<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 September 30, 1998
                                       or

           [    ]  Transition Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934
           For the transition period from          to
                                          ---------    ---------

                        Commission file number  0-23429
                                                -------

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

           Ohio                                             31-4135-025
--------------------------------                      -------------------
 (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)

                                 (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 October 31, 1998.


<PAGE>   2
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements:

          Consolidated Balance Sheets
            December 31, 1997 and September 30, 1998
          Consolidated Statements of Income
            Three Months Ended September 30, 1997 and 1998
          Consolidated Statements of Income
            Nine Months Ended September 30, 1997 and 1998
          Consolidated Statements of Cash Flows
            Nine Months Ended September 30, 1997 and 1998
          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,          SEPTEMBER 30,
                                                                          1997                   1998
                                                                      ------------         ------------
<S>                                                                    <C>                   <C>
Current assets:
     Cash and cash equivalents                                          $9,633,184           $4,905,994
     Accounts receivable, less allowance for doubtful accounts of
       $465,000 at December 31, 1997 and $738,000 at
        September 30, 1998                                              12,767,043           17,774,348
     Inventories                                                         3,551,281            6,439,629
     Prepaid expenses                                                      897,017            1,341,164
     Refundable income taxes                                               230,775               95,000
     Deferred income taxes                                                 100,437              100,437
                                                                      ------------         ------------
          Total current assets                                          27,179,737           30,656,572
                                                                      ------------         ------------
Property, plant and equipment, at cost:
     Buildings                                                           5,958,861           10,137,010
     Machinery and equipment                                            18,935,308           25,238,841
     Leasehold improvements                                                464,156              546,525
     Assets under construction                                             798,093            2,018,929
                                                                      ------------         ------------
                                                                        26,156,418           37,941,305
          Less accumulated depreciation and amortization               (11,586,612)         (11,883,368)
                                                                      ------------         ------------
                                                                        14,569,806           26,057,937
     Land                                                                1,662,819            2,547,451
                                                                      ------------         ------------
                                                                        16,232,625           28,605,388
                                                                      ------------         ------------
Cash surrender value of officer's life insurance, net of policy
     loans of $2,920 at December 31, 1997                                  197,775
Intangible assets and other                                              2,296,389           11,495,390
Prepaid pension costs                                                      341,968              569,567
                                                                      ------------         ------------
                                                                         2,836,132           12,064,957
                                                                      ------------         ------------
     Total assets                                                      $46,248,494          $71,326,917
                                                                      ============         ============



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

</TABLE>



                                       3
<PAGE>   4
                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)


LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,           SEPTEMBER 30,
                                                                        1997                   1998
                                                                     ------------           -------------
<S>                                                                  <C>                   <C>
Current liabilities:
     Accounts payable                                                  $8,124,356           $9,159,231
     Accrued expenses and other                                         2,321,899            2,790,850
     Current installments on  debt                                         21,767              378,989
     Income taxes payable                                                  18,536              354,385
                                                                      -----------          -----------
          Total current liabilities                                    10,486,558           12,683,455
                                                                      -----------          -----------
Debt, net of current installments                                          36,530           19,589,902
Deferred income taxes                                                   2,423,385            2,719,385
Other                                                                     314,016            2,008,101
Commitments and contingencies
Shareholders' equity:
     Common stock, $1 par value; 10,000,000
         shares authorized, 6,314,575 shares issued                     6,314,575            6,314,575
     Additional paid-in capital                                        20,482,702           20,482,702
     Retained earnings                                                  6,698,452            8,036,521
                                                                      -----------          -----------
                                                                       33,495,729           34,833,798
     Less 540,240 shares of common stock in treasury,
         at cost                                                          507,724              507,724
                                                                      -----------          -----------

Total shareholders' equity                                             32,988,005           34,326,074
                                                                      -----------          -----------

Total liabilities and shareholders' equity                            $46,248,494          $71,326,917
                                                                      ===========          ===========



    The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>





                                       4
<PAGE>   5
                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED SEPTEMBER 30,
                                                            1997                         1998
                                                        ------------                  -----------
<S>                                                      <C>                          <C>
Net sales                                                $20,933,111                  $51,221,989
Cost of sales                                             16,768,251                   40,409,966
                                                         -----------                  -----------
     Gross profit                                          4,164,860                   10,812,023
Operating costs and expenses:
   Selling and distribution                                3,557,073                    8,079,703
   General and administrative expenses                       529,982                    1,673,192
                                                         -----------                  -----------
                                                           4,087,055                    9,752,895
                                                         -----------                  -----------

Income from operations                                        77,805                    1,059,128
Other income (expense):
   Interest income and other, net                             61,542                      109,039
   Interest expense                                         (37,182)                     (383,389)
                                                          ----------                  -----------
                                                              24,360                     (274,350)
                                                          ----------                  -----------

Income before income taxes                                   102,165                      784,778
Total income tax expense                                      45,432                      305,907
                                                          ----------                  -----------
Net income                                                   $56,733                     $478,871
                                                          ==========                  ===========
Earnings per common share:
   Basic                                                       $0.01                        $0.08
                                                          ==========                  ===========
   Diluted                                                     $0.01                        $0.08
                                                          ==========                  ===========
Shares used in computing earnings per
common share:

   Basic                                                   4,121,670                    5,774,335
                                                          ==========                  ===========
   Diluted
                                                           4,122,617                    5,774,335
                                                          ==========                  ===========




     The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>





                                       5
<PAGE>   6
                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED SEPTEMBER 30,
                                                             1997                         1998
                                                         -----------                  -----------
<S>                                                      <C>                         <C>
Net sales                                                $61,964,349                 $128,392,359
Cost of sales                                             49,030,082                  100,832,866
                                                         -----------                 ------------
     Gross profit                                         12,934,267                   27,559,493
Operating costs and expenses:
   Selling and distribution                                9,852,016                   20,333,892
   General and administrative expenses                     1,483,773                    3,621,701
                                                         -----------                 ------------
                                                          11,335,789                   23,955,593
                                                         -----------                 ------------
Income from operations                                     1,598,478                    3,603,900
Other income (expense):
   Interest income and other, net                            144,199                      465,128
   Interest expense                                        (116,984)                     (460,351)
                                                         -----------                 ------------
                                                              27,215                        4,777
                                                         -----------                 ------------

Income before income taxes                                 1,625,693                    3,608,677
Total income tax expense                                     638,347                    1,404,445
                                                         -----------                 ------------
Net income                                                  $987,346                   $2,204,232
                                                         ===========                 ============
Earnings per common share:
   Basic                                                       $0.24                        $0.38
                                                         ===========                 ============
   Diluted                                                     $0.24                        $0.38
                                                         ===========                 ============
Shares used in computing earnings per
common share:

   Basic                                                   4,120,327                    5,774,335
                                                         ===========                 ============
   Diluted                                                 4,122,536                    5,774,335
                                                         ===========                 ============
                                                         






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


</TABLE>



                                       6
<PAGE>   7
                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                                       1997               1998
                                                                    -----------       ------------
<S>                                                                <C>               <C>
Cash flows from operating activities:
     Net income                                                       $987,346         $2,204,232
     Adjustment to reconcile net income to net cash
          provided by (used in) operating activities:
          Depreciation and amortization                                686,605          1,758,675
          Bad debt expense                                              32,000             36,000
          Gain on disposal of property, plant and equipment            (4,419)           (69,863)
          Change in deferred gain on sale of fixed assets
          Deferred income taxes                                       (62,966)           (27,291)
          Change in assets and liabilities:
              Accounts receivable                                      272,086          (674,147)
              Inventories                                            (347,267)          (283,875)
              Prepaid expenses                                        (98,848)           (82,184)
              Refundable income taxes                                  168,651            230,775
              Other assets                                           (652,238)          (374,614)
              Prepaid and accrued pension costs                       (63,580)          (227,599)
              Accounts payable                                         103,847        (3,722,675)
              Accrued expenses and other                              (43,767)          (372,700)
              Income taxes payable                                   (236,608)            325,208
              Other long term liabilities                                                (68,133)
                                                                   -----------        -----------
                   Total adjustments                                 (246,504)        (3,552,423)
                                                                   -----------        -----------
     Net cash provided by (used in) operating activities               740,842        (1,348,191)
                                                                   -----------        -----------
Cash flows from investing activities:
     Proceeds from disposal of property, plant and equipment            10,364            522,342
     Proceeds from termination of officer's life insurance                                       
       policy                                                                             197,775
     Purchases of property, plant and equipment                    (1,508,544)        (3,496,721)
     Business acquisitions, net of cash acquired                                     (18,698,280)
                                                                   -----------        -----------
     Net cash used in investing activities                         (1,498,180)       (21,474,884)
                                                                   -----------        -----------
Cash flows from financing activities:
     Payments on term debt                                           (966,847)           (85,478)
     Proceeds from debt                                                565,000         19,336,230
     Purchases of preferred stock                                     (37,070)
     Dividends paid                                                  (262,505)        (1,154,867)
     Issuance of treasury stock, including tax benefits                  4,594
                                                                   -----------        -----------
     Net cash (used in) provided by financing activities             (696,828)         18,095,885
                                                                   -----------        -----------
     Net decrease in cash and cash equivalents                     (1,454,166)        (4,727,190)
</TABLE>


CONTINUED,





                                       7
<PAGE>   8
                    BROUGHTON FOODS COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED SEPTEMBER 30,
                                                                       1997               1998
                                                                     --------            -------
<S>                                                                <C>                <C>
     Cash and cash equivalents, beginning of period                 $2,307,815         $9,633,184
                                                                    ----------         ----------

     Cash and cash equivalents, end of period                        $ 853,649         $4,905,994
                                                                    ==========         ==========

Supplemental disclosure of cash flow information:

     Cash paid during the period for:

          Interest                                                    $121,426           $443,851
                                                                    ==========         ==========
          Income taxes                                                $908,764         $1,004,786
                                                                    ==========         ==========

Supplemental disclosure of noncash investing and
     financing activities:


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



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

</TABLE>




                                       8
<PAGE>   9
                    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-7 to F-10 of its 1997 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 1998.

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, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."  The
adoption of this statement did not have an impact on the Company's presentation
of financial statements for the period ended September 30, 1998.


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, 1997 and September
30, 1998 were as follows:


<TABLE>
<CAPTION>
                                                             DECEMBER 31,       SEPTEMBER 30,
                                                                1997                1998
                                                            ----------           ----------
<S>                                                         <C>                  <C>
Raw products and finished goods                             $1,966,156           $3,612,860
Ingredients                                                    450,480              881,946
Warehouse, packaging supplies and other                      1,134,645            1,944,823
                                                            ----------           ----------
                                                            $3,551,281           $6,439,629
                                                            ==========           ==========
</TABLE>



3. DEBT

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 that was in place at December 31,
1997. 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 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.





                                       9
<PAGE>   10


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

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.


4. COMMITMENTS AND CONTINGENCIES

The former Southern Belle Dairy Company received a Notice of Proposed Debarment
dated June 1, 1994, from the United States Department of Agriculture ("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 is
still operating under its terms.

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 has 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 has indicated that both
Southern Belle and the Company could be subject to suspension and debarment if
they fail to enter into such proposed agreement.  Further, the terms of the
proposed agreement include a requirement that the USDA consent to the  proposed
merger of the Company with a wholly-owned subsidiary of Suiza Foods
Corporation.  The Company is currently engaged in discussions with USDA with
respect to this matter.

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 any action it may purse against the Company. The USDA has indicated that the
separate action it may pursue against the Company would be based on the civil
antitrust action brought by the State of Ohio against the Company and sixteen
other defendants, which the Company and six of the original defendants settled
in September 1997. In its September 23, 1998 letter, the USDA withdrew its offer
to the Company of the newly proposed Compliance Agreement in Lieu of Debarment.
The USDA has advised that a decision on Southern Belle's suspension and
debarment will be rendered by November 30, 1998, unless good cause exists to
extend the determination period.

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.


5. ACQUISITIONS

On May 29, 1998,  the Company purchased LFD Holding Corp. and its wholly-owned
subsidiary, London's Farm Dairy, Inc. (collectively referred to as "London's")
of Port Huron, Michigan.  Total preliminary acquisition costs were $18,831,889,
subject to a final working capital adjustment as provided for in the Purchase
Agreement.  LFD Holding Corp. is a wholly-owned subsidiary of the Company.


                                       10
<PAGE>   11


The acquisition was accounted for by the purchase method, and accordingly, the
acquisition costs have been allocated to the assets and liabilities acquired
based upon their estimated fair values at the date of acquisition.  The
estimated fair values of these assets are summarized as follows:

<TABLE>
                 <S>                                                       <C>
                 Current assets                                             $7,487,561
                 Property, plant and equipment                              10,694,747
                 Other assets                                                  360,195
                 Excess of costs over net assets                             8,751,338
                 Current liabilities                                       (6,165,354)
                 Other liabilities                                         (1,340,757)
                 Debt, long-term portion                                     (659,840)
                 Deferred taxes, net                                         (296,001)
                                                                           -----------
                                                                           $18,831,889
                                                                           ===========
</TABLE>


Tradename, distribution network and workforce are being amortized over the
following estimated useful lives on a straight-line basis:


<TABLE>
<CAPTION>
                                                    Life                      Amount
                                                    ----                  ----------
                 <S>                                  <C>                 <C>
                 Tradename                            40                  $5,371,915
                 Distribution network                 40                   2,637,122
                 Workforce                            23                     742,301
                                                                          ----------
                                                                          $8,751,338
                                                                          ==========
</TABLE>

The following table summarizes the unaudited consolidated pro forma results of
operations and pro forma net income per share for the nine months ended
September 30, 1997 and the nine months ended September 30, 1998, assuming the
London's acquisition had occurred at January 1, 1997.

<TABLE>
<CAPTION>
                                                           Nine months ended         Nine months ended
                                                          September 30, 1997         September 30, 1998
                                                          ------------------         ------------------
                 <S>                                             <C>                        <C>
                 Revenues                                        $104,503,000               $150,800,000
                 Net income                                           926,000                    998,000
                 Diluted earnings per share                             $0.22                      $0.17
                 Diluted weighted average shares
                     outstanding                                    4,122,500                  5,774,335
</TABLE>


The consolidated pro forma results of operations and pro forma net income per
share do not represent the Company's actual results of operations, nor do they
purport to predict or indicate the Company's financial position or results of
operations at any future date or for any future period, and they are not
necessarily indicative of the results that would have been obtained had the
companies been combined during the periods indicated.


6. MERGER

On September 10, 1998, the Company entered into a definitive agreement to merge
with a wholly-owned subsidiary of Suiza Foods Corporation (Suiza).  As a result
of the merger, each non-dissenting Broughton shareholder would receive $19.00
per share in cash.  Consummation of the merger is conditioned upon expiration
or termination of applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (HSR Act), approval of Broughton
shareholders and satisfaction of other conditions contained in the Agreement.

The Company and Suiza agreed, pursuant to the Merger Agreement, to use their
respective best efforts to file or cause to be filed with the Federal Trade
Commission ("FTC") and the Department of Justice ("DOJ") such

                                       11
<PAGE>   12

notifications as are required to be filed under the HSR Act and the rules and
regulations promulgated thereunder, and to respond as promptly as practicable
to any requests for additional information made by either the FTC or the DOJ.
Pursuant to such agreement, on September 24, 1998, the Company and Suiza each
filed Premerger Notification and Report Forms with the FTC and the Antitrust
Division of the DOJ, requesting early termination of the 30-day waiting period.
The statutory waiting period under the HSR Act was scheduled to expire at 
11:59 p.m. on October 24, 1998.  By letter dated October 23, 1998, the DOJ
requested additional information of both the Company and Suiza and extended the
waiting period, during which the Merger may not be consummated, for a period of
20 days after the DOJ's receipt of all requested information.

At any time before or after the consummation of the Merger and notwithstanding
the expiration or termination of the applicable HSR Act waiting period, any
federal or state antitrust authorities could take action under the antitrust
laws as they deem necessary or desirable in the public interest.  Such action
could include seeking to enjoin the consummation of the Merger or seeking
divestiture of all or part of the assets of the Company or Suiza.  Private
parties may also seek to take legal action under the antitrust laws, if
circumstances permit.

If the FTC, the DOJ, or any other federal or antitrust authority were to
challenge the Merger, the consummation of the Merger could be postponed beyond
December 31, 1998, in which event either the Company or Suiza would be entitled
to terminate the Merger Agreement.





                                       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, Michigan, West Virginia, Kentucky, Tennessee 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 Dairy Division
based in Port Huron, Michigan.

The Company completed an acquisition of Southern Belle Dairy Company ("Southern
Belle") of Somerset, Kentucky in December 1997.  The Company has had an
increase in sales, cost of sales and operating expenses for the first nine
months of 1998 compared with the first nine months of 1997 due primarily to the
Southern Belle acquisition. As a result of this 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.  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 an acquisition of London's on May 29, 1998.  As a result
of the London's acquisition, the Company has had an increase in sales, cost of
sales and operating expenses for the second and third quarters of 1998.  The
Company expects 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'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





                                       13
<PAGE>   14
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 former ethics and education
training for all employees.  Although the Southern Belle Compliance Agreement
expired on April 18, 1998, the Southern Belle Division is still operating under
its terms.

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 has 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 has indicated that both
Southern Belle and the Company could be subject to suspension and debarment if
they fail to enter into such proposed agreement.  Further, the terms of the
proposed agreement include a requirement that the USDA consent to the  proposed
merger of the Company with a wholly-owned subsidiary of Suiza Foods Corporation.
The Company is currently engaged in discussions with USDA with respect to this
matter.

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 any action it may purse against the Company. The USDA has indicated that the
separate action it may pursue against the Company would be based on the civil
antitrust action brought by the State of Ohio against the Company and sixteen
other defendants, which the Company and six of the original defendants settled
in September 1997. In its September 23, 1998 letter, the USDA withdrew its offer
to the Company of the newly proposed Compliance Agreement in Lieu of Debarment.
The USDA has advised that a decision on Southern Belle's suspension and
debarment will be rendered by November 30, 1998, unless good cause exists to
extend the determination period.

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.

On September 10, 1998, the Company entered into a definitive agreement to merge
with a wholly-owned subsidiary of Suiza Foods Corporation (Suiza).  As a result
of the merger, each non-dissenting Broughton shareholder would receive $19.00
per share in cash.  Consummation of the merger is conditioned upon expiration
or termination of applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (HSR Act), approval of Broughton
shareholders and satisfaction of other conditions contained in the Agreement.

The Company and Suiza agreed, pursuant to the Merger Agreement, to use their
respective best efforts to file or cause to be filed with the Federal Trade
Commission ("FTC") and the Department of Justice ("DOJ") such notifications as
are required to be filed under the HSR Act and the rules and regulations
promulgated thereunder, and to respond as promptly as practicable to any
requests for additional information made by either the FTC or the DOJ. Pursuant
to such agreement, on September 24, 1998, the Company and Suiza each filed
Premerger Notification and Report Forms with the FTC and the Antitrust Division
of the DOJ, requesting early termination of the 30-day waiting period. The
statutory waiting period under the HSR Act was scheduled to expire at 11:59 p.m.
on October 24, 1998.  By letter dated October 23, 1998, the DOJ requested
additional information of both the Company and Suiza and extended the waiting
period, during which the Merger may not be consummated, for a period of 20 days
after the DOJ's receipt of all requested information.

At any time before or after the consummation of the Merger and notwithstanding
the expiration or termination of the applicable HSR Act waiting period, any
federal or state antitrust authorities could take action under the antitrust
laws as they deem necessary or desirable in the public interest.  Such action
could include seeking to enjoin the consummation of the Merger or seeking
divestiture of all or part of the assets of the Company or Suiza.  Private
parties may also seek to take legal action under the antitrust laws, if
circumstances permit.

                                       14
<PAGE>   15
If the FTC, the DOJ, or any other federal or antitrust authority were to
challenge the Merger, the consummation of the Merger could be postponed beyond
December 31, 1998, in which event either the Company or Suiza would be entitled
to terminate the Merger Agreement.

RESULTS OF OPERATIONS

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


                        THREE MONTHS ENDED SEPTEMBER 30,
             (IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

<TABLE>
<CAPTION>
                                          1997                                  1998
                                          ----                                  ----
<S>                           <C>                 <C>           <C>                   <C>
Net sales                       $20,933             100.0%           $51,222            100.0%
Cost of sales                    16,768              80.1             40,410             78.9
Gross profit                      4,165              19.9             10,812             21.1
Operating costs
   and expenses                   4,087              19.5              9,753             19.0
Operating income                     78               0.4              1,059              2.1
Other income, net                    24               0.1              (274)              0.5
                              ---------          ---------         ---------          --------
Net income                          $57               0.3%              $479              0.9%
                              =========                            =========
Earnings per
   common share:
         Basic                    $0.01                                $0.08
                              =========                            =========
         Diluted                  $0.01                                $0.08
                              =========                            =========
Shares used in
   computing earnings
   per common share:
         Basic                4,121,670                            5,774,335
                              =========                            =========
         Diluted
                              4,122,617                            5,774,335
                              =========                            =========
</TABLE>

     THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
                              SEPTEMBER 30, 1997

NET SALES

Net sales for the third quarter 1998 increased $30.3 million or 145.0%, to
$51.2 million from $20.9  million for the third quarter 1997. The increase in
net sales was primarily due to the acquisition of Southern Belle in December
1997 and London's in May 1998.  Therefore, three months sales were  reflected
in the third quarter 1998 net sales amounts for Southern Belle and London's.

COST OF SALES

Cost of sales for the third quarter 1998 increased $23.6 million or 141.0%, to
$40.4  million from $16.8 million in the third quarter 1997. Cost of sales as a
percentage of net sales decreased to 78.9% in the third quarter 1998 from 80.1%
in the third quarter 1997 primarily as a result of (i) a significant change in
customer mix resulting from the Southern Belle and London's acquisitions (ii)
less dependence on the spot market for the Company's internal butterfat
requirements, (iii) the production of certain products by the Company which
were previously purchased from outside suppliers and (iv)  a change in customer
mix toward customers requiring additional delivery service with such sales
typically having a lower cost basis as a percentage of net sales.  The factors
representing the decrease in cost of sales as a percentage of net sales were
partially offset by an overall increase in butterfat costs and increased price
competition in the third quarter of 1998 compared to the third quarter of 1997.

OPERATING EXPENSES

Operating expenses for the third quarter 1998 increased $5.7 million, or 139.0%,
to $9.8 million from $4.1 million in the third quarter 1997. Operating expenses
as a percentage of net sales decreased to 19.0% for the third quarter 1998
compared to 19.5% for the third quarter 1997.  The decrease in operating
expenses as a percentage of net sales is primarily related to the acquisition of
London's which has lower operating costs as a percentage of sales primarily due
to the composition of delivery routes and distribution network. Operating
expenses were also impacted by additional costs incurred during the third
quarter for certain merger related expenses related to the planned merger with
Suiza Foods Corporation. As





                                       15
<PAGE>   16
a result of the London's acquisition, the Company will incur additional
amortization expense of intangible assets resulting in an annual charge to
earnings of approximately $232,000.

OTHER INCOME (EXPENSE)

Other expense for the third quarter 1998 was ($274,000) compared to income of
$24,000 for the third quarter 1997. The decrease in other income was primarily
the result of additional interest expense to finance the acquisition of
London's.

NET INCOME

Net income for the third quarter 1998 increased $422,000 to $479,000, or $0.08
per share on a diluted basis, from $57,000, or $0.01 per share on a diluted
basis, for the third quarter 1997. The increase in net income is primarily
attributed to additional sales as a result of the acquisition of Southern Belle
and London's.


<TABLE>
<CAPTION>
                                  NINE MONTHS ENDED SEPTEMBER 30,
                       (IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)

                                           1997                                 1998
                                           ----                                 ----
<S>                           <C>                  <C>           <C>                   <C>
Net sales                       $61,964             100.0%          $128,392            100.0%
Cost of sales                    49,030              79.1            100,833             78.5
Gross profit                     12,934              20.9             27,559             21.5
Operating costs
   and expenses                  11,335              18.3             23,956             18.7
Operating income                  1,599               2.6              3,604              2.8
Other income, net                    27               ---                  5              ---
                              ---------         ---------          ---------         ---------
Net income                         $987               1.6%            $2,204              1.7%
                              =========                            =========
Earnings per
   common share:
         Basic                    $0.24                                $0.38
                              =========                            =========
         Diluted                  $0.24                                $0.38
                              =========                            =========
Shares used in
   computing earnings
   per common share:
         Basic                4,120,327                            5,774,335
                              =========                            =========
         Diluted
                              4,122,536                            5,774,335
                              =========                            =========




    NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997

</TABLE>
NET SALES

Net sales for the first nine months 1998 increased $66.4 million or 107.2% to
$128.4  million from $62.0 million for the first nine months 1997.  The
increase in net sales was primarily due to the acquisition of Southern Belle in
December 1997 and London's in May 1998.  Therefore, nine month's sales were
reflected in the first nine months 1998 net sales amounts for Southern Belle
and 125 days of net sales were reflected in the first nine months 1998 for
London's.

COST OF SALES

Cost of sales for the first nine months 1998 increased $51.8 million or 105.7%,
to $100.8 million from $49.0 million in the first nine months 1997.  Cost of
sales as a percentage of sales, however, decreased to 78.5% in the first nine





                                       16
<PAGE>   17
months 1998 from 79.1% in the first nine months 1997 primarily as a result of
(i) a significant change in the customer mix as a result of the Southern Belle
and London's acquisition, (ii) less dependence on the spot market for the
Company's internal butterfat requirements, and (iii) the production of certain
products by the Company which were previously purchased from outside suppliers.
The factors representing the decrease in cost of sales as a percentage of net
sales were partially offset by an overall increase in butterfat costs and
increased price competition in the first nine months 1998 compared to the first
nine months 1997.

OPERATING EXPENSES

Operating expenses for the first nine months 1998 increased $12.7 million, or
111.3%, to $24.0 million from $11.3 million in the first nine months 1997.
Operating expenses as a percentage of net sales were 18.7% for the first nine
months 1998 compared to 18.3% for the first nine months 1997.  Operating
expenses as a percentage of net sales increased primarily due to (i) additional
costs related to the announced merger with Suiza Foods Corporation, (ii)
additional costs associated with the Company being a public reporting entity
and (iii) the implementation of a new computer system at the Company's
Marietta, Ohio facility. As a result of the London's acquisition, the Company
will incur additional amortization expense of intangible assets resulting in an
annual charge to earnings of approximately $232,000.

OTHER INCOME

Other income for the first nine months 1998 was $5,000 compared to $27,000 for
the first nine months 1997.  The decrease in other income was primarily the
result of additional interest expense resulting from the Company's acquisition
of London's offset by additional interest income from funds remaining in the
Company's treasury as a result of the Company's initial public offering and the
gain on sale of certain Company trailers which were replaced by a leased fleet.

NET INCOME

Net income for the first nine months 1998 increased $1.2 million  to $2.2
million, or $0.38 per share on a diluted basis, from $987,000, or $0.24 per
share on a diluted basis, for the first nine months 1997.  The increase in net
income is primarily attributed to additional sales as a result of the
acquisitions of Southern Belle and London's.


LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its capital expenditures and working
capital requirements through cash generated from operating activities. On June
25, 1998, the Company announced a $16.4 million expansion to its existing
Marietta, Ohio, processing facility.  The expansion is expected to be financed
via loans and incentives from state and local governmental agencies of
approximately $4.0 million consisting primarily of loans from such agencies,
debt financing from banks and internally generated cash.  The Company has not
finalized any agreements for the financing of the proposed plant expansion and
the expansion has not commenced due to the announced merger with a wholly owned
subsidiary of Suiza Foods Corporation.

During the first nine months of 1998, as compared to the first nine months of
1997, capital expenditures increased $2.0 million to $3.5  million from $1.5
million in the first nine months of 1997. The capital expenditures were
partially offset by cashflows from investing activities for the sale of certain
trailers due to the Company's conversion to primarily all leased vehicles of
$492,000 and cash received due to the Company canceling an insurance policy on
previous officers of Southern Belle in the amount of $198,000.  The Company
anticipates that capital expenditures in future periods will exceed historical
levels.

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





                                       17
<PAGE>   18
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.  As a result of the
Company's acquisition of London's, approximately $19.3 million was drawn from
the Company's available credit facility in May 1998 to finance the acquisition.

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.  

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.

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 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 first 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 first 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 first 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 first 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 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.





                                       18
<PAGE>   19
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.





                                       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, 1997, 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, 1997 describes a pending legal proceeding involving the Company's Southern
Belle Division and the U.S. Department of Agriculture.  Note 4 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

<TABLE>
<S>      <C>
         (A) EXHIBITS
             Exhibit #27 - Financial Data Schedule

         (B) REPORTS ON FORM 8-K
             On September 15, 1998, the Company filed a report on Form 8-K reporting under Item 2, disclosing the Company's
             execution of the agreement of merger with a wholly owned subsidiary of Suiza Foods Corporation.

         (C) PROXY STATEMENT
             Exhibit #2 - Proxy Statement regarding proposed merger with a wholly owned subsidiary of Suiza Foods Corporation.
             Incorporated by reference from Proxy filing on October 30, 1998.
</TABLE>





                                       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: November 13, 1998

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

Date: November 13, 1998





                                       22