closing on July
2, 2002. The closing resulted in the elimination of all 204 jobs. The Company anticipates annual savings of $8.0 million related to closing this facility. Impacted employees received severance pay in accordance with the Companys policies and
union agreements. The Company recorded charges of $32.4 million during 2002 in connection with the shutdown of the West Seneca facility. The non-cash portion of the charges was approximately $28.2 million and is attributable to the write-down of
property, plant and equipment, with the remaining $4.2 million of cash costs related to severance and other employee related costs of $3.0 million, and other costs necessary to maintain and dispose of the facility of $1.2 million. During the quarter
ended March 31, 2003, the Company paid $0.1 million in severance and related costs and $0.5 million of other costs related to closing and sale of the facility. No adjustments were made to recorded liabilities and the remaining liability of $0.1
million is expected to be paid in the second quarter of 2003.



On October 30, 2002, the Company announced its intention to close its Yuba City, California facility where the Company manufactured specialty seafood and Chefs Choice products. As a result of this decision, production at the Yuba City
facility ceased in early 2003. The closing resulted in the elimination of all 155 jobs. The Company anticipates annual savings of $4.0 million related to closing this facility. Impacted employees received severance pay in accordance with the
Companys policies. As a result the Company recorded a charge of $6.7 million during the fourth quarter of 2002. The non-cash portion of the charge of approximately $4.9 million was attributable to the write-down of property, plant and
equipment. The remaining $1.8 million of cash costs was related to severance and other employee related costs of $0.9 million and other costs necessary to maintain and dispose of the facility of $0.9 million. During the quarter ended March 31, 2003,
the Company paid $0.5 million in severance and other employee related costs and $0.1 million in facility related costs. No adjustments were made to recorded liabilities and a majority of the remaining liability of $1.2 million is expected to be paid
during 2003.



Subsequent Events



In April 2003, the Company announced that it had restructured its corporate
organization and reduced its corporate staff by approximately 75 positions through terminations and the elimination of open positions. Affected employees will receive severance pay in accordance with the Companys policies. In addition,
retention bonuses



23



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will be awarded to certain key employees who remain with the Company through June 1, 2004. The Company expects the restructuring and staff reductions to
result in a charge of approximately $7.0 million over future quarters and estimates that the cash impact in 2003 will be approximately $5.0 million.



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



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



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



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



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



| |  | The Companys existing accounts receivable sales facility would be terminated.
|- |  | ------------------------------------------------------------------------------



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



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



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



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



24



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



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



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



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



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



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



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



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



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



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



Forward-Looking Statements



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



26



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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



The Company has entered into interest rate swap and collar agreements for
non-trading purposes. At March 31, 2003, the Company was party to a single interest rate collar agreement, as its interest rate swap agreement with a notional principal amount of $150.0 million expired on March 17, 2003. Risks associated with the
collar agreement include those associated with changes in the market value and interest rates. The Company is generally a beneficiary of lower interest rates. To reduce the risk associated with rising interest rates, the Company entered into swap
and collar agreements, which have the effect of fixing the interest rates or limiting this risk on a portion of its variable rate debt. Conversely, when interest rates decline, the Company benefits, but on a reduced basis on the amounts subject to
these interest rate agreements. As the Companys debt financing portfolio has not changed significantly since December 31, 2002, the risks associated with fluctuations in market interest rates have not changed significantly in 2003 except to
the extent that $150 million of variable rate debt is no longer subject to the interest rate swap which expired on March 17, 2003.



ITEM 4: CONTROLS AND PROCEDURES



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



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



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PART IIOTHER INFORMATION



ITEM 1: LEGAL PROCEEDINGS



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



The Company is also subject to litigation in the ordinary course of business. In the opinion of management, the ultimate outcome of any existing
litigation would not have a material adverse effect on the Companys financial condition, results of operations or cash flows.



ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS



None



ITEM 3: DEFAULTS UPON SENIOR SECURITIES



None



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



None



ITEM 5: OTHER INFORMATION



None



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ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibits:



See Exhibit Index.



(b) Reports on Form 8-K during the quarter ended March 31, 2003:



|February 27, 2003 |  | Press release issued by Aurora Foods Inc. on February 26, 2003 announcing its financial results for the fourth quarter and year ended December 31, 2002.
|----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized.





AURORA FOODS INC.By:

/s/ Dale F. MorrisonDale F. MorrisonChairman of the Board andInterim Chief Executive Officer(Principal Executive Officer)By:

/s/ William R. McManamanWilliam R. McManamanExecutive Vice President andChief Financial Officer(Principal Financial Officer andPrincipal Accounting Officer)




Date: September
16, 2003



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EXHIBIT INDEX



|ExhibitNumber |  | Exhibit                                                                                                                                                     
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|              | 
|31.1          |  | Certification of Chairman of the Board and Interim Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
|              | 
|31.2          |  | Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.     
|              | 
|32            |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                     



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