<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-Q

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

           [ x ] Quarterly Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934
                      For the period ended March 31, 1999

                                       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 0-23429
                                                -------

                            BROUGHTON FOODS COMPANY
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
                         Ohio                              31-4135-025
      ------------------------------------------       -------------------
           <S>                                         <C>
           (State or other jurisdiction of               (I.R.S. Employer
            incorporation or organization)             Identification No.)

                210 N. Seventh Street
                     P.O. Box 656
                    Marietta, Ohio                            45750
      ------------------------------------------       -------------------
                (Address of principal                       (Zip Code)
                  executive offices)
</TABLE>
                                  (740) 373-4121
                --------------------------------------------------
               (Registrant's telephone number including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
   required to be filed by Section 13 or 15(d) of the Securities Exchange Act
   of 1934 during the preceding 12 months (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 the number of shares outstanding of each of the issuer's classes of
    common stock, as of the latest practicable date: 5,774,335 shares of the
                  Company's Common Stock ($1.00 par value) were
                        outstanding as of April 30, 1999.


<PAGE>   2


TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

   Item 1.  Financial Statements:
          Consolidated Balance Sheets
           December 31, 1998 and March 31, 1999
          Consolidated Statements of Operations
           Three Months Ended March 31, 1998 and 1999
          Consolidated Statements of Cash Flows
           Three Months Ended March 31, 1998 and 1999
          Notes to Consolidated Financial Statements

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

   Item 3.  Quantitative and Qualitative Disclosures About Market Risk

PART II. OTHER INFORMATION

   Item 1.  Legal Proceedings

   Item 6.  Exhibits and Reports on Form 8-K

SIGNATURE

All other schedules and compliance information called for by the instructions to
Form 10-Q have been omitted since the required information is not present or not
present in amounts sufficient to require submission.


                                       2
<PAGE>   3

PART I.  FINANCIAL INFORMATION

    ITEM 1. FINANCIAL STATEMENTS


                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
ASSETS

                                                     DECEMBER 31,        MARCH 31,
                                                         1998              1999
                                                     ------------      ------------
<S>                                                  <C>               <C>
Current assets:
     Cash and cash equivalents                       $ 4,278,208       $ 5,610,681
     Accounts receivable, less allowance for
     doubtful accounts of $652,000 and
     $721,000 at December 31, 1998
      and March 31, 1999, respectively                18,437,190        17,330,234
     Inventories                                       5,982,717         6,721,399
     Prepaid expenses                                  1,249,943           980,555
     Refundable income taxes                             577,037           731,619
     Deferred income taxes                               240,617           240,617
                                                     -----------       -----------
        Total current assets                          30,765,712        31,615,105
                                                     -----------       -----------

Property, plant and equipment, at cost:
     Buildings and land improvements                  11,051,586        11,066,416
     Machinery and equipment                          24,718,705        25,174,021
     Leasehold improvements                              198,760           198,760
     Assets under construction                         1,986,190         2,057,487
                                                     -----------       -----------
                                                      37,955,241        38,496,684
        Less accumulated depreciation and
          amortization                                11,477,024        12,145,789
                                                     -----------       -----------
                                                      26,478,217        26,350,895
     Land                                              2,818,418         2,818,418
                                                     -----------       -----------
                                                      29,296,635        29,169,313
                                                     -----------       -----------

Intangible assets, net of accumulated
 amortization of $332,770 and $439,283
 at December 31, 1998 and
 March 31, 1999, respectively                         13,739,121        13,632,608
Other assets                                             770,026           765,632
Prepaid pension costs                                    604,361           604,361
                                                     -----------       -----------
                                                      15,113,508        15,002,601
                                                     -----------       -----------

         Total assets                                $75,175,855       $75,787,019
                                                     ===========       ===========
</TABLE>


                  The accompanying notes are an integral part
                   of the consolidated financial statements.


                                       3
<PAGE>   4

                   BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                    DECEMBER 31,    MARCH 31,
                                                        1998          1999
                                                   ------------  --------------
<S>                                                 <C>              <C>
Current liabilities:
     Accounts payable                               $10,627,996      $11,919,144
     Accrued expenses and other                       2,681,903        2,837,815
     Current installments on  debt                      554,420       16,075,792
                                                     ----------       ----------
        Total current liabilities                    13,864,319       30,832,751
                                                     ----------       ----------

Term Debt, net of current installments               19,363,574        3,787,317
Deferred income taxes                                 5,933,973        5,933,973
Other                                                 1,967,476        1,933,168
Commitments and contingencies
Shareholders' equity:
     Common stock, $1 par value; 10,000,000           6,314,575        6,314,575
       shares authorized, 6,314,575 shares
       issued at December 31, 1998
       and March 31, 1999
     Additional paid-in capital                      20,482,702       20,482,702
     Retained earnings                                7,756,960        7,010,257
                                                     ----------       ----------
                                                     34,554,237       33,807,534
     Less 540,240 shares of common stock in
       treasury, at cost                                507,724          507,724
                                                     ----------       ----------

Total shareholders' equity                           34,046,513       33,299,810
                                                     ----------       ----------

Total liabilities and shareholders'
equity                                              $75,175,855      $75,787,019
                                                     ==========       ==========
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       4
<PAGE>   5

                   BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED MARCH 31,
                                                  1998                 1999
                                            ---------------       --------------
<S>                                          <C>                  <C>
Net sales                                     $ 34,751,119         $ 49,704,027
Cost of sales                                   27,130,177           41,250,214
                                              ------------         ------------
     Gross profit                                7,620,942            8,453,813
Operating costs and expenses:
   Selling and distribution                      5,747,480            7,643,927
   General and administrative
    expenses                                       887,895            1,761,875
                                              ------------         ------------
                                                 6,635,375            9,405,802
                                              ------------         ------------

Income (loss) from operations                      985,567            (951,989)
Other income (expense):
   Other income, net                                13,964               14,172
   Interest income                                 145,517               78,327
   Interest expense                                (1,626)            (364,611)
                                              ------------         ------------
                                                   157,855            (272,112)
                                              ------------         ------------

Income (loss) before income taxes                1,143,422          (1,224,101)
Total income tax expense (benefit)                 443,027            (477,398)
                                              ------------         ------------
Net income (loss)                             $    700,395           ($746,703)
                                              ============         ============

Earnings (loss) per common share:
   Basic                                      $       0.12              ($0.13)
                                              ============         ============
   Diluted                                    $       0.12              ($0.13)
                                              ============         ============
Shares used in computing earnings
 (loss) per common share:

   Basic                                         5,774,335            5,774,335
                                              ============         ============
   Diluted                                       5,774,335            5,774,335
                                              ============         ============
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       5
<PAGE>   6


                   BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED MARCH 31,
                                                            1998              1999
                                                         ----------        ----------
<S>                                                     <C>                <C>
Cash flows from operating activities:
     Net income (loss)                                   $   700,395       ($746,703)
     Adjustments to reconcile net income
        (loss) to net cash provided by
        operating activities:
        Depreciation and amortization                        434,416          851,644
        Bad debt expense                                      12,000           73,004
        Gain on disposal of property, plant
        and equipment                                        (7,500)          (2,099)
        Change in deferred gain on sale of
          fixed assets                                       (9,099)          (9,096)
        Change in assets and liabilities:
           Accounts receivable                               534,291        1,033,952
           Inventories                                     (238,644)        (738,682)
           Prepaid expenses                                 (39,909)          269,388
           Refundable income taxes                           230,775        (154,582)
           Other assets                                    (140,938)         (32,594)
           Prepaid and accrued pension costs               (217,291)              ---
           Accounts payable                              (1,002,935)        1,291,148
           Accrued expenses and other                       (43,466)          155,912
           Income taxes payable                              180,252
           Other long-term liabilities                           ---         (25,212)
                                                         -----------       ----------
               Total adjustments                           (308,048)        2,712,783
                                                         -----------       ----------
     Net cash provided by operating activities               392,347        1,966,080
                                                         -----------       ----------

Cash flows from investing activities:
     Proceeds from disposal of property,
       plant and equipment                                   383,500           16,686
     Proceeds from termination of officer's
       life insurance policy                                 197,775              ---
     Purchases of property, plant and
       equipment                                         (1,114,903)        (595,408)
                                                         -----------       ----------
     Net cash used in investing activities                 (533,628)        (578,722)
                                                         -----------       ----------

Cash flows from financing activities:
     Payments on term debt                                   (5,311)         (54,885)
     Dividends paid                                        (288,717)              ---
                                                         -----------       ----------
     Net cash used in financing activities                 (294,028)         (54,885)
                                                         -----------       ----------
     Net (decrease) increase in cash and
       cash equivalents                                    (435,309)        1,332,473
</TABLE>

CONTINUED,


                                       6
<PAGE>   7

                   BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED MARCH 31,
                                                             1998         1999
                                                           ----------   ----------
<S>                                                        <C>          <C>
     Cash and cash equivalents,
       beginning of period                                  9,633,184    4,278,208
                                                           ----------   ----------
     Cash and cash equivalents,
       end of period                                       $9,197,875   $5,610,681
                                                           ==========   ==========

Supplemental disclosure of cash flow information:
     Cash paid during the period for:
         Interest                                              $1,643     $364,611
                                                           ==========   ==========
         Income taxes                                             ---       $9,831
                                                           ==========   ==========
Supplemental disclosure of noncash investing
  and financing activities:
     The Company declared a $.05 per share
       dividend on February 25, 1998 to
       shareholders of record on March 27,
       1998, payable on April 9, 1998.                       $288,717
                                                           ==========

     The Company recorded a deferred gain
       in February 1998 as a result of a
       sale leaseback of certain equipment.                  $181,958
                                                           ==========
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       7
<PAGE>   8

                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.  BUSINESS OPERATIONS AND BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Interim
results are not necessarily indicative of results for a full year.

A summary of the Company's significant accounting policies is presented on
pages F-9 to F-11 of its 1998 Annual Report on Form 10-K. Users of financial
information produced for interim periods are encouraged to refer to the
footnotes contained in the Annual Report on Form 10-K when reviewing interim
financial results. There has been no material change in the accounting policies
followed by the Company during 1999, except as described below.

In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the unaudited consolidated financial
position, results of operations and cash flows of Broughton Foods Company ("the
Company" or "Broughton") and subsidiaries for interim periods.

Effective January 1, 1999, the Company adopted Statement of Position ("SOP")
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". The SOP requires that certain external costs and internal
payroll and payroll-related costs be capitalized during the application
development and implementation stages of a software development project and
amortized over the software's useful life. Additionally, the Company adopted
SOP 98-5, "Reporting on the Costs of Start-up Activities." The SOP requires
that entities expense start-up costs and organization costs as they are
incurred. The adoption of these pronouncements did not have a material impact
on the Company's presentation of financial statements for the period ended
March 31, 1999.

2.  INVENTORIES

Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out ("FIFO") method using standard costs which approximate
actual. The major components of inventory at December 31, 1998 and March 31,
1999 were as follows:

<TABLE>
<CAPTION>
                                       DECEMBER 31,          MARCH 31,
                                          1998                  1999
                                     ---------------      ----------------
<S>                                  <C>                  <C>
Raw products and finished goods          $3,458,923            $4,088,074
Ingredients                                 679,726               772,522
Warehouse, packaging supplies and
other                                     1,844,068             1,860,803
                                     ---------------      ----------------
                                         $5,982,717            $6,721,399
                                     ===============      ================
</TABLE>


3.  DEBT

The Company has an uncollateralized line of credit of $4.0 million with a Bank.
Interest on this line of credit is .25 percentage points under the highest
prime rate as published by the Wall Street Journal.

On March 30, 1998, the Company finalized an agreement with a Bank to provide
for two additional credit facilities, in addition to the Company's $4.0 million
line of credit agreement with another bank. The first facility provides for a
$15.0 million line of credit with interest at either the Bank's prime rate or
LIBOR plus a margin. The borrowings under this agreement are uncollateralized
and the Company pays a commitment fee on unused borrowings ranging

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<PAGE>   9

from .20% to .35 %. The principal is payable in full on March 30, 2000, with
monthly interest-only payments. The second facility is a $5.0 million
uncollateralized capital expenditure line of credit at either the Bank's prime
rate or LIBOR plus a margin. The borrowings under this commitment provide for
monthly interest-only payments for one year, converting to term debt to be paid
over seven years.

On February 23, 1999 the Company amended its credit agreement regarding the
$15.0 million line of credit and $5.0 million uncollateralized capital
expenditure line of credit. As a result of this amendent, certain terms and
covenants in the credit agreement have been modified.

The most restrictive covenants under these agreements are the maintenance of a
maximum funded debt to Earnings Before Interest Expense, Taxes, Depreciation
and Amortization (EBITDA) ratio, a minimum tangible net worth, a minimum
Earnings Before Interest and Taxes (EBIT) to interest expense ratio and a
cashflow coverage ratio.

The Company had $19,336,230 outstanding under its revolving credit facilities
at March 31, 1999.

4.  SEGMENT INFORMATION:

In 1998, the Company adopted SFAS No. 131. Segment data includes intersegment
revenues with the elimination of intercompany profit. In addition, the Company
does not allocate interest or corporate general and administrative expenses to
the specific operating segment. Thus, the Company evaluates the performance of
its segment based on an operating profit basis prior to charges for corporate
general and administrative expenses and interest.

The Company is organized primarily on an operating division basis based on
historical operations, product sales and geographic location. The Company
operates through four divisions--The Dairy Division, Foods Division, Southern
Belle Division and London's Farm Dairy Division. All of the Company's four
divisions are primarily engaged in the manufacture and distribution of dairy
based products. Therefore, the Company reports under one segment referred to as
"Dairy." (The Dairy Division is an operating division of the Dairy segment.)
The Dairy Division, with its raw milk processing plant based in Marietta, Ohio
manufactures and distributes a full line of fresh milk and related products and
also distributes brand name dairy and non-dairy foods. The Foods Division, with
an ultra high temperature ("UHT") plant based in Charleston, West Virginia,
processes a variety of extended life products, including half-and-half, sour
cream, dips, dressings, aerosol toppings, whipped cream, coffee cream, table
cream, non-dairy creamers and whipped toppings. The Southern Belle Division
with its raw milk processing plant in Somerset, Kentucky manufactures and
distributes a full line of fresh milk and other products and also distributes
dairy and non-dairy foods. The London's Farm Dairy Division, with its raw milk
processing plant in Port Huron, Michigan manufactures and distributes a full
line of fresh milk and other products, while its Burton, Michigan plant
produces a variety of ice cream products.

The table below presents information about reported segments for the three
months ended March 31, 1998 and 1999, respectively:

       <TABLE>
       <CAPTION>
                                  Three Months Ended March
                                     31, (in thousands)

       Dairy                           1998            1999
       -----                           ----            ----
<S>                                  <C>             <C>
       Sales                         $37,467         $52,134
       Operating income (loss)        $1,131          ($578)
       </TABLE>

A reconciliation of total segment sales to total consolidated sales and of
total segment operating income (loss) to total consolidated income (loss)
before income taxes, for the three months ended March 31, 1998 and 1999,
respectively is as follows:

                                       9
<PAGE>   10

        <TABLE>
        <CAPTION>

                                             Three Months Ended March
                                                31, (in thousands)

        SALES:                                    1998            1999
                                                  ----            ----

<S>                                              <C>             <C>
        Total segment sales                      $37,467         $52,134
        Elimination of intersegment
          revenue                                (2,716)         (2,430)
                                             ------------     -----------

        Consolidated Sales                       $34,751         $49,704
                                             ============     ===========

        OPERATING INCOME (LOSS):

        Total operating income (loss)
         from reportable segments                 $1,131          ($578)
        Corporate General and
         administrative                            (145)           (373)
        Interest                                     (2)           (365)
        Other income                                 159              92
                                             ------------     -----------

        Consolidated income (loss) before
          income taxes                            $1,143         ($1,224)
                                             ============     ===========
</TABLE>


5.  COMMITMENTS AND CONTINGENCIES

The former Southern Belle Dairy Company received a Notice of Proposed Debarment
dated June 1, 1994, from the USDA, in which the USDA proposed to debar the
former Southern Belle Dairy Company from engaging in contracts and other
transactions involving all federal agency procurement and nonprocurement
programs for up to three years as a result of previously settled antitrust
violations by such entity. On April 18, 1995, the former Southern Belle Dairy
Company entered into a Compliance Agreement in Lieu of Debarment with the USDA
(the "Southern Belle Compliance Agreement"). This agreement was for a
three-year period and required the former Southern Belle Dairy Company to
establish and maintain a compliance program which included, among other things,
the establishment of an ethics committee and formal ethics and education
training for all employees. Although the Southern Belle Compliance Agreement
expired on April 18, 1998, the Southern Belle Division continued to operate
under its terms until the debarment notification described below.

By notice dated December 31, 1997, the USDA suspended the Southern Belle
Division from federal procurement and nonprocurement programs and proposed to
debar such division for a period that by regulation would not exceed three
years, based on alleged breaches of the Southern Belle Compliance Agreement by
the former Southern Belle Dairy Company, prior to its merger with the Company
in early December 1997. The Company challenged the USDA action in an
administrative proceeding. The USDA had proposed that the Southern Belle
Division and the Company enter into a new Compliance Agreement in Lieu of
Debarment as a means of resolving this matter and had indicated that Southern
Belle could be subject to debarment and the Company subject to suspension and
debarment if they failed to enter into such proposed agreement.

On September 23, 1998, the USDA agreed to the Company's request that it
separate the suspension and debarment proceedings against the Southern Belle
Division and such similar threatened proceedings against the Company, and
advised that it would pursue suspension and proposed debarment against the
Southern Belle Division and the Company, based on the Company's settlement of
civil antitrust litigation independent of each other. Accordingly, the USDA
withdrew its offer to the Company of the newly proposed Compliance Agreement in
Lieu of Debarment. The USDA advised that a decision on Southern Belle's
suspension and debarment would be rendered by October 15, 1998, unless good
cause exists to extend the determination period. Since that date, the USDA
extended that decision in successive 45-day periods.

On April 7, 1999, the USDA advised that it had debarred the Southern Belle
Division of Broughton from federal procurement and non-procurement programs for
a period of three years, effective from December 31, 1997. During

                                       10
<PAGE>   11

the period of debarment, Southern Belle is excluded generally from engaging in
contracts and other transactions involving federal procurement and federal
non-procurement programs governmentwide, unless an agency head or other
authorized designee grants an exception with respect to a particular
transaction.

Broughton is currently considering its options with respect to the Southern
Belle Division debarment, including whether or not to appeal the debarment
decision.

The USDA also notified Broughton on April 7, 1999, by notice dated and
effective March 31, 1999, that the USDA had suspended Broughton, and is
proposing to debar Broughton from engaging in contracts and other transactions
involving federal non-procurement transactions, with the effect that Broughton
is excluded generally from engaging in contracts and other transactions
involving both federal non-procurement and federal procurement programs
governmentwide during the period of the suspension. The proposed debarment of
Broughton, if ordered, would remain in effect for a period commensurate with
the USDA's determination of the seriousness of the alleged cause, generally by
regulation not to exceed three years. The suspension and proposed debarment is
based upon Broughton's delivery to several schools of half-pint containers of
fluid milk which allegedly failed to contain the minimum required quantities of
fluid milk, and the alleged failure of such containers of milk to meet net
content labeling or contract requirements.

Broughton intends to oppose the suspension and proposed debarment of Broughton
through the administrative process. Broughton's management is unable at this
time to predict the outcome of the USDA proceedings or their effect on
Broughton's financial position and results of operations. However, neither the
Southern Belle Division debarment nor the Broughton suspension preclude the
performance of contracts existing at the time of debarment or suspension.
Further, under existing USDA regulations, neither debarment nor suspension
preclude the Southern Belle Division or Broughton from obtaining and performing
contracts awarded under federal non-procurement programs administered by the
USDA Food and Nutrition Service and valued under $100,000 unless an exception
is granted by the agency.

Management is unable at this time to predict the outcome of this USDA
proceeding; however, if unfavorably resolved, this USDA proceeding could have a
material adverse effect on the Company's financial position and results of
operations.

The Company is involved in or subject to certain other legal proceedings,
including with respect to regulatory matters, which arise in the ordinary
course of the Company's business. Although the Company cannot predict the
outcomes of these legal proceedings, the Company's management does not believe
that these actions will have a material adverse effect on the Company's
financial position, results of operations or liquidity.

6.  PROPOSED MERGER WITH SUIZA FOODS CORPORATION

On September 11, 1998, the Company announced that it had executed an Agreement
and Plan of Merger with Suiza Foods Corporation ("Suiza") a Delaware
corporation and Suiza Foods Acquisition Corp. ("Merger Sub"), an Ohio
corporation and wholly owned subsidiary of Suiza dated September 10, 1998 (the
"Agreement"), providing for the merger of Broughton with Merger Sub, with each
Broughton share being exchanged for the sum of Nineteen Dollars ($19.00) cash.
Consummation of the merger was conditioned upon satisfaction of all conditions
contained in the Agreement. If the merger is consummated, Broughton will become
a wholly-owned subsidiary of Suiza. On September 10, 1998, 5,774,335 shares of
Broughton common stock were issued and outstanding. The Agreement was approved
by Broughton shareholders at a special meeting held on December 4, 1998.

On January 18, 1999 Broughton announced that Suiza and Broughton had executed
an Amendment No. 1 to the Merger Agreement.

That Amendment No. 1 to the Merger Agreement, dated January 18, 1999, extended
from December 31, 1998 to April 15, 1999 the date on which either party could
terminate the Merger Agreement (as amended) if the Merger had not been
completed on such date. A related Stock Purchase Agreement dated January 18,
1999 between Suiza, the Company and the Inside Shareholders provided that at
completion of the Merger, those Inside Shareholders would

                                       11
<PAGE>   12

sell Two Million (2,000,000) Company Shares to Suiza, and would receive, in
lieu of the $19.00 per Share cash merger consideration, the cash sum of $10.00
per share, without interest, plus the right to receive up to an additional
$9.00 per share if certain earnings and performance goals were met between the
date of the Merger and March 31, 2000. The Inside Shareholders, all of whom are
either Company directors or related parties, proposed this arrangement in
response to Suiza's concern with Broughton's financial performance since the
September 11, 1998 announcement of the proposed Merger, in an effort to ensure
performance and consummation of the Merger Agreement by Suiza.

Subject to satisfaction of all conditions contained in the Agreement and Plan
of Merger, as amended, and the Stock Purchase Agreement, the parties agreed to
complete the merger on March 31, 1999.

On March 18, 1999 the United States Department of Justice Antitrust Division
("DOJ") filed a Motion for Temporary Restraining Order ("TRO"), Motion for
Preliminary Injunction and a Complaint in the United States District Court for
the Eastern District of Kentucky, London Division, seeking to enjoin the
proposed acquisition of the Company by Suiza. The DOJ alleged that competition
in the production and sale of school milk in certain South Central Kentucky
school districts would be substantially lessened as a result of the proposed
transaction. On March 18, 1999 the court entered a TRO enjoining Suiza, the
Company and all persons acting on their behalf from consummating, directly or
indirectly, the proposed Merger, or implementing any other plan or agreement by
which Suiza and the Company, or any part of them would combine under common
ownership or control.

On April 28, 1999, the Company and Suiza reached an agreement with the DOJ to
settle the civil antitrust lawsuit brought by the DOJ against the Company and
Suiza. The proposed settlement will allow Suiza to complete the proposed merger
with Broughton, conditioned upon Suiza's agreement to later sell the business
conducted at Broughton's Southern Belle Dairy based in Pulaski County,
Kentucky. The proposed settlement is subject to approval by the U.S. District
Judge for the Eastern District of Kentucky London Division where the DOJ's
antitrust lawsuit is currently pending. Before finally approving the
settlement, the court must submit the proposed settlement for public comment
for a period of 60 days, but the parties may close the merger prior to final
approval of the settlement. Pursuant to the proposed settlement, Suiza will
agree to sell the Southern Belle Dairy to a buyer acceptable to the DOJ within
six months after the settlement agreement is filed with the court, or five days
after entry by the court of the final judgment, whichever is later.

As a result of the requirements of the proposed settlement agreement, Suiza and
Broughton have entered into an amendment to the September 1998 Agreement and
Plan of Merger between Suiza and Broughton. The amendment lowers the
consideration to be received by all Broughton stockholders (other than five
directors of Broughton and certain of their affiliates who are parties to a
separate stock purchase agreement with Suiza) from $19 cash per share to $16.50
cash per share. Pursuant to an amendment to the stock purchase agreement with
the five Broughton directors and certain of their affiliates, the five
Broughton directors and their affiliates will sell an aggregate of 2 million
Broughton shares to Suiza for $11.25 per share, plus the contingent right to
receive $1.25 per share if certain conditions are satisfied. The amendment to
the Agreement and Plan of Merger is subject to the approval of Broughton's
stockholders.

Assuming all conditions to closing are satisfied, Suiza and Broughton
anticipate closing the proposed acquisition on May 31, 1999. Either party may
terminate the amended merger agreement if the transaction is not closed by June
30, 1999.


                                       12
<PAGE>   13

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

OVERVIEW

The Company is a leading manufacturer and distributor of fresh milk and related
dairy products in Ohio, West Virginia, Kentucky, Tennessee, Michigan and parts
of the eastern United States. The Company has grown primarily through internal
growth and strategic acquisitions. Through such growth, the Company has
realized regional economies of scale and operational efficiencies. The Company
operates through four major divisions -- the Dairy Division based in Marietta,
Ohio; the Foods Division based in Charleston, West Virginia; the Southern Belle
Division based in Somerset, Kentucky; and the London's Farm Division based in
Port Huron, Michigan.

The Company completed an acquisition of Southern Belle Dairy Company of
Somerset, Kentucky in December 1997. As a result of the Southern Belle
acquisition, the Company has taken and expects to take a number of actions
intended to integrate the operations of Southern Belle with the Company's
existing operations and to reduce certain product costs and overall, selling,
general and administrative expenses. The Company has successfully implemented
synergy savings involving the utilization of butterfat, a raw material required
in the production of many items within the Foods Division, including heavy
whipping cream, table cream, aerosol whipped toppings and half-and-half.
Southern Belle does not manufacture non-fluid dairy products and, therefore,
does not utilize butterfat, a by-product of its fluid milk manufacturing
processes and an integral raw material required in the production of non-fluid
dairy products. Accordingly, as a result of the Southern Belle acquisition, the
Company has received cost savings from less dependence on the "spot" market for
its butterfat requirements. Southern Belle is also supplying the Dairy Division
with orange juice and buttermilk, items which the Dairy Division previously
manufactured. The Dairy Division is currently successfully manufacturing for
the Southern Belle Division both plastic pints and soft-serve mixes. Southern
Belle previously purchased soft-serve mixes from an outside supplier and had
not initiated a plastic pint product within its market segment. In addition to
the products that have been successfully integrated into the Company,
additional cost savings are anticipated to be achieved through the further
integration of ice cream, sour cream and cottage cheese production, all
products that Southern Belle has historically purchased from outside suppliers
and which will now be supplied by the Company. The Company's Foods Division is
currently manufacturing for the Southern Belle Division a full complement of
UHT products including heavy whipping cream, half-and-half and non-dairy
creamers. The Company has been successful in integrating many of the cost
saving synergies identified in the Southern Belle acquisition, however, there
can be no assurance that the Company will be successful in integrating the
remaining operations of Southern Belle and realizing additional cost savings in
the future.

The Company completed the acquisition of London's Farm Dairy on May 29, 1998.
As a result of the London's acquisition, the Company had an increase in sales,
cost of sales and operating expenses for the second, third and fourth quarters
of 1998 and the first quarter 1999. As a result of the acquisition of London's,
the Company expected to take a number of actions intended to integrate the
operations of London's with the Company's existing operations and to reduce
overall selling, general and administrative expenses. London's previously
purchased certain products from outside suppliers, including UHT products,
cottage cheese and plastic pints, each of which can be supplied by the Company
at an anticipated savings. The acquisition is expected to provide the Company
with an additional source of butterfat for the Company's Foods Division during
certain peak periods of the year. London's operates an ice cream plant in
Burton, Michigan, and it is anticipated that additional internal ice cream
production needs will be converted to this plant for the Company as a whole,
thereby better utilizing internal equipment and production capacity. There can
be no assurance that the Company will be successful in integrating the
operations of London's and realizing the anticipated cost savings. Among the
factors that might affect the Company's ability to integrate the operations of
London's and realize anticipated cost savings include the Company's ability to
distribute London's products to other Company divisions in a cost-effective
manner, London's ability to realize an increase in plastic pint sales and the
Company's ability to develop uniform standards for ice cream production across
its plants.

The Company began discussions with Suiza in May of 1998 regarding a possible
business combination and as a result of the proposed merger with Suiza Foods,
announced on September 11, 1998, the Company has been delayed in integrating
the operations of London's and completing the integration of Southern Belle.

                                       13
<PAGE>   14

Approximately $1.7 million of the purchase price for the Southern Belle
acquisition has been recorded by the Company as goodwill. Goodwill will be
amortized as a non-cash charge to the income statement over a period of 40
years. The impact of this amortization will result in a charge to earnings of
approximately $43,400 annually. Approximately $11.9 million of the purchase
price of the London's acquisition has been recorded by the Company as
intangible assets to be amortized as a non-cash charge to the income statement
over periods ranging from 23 to 40 years. The impact of this amortization will
result in a charge to earnings of approximately $311,000 annually for the first
23 years of charges.

The Company's net sales consist primarily of sales of products derived from raw
milk, including fluid milk, frozen desserts, cultured products and UHT
products. Revenues are recognized by the Company when the Company's products
are received by the customer. The Company's revenues are subject to quarterly
fluctuations caused by seasonal variations in the demand for milk and dairy
products.

The Company's cost of sales consists primarily of raw materials, including milk
and items procured from outside parties, such as packaging material, and
manufacturing costs, including direct labor and overhead. Significant factors
affecting the Company's cost of sales include the costs of raw materials and
labor and benefit rates.

The Company's operating costs consist of selling, distribution, general and
administrative components. These costs include salaries for sales and marketing
personnel, certain administrative personnel and executive salaries as well as
salary and related costs for transportation and distribution.

The former Southern Belle Dairy Company received a Notice of Proposed Debarment
dated June 1, 1994, from the USDA, in which the USDA proposed to debar the
former Southern Belle Dairy Company from engaging in contracts and other
transactions involving all federal agency procurement and nonprocurement
programs for up to three years as a result of previously settled antitrust
violations by such entity. On April 18, 1995, the former Southern Belle Dairy
Company entered into a Compliance Agreement in Lieu of Debarment with the USDA
(the "Southern Belle Compliance Agreement"). This agreement was for a
three-year period and required the former Southern Belle Dairy Company to
establish and maintain a compliance program which included, among other things,
the establishment of an ethics committee and formal ethics and education
training for all employees. Although the Southern Belle Compliance Agreement
expired on April 18, 1998, the Southern Belle Division continued to operate
under its terms until the debarment notification described below.

By notice dated December 31, 1997, the USDA suspended the Southern Belle
Division from federal procurement and nonprocurement programs and proposed to
debar such division for a period that by regulation would not exceed three
years, based on alleged breaches of the Southern Belle Compliance Agreement by
the former Southern Belle Dairy Company, prior to its merger with the Company
in early December 1997. The Company challenged the USDA action in an
administrative proceeding. The USDA had proposed that the Southern Belle
Division and the Company enter into a new Compliance Agreement in Lieu of
Debarment as a means of resolving this matter and had indicated that Southern
Belle could be subject to debarment and the Company subject to suspension and
debarment if they failed to enter into such proposed agreement.

On September 23, 1998, the USDA agreed to the Company's request that it
separate the suspension and debarment proceedings against the Southern Belle
Division and such similar threatened proceedings against the Company, and
advised that it would pursue suspension and proposed debarment against the
Southern Belle Division and the Company, based on the Company's settlement of
civil antitrust litigation independent of each other. Accordingly, the USDA
withdrew its offer to the Company of the newly proposed Compliance Agreement in
Lieu of Debarment. The USDA advised that a decision on Southern Belle's
suspension and debarment would be rendered by October 15, 1998, unless good
cause exists to extend the determination period. Since that date, the USDA
extended that decision in successive 45-day periods.

On April 7, 1999, the USDA advised that it had debarred the Southern Belle
Division of Broughton from federal procurement and non-procurement programs for
a period of three years, effective from December 31, 1997. During the period of
debarment, Southern Belle is excluded generally from engaging in contracts and
other transactions

                                       14
<PAGE>   15

involving federal procurement and federal non-procurement programs
governmentwide, unless an agency head or other authorized designee grants an
exception with respect to a particular transaction.

Broughton is currently considering its options with respect to the Southern
Belle Division debarment, including whether or not to appeal the debarment
decision.

The USDA also notified Broughton on April 7, 1999, by notice dated and
effective March 31, 1999, that the USDA had suspended Broughton, and is
proposing to debar Broughton from engaging in contracts and other transactions
involving federal non-procurement transactions, with the effect that Broughton
is excluded generally from engaging in contracts and other transactions
involving both federal non-procurement and federal procurement programs
governmentwide during the period of the suspension. The proposed debarment of
Broughton, if ordered, would remain in effect for a period commensurate with
the USDA's determination of the seriousness of the alleged cause, generally by
regulation not to exceed three years. The suspension and proposed debarment is
based upon Broughton's delivery to several schools of half-pint containers of
fluid milk which allegedly failed to contain the minimum required quantities of
fluid milk, and the alleged failure of such containers of milk to meet net
content labeling or contract requirements.

Broughton intends to oppose the suspension and proposed debarment of Broughton
through the administrative process. Broughton's management is unable at this
time to predict the outcome of the USDA proceedings or their effect on
Broughton's financial position and results of operations. However, neither the
Southern Belle Division debarment nor the Broughton suspension preclude the
performance of contracts existing at the time of debarment or suspension.
Further, under existing USDA regulations, neither debarment nor suspension
preclude the Southern Belle Division or Broughton from obtaining and performing
contracts awarded under federal non-procurement programs administered by the
USDA Food and Nutrition Service and valued under $100,000 unless an exception
is granted by the agency.

Management is unable at this time to predict the outcome of this USDA
proceeding; however, if unfavorably resolved, this USDA proceeding could have a
material adverse effect on the Company's financial position and results of
operations.

The Company is involved in or subject to certain other legal proceedings,
including with respect to regulatory matters, which arise in the ordinary
course of the Company's business. Although the Company cannot predict the
outcomes of these legal proceedings, the Company's management does not believe
that these actions will have a material adverse effect on the Company's
financial position, results of operations or liquidity.

On September 11, 1998, the Company announced that it had executed an Agreement
and Plan of Merger with Suiza Foods Corporation ("Suiza") a Delaware
corporation and Suiza Foods Acquisition Corp. ("Merger Sub"), an Ohio
corporation and wholly owned subsidiary of Suiza dated September 10, 1998 (the
"Agreement"), providing for the merger of Broughton with Merger Sub, with each
Broughton share being exchanged for the sum of Nineteen Dollars ($19.00) cash.
Consummation of the merger was conditioned upon satisfaction of all conditions
contained in the Agreement. If the merger is consummated, Broughton will become
a wholly-owned subsidiary of Suiza. On September 10, 1998, 5,774,335 shares of
Broughton common stock were issued and outstanding. The Agreement was approved
by Broughton shareholders at a special meeting held on December 4, 1998.

On January 18, 1999 Broughton announced that Suiza and Broughton had executed
an Amendment No. 1 to the Merger Agreement.

That Amendment No. 1 to the Merger Agreement, dated January 18, 1999, extended
from December 31, 1998 to April 15, 1999 the date on which either party could
terminate the Merger Agreement (as amended) if the Merger had not been
completed on such date. A related Stock Purchase Agreement dated January 18,
1999 between Suiza, the Company and the Inside Shareholders provided that at
completion of the Merger, those Inside Shareholders would sell Two Million
(2,000,000) Company Shares to Suiza, and would receive, in lieu of the $19.00
per Share cash merger consideration, the cash sum of $10.00 per share, without
interest, plus the right to receive up to an additional $9.00 per share if
certain earnings and performance goals were met between the date of the Merger
and March 31,

                                       15
<PAGE>   16

2000. The Inside Shareholders, all of whom are either Company directors or
related parties, proposed this arrangement in response to Suiza's concern with
Broughton's financial performance since the September 11, 1998 announcement of
the proposed Merger, in an effort to ensure performance and consummation of the
Merger Agreement by Suiza.

Subject to satisfaction of all conditions contained in the Agreement and Plan
of Merger, as amended, and the Stock Purchase Agreement, the parties agreed to
complete the merger on March 31, 1999.

On March 18, 1999 the United States Department of Justice Antitrust Division
("DOJ") filed a Motion for Temporary Restraining Order ("TRO"), Motion for
Preliminary Injunction and a Complaint in the United States District Court for
the Eastern District of Kentucky, London Division, seeking to enjoin the
proposed acquisition of the Company by Suiza. The DOJ alleged that competition
in the production and sale of school milk in certain South Central Kentucky
school districts would be substantially lessened as a result of the proposed
transaction. On March 18, 1999 the court entered a TRO enjoining Suiza, the
Company and all persons acting on their behalf from consummating, directly or
indirectly, the proposed Merger, or implementing any other plan or agreement by
which Suiza and the Company, or any part of them would combine under common
ownership or control.

On April 28, 1999, the Company and Suiza reached an agreement with the DOJ to
settle the civil antitrust lawsuit brought by the DOJ against the Company and
Suiza. The proposed settlement will allow Suiza to complete the proposed merger
with Broughton, conditioned upon Suiza's agreement to later sell the business
conducted at Broughton's Southern Belle Dairy based in Pulaski County,
Kentucky. The proposed settlement is subject to approval by the U.S. District
Judge for the Eastern District of Kentucky London Division where the DOJ's
antitrust lawsuit is currently pending. Before finally approving the
settlement, the court must submit the proposed settlement for public comment
for a period of 60 days, but the parties may close the merger prior to final
approval of the settlement. Pursuant to the proposed settlement, Suiza will
agree to sell the Southern Belle Dairy to a buyer acceptable to the DOJ within
six months after the settlement agreement is filed with the court, or five days
after entry by the court of the final judgment, whichever is later.

As a result of the requirements of the proposed settlement agreement, Suiza and
Broughton have entered into an amendment to the September 1998 Agreement and
Plan of Merger between Suiza and Broughton. The amendment lowers the
consideration to be received by all Broughton stockholders (other than five
directors of Broughton and certain of their affiliates who are parties to a
separate stock purchase agreement with Suiza) from $19 cash per share to $16.50
cash per share. Pursuant to an amendment to the stock purchase agreement with
the five Broughton directors and certain of their affiliates, the five
Broughton directors and their affiliates will sell an aggregate of 2 million
Broughton shares to Suiza for $11.25 per share, plus the contingent right to
receive $1.25 per share if certain conditions are satisfied. The amendment to
the Agreement and Plan of Merger is subject to the approval of Broughton's
stockholders.

Assuming all conditions to closing are satisfied, Suiza and Broughton
anticipate closing the proposed acquisition on May 31, 1999. Either party may
terminate the amended merger agreement if the transaction is not closed by June
30, 1999.

RESULTS OF OPERATIONS

The following table presents certain financial information concerning the
Company's results of operations, including certain information presented as a
percentage of sales.

                                       16
<PAGE>   17

<TABLE>
<CAPTION>
                          THREE MONTHS ENDED MARCH 31,
              (IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

                                        1998                          1999
                                        ----                          ----
<S>                          <C>           <C>             <C>             <C>
Net Sales                      $34,751          100.0%        $49,704         100.0%
Cost of sales                   27,130            78.1         41,250           83.0
Gross profit                     7,621            21.9          8,454           17.0
Operating costs
 and Expenses                    6,635            19.1          9,406           18.9
Operating income
 (loss)                            986             2.8          (952)          (1.9)
Other income
 (expense), net                    158             0.5          (272)          (0.6)
                             ----------     -----------    -----------     ----------

Net income (loss)                 $700            2.0%         ($747)         (1.5%)
                             ==========     ===========    ===========     ==========

Earnings (loss) per
    Common share:
         Basic                   $0.12                        ($0.13)
                             ==========                    ===========
         Diluted                 $0.12                        ($0.13)
                             ==========                    ===========

Shares used in computing
 earnings (loss) per
 common share:

         Basic                   5,774                          5,774
                             ==========                    ===========
         Diluted                 5,774                          5,774
                             ==========                    ===========
</TABLE>

Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998

Net Sales

Net sales for the first quarter 1999 increased $15.0 million or 43.0% to $49.7
million from $34.8 million for the first quarter 1998. The increase in net
sales was primarily due to the acquisition of London's in May 1998. Therefore,
a full quarter's sales for London's were reflected in the first quarter 1999
net sales amounts. The net sales increase is also attributable to higher raw
product costs partially offset by volume reductions at divisions reporting in
1998.

Cost of Sales

Cost of sales for the first quarter 1999 increased $14.1 million or 52.1%, to
$41.3 million from $27.1 million in the first quarter 1998. Cost of sales as a
percentage of net sales, however increased to 83.0% in the first quarter 1999
from 78.1% in the first quarter 1998 primarily as a result of an overall
increase in raw milk costs in the first quarter 1999 compared to the first
quarter 1998 and increased price competition.

Operating Expenses

Operating expenses for the first quarter 1999 increased $2.8 million, or 41.8%,
to $9.4 million from $6.6 million in the first quarter 1998. Operating expenses
as a percentage of net sales were 18.9% for the first quarter 1999,


                                       17
<PAGE>   18

compared to 19.1% for the first quarter 1998. Operating expenses as a
percentage of net sales decreased primarily due to higher net sales resulting
from record raw milk costs in January and February 1999. The Company incurred
direct merger costs associated with the proposed merger with Suiza Foods of
approximately $127,000 in the first quarter of 1999.

Other income (expense)

Other expense for the first quarter 1999 was ($272,000) compared to income of
$158,000 for the first quarter 1998. The change was primarily the result of
increased interest expense resulting from the purchase of London's.

Net income(loss)

Net income(loss) for the first quarter 1999 changed by $1,447,098, to a loss of
($747,000) or ($0.13) per share on a diluted basis from income of $700,000 or
$0.12 per share on a diluted basis, for the first quarter 1998. The net loss is
primarily attributed to record raw milk costs for two months in 1999, decreases
in volume for divisions reporting in 1998 and increased price competition.

LIQUIDITY AND CAPITAL RESOURCES

The company has historically financed its capital expenditures and working
capital requirements through cash generated from operating activities. The
Company's working capital position was $782,000 and $16.9 million at March 31,
1999 and December 31, 1998, respectively.

The decrease in working capital position of $16.1 million resulted from certain
components of the Company's credit facility becoming payable in full on March
30, 2000. It is the Company's intent to review options regarding its credit
facilities which may include extensions of interest only payments or conversion
to term debt. These events will be contingent on the final outcome of the
proposed merger with Suiza.

During the first quarter 1999 as compared to the first quarter 1998, capital
expenditures decreased $519,000 to $595,000 from $1.1 million in the first
quarter 1998.

On March 30, 1998, the Company finalized a loan commitment agreement with a bank
that was entered into on February 16, 1998. The agreement provides for two
additional credit facilities, in addition to the Company's $4.0 million line of
credit agreement with another bank. The first facility provides for a $15.0
million line of credit with interest at either the Bank's prime rate or LIBOR
plus a margin. The borrowings under this agreement are uncollateralized and the
Company pays a commitment fee on unused borrowings ranging from .20% to .35%.
The second facility is a $5.0 million uncollateralized capital expenditure line
of credit at either the Bank's prime rate or LIBOR plus a margin. The borrowings
under this commitment are uncollateralized and provide for monthly interest-only
payments for one year, converting to term debt to be paid over seven years.

On February 23, 1999 the Company amended its credit agreement regarding the
$15.0 million line of credit and $5.0 million uncollateralized capital
expenditure line of credit. As a result of this amendent, certain terms and
covenants in the credit agreement have been modified.

The most restrictive covenants under these agreements are the maintenance of a
maximum funded debt to Earnings Before Interest Expense, Taxes, Depreciation and
Amortization (EBITDA) ratio, a minimum tangible net worth, a minimum Earnings
Before Interest and Taxes (EBIT) to interest expense ratio, a cashflow coverage
ratio as well as other restrictive covenants which are included in the credit
agreement dated March 30, 1998 and the amended credit agreement dated February
23, 1999. (See Exhibit 10)

Year 2000

The Year 2000 problem can affect all software programs and physical devices with
embedded computer chips or processors. The Company has been concerned with this
problem and committed to limiting its exposure. The 

                                       18
<PAGE>   19

Company and its subsidiaries have put in place a plan to analyze all software
and systems in order to isolate where Year 2000 problems will occur. This
project is divided into two major sections; General Offices and Plants, and is
being reviewed on a divisional basis.

The analysis of the General Offices includes all systems and software,
including, but not limited to, major business software and hardware; personal
computers; telephone systems; and security systems. The Company's General
Offices review is near completion. The major business application hardware and
software for the Company's London's Farm Dairy Division, a commercial software
package, is Year 2000 compliant; however, the software vendor is continuing its
testing program. The Company's Dairy division hardware is compliant and a
compliant software version of its business applications is to be supplied by the
vendor in the second quarter of 1999. The Company's Foods division hardware is
compliant and will commence conversion to the Company's Dairy division's
commercial software package in the second quarter of 1999. The Company's
Southern Belle division hardware and software is currently non-compliant. This
division will commence conversion to the software utilized by the Company's
Dairy division in the second quarter of 1999.

The analysis of the Company Plants includes all systems and software, including,
but not limited to, process control equipment (PLC) and software; personal
computers; safety systems; telephone systems; and security systems. The Company
Plants have been contacting their vendors to ensure Year 2000 compliance. A
substantial portion of this section of the project has been completed. The
analysis phase will be completed by the second quarter of 1999. All Company
Plant systems are expected to be compliant by the third quarter of 1999.

The Company is committed to remediate or replace any software or system that has
been identified as being non-Year 2000 compliant. The review of the majority of
software and systems is completed. As Year 2000 compliance issues are
identified, they have been eliminated. For the past several years, all software
and system purchases and/or upgrades were made with the understanding of Year
2000 compliance. An ownership change in November 1996 was a primary driver in
the replacement of major business hardware and software. Although Year 2000
compliance was a consideration, it did not accelerate the conversion to the new
systems. The remaining costs associated with Year 2000 compliance are not
expected to significantly affect the operating cash flow, although such costs
have not been completely quantified at this time.

Contingency plans have been created in order for the Company to produce and
distribute products in the event of non-compliance. The impact of these
contingencies would not adversely affect the operation or financial condition of
the Company.

The Company is also concerned with the readiness of its suppliers and vendors
with a material relationship to the Company. They are being contacted on the
Company's behalf to verify that their systems also will be Year 2000 compliant
and, if not, whether such non-compliance will have a material impact on the
operations of the Company. The Company intends to develop, if needed,
contingency plans to facilitate a supply of products to its customers and the
receipt of products from suppliers and vendors if problems are discovered.

Despite the Company's efforts in regards to this issue, there can be no
assurance that partial or total systems interruptions, or the costs necessary to
update hardware and software, would not have a material adverse effect upon the
Company. The foregoing assessments of the impact on the Year 2000 compliance
problem on the Company are based on management's best estimates at the present
time and could change substantially. The Company's readiness program is an
ongoing process and the estimated completion dates for various software and
systems described above are subject to change.

Inflation

The impact of inflation on the Company's business has been insignificant to date
and the Company believes that it will continue to be insignificant for the
foreseeable future.


                                       19
<PAGE>   20

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q that are not
historical fact are "forward-looking" statements and involve important risks and
uncertainties. Such risks and uncertainties, which are detailed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and other
filings with the Securities and Exchange Commission, could cause the Company's
results to differ materially from the Company's current expectations as
expressed herein.


                                       20
<PAGE>   21

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

       The Company's Annual Report on Form 10-K for the year ended December 31,
1998 describes a pending legal proceeding involving the Company's Southern Belle
Division and the U.S. Department of Agriculture. Note 5 to the Company's
unaudited Financial Statements included herein contains updating information and
is incorporated herein by reference.

       The Company's Annual Report on Form 10-K for the year ended December 31,
1998 describes a legal proceeding initiated by the DOJ regarding the Company's
merger with Suiza. Note 6 to the Company's unaudited financial statements
included herein contains updating information and is incorporated herein by
reference.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

       (A)    EXHIBITS

              Exhibit #10 - First Amendment to Credit Agreement dated February
                            23, 1999
              Exhibit #27 - Financial Data Schedule

       (B)    Reports on Form 8-K
              On January 18, 1999 the Company filed a report on Form 8-K
              reporting under Item 2, disclosing an amendment to the Agreement
              and Plan of Merger between Suiza Foods Corporation a Delaware
              Corporation and Suiza Foods Acquisition Corp., an Ohio corporation
              and wholly owned subsidiary of Suiza dated September 10, 1998.


                                       21
<PAGE>   22

                                    SIGNATURE

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

BROUGHTON FOODS COMPANY

By:   /s/ Philip E. Cline
      -------------------
      President and Chief Executive Officer
      (Principal Executive Officer)

Date: May 5, 1999

By:   /s/ Todd R. Fry
      ---------------
      Treasurer and Chief Financial Officer
      (Principal Financial and Accounting Officer)

Date: May 5, 1999



                                       22