Aurora Foods Second-Quarter Results Reflect Continued Sales and Unit-Volume Growth, Company Fundamentals Continuing to Improve

St. Louis, MO - July 26, 2001 - Aurora Foods Inc. (NYSE: AOR), today announced continued operating-performance improvement with strong sales and unit-volume growth during the second quarter of 2001.

For the three months that ended June 30, 2001, unit volume and net sales increased 3.8% and 2.4%, respectively, compared with year-ago levels. Net sales grew to $219.9 million, led by Log Cabin and Mrs. Butterworth's Syrups (up 18.5%), Duncan Hines (up 8.9%), Celeste Pizza (up 5.8%) and Aunt Jemima Frozen Breakfast (up 4.3%).

Aurora also reported that adjusted EBITDA, or earnings before interest, taxes, depreciation, amortization and other special items, rose 3.6% to $33.5 million versus year-ago levels. The net loss for the quarter narrowed to $9.0 million, or $0.13 per share, a significant improvement compared with the year-ago loss of $18.9 million, or $0.28 per share.

The Company said that EBITDA and net income for the second quarter were negatively affected by an unexpected $4.0 million adjustment in marketing spending, which arose from the discovery at quarter close of a programming error in the Company's promotion spending tracking system. The computer systems have been corrected and all appropriate charges have been reflected in this statement. The Company also said that it could not provide any guidance on the expected second-half EBITDA growth until it completed a detailed analysis of its second six-month business programs with its corrected system, with the possibility of modifying them as necessary. The Company indicated this analysis would take two to three weeks to complete and would provide an update on its second six months at that time.

The Company said that in addition to the $4.0 million marketing spending adjustment, EBITDA for the quarter as compared to target was negatively impacted by net volume declines and unfavorable brand, channel and SKU volume mix, offset by significant reductions in marketing spending.

"The growth trend in net sales, both versus year ago and the first quarter, is a major indicator of the improving health of our business," said James T. Smith, Chairman and Chief Executive Officer of Aurora Foods. "Our brands are much stronger today as evidenced by the fact that seven of our nine brands have higher market shares."

The Company reported that absolute consumer consumption of its brands has successively improved in each of the last four three-month IRI periods, driven, in part, by substantial distribution gains at the retail level. There were especially strong results on Duncan Hines, the Company's largest brand, with major gains on cake mix, frosting and brownies, behind the strategy of building on cake to grow market share on frosting and brownies.

The Company said that despite the $4.0 million marketing spending adjustment, absolute marketing spending was $8.3 million below year ago, behind growing volume, offsetting negative brand, channel and SKU volume mix. Total Company unit volume, excluding Lender's retail, was up 9.0% versus year ago, highlighting the signficance of Lender's disappointing performance. "We have learned a great deal about this business over the last six months. We are now even more convinced that the trends in this business are reversible and that Lender's can become a major contributor to the Company's earnings growth," said Mr. Smith. "For starters, we are seeing distribution improvements in each of the last three monthly IRI periods, and second-quarter volume on fresh Lender's was up 20% versus year ago."

The Company also reported that it recorded a net pre-tax gain of $3.1 million related to the receipt of shares from former management in excess of those required to be distributed to class members as part of the May 2001 settlement of shareholder class action claims, as well as the accrual of other legal and consolidation costs. This gain is not included in adjusted EBITDA. Interest expense for the quarter was a net $30.4 million and includes a $4.9 million non-cash charge related to the recognition of a longstanding and now ineffective interest rate hedge under FAS 133. Recognition of this expense in the second quarter will result in lower future recorded interest. Overall, Aurora will continue to benefit from the reduction in market interest rates.

For the six months that ended June 30, 2001, sales rose to $503.5 million, compared with $496.7 million in the same year-ago period, while the net loss was $16.8 million, or $0.24 per share, compared with a net loss of $47.5 million, or $0.71 per share, in 2000.

Finally, the Company indicated that it entered the second half of this year in signficantly better financial condition. July unit volume will be at least 10% above year ago, and ending June inventories have been reduced from $124 million year ago to $85 million currently. The inventory reduction temporarily increased per-unit fixed manufacturing costs, but following quarters will benefit from a more normal flow of business through the Company's production facilities.