Pierre Foods 10-K/A 2005 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

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

For the fiscal year ended:  March 5, 2005

OR

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

For the transition period from                           to                          

Commission File No.:  0-7277

PIERRE FOODS, INC.

(Exact name of Registrant as specified in its charter)

North Carolina	56-0945643
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification No.)
9990 Princeton Road, Cincinnati, Ohio	45246
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:  (513) 874-8741

Securities registered pursuant to Section 12(b) of the Act:  None.

Securities registered pursuant to Section 12(g) of the Act:  None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o   No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o   No ý

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 twelve 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 ý   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ý

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

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes o   No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second quarter (September 3, 2004) was $0.00.

As of April 30, 2005, there were 100,000 Class A Common Shares of the registrant outstanding.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (the “Amended 10-K”) is being filed with respect to the Annual Report on Form 10-K of Pierre Foods, Inc. (the “Company” or “Pierre”) for the fiscal year ended March 5, 2005.  This Amended 10-K amends the Company’s original Form 10-K as filed on June 3, 2005 (the “Original Filing”).  This Amended 10-K also does not reflect events occurring after the filing of the Original Filing or modify or update those disclosures (including, except as otherwise provided herein, the exhibits to the Original Filing) affected by subsequent events.  Accordingly, this Amended 10-K should be read in conjunction with the Company’s filings made with the Securities and Exchange Commission subsequent to the Original Filing, including the Company’s filing of Form 10-Q for the quarters ended June 4, 2005 and September 3, 2005.

The Company hereby amends Item 9A. Controls and Procedures of the Original Filing, Item 8. Financial Statements and Supplementary Data of the Original Filing, and Item 15. Exhibits and Financial Statement Schedules of the Original Filing.  With respect to the Company’s Consolidated Financial Statements, the Original Filing has not been amended except to reflect revisions to column headings in the Company’s Consolidated Statements of Cash Flows in order to be consistent with heading presented in the Company’s Consolidated Statements of Operations and to reflect revisions to the Selected Quarterly Financial Data that follows Note 17 of the Notes to Consolidated Financial Statements in order to present the information in a manner that is consistent with the presentation of the Company’s Consolidated Statements of Operations (including the elimination of gross profit as a line item).

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by the Company’s Principal Executive Officer and Principal Accounting Officer are being filed as exhibits to this Amended 10-K under Item 15.

For purposes of this Amended 10-K, and in accordance with Rule 12b-15 under the Exchange Act, Item 9A, Item 8 and Item 15 of the Original Filing have been amended and restated in their entirety.  No changes have been made in this Amended 10-K that modify or update other disclosures as presented in the Original Filing.

2

TABLE OF CONTENTS

Item Number		Page
	PART I
Item 1.	Description of Business	*
	General Development of Business	*
	Narrative Description of the Business	*
Item 2.	Properties	*
Item 3.	Legal Proceedings	*
Item 4.	Submission of Matters to a Vote of Security Holders	*
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	*
Item 6.	Selected Financial Data	*
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	*
	Results of Operations	*
	Critical Accounting Policies and Estimates	*
	Liquidity and Capital Resources	*
	Commercial Commitments, Contingencies and Contractual Obligations	*
	Inflation	*
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	*
Item 8.	Financial Statements and Supplementary Data	4
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	*
Item 9A.	Controls and Procedures	4
Item 9B.	Other Information	*
	PART III
Item 10.	Directors and Executive Officers of the Registrant	*
Item 11.	Executive Compensation	*
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	*
Item 13.	Certain Relationships and Related Party Transactions	*
Item 14.	Principal Accountant Fees and Services	*
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	4
Signatures		5
Index to Exhibits		6

*Not included in this Amended 10-K.  Information responsive to the item is contained in the 10-K filed on June 3, 2005.

3

Item  8.  Financial Statements and Supplementary Data

The Company’s Consolidated Financial Statements required by this Item are on pages F-1 through F-32 of this Amended
10-K.

Item  9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures.  As of the end of the period covered by this report, the Company performed an evaluation, under the supervision and with the participation of its management including the President and Chief Executive Officer and Principal Accounting Officer of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based upon this evaluation, the Company’s President and Chief Executive Officer and Principal Accounting Officer have concluded that as of March 5, 2005, the Company’s disclosure controls and procedures were effective for the purposes of ensuring that information required to be disclosed in reports that the Company files or submits under the 1934 Act has been recorded, processed, summarized and reported in accordance with the rules and forms of the Securities and Exchange Commission.

Changes in Internal Controls.  There have been no changes in the Company’s internal controls over financial reporting during the quarter ended March 5, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item  15.  Exhibits and Financial Statement Schedules

(a)1.Financial Statements

The Financial Statements listed in the accompanying Index on page F-1 are filed as a part of this Report.

2.Financial Statement Schedules

Financial statement schedules have been omitted because they are not applicable or not required, or because the required information is provided in the Company’s Consolidated Financial Statements or notes thereto.

3.Exhibits

See Index to Exhibits below.

4

SIGNATURES

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

PIERRE FOODS, INC.
By:	/S/ JOSEPH W. MEYERS
	Joseph W. Meyers
	Vice President, Finance

Dated: January 3, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Pierre Foods, Inc., in the capacities and on the dates indicated.

Signature	Title	Date
/S/ NORBERT E. WOODHAMS	Chief Executive Officer and	January 3, 2006
Norbert E. Woodhams	President (Principal Executive
	Officer), Director and Chairman
	of the Board
/S/ JOSEPH W. MEYERS	Vice President, Finance	January 3, 2006
Joseph W. Meyers	(Principal Financial Officer and
	Principal Accounting Officer)
/S/ NICHOLAS W. ALEXOS	Director	January 3, 2006
Nicholas W. Alexos
/S/ SCOTT W. MEADER	Director	January 3, 2006
Scott W. Meader
/S/ GEORGE A. PEINADO	Director	January 3, 2006
George A. Peinado
/S/ ROBIN P. SELATI	Director	January 3, 2006
Robin P. Selati

5

INDEX TO EXHIBITS

	Description	Located at Manually Numbered Page
(2)	PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION
	2.1Stock Purchase Agreement, dated as of May 11, 2004, among PF Management, Inc., the PF Management, Inc. Shareholders, David R. Clark, as Shareholders Agent, and Pierre Holding Corp. (filed as Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission On May 17, 2004)	**
(3)(i)	ARTICLES OF INCORPORATION
	3(i).1Articles of Restatement of Pierre Foods, Inc., dated July 30, 2002 incorporating Restated Articles of Incorporation (filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on October 15, 2002)	**
	3(i).2Articles of Merger of Pierre Foods, Inc. and Pierre Merger Corp., dated June 30, 2004 (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	3(i).3Articles of Organization of Fresh Foods Properties, LLC, dated December 10, 1997 (filed as Exhibit 3.4 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(3)(ii)	BYLAWS
	3(ii).1Amended and Restated Bylaws of Pierre Foods, Inc., dated September 18, 2002 (filed as Exhibit 3.3 to the Amendment No. 2 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on February 3, 2005)	**
	3(ii).2Operating Agreement of Fresh Foods Properties, LLC (filed as Exhibit 3.5 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(4)	INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
	4.1Indenture, dated as of June 30, 2004, between Pierre Merger Corp. and U.S. Bank National Association, Trustee (filed as Exhibit 4.1— to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	4.2First Supplemental Indenture, dated as of June 30, 2004, among Pierre Foods, Inc., Fresh Foods Properties, LLC and U.S. Bank National Association, Trustee (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**

6

	4.3Registration Rights Agreement, dated June 30, 2004, among Pierre Foods, Inc. and Banc of America LLC and Wachovia Capital Markets, LLC (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(10)	MATERIAL CONTRACTS
	Management Contracts and Compensatory Plans or Arrangements
	10.1Third Amendment to Incentive Agreement, dated as of May 11, 2004, between the Company and Norbert E. Woodhams (filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on May 17, 2004)	**
	10.2Amendment to Employment Agreement, dated as of May 11, 2004, between the Company and Robert C. Naylor (filed as Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on May 17, 2004)	**
	10.3Pierre Foods, Inc. Fiscal 2006 Executive Incentive Compensation Plan (filed as Exhibit 10.1 to the Company Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 15, 2005)	**
	10.4Employment Agreement dated as of May 11, 2004 between Pierre Holding Corp. and Norbert E. Woodhams (filed as Exhibit 10.15 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.5Employment Agreement dated as of May 11, 2004 between Pierre Holding Corp. and Robert C. Naylor (filed as Exhibit 10.16 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.6Deferred Compensation Plan (filed as Exhibit 10.17 to the Company’s Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.7Pierre Holding Corp. 2004 Stock Option Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on January 18, 2005)	**
	10.8Form of Option Agreement (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on January 18, 2005)	**
	Other Material Contracts
	10.9Assignment and Assumption and Subordination Agreement dated as of March 8, 2004, between Pierre Foods, Inc. and PF Management, Inc. (filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 9, 2004)	**
	10.10Termination Agreement, dated as of March 8, 2004, between Columbia Hill Aviation, LLC and Pierre Foods, Inc. (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission March 9, 2004)	**

7

10.11Termination Agreement, dated as of March 8, 2004, between PF Purchasing, LLC and Pierre Foods, Inc. (filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission March 9, 2004)	**
10.12Termination Agreement, dated as of March 8, 2004, between PF Distribution, LLC and Pierre Foods, Inc. (filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission March 9, 2004)	**
10.13Amended and Restated Agreement, dated as of May 21, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.14Amended and Restated Formula Development Agreement, dated as of May 21, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.16First Amendment Agreement, dated as of June 27, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C
10.17Amended and Restated Agreement, dated as of May 21, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.18Amended and Restated Formula Development Agreement, dated as of May 21, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 7, 2005)	**C
10.19First Amendment Agreement, dated as of June 27, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.13 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C
10.22Second Amendment Agreement, dated as of September 30, 2004, between the Company and Carl Karcher Enterprises, Inc. (filed as Exhibit 10.14 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C
10.23Second Amendment Agreement, dated as of September 30, 2004, between the Company and Hardee’s Food Systems, Inc. (filed as Exhibit 10.15 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 2, 2004)	**C

8

	10.20Credit Agreement, dated as of June 30, 2004, among Pierre Merger Corp., Wachovia Bank, National Association, as administrative and collateral agent, Wachovia Capital Markets, LLC and Banc of America Securities LLC, as joint lead arrangers and book-running managers, and a syndicate of banks, financial institutions and other institutional lenders party thereto (filed as Exhibit 10.14 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
	10.21Tax Sharing and Indemnification Agreement, dated as of May 11, 2004, among PF Management, Inc., the PF Management, Inc. Shareholders, David R. Clark as Shareholders Agent and Pierre Holding Corp. (filed as Exhibit 10.18 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 27, 2004)	**
(12)	CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES	*
(21)	SUBSIDIARIES OF THE REGISTRANT	*
	21Subsidiaries of Pierre Foods, Inc.	*
(31)	RULE 13a - 14(a)/15(d)-14(a) CERTIFICATIONS
	31.1Rule 13a-14(a) Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002	—
	31.2Rule 13a-14(a) Certification of Principal Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002	—
(32)	SECTION 1350 CERTIFICATION
	32Section 1350 Certification of Chief Executive Officer and Principal Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002	—

*   Indicates that Exhibit was filed with the Original Filing.

**  Indicates that Exhibit is incorporated by reference in this Report from a previous filing with the Commission.

“C”  Confidential treatment requested as to certain portions, which have been filed separately with the Commission.

9

INDEX TO FINANCIAL STATEMENTS

PIERRE FOODS, INC.

CONSOLIDATED FINANCIAL STATEMENTS:

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Pierre Foods, Inc.

Cincinnati, Ohio

We have audited the accompanying consolidated balance sheets of Pierre Foods, Inc. and subsidiaries (the “Company”) as of March 5, 2005 and March 6, 2004, and the related consolidated statements of operations, shareholder’s equity, and cash flows for the periods from July 1, 2004 through March 5, 2005 and March 7, 2004 through June 30, 2004 and the years ended March 6, 2004 and March 1, 2003.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 5, 2005 and March 6, 2004, and the results of its operations and its cash flows for the periods from July 1, 2004 through March 5, 2005 and March 7, 2004 through June 30, 2004 and the years ended March 6, 2004 and March 1, 2003 in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Cincinnati, Ohio

June 2, 2005

F-2

PIERRE FOODS, INC.

CONSOLIDATED BALANCE SHEETS

	Successor			Predecessor
	March 5,			March 6,
	2005			2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	204,865
Certificate of deposit	—			1,240,000
Accounts receivable, net	29,547,340			25,641,608
Inventories	45,448,224			38,974,018
Refundable income taxes	2,906,502			—
Deferred income taxes	5,764,233			3,569,766
Prepaid expenses and other current assets (includes related party amounts of $24,000 at March 6, 2004)	2,954,942			3,236,867
Total current assets	86,621,241			72,867,124
PROPERTY, PLANT AND EQUIPMENT, NET	56,284,482			60,695,455
OTHER ASSETS:
Other intangibles, net	158,223,072			38,808,636
Goodwill	186,535,050			—
Note receivable-related party	—			993,247
Deferred income taxes	—			482,215
Deferred loan origination fees, net	8,923,688			1,627,601
Other	—			296,694
Total other assets	353,681,810			42,208,393
Total Assets	$	496,587,533		$	175,770,972
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt	$	421,713		$	1,628,276
Trade accounts payable	11,172,350			7,170,004
Accrued payroll and payroll taxes	4,663,372			5,745,950
Accrued interest	1,832,374			3,242,623
Accrued promotions	3,499,230			3,064,769
Income taxes payable	—			39,248
Accrued taxes (other than income and payroll)	949,572			901,693
Other accrued liabilities (includes related party amounts of $4,503,219 in fiscal 2004)	1,420,979			4,964,703
Total current liabilities	23,959,590			26,757,266
LONG-TERM DEBT, less current installments	263,158,658			136,772,418
OBLIGATION OF SPECIAL PURPOSE ENTITY	—			5,293,342
DEFERRED INCOME TAXES	52,929,534			—
OTHER LONG-TERM LIABILITIES	10,517,166			327,411
COMMITMENTS AND CONTINGENCIES	—			—
Total liabilities	350,564,948			169,150,437
SHAREHOLDER’S EQUITY:
Common stock - Class A, 100,000 shares authorized, issued and outstanding at March 5, 2005 and March 6, 2004	150,351,972			29,438,172
Accumulated Deficit	(4,329,387		)	(17,817,637		)
Note receivable-related party	—			(5,000,000		)
Total shareholder’s equity	146,022,585			6,620,535
Total Liabilities and Shareholder’s Equity	$	496,587,533		$	175,770,972

See accompanying notes to consolidated financial statements.

F-3

PIERRE FOODS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Successor			Predecessor
	Fiscal 2005			Fiscal 2005
	For the Period			For the Period			Fiscal 2004			Fiscal 2003
	July 1, 2004			March 7, 2004			For the Year			For the Year
	Through			Through			Ended			Ended
	March 5, 2005			June 30,2004			March 6, 2004			March 1, 2003
REVENUES, NET:	$	294,867,222		$	115,548,564		$	358,549,316		$	276,338,823
COSTS AND EXPENSES:
Cost of goods sold (includes net related party transactions totaling $5,295,036,and $4,283,025 in fiscal 2004 and 2003, respectively)	217,322,673			87,025,521			254,235,016			184,091,572
Selling, general and administrative expenses (includes related party transactions totaling $32,487,545 and $23,155,405 in fiscal 2004 and 2003, respectively)	39,827,160			26,446,857			79,982,134			71,351,817
Net loss on disposition of property, plant and equipment	5,372			339,921			11,042			88,937
Depreciation and amortization	23,169,814			1,544,903			4,604,954			4,124,641
Total costs and expenses	280,325,019			115,357,202			338,833,146			259,656,967
OPERATING INCOME	14,542,203			191,362			19,716,170			16,681,856
OTHER INCOME (EXPENSE):
Interest expense	(19,493,148		)	(6,537,519		)	(16,979,028		)	(14,228,220		)
Other income, net (includes related party income totaling $371,610 in fiscal 2003)	24,334			1,784			—			446,825
Other expense, net	(19,468,814		)	(6,535,735		)	(16,979,028		)	(13,781,395		)
INCOME (LOSS) BEFORE INCOME TAX AND CUMMULATIVE EFFECT OF ACCOUNTING CHANGE	(4,926,611		)	(6,344,373		)	2,737,142			2,900,461
INCOME TAX (PROVISION) BENEFIT	597,224			2,080,338			(1,303,347		)	(1,122,478		)
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE	(4,329,387		)	(4,264,035		)	1,433,795			1,777,983
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (net of income income tax benefit of $10,415,037)	—			—			—			(18,604,534		)
NET INCOME (LOSS)	$	(4,329,387	)	$	(4,264,035	)	$	1,433,795		$	(16,826,551	)
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED
Income (loss) before cumulative effect of accounting change	$	(43.29	)	$	(42.64	)	$	14.34		$	17.78
Cumulative effect of accounting change	—			—			—			(186.05		)
Net income (loss) per common share - basic and diluted	$	(43.29	)	$	(42.64	)	$	14.34		$	(168.27	)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED	100,000			100,000			100,000			100,000

See accompanying notes to consolidated financial statements.

F-4

PIERRE FOODS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

	Common			Additional			Retained			Receivable			Total
	Stock			Paid in			Earnings			From			Shareholder’s
	Class A			Capital			(Deficit)			Shareholder			Equity
PREDECESSOR PIERRE BALANCE AT MARCH 2, 2002	$	—		$	23,656,692		$	2,768,845		$	(5,000,000	)	$	27,207,017
Recapitalization	29,438,172			(23,656,692		)	—			—			—
Net loss	—			—			(16,826,551		)	—			(16,826,551		)
Distributions of special purpose entity	—			—			(1,382,557		)	—			(1,382,557		)
PREDECESSOR PIERRE BALANCE AT MARCH 1, 2003	29,438,172			—			(15,440,263		)	(5,000,000		)	8,997,909
Net income	—			—			1,433,795			—			1,433,795
Distribution to parent - tax benefit	—			—			(3,578,169		)	—			(3,578,169		)
Distributions of special purpose entity	—			—			(233,000		)	—			(233,000		)
PREDECESSOR PIERRE BALANCE AT MARCH 6, 2004	29,438,172			—			(17,817,637		)	(5,000,000		)	6,620,535
Net loss	—			—			(4,264,035		)	—			(4,264,035		)
Transaction with common shareholder	(339,639		)	—			(11,900,276		)	—			(12,239,915		)
PREDECESSOR PIERRE BALANCE AT JUNE 30, 2004	29,098,533			—			(33,981,948		)	(5,000,000		)	(9,883,415		)
PURCHASE ACCOUNTING ADJUSTMENT	(29,098,533		)	—			33,981,948			5,000,000			9,883,415
SUCCESSOR PIERRE PURCHASE ALLOCATION	150,023,000			—			—			—			150,023,000
Net loss	—			—			(4,329,387		)	—			(4,329,387		)
Contribution from parent	350,000												350,000
Expenses paid on behalf of parent	(21,028		)	—			—			—			(21,028		)
SUCCESSOR PIERRE BALANCE AT MARCH 5, 2005	$	150,351,972		$	—		$	(4,329,387	)	$	—		$	146,022,585

See accompanying notes to consolidated financial statements.

F-5

PIERRE FOODS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Successor			Predecessor
	Fiscal 2005			Fiscal 2005
	For the Period			For the Period			Fiscal 2004			Fiscal 2003
	July 1, 2004			March 7, 2004			For the Year			For the Year
	Through			Through			Ended			Ended
	March 5, 2005			June 30, 2004			March 6, 2004			March 1, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(4,329,387	)	$	(4,264,035	)	$	1,433,795		$	(16,826,551	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Cumulative effect of accounting change	—			—			—			18,604,534
Depreciation and amortization	23,169,814			1,544,903			4,604,954			4,124,641
Amortization of deferred loan origination fees	1,029,109			716,478			769,587			746,262
Deferred income taxes	370,083			(2,080,338		)	1,296,247			1,286,191
Write-off of deferred loan origination fees	4,283,122			—			1,233,530			—
Net loss on disposition of assets (net of writedowns)	5,372			339,921			11,042			88,937
Decrease in other assets	—			296,694			72,806			79,831
Increase (decrease) in other long-term liabilities	199,565			(94,477		)	(366,339		)	(338,946		)
Changes in operating assets and liabilities providing (using) cash:
Receivables	(9,566,451		)	5,660,719			(1,987,250		)	(2,170,878		)
Inventories	458,272			(4,911,529		)	(6,389,241		)	(8,731,922		)
Refundable income taxes, prepaid expenses and other assets	(3,636,860		)	949,584			193,708			(1,726,478		)
Trade accounts payable and other accrued liabilities	867,917			2,227,855			2,388,092			4,906,862
Total adjustments	17,179,943			4,649,810			1,827,136			16,869,034
Net cash provided by operating activities	12,850,556			385,775			3,260,931			42,483
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of assets to others	—			—			278,400			83,000
Capital expenditures	(3,677,259		)	(2,084,160		)	(10,040,768		)	(16,216,292		)
Net cash used in investing activities	(3,677,259		)	(2,084,160		)	(9,762,368		)	(16,133,292		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) of revolving credit agreement	(17,702,886		)	7,712,901			(1,805,161		)	15,085,147
Borrowings under equipment term loan subline	—			—			5,000,000			—
Borrowings under real estate term loan subline	—			—			5,000,000			—
Principal payments on long-term debt	(16,169,945		)	(673,526		)	(849,257		)	(311,967		)
Loan origination fees	(9,952,798		)	(3,371,999		)	(680,609		)	(1,603,467		)
Payoff of Old Notes	(115,000,000		)	—			—			—
Issuance of New Notes	125,000,000			—			—			—
Borrowings under new term loan	150,000,000			—			—			—
Repayment of debt in conjunction with the Acquisition	(29,048,031		)	—			—			—
Termination of certificate of deposit	1,262,245			—			—			—
Return of capital to parent	(100,085,738		)	—			—			—
Distribution of special purpose leasing entity	—						(233,000		)	(1,382,557		)
Contribution from parent	350,000			—			—			—
Net cash provided by (used in) financing activities	(11,347,153		)	3,667,376			6,431,973			11,787,156
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(2,173,856		)	1,968,991			(69,464		)	(4,303,653		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	2,173,856			204,865			274,329			4,577,982
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	2,173,856		$	204,865		$	274,329

See accompanying notes to consolidated financial statements.

F-6

PIERRE FOODS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.BASIS OF PRESENTATION AND ACQUISITION

Description of Business.  Pierre Foods, Inc. (the “Company” or “Pierre”) is a manufacturer and marketer of high-quality, differentiated processed food solutions, focusing on formed, pre-cooked protein products and hand-held convenience sandwiches.  The Company’s products include beef, poultry, pork and bakery items.  Pierre offers comprehensive food solutions to its customers, including proprietary product development, special ingredients and recipes, as well as custom packaging and marketing programs.  Pierre’s pre-cooked proteins include flamebroiled burger patties, homestyle meatloaf, chicken strips and boneless, barbecued pork rib products.  Pierre markets its pre-cooked protein products to a broad array of customers that includes restaurant chains, schools and other foodservice providers under a variety of brand names, including Pierre™, Fast Choice®, Rib-B-Q®, Hot ‘n’ Ready® and Big AZ®.

The Company’s predecessor was founded as a North Carolina corporation in 1966 to own and operate restaurants. The Company’s food processing business was originally developed to support its restaurants, but grew independently to become its principal business. In recognition of this fact, in May 1998, the Company, then known as “WSMP, Inc.,” changed its name to “Fresh Foods, Inc.” In June 1998, the Company consummated the purchase of substantially all of the business in Cincinnati, Ohio, and a portion of the business in Caryville, Tennessee (collectively, “Pierre Cincinnati”), conducted by the Pierre Foods Division of Hudson Foods, Inc. (“Hudson”), a subsidiary of Tyson Foods, Inc. (“Tyson”). Pierre Cincinnati was a value-added food processor selling principally to the foodservice and packaged foods markets.  In September 1998, the Company implemented a tax-exempt reorganization of its corporate structure. The reorganization established Fresh Foods, Inc. as a holding company, consolidated 32 subsidiaries into 12 subsidiaries and separated the Company’s food processing and restaurant businesses.  In July 1999, the Company sold its ham curing business, and in October 1999, the Company disposed of its restaurant segment.  Subsequent to the disposal of the restaurant segment, Pierre operates solely in the food processing business, its sole segment. In December 1999, the Company implemented another tax-exempt reorganization of its corporate structure to further streamline its operations into one subsidiary. In July 2000, the Company, then known as “Fresh Foods, Inc.,” changed its name to “Pierre Foods, Inc.”

Management Buyout.  On July 26, 2002, management completed a going private transaction in which the Company’s shareholders approved the Amended and Restated Agreement and Plan of Share Exchange dated as of December 20, 2001, and amended as of June 20, 2002.  This going-private transaction resulted in the Company becoming a wholly-owned subsidiary of PF Management, Inc. (“PFMI”); accordingly, there is no public market fort the Company’s common stock.  The Company had 5,781,480 shares issued and outstanding immediately before the closing and 2,500,000 shares of preferred stock authorized, none of which were outstanding.  After the closing, the Company amended and restated its Articles of Incorporation to authorize the issuance of up to 100,000 shares of Class A common stock as the only authorized class of capital stock of the Company.  All 100,000 shares of authorized common stock were issued to PFMI.  All per share amounts have been retroactively restated in the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements for all periods presented to reflect the transaction.

Restructuring.  On March 8, 2004, following a consent solicitation in which consents of holders of $112.4 million in aggregate principal amount of the Company’s outstanding Notes (“Old Notes”), representing 97.74% of the outstanding Notes, consented to a Fourth Supplemental Indenture between the Company and the Trustee thereunder, the Company entered into the Fourth Supplemental Indenture with the Trustee.  Among other things, the Fourth Supplemental Indenture increased the annual interest rate on the Old Notes from 10.75% to 12.25% through March 31, 2005 and 13.25% thereafter; required the payment of a cash consent fee of $3.5 million (3% of the principal amount of Old Notes held by each consenting noteholder); granted to the noteholders liens on the assets of the Company and its subsidiaries, such liens being junior to the senior liens securing the Company’s credit facility, granted to noteholders a repurchase right allowing all of the noteholders to require the Company to repurchase their Old Notes at par plus accrued interest on March 31, 2005; provided for the payment of a portion of certain cash flow of the Company (referred to as “excess cash”) to reduce the principal amount of Old Notes outstanding at the end of the Company’s fiscal years; added restrictive covenants limiting the compensation payable to certain senior executives of the Company and limiting future related party transactions; required the termination of all related party transactions, except for certain specifically-permitted transactions; provided for the assumption by the Company of approximately $15.3 million of subordinated debt of PFMI, the sole shareholder of the Company, required the Company to comply with certain corporate governance standards, including appointing an independent director acceptable to the Company and the noteholders to its board and hiring an independent auditor to monitor the Company’s compliance with the Indenture; and waived any and all defaults of the Indenture existing as of March 8, 2004.

F-7

The restrictive covenants limiting compensation payable to certain senior executives of the Company permitted for bonus payments to those executives above the compensation limitations.  The bonus payments were based on the profitability of the Company and cash payments made on the Old Notes.

Concurrently with the execution of the Fourth Supplemental Indenture, the Company took title to an aircraft transferred from a related party subject to $5.6 million of existing purchase money debt; assumed $15.3 million of debt from PFMI; cancelled the $1.0 million related party note receivable against the debt assumed from PFMI; cancelled the balances owed by the Company to certain related parties, as follows: $0.5 million owed to Columbia Hill Aviation; $3.5 million owed to PF Purchasing; $0.5 million owed to PF Distribution; and assumed the operating leases of PF Distribution in connection with the Fourth Supplemental Indenture.

In this document, unless the context otherwise requires, the term “Company” refers to Pierre Foods, Inc. and its current and former subsidiaries.  As a result of the Acquisition discussed below, on June 30, 2004, the Company’s fiscal year ended March 5, 2005 is comprised of two short periods.  The periods of March 7, 2004 through June 30, 2004 and July 1, 2004 through March 5, 2005 are referred to “predecessor fiscal 2005” and “successor fiscal 2005,” respectively.  These two short periods collectively are referred to as “predecessor fiscal 2005 and successor fiscal 2005 combined.”   The Company’s fiscal year ended March 6, 2004 is referred to as “predecessor fiscal 2004” and its fiscal year ended March 1, 2003 is referred to as “predecessor fiscal 2003.”

Acquisition.  On June 30, 2004, Pierre Holding Corp. (“Holding”) acquired 100% of the shares of the Company’s parent, PF Management, Inc. (“PFMI”).  Such acquisition is referred to herein as the “Acquisition”.  In connection with the Acquisition, the following occurred:

•The Company merged with Pierre Merger Corp., an affiliate of Madison Dearborn Partners, LLC (“MDP”), with the Company being the surviving corporation following the merger.

•The Company terminated its three-year variable-rate $40 million revolving credit facility and obtained a $190 million credit facility from a new lender which includes a six-year variable-rate $150 million term loan and a five-year variable rate $40 million revolving credit facility with a $10 million letter of credit subfacility.  See Note 7, “Financing Arrangements,” to the Consolidated Financial Statements.

•The Company terminated its few remaining related party transactions (described in Note 16, “Transactions with Related Parties,” to the Consolidated Financial Statements), transferred miscellaneous assets to Messrs. Richardson and Clark, the Company’s former Chairman and Vice Chairman, respectively, including the Company’s airplane, which was distributed to Mr. Richardson.

•Pierre Merger Corp. closed a cash tender offer and consent solicitation for the Company’s Old Notes.  Holders of approximately $106.3 million, or approximately 92%, of aggregate principal amount of the Company’s outstanding Old Notes tendered their Old Notes.  The Company, as the surviving corporation of the merger with Pierre Merger Corp., accepted and paid for all Old Notes tendered pursuant to the tender offer.  A redemption notice for the Old Notes not tendered (approximately $8.7 million) was issued on June 30, 2004 and these Old Notes were redeemed on July 20, 2004.

•The Company issued $125.0 million of 9-7/8% Senior Subordinated Notes due 2012 (the “New Notes”). The proceeds of the New Notes, together with the equity contributions from MDP and certain members of management (as described below) and borrowings under the Company’s new senior credit facility, were used to finance the Acquisition and to repay outstanding indebtedness.

•The Company’s President and Chief Executive Officer, Norbert E. Woodhams, and its Senior Vice President of Sales, Marketing and New Product Development, Robert C. Naylor, signed employment agreements committing them to continue working for the Company after the Acquisition. The stated term of employment for each executive is one year, but each agreement will renew automatically and continuously year-to-year unless terminated.

•The management investors, the Company’s President and Chief Executive Officer, Norbert E. Woodhams, and its Senior Vice President of Sales, Marketing and New Product Development, Robert C. Naylor, invested approximately $4.9 million in a deferred compensation plan.  This deferred compensation plan is funded through a rabbi trust that owns preferred stock of Holding with an aggregate liquidation value of approximately $4.9 million.

F-8

•In addition to the base purchase price, the stock purchase agreement entitled the selling shareholders to earn-out cash payments, which included an additional aggregate amount of $13.0 million in the event that, at the end of any fiscal quarter during the fiscal year ended March 5, 2005, the Company achieved EBITDA (as defined in the stock purchase agreement) for the prior four fiscal quarters then ended of $56.0 million or more.  No portion of the additional amount is payable as of March 5, 2005, as this EBITDA target was not met.

The following table presents unaudited pro forma information for predecessor fiscal 2004, and for predecessor fiscal 2005 and successor fiscal 2005 combined, as if the Acquisition had occurred on March 2, 2003 and March 7, 2004, as applicable.

	Predecessor Fiscal 2004						Predecessor and Successor Fiscal 2005 Combined
	Actual			Pro Forma			Actual			Pro Forma
Revenues	$		358,549,316	$	358,445,189		$	410,415,786		$	410,407,182
Net income (loss)	$	1,433,795		$	(3,668,629	)	$	(8,593,422	)	$	(11,800,203	)

These unaudited pro forma results, based on assumptions deemed appropriate by the Company’s management, have been prepared for informational purposes only and are not necessarily indicative of the amounts that would have resulted if the Company had been acquired by MDP on March 2, 2003 or March 7, 2004, as applicable. Purchase related adjustments to the results of operations include the effects on depreciation and amortization, interest expense, cost of goods sold and income taxes.

Included in these pro forma results are certain predecessor fees that the Company does not expect to incur in the future. These include professional fees, primarily related to the restructuring of the Fourth Supplemental Indenture on March 8, 2004 and the Management Buy Out on July 26, 2002. For predecessor fiscal 2004, these fees amounted to $2,392,660.  For predecessor fiscal 2005 and successor fiscal 2005 combined, these fees amounted to $2,591,989.

Other predecessor expenses included in these pro forma results that are no longer expected to be incurred include outside Board of Director fees, community relations and donations to our former shareholder’s alma mater.  For predecessor fiscal 2004 and for predecessor fiscal 2005 and successor fiscal 2005 combined, these fees amounted to $1,004,818 and $710,673, respectively.

Also included in the pro forma results for predecessor fiscal 2005 and successor fiscal 2005 combined are certain Acquisition expenses related to the sale of the Company to MDP. These transaction expenses include professional fees of $956,000 for predecessor fiscal 2005 and successor fiscal 2005 combined. Other predecessor fiscal 2005 and successor fiscal 2005 combined transaction expenses relating to the previous shareholders’ adviser amounted to $780,952. A termination payoff of the endorsement between the Company and Crawford Race Cars, LLC also resulted in expense in predecessor fiscal 2005 and successor fiscal 2005 combined amounting to $318,000 that is not expected to be incurred in the future.

The unaudited pro forma condensed consolidated financial statements reflect the Acquisition of the Company in accordance with Financial Accounting Standard No. 141 (“FAS 141”) —Business Combinations and Financial Accounting Standard No. 142 (“FAS 142”) —Goodwill and Other Intangible Assets.

F-9

The Acquisition was recorded under the purchase method of accounting. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value at the date of Acquisition. The allocation of the purchase price is as follows:

Current assets	$	75,727,665
Plant, property and equipment	57,857,942
Non-current assets	4,283,121
Goodwill	186,535,050
Other intangibles	175,900,000
Debt and other liabilities assumed	(239,899,080		)
Net assets acquired	$	260,404,698

The Company has obtained outside appraisals of acquired assets and liabilities in successor fiscal 2005. Deferred tax liabilities have been finalized based on the final allocation of the purchase price and the determination of the tax basis of the assets and liabilities acquired.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.  The accompanying consolidated financial statements include Pierre Foods, Inc. and subsidiaries, as well as the accounts of the special purpose leasing entity (see Note 16).  All intercompany transactions have been eliminated.

Fiscal Year. The Company operates on a 52-week or 53-week fiscal year ending on the first Saturday in March or if the last day of February is a Saturday, the last day of February.  Each quarter of the fiscal year contains 13 weeks except for the infrequent fiscal years with 53 weeks.  The results for predecessor fiscal 2005 and successor fiscal 2005 combined contain 52 weeks.  The results for predecessor fiscal 2004 contain 53 weeks.  The results for predecessor fiscal 2003 contain 52 weeks.

Cash and cash equivalents.  The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories.  Inventories are stated at the lower of cost (first-in, first-out) or market.

Property, Plant and Equipment.  Property, plant and equipment are stated at cost or fair value at date of acquisition.  Expenditures for maintenance and repairs which do not significantly extend the useful lives of assets are charged to operations whereas additions and betterments, including interest costs incurred during construction, which was not material for any year presented, are capitalized.

Depreciation of property, plant and equipment is provided over the estimated useful lives of the respective assets on the straight-line basis.  Leasehold improvements are depreciated over the shorter of their estimated useful lives or the terms of the respective leases.  Property under capital leases is amortized in accordance with the Company’s normal depreciation policy.  Depreciation expense, along with amortization of intangible assets, is recorded as a separate line item in the consolidated statements of operations.  Cost of goods sold and selling, general and administrative expenses exclude depreciation expense.

The Company evaluates the carrying values of long-lived assets for impairment by assessing recoverability based on forecasted operating cash flows on an undiscounted basis in accordance with SFAS 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” and determined no impairment existed at March 5, 2005, March 6, 2004 or March 1, 2003.

Goodwill and Other Intangible Assets.  In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS 142, “Goodwill and Other Intangible Assets,” which was effective for the fiscal year beginning March 3, 2002.  As prescribed under SFAS 142, the Company tested goodwill for impairment during fiscal 2003 using a two-step process.  The

F-10

first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the entity with its net asset value (or carrying amount), including goodwill.  If the fair value of the entity exceeds its net asset value, goodwill of the entity is considered not impaired and the second step of the goodwill impairment test is not needed.  If the net asset value of the entity exceeds the fair market value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test compares the implied fair value of the entity’s goodwill with the carrying amount of that goodwill.  If the carrying amount of the entity’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.  Subsequent to recognizing an impairment loss, the adjusted carrying amount of the intangible asset shall be its new accounting basis.  Reversal of a previously recognized impairment loss is prohibited.

During fiscal 2003, upon adoption of SFAS 142, the Company utilized a valuation technique based on market values of publicly-traded equity, as adjusted, plus publicly-owned subordinated notes, which were determined in conjunction with the management buyout in fiscal 2003.  The Company’s analysis showed that the carrying value of the goodwill exceeded its fair value, requiring the Company to determine the implied fair value of its goodwill.  Upon completion of that analysis, management determined that the entire net carrying value of its goodwill was impaired.  The carrying amount, $29.0 million, net of the related effect on income taxes, $10.4 million, was written-off by the Company and reported as the Cumulative Effect of an Accounting Change, net of income taxes in the statement of operations.

In conjunction with the Acquisition, the Company engaged an independent party to perform valuations for financial reporting purposes of the Company’s goodwill and other intangibles. Assets identified through this valuation process included goodwill, formulas, customer relationships, licensing agreements and certain trade names and trademarks.

The Company tests recorded goodwill and intangibles with indefinite lives for impairment at least annually. All other intangible assets with finite lives are amortized over their estimated economic or estimated useful lives. In addition, all other intangible assets are reviewed for impairment in accordance with SFAS 144.  Based on the Company’s review and the review performed by third parties, no impairment existed at March 5, 2005 or March 6, 2004.

The Company’s amortizable intangible assets are amortized using accelerated amortization methods that match the expected benefit derived from the assets. The accelerated amortization methods allocate amortization expense in proportion to each year’s expected revenues to the total expected revenues over the estimated useful lives of the assets.

Deferred Loan Origination Fees.  Deferred loan origination fees associated with the Company’s revolving credit facility and long-term debt are amortized based on the term of the respective agreements.  This amortization expense is included in interest expense.  Also included in interest expense, as a result of the Acquisition, is the write-off of deferred loan origination fees associated with the old debt structure.

Revenue Recognition.  Revenue from sales of food processed products is recorded at the time title transfers.  Standard shipping terms are FOB destination, therefore title passes at the time the product is delivered to the customer.  Revenue is recognized as the net amount to be received after deductions for estimated discounts, product returns and other allowances.  These estimates are based on historical trends and expected future payments (see also “Promotions” below).

Promotions.  Promotional expenses associated with rebates, marketing promotions and special pricing arrangements are recorded as a reduction of revenues or selling expense at the time the sale is recorded.  Certain of these expenses are estimated based on historical trends, expected future payments to be made under these programs and expected future customer deductions to be taken under these programs.  The Company believes the estimates recorded in the financial statements are reasonable estimates of the Company’s obligations under the programs.

Concentration of Credit Risk and Significant Customers.  Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company encounters a certain amount of credit risk as a result of a concentration of receivables among a few significant customers. Sales to the Company’s largest customer were approximately 25%, 24% and 11% of revenues for predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003, respectively.  Accounts receivable at March 5, 2005 and March 6, 2004 included receivables from the Company’s largest customer totaling $3.7 million and $2.8 million, respectively.

F-11

Stock-Based Compensation.  On June 30, 2004, Holding adopted a stock option plan, pursuant to which the Board of Directors of Holding may grant options to purchase an aggregate of 163,778 shares of common stock of Holding.  Such options may be granted to directors, employees and consultants of Holding and its subsidiaries, including the Company.  At March 5, 2005, options to purchase a total of 127,397 shares of common stock of Holding had been issued to members of management of the Company (the “Options”) and 36,381 were reserved for future issuance.  All outstanding Options were granted at $10 per share and expire ten years from the date of grant.  A portion of each outstanding Option vests daily on a pro-rata basis over a five-year period from the date of grant and the remaining portion of each outstanding Option vests seven years from the date of grant, subject to accelerated vesting based on the achievement of certain performance measures.

The Company treats the Options as stock-based employee compensation for employees of the Company.  As permitted under accounting principles generally accepted in the United States of America (“GAAP”), the Company accounts for the Options under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related Interpretations using the intrinsic value method.  Accordingly, no compensation expense has been recognized for the Options in its consolidated statements of operations.  Had compensation expense for the Options been determined in accordance with the minimum value approach as defined by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), the Company’s net income (loss) and earnings (loss) per share would have been the following (in thousands, except per share data):

	Successor Fiscal 2005
Net loss as reported	$	(4,329,387	)
Minimum value of stock-based compensation, net of tax	(27,099		)
Net loss pro forma	$	(4,356,486	)
Basic and diluted loss per share, as reported	$	(43.29	)
Basic and diluted loss per share, pro forma	$	(43.56	)

The Company engaged an independent third party to perform a valuation analysis of the Options.  The estimated total stock-based employee compensation expense was determined using the Black-Scholes-Merton option pricing model with the following weighted average assumptions:

Dividend yield	—
Term to expiration	10 years
Expected life	6.3 years
Expected volatility	—
Risk free interest rate	3.93		%
Weighted average minimum value per share of options granted	$	2.24

In December of 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revision 2004), “Share-Based Payment” (“SFAS 123R”) which is effective for the first annual reporting period beginning after December 15, 2005 for non-public companies (as defined in SFAS 123R). The new statement requires compensation expense associated with share-based payments to employees to be recognized in the financial statements based on their fair values.  Upon the adoption of SFAS 123R, the Company will be required to apply the provisions of the statement prospectively for any newly issued, modified or settled award after the date of initial adoption.  As the Company currently uses the intrinsic value method to value the Options, the fair value assigned to any newly issued, modified or settled awards after the adoption of SFAS 123R is expected to be significantly greater due to the differences in valuation methods.

F-12

Advertising Costs.  The Company expenses advertising costs as incurred.  Advertising expense for predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003 was $272,945, $558,689 and $652,927, respectively.

Research and Development.  The Company expenses research and development costs as incurred.  Research and development expense for predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003 was $1,650,000, $1,286,000 and $1,030,000, respectively.

Income Taxes.  Income taxes are provided for temporary differences between the tax and financial accounting bases of assets and liabilities using the asset and liability method.  The tax effects of such differences are reflected in the balance sheet at the enacted tax rate applicable to the years when such differences are scheduled to reverse.  The effect on deferred taxes of a change in tax rates is recognized in the period that includes the enactment date.

Distribution Expense.  The Company expenses distribution costs as incurred.  These costs include warehousing, fulfillment and freight costs, and are included in selling, general and administrative expense.  Distribution expense included in operations for predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003 was $22,372,599, $31,126,379 and $21,544,130, respectively (See Note 16).

Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant accounting estimates include sales discounts and promotional allowances, inventory reserves, insurance reserves, and useful lives assigned to intangible assets.  Actual results could differ from those estimates.

Going Concern Assumption.  Significant assumptions underlie the belief that the Company anticipates that its fiscal 2006 cash requirements for working capital and debt service will be met through a combination of funds provided by operations and borrowings under its new $40 million revolving credit facility, including, among other things, that there will be no material adverse developments in the business, liquidity or significant capital requirements of the Company.

New Accounting Pronouncements.  In December of 2003, the FASB issued FIN 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”), which replaces the same titled FIN 46 that was issued in January 2003. FIN 46R addresses how to identify variable interest entities and the criteria that requires a company to consolidate such entities in its financial statements. FIN 46R is effective for the first reporting period that ends after March 15, 2004. This statement did not have an impact on the Company’s financial statements.

In November 2004, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 151, “Inventory Costs—an amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. We will adopt the provisions of SFAS No. 151, effective March 5, 2006 for our fiscal 2007 consolidated financial statements. Management currently believes that adoption of the provisions of SFAS No. 151 will not have a material impact on our consolidated financial statements.

F-13

3.ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable consist of the following:

	March 5,		March 6,
	2005		2004
Accounts receivable:
Trade accounts receivable (less allowance for doubtful receivables of $279,763 and $353,543 at March 5, 2005 and March 6, 2004)	$	28,176,404	$	24,300,201
Other receivables	1,370,936		1,341,407
Total accounts receivable	$	29,547,340	$	25,641,608
Related party note receivable (includes accrued interest) (Note 16):	$	—	$	993,247
Total noncurrent note receivable	$	—	$	993,247

See Note 16 regarding a $5,000,000 note receivable from a previous shareholder presented as a reduction of shareholders’ equity at March 6, 2004.

The following is a summary of activity in the allowance for doubtful receivables for successor fiscal 2005, predecessor fiscal 2005, predecessor fiscal 2004 and predecessor fiscal 2003.

			Additions	Deduction
	Balance		Charged to	Amounts	Balance
	Beginning		Costs and	Charged	End of
	of Period		Expenses	Off-Net	Period
Successor fiscal 2005	$	0	306,247	26,484	$	279,763
Predecessor fiscal 2005	$	353,543	15,630	86,228	$	282,945
Predecessor fiscal 2004	$	309,741	507,077	463,275	$	353,543
Predecessor fiscal 2003	$	219,118	108,646	18,023	$	309,741

4.INVENTORIES

A summary of inventories, by major classification, follows:

	March 5,		March 6,
	2005		2004
Manufacturing supplies	$	1,684,290	$	1,572,212
Raw materials	6,530,663		5,427,936
Work in process	6,883		1,157
Finished goods	37,226,388		31,972,713
Total	$	45,448,224	$	38,974,018

F-14

5.PROPERTY, PLANT AND EQUIPMENT

The major components of property, plant and equipment are as follows:

	Estimated	March 5,		March 6,
	Useful Life	2005		2004
Land		$	1,620,000	$	1,270,025
Land improvements	10-20 years	37,840		585,729
Buildings	20-40 years	15,243,465		26,492,579
Leasehold improvements	5-20 years	—		1,145,737
Machinery and equipment	5-20 years	38,730,648		45,793,907
Machinery and equipment under capital leases	5-15 years	1,278,141		325,871
Furniture and fixtures	5-15 years	2,598,745		5,798,747
Furniture and fixtures under capital leases	5-15 years	291,557		58,102
Aircraft (Note 16)	16 years	—		6,200,000
Automotive equipment	2-5 years	171,567		644,926
Construction in progress		1,804,459		338,357
Total		61,776,422		88,653,980
Less accumulated depreciation and amortization		5,491,940		27,958,525
Property, plant and equipment, net		$	56,284,482	$	60,695,455

F-15

6. GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying value of goodwill and the gross carrying value and accumulated amortization of other intangible assets are as follows:

	As of March 5, 2005
			Gross		Expense and		Net
	Useful		Carrying		Accumulated		Carrying
	Life		Amount		Amortization		Amount
Amortizable intangible assets:
Formulas	15 years		$	95,000,000	$	10,380,233	$	84,619,767
Tradename and trademarks	12-20 years		20,100,000		1,409,337		18,690,663
Customer relationships	12 years		28,500,000		4,851,794		23,648,206
Licensing agreements	10 years		12,100,000		1,035,564		11,064,436
Total amortizable intangible assets			$	155,700,000	$	17,676,928	$	138,023,072
	As of March 5, 2005				As of March 6, 2004
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
Unamortizable intangible assets:
Tradename	$	20,200,000	$	—	$	38,808,636	$	—
Goodwill	186,535,050		—		—		—
Total unamortizable intangible assets	$	206,735,050	$	—	$	38,808,636	$	—

The future amortization of other intangible assets (dollars in thousands) for the next five fiscal years is estimated to be as follows:

	2006		2007		2008		2009		2010
Formulas	$	14,300	$	12,671	$	11,165	$	9,761	$	8,468
Tradename and trademarks	2,024		1,919		1,821		1,732		1,646
Customer relationships	5,376		4,011		3,358		2,874		2,391
Licensing agreements	1,678		1,569		1,495		1,426		1,361

F-16

7.  FINANCING ARRANGEMENTS

Long-term debt is comprised of the following:

	March 5, 2005		March 6, 2004
12.25% Senior Notes, interest payable on June 1 and December 1 of each year, maturing on June 1, 2006, (“Old Notes”)	$	—	$	115,000,000
9.875% Senior Notes, interest payable on January 15 and July 15 of each year, maturing on July 15, 2012	125,000,000		—
$150 million term loan, with floating interest rates maturing 2010	136,500,000		—
New revolving line of credit, maximum borrowings of $40 million with floating interest rates maturing 2009	790,000		—
Former revolving line of credit, maximum borrowings of $40 million with floating interest rates maturing 2007	—		13,279,985
5.25% Term loan subline-equipment	—		4,583,339
5.25% Term loan subline-real estate	—		4,708,331
Aircraft note payable-variable interest rate	—		5,606,685
6% Note payable maturing 2008	—		270,983
0.0% to 11.5% capitalized lease obligations maturing through 2010(Note 9)	1,290,371		244,713
Total long-term debt	263,580,371		143,694,036
Less current installments	421,713		1,628,276
Long-term debt, less current installments	$	263,158,658	$	142,065,760

On March 8, 2004, following a consent solicitation in which consents of holders of $112.4 million in aggregate principal amount of the Company’s Old Notes, representing 97.74% of the outstanding Old Notes, consented to a Fourth Supplemental Indenture between the Company and U.S. Bank National Association, as trustee (the “Trustee”), the Company entered into the Fourth Supplemental Indenture with the Trustee.  Concurrently with the execution of the Fourth Supplemental Indenture the Company took title to an aircraft transferred from a related party subject to $5.6 million of existing purchase money debt; cancelled the $1.0 million related party note receivable from its principal shareholders; cancelled the balances owed by the Company to certain related parties, as follows: $0.5 million owed to Columbia Hill Aviation; $3.5 million owed to PF Purchasing and $0.5 million owed to PF Distribution; and assumed the operating leases of PF Distribution in connection with the Fourth Supplemental Indenture. Minimum lease payments on the former PF Distribution operating leases were scheduled to be $3.0 million during fiscal year 2005, $2.9 million during fiscal year 2006 and $0.5 million during fiscal year 2007. The Company assumed $15.3 million of subordinated debt of PFMI the sole shareholder of the Company, in connection with the execution of the Fourth Supplemental Indenture and cancelled the $1.0 million related party note receivable against the debt assumed from PFMI.

On June 30, 2004, the shareholders of PFMI closed the sale of their shares of stock of PFMI to Holding See Note 1, “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements.  Effective June 30, 2004, the Company terminated its three-year variable-rate $40 million revolving credit facility.  Existing debt issuance costs related to the Company’s former $40 million facility in the amount of $0.5 million and a prepayment penalty paid to the former lender in the amount of $0.4 million were charged to interest expense.  Also effective June 30, 2004, the Company obtained a $190 million credit facility from a new lender which includes a six-year variable-rate $150 million term loan, a five-year variable rate $40 million revolving credit facility and a $10 million letter of credit subfacility.  Funds available under this new facility are available for working capital requirements, permitted investments and general corporate purposes.  Borrowings under the new facility bear interest at floating rates based upon the interest rate option selected from time to time by the Company and are secured by a first-priority security interest in substantially all of the Company’s assets.  The interest rate for borrowings under

F-17

the new revolving credit facility and the new term loan at March 5, 2005 was 7.5% (prime plus 1.75%).  Repayment of borrowings under the term loan was initially $375,000 per quarter, which began on September 4, 2004, with a balloon payment of $141.4 million due on June 5, 2010.  In addition to the scheduled quarterly payment, prepayments on the term loan totaling $12.4 million were made during successor fiscal 2005.  These prepayments have satisfied the scheduled quarterly payment requirements, therefore, the remaining outstanding balance of $136.5 million as of March 5, 2005 is due on June 5, 2010.  The maturity date of the $40 million revolving credit facility is June 30, 2009.  In addition, the Company is required to satisfy certain financial covenants regarding cash flow and capital expenditures.

Also in conjunction with the Acquisition, the Company issued $125.0 million of 9⁷/₈% Senior Subordinated Notes due 2012 (the “New Notes”). The proceeds of the New Notes, together with the equity contributions from MDP and certain members of management and borrowings under our new senior credit facility, were used to finance the Acquisition of the Company and to repay outstanding indebtedness, including paying off debt of PFMI assumed by the Company under the Fourth Supplemental Indenture (except capital leases), paying for the Old Notes tendered in connection with the tender offer described in Note 1, “Basis of Presentation and Acquisition” and redeeming the Old Notes not tendered.  As of March 5, 2005, the Company had borrowing availability of approximately $34.7 million under its revolving credit facility.

Long-Term Debt Maturities, Including Capital Leases (Note 9)
2006		2007		2008		2009		2010		Thereafter		Total
$	421,713	$	229,171	$	190,293	$	167,576	$	965,452	$	261,606,166	$	263,580,371

On March 8, 2004, the Company took title to an aircraft that was transferred from a special purpose entity owned by its former shareholders, subject to an existing seven year variable purchase rate note payable, due in monthly installments with a balloon payment due in December 2008 (See Note 16).   Subsequently, as a result of the Acquisition, the aircraft was distributed to a former shareholder.

	March 6, 2004
Obligation of special purpose entity	$	5,606,686
Less current installments	313,344
Obligation of special purpose entity, less current installments	$	5,293,342

F-18

8.INCOME TAXES

The income tax provision (benefit) is summarized as follows:

	Successor			Predecessor
	Fiscal 2005			Fiscal 2005
	For the Period			For the Period			Fiscal 2004		Fiscal 2003
	July 1, 2004			March 7, 2004			For the Year		For the Year
	Through			Through			Ended		Ended
	March 5, 2005			June 30,2004			March 6, 2004		March 1, 2003
Current:
Federal	$	(968,107	)	$	—		$	—	$	(232,761	)
State	800			—			7,100		69,048
Total current	(967,307		)	—			7,100		(163,713		)
Deferred:
Federal	(508,731		)	(1,946,381		)	1,077,657		1,161,298
State	878,814			(133,957		)	218,590		124,893
Total deferred	370,083			(2,080,338		)	1,296,247		1,286,191
Total provision (benefit)	$	(597,224	)	$	(2,080,338	)	$	1,303,347	$	1,122,478

Actual income tax provision (benefit) are different from amounts computed by applying a statutory federal income tax rate to income or loss.  The computed amount is reconciled to total income tax provision (benefit).

	Successor					Predecessor
	Fiscal 2005					Fiscal 2005
	For the Period					For the Period					Fiscal 2004					Fiscal 2003
	July 1, 2004					March 7, 2004					For the Year					For the Year
	Through					Through					Ended					Ended
	March 5, 2005					June 30, 2004					March 6, 2004					March 1, 2003
				Percent of					Percent of					Percent of					Percent of
	Amount			Pretax Income		Amount			Pretax Income		Amount			Pretax Income		Amount			Pretax Income
Computed provision at statutory rate	$	(1,724,314	)	35.0	%	$	(2,157,087	)	34.0	%	$	930,628		34.0	%	$	986,156		34.0	%
Tax effect resulting from:
State and local income taxes, net of federal tax provision	(195,884		)	4.0		119,372			(1.9	)	214,720			7.8		128,001			4.4
Change in estimated effective tax rate	1,121,312			(22.8	)	—					—					—
General business credit expired	76,143			(1.6	)	—					—					—
Compensation limitation	—					—					—					18,360			0.6
Income of Columbia Hill Aviation	—					—					(260,504		)	(9.5	)	(403,663		)	(13.9	)
Meals and entertainment	—					—			359,165		13.1			386,830		13.3
Other permanent differences	125,519			(2.5	)	(42,623		)	0.7		59,338			2.2		6,794			0.3
Income tax provision	$	(597,224	)	12.1	%	$	(2,080,338	)	32.8	%	$	1,303,347		47.6	%	$	1,122,478		38.7	%

F-19

The approximate tax effect of each type of temporary difference and carryforward that gave rise to the Company’s deferred income tax assets and liabilities for fiscal 2005 and fiscal 2004 is as follows:

		March 5, 2005									March 6, 2004
		Assets			Liabilities			Total			Assets		Liabilities			Total
Current:
Allowance for doubtful receivables		$	627,069		$	—		$	627,069		$	641,274	$	—		$	641,274
Inventory		1,136,188			—			1,136,188			1,033,554		—			1,033,554
Accrued bonus		1,962,476			—			1,962,476
Accrued promotional expense		1,391,447			—			1,391,447			1,213,601		—			1,213,601
Accrued vacation pay		559,158			—			559,158			479,528		—			479,528
Reserve for returns		44,626			—			44,626			70,155		—			70,155
Reserves - other		3,817			—			3,817			3,634		—			3,634
Prepaid expenses		—			(332,785		)	(332,785		)	—		(254,633		)	(254,633		)
Accrued worker’s compensation		332,932			—			332,932			218,037		—			218,037
Consulting Agreements		—			—			—			116,362		—			116,362
Other		39,305			—			39,305			48,254		—			48,254
	Total current	6,097,018			(332,785		)	5,764,233			3,824,399		(254,633		)	3,569,766
Noncurrent:
Property, plant and equipment		—			(8,901,386		)	(8,901,386		)	—		(6,948,257		)	(6,948,257		)
Amortization of intangibles		—			(50,989,159		)	(50,989,159		)	3,368,976		—			3,368,976
Non-qualified deferred compensation plan		124,860			—			124,860			—		—			—
General business credit carryforward		1,010,883			—			1,010,883			1,070,799		—			1,070,799
Alternative minimum tax credit carryforward		656,298			—			656,298			206,421		—			206,421
Federal loss carryforward		4,409,688			—			4,409,688			1,807,420		—			1,807,420
State loss carryforward		415,557			—			415,557			181,922		—			181,922
Ohio investment tax credit		881,197			—			881,197
Charitable contribution carryforward		—			—			—			177,155		—			177,155
Valuation allowance		(537,472		)	—			(537,472		)
Other		—			—			—			617,779		—			617,779
	Total noncurrent	6,961,011			(59,890,545		)	(52,929,534		)	7,430,472		(6,948,257		)	482,215
	Total current and noncurrent	$	13,058,029		$	(60,223,330	)	$	(47,165,301	)	$	11,254,871	$	(7,202,890	)	$	4,051,981

For fiscal 2004, the Company filed a consolidated federal income tax return with its parent, PF Management.  Under consolidated tax return rules, PF Management was able to utilize the net operating loss and certain other deductions of the Company that could not have otherwise been utilized by the Company on a separate return basis. The tax sharing agreement between PF Management and the Company did not require PF Management to reimburse the Company for the net operating loss and other deductions that could not be utilized on a separate return basis.  Accordingly, the Company recorded a noncash distribution to PF Management in the amount of $3,578,169 for the utilization of the Company’s deferred tax assets in PF Management’s consolidated federal income tax return for fiscal 2004.  For successor fiscal 2005, the Company will file a consolidated federal income tax return with PF Management and Holding.  Due to changes in the Company’s structure, as a result of the Acquisition, the Company does not expect

At March 5, 2005, federal and state loss carryovers of approximately $12,599,105 and $13,109,061, respectively, are available to offset future federal and state taxable income.  The carryover periods range from fifteen to twenty years, which will result in expirations of varying amounts beginning in fiscal 2015 and continuing through fiscal 2025.  As a result of the Acquisition, a portion of the federal and state loss carryforwards are subject to limitations on utilization under Internal Revenue Code Section 382.  As such, management has evaluated the Company’s ability to utilize those losses and has determined that it is more likely than not that all of the loss carryforwards will be utilized.

At March 5, 2005, the Company also had federal and state tax credit carryforwards of $1,667,182 and $881,197, respectively.  The carryover periods range from 7 years to indefinite carryover.  As a result of the Acquisition, a portion of the federal and state credit carryforwards is subject to limitations on utilization under Internal Revenue Code Sections 382 and 383.  As such, management has evaluated the Company’s ability to utilize those losses and has determined that it is more likely than not that a portion of the federal credits will not be utilized by the Company.  A valuation allowance has been established accordingly.

F-20

9.LEASED PROPERTIES

The Company leases certain machinery and equipment and furniture and fixtures under leases classified as capital leases.  The leases have original terms ranging from one to eight years.  The assets covered under these leases have carrying values of $1,452,471 and $310,904 at March 5, 2005 and March 6, 2004, respectively.

Certain machinery and equipment and real estate are under operating leases with terms that are effective for varying periods until 2012.  Certain of these leases have remaining renewal clauses, exercisable at the option of the lessee.

At March 5, 2005, minimum rental payments required under operating and capital leases are summarized as follows:

	Minimum Rental Payments
	Operating		Capital
Fiscal Year	Leases		Leases			Total
2006	$	3,454,557	$	477,605		$	3,932,162
2007	3,261,145		270,999			3,532,144
2008	393,502		220,670			614,172
2009	50,343		189,337			239,680
2010	19,440		189,209			208,649
Later years	19,440		110,372			129,812
Total minimum lease payments	$	7,198,427	1,458,192			$	8,656,619
Less amount representing interest			(167,821		)
Present value of minimum lease payments under capital leases
(See Note 7, “Financing Arrangements”)			$	1,290,371

Rental expense charged to continuing operations is as follows:

	Successor		Predecessor
	Fiscal		Fiscal		Fiscal		Fiscal
	2005		2005		2004		2003
Real estate	$	63,244	$	222,055	$	525,830	$	192,396
Equipment	2,535,838		1,375,181		928,190		981,533
Total	$	2,599,082	$	1,597,236	$	1,454,020	$	1,173,929

F-21

10.   EMPLOYEE BENEFITS

The Company maintains a 401(k) Retirement Plan for its employees, which provides that the Company will make a matching contribution of up to 50% of an employee’s voluntary contribution, limited to the lesser of 5% of that employee’s annual compensation or $13,000 for predecessor fiscal 2005 and successor fiscal 2005 combined.  The Company’s contributions were $518,368, $494,203 and $484,639 in predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003, respectively.

The Company provides employee health insurance benefits to employees.  Medical benefits are provided primarily through self insurance group medical plans.  The Company’s contributions included in operations were $5,134,812, $4,139,845 and $2,833,789, for predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003, respectively.

Effective August 1, 2000, the Company adopted the Pierre Foods, Inc. Compensation Exchange Plan. The Plan is a non-qualified deferred compensation plan in which eligible participants consist of highly compensated employees and the Company’s former Board of Directors.  Cash contributions to the Plan were $43,839 during fiscal 2003.  Effective December 31, 2002, the Company terminated the plan.

In connection with the Acquisition the management investors invested approximately $4.9 million in a deferred compensation plan. This deferred compensation plan is funded through a rabbi trust that owns preferred stock of Holding with an aggregate liquidation value of approximately $4.9 million.

11.STOCK-BASED COMPENSATION

The following table summarizes changes in shares for predecessor fiscal 2005 and successor fiscal 2005:

	Shares	Weighted Average Exercise Price Per Share
Adoption of Plan on June 30, 2004	—
Options granted	127,397	$	10.00
Balance at March 5, 2005	127,397	$	10.00
Shares available for grant at March 5, 2005	36,381
Shares exercisable at March 5, 2005	6,313

F-22

12.   DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The Company’s nonderivative financial instruments consist primarily of cash and cash equivalents, trade and note receivables, trade payables and long-term debt.  The estimated fair values of the financial instruments have been determined by the Company using available market information and appropriate valuation techniques.  Considerable judgment is required, however, to interpret market data to develop the estimates of fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

At March 5, 2005 excluding long-term debt, the book values of each of the nonderivative financial instruments recorded in the Company’s balance sheet are considered representative of fair value due to variable interest rates, short terms to maturity and/or short length of time outstanding.

The fair value of the Company’s New Notes and Old Notes is estimated based on quoted market prices and interest rates currently available for issuance of debt with similar terms and maturities.  As of March 5, 2005, the fair value of the New Notes was $131,875,000.  As of March 6, 2004, the fair value of the Old Notes was $115,000,000.  The carrying value of all other long-term debt is considered representative of its fair value as of March 5, 2005.

13.BUSINESS SEGMENT

During predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003, the Company operated solely in the food processing segment.  Note that as a result of the Acquisition described above, the results for predecessor fiscal 2005 and successor fiscal 2005 are combined in the table below in order to provide a more meaningful period-to-period comparison. Sales by major product line are as follows:

	Net Revenues by Source
	Predecessor Fiscal 2005
	And
	Successor Fiscal 2005		Predecessor		Predecessor
	Combined		Fiscal 2004		Fiscal 2003
	(in millions)		(in millions)		(in millions)
Food Processing
Fully-Cooked Protein Products	$	255,278,619	$	214,738,933	$	149,302,819
Microwaveable Sandwiches	147,339,267		136,423,374		119,087,550
Bakery and Other Products	7,797,900		7,387,009		7,948,454
Total Food Processing	$	410,415,786	$	358,549,316	$	276,338,823

Significantly all revenues and long-lived assets are derived from and reside in the United States.

14.COMMITMENTS AND CONTINGENCIES

The Company provided a letter of credit in the amount of $4.5 million, $3.5 million and $1.5 million in predecessor fiscal 2005 and successor fiscal 2005 combined, predecessor fiscal 2004 and predecessor fiscal 2003, respectively, to its insurance carrier for the underwriting of certain performance bonds.  This letter of credit expires in fiscal 2006.  The Company also provides secured letters of credit to its insurance carriers for outstanding and potential worker’s compensation and general liability claims.  Letters of credit for these claims totaled $110,000 in predecessor fiscal 2005 and successor fiscal 2005 combined and $75,000 in both predecessor fiscal 2004 and predecessor fiscal 2003.  In addition, the Company provides secured letters of credit to a limited number of suppliers.  The Company had no letters of credit for suppliers in predecessor fiscal 2005 and successor fiscal 2005 combined.  Letters of credit for suppliers totaled $250,000 in both predecessor fiscal 2004 and predecessor fiscal 2003.

The Company is involved in various legal proceedings.  Management believes, based on the advice of legal counsel, that the outcome of such proceedings will not have a materially adverse effect on the Company’s financial position or future results of operations and cash flows.

F-23

The following tables summarize our contractual obligations and commitments as of March 5, 2005.

	Commitments by Fiscal Year
	Total		Less than 1 Year		1 – 3 Years		3-5 Years		More than 5 Years
Letters of credit	$	4,560,000	$	4,560,000	$	—	$	—	$	—
Purchase commitments for capital projects	1,612,500		1,612,500		—		—		—
Purchase commitments for electricity	2,474,640		2,474,640		—		—		—
Purchase commitments for raw materials	1,187,277		1,187,277		—		—		—
Purchase commitments for natural gas	605,473		605,473		—		—		—
Total	$	10,439,890	$	10,439,890	$	—	$	—	$	—

	Contractual Obligations by Fiscal Year
	Total		Less than 1 Year		1 – 3 Years		3-5 Years		More than 5 Years
Long-term debt	$	262,290,000	$	—	$	—	$	790,000	$	261,500,000
Capital lease obligations	1,290,371		421,713		419,464		343,028		106,166
Operating lease obligations	7,198,427		3,454,557		3,654,647		69,783		19,440
Total	$	270,778,798	$	3,876,270	$	4,074,111	$	1,202,811	$	261,625,606

In conjunction with the Acquisition, the Company and the selling shareholdersentered into a tax sharing and indemnification agreement which contains certain representations and warranties of the selling shareholders with respect to taxes.  The agreement provides that any net operating loss carryforward (“NOL”) with respect to periods before the Acquisition, and attributable to expenses relating to the sale of the Company, will be for the benefit of the selling shareholders.  Accordingly, the Company will pay to the selling shareholders the amount of any tax benefit attributable to such NOL, except that the first $4 million of such tax benefits shall be paid into an escrow account that will secure the selling shareholders indemnification obligations under the tax sharing agreement.  The Company has recorded a net long-term liability to the former shareholders totaling $10,190,051 for the estimated obligations under the tax sharing agreement.  This amount is excluded from the table above due to the uncertainty of when such utilization of the NOL will occur.

F-24

15.   SUPPLEMENTAL CASH FLOW INFORMATION—Cash Paid and Non-Cash Transactions

Cash paid for interest, income taxes refunded and non-cash transactions consisting of notes issued for assets acquired, capital lease additions and certain tax benefits utilized by the Parent account for as a distribution to the Parent are as follows:

	Successor		Predecessor
	Fiscal 2005		Fiscal 2005		Fiscal 2004			Fiscal 2003
Cash paid during the period for:
Interest	$	13,440,430	$	7,915,332	$	14,857,594		$	13,515,920
Income taxes paid (refunds received)	$	1,939,806	$	—	$	(197,977	)	$	(68,506	)
Non-cash transactions
Restructuring transactions
Assumption of PF Management debt	$	—	$	14,274,050	$	—		$	—
Assumption of deferred tax liability for aircraft	$	—	$	1,576,000	$	—		$	—
Cancellation of note receivable	$	—	$	993,247	$	—		$	—
Cancellation of accrual to PF Purchasing	$	—	$	3,479,007	$	—		$	—
Cancellation of accrual to PF Distribution	$	—	$	535,251	$	—		$	—
Other	$	—	$	174,874	$	—		$	—
Acquisition transactions
Elimination of Predecessor Pierre capital and retained earnings	$	4,883,415	$	—	$	—		$	—
Cancellation of receivable from previous Shareholder	$	5,000,000	$	—	$	—		$	—
Distribution of plant, property and equipment	$	8,476,080	$	—	$	—		$	—
Distribution of other current assets	$	9,255	$	—	$	—		$	—
Equity from parent	$	250,087,097	$	—	$	—		$	—
Tax sharing liability to previous shareholders	$	10,317,601	$	—	$	—		$	—
Valuation of goodwill and other intangibles	$	323,626,414	$	—	$	—		$	—
Deferred tax liability	$	54,464,900	$	—	$	—		$	—
Adjustment of inventory to fair value	$	2,020,948	$	—	$	—		$	—
Adjustment of plant, property and equipment to fair value	$	4,438,984	$	—	$	—		$	—
Other transactions
Distribution to parent—tax benefit	$	—	$	—	$	3,578,167		$	—
Capital lease additions	$	247,536	$	1,013,300	$	273,208		$	73,475
Note issued for assets acquired	$	—	$	—	$	—		$	270,983

F-25

16.  TRANSACTIONS WITH RELATED PARTIES

Successor Pierre

In conjunction with or subsequent to the Acquisition, the following relationships and related transactions existed:

•In conjunction with the Acquisition, John Grigg, one of the Company’s former directors, was paid a fee at the closing, pursuant to his letter agreement with the Company dated as of January 29, 2004, for professional services performed on behalf of the Company and PFMI.  The fee was approximately $780,952 and was paid from the proceeds to the selling shareholders.

•Madison Dearborn Partners IV, L.P. received a fee of $5.0 million at the closing of the Acquisition, plus out-of-pocket expenses incurred in connection with the Acquisition.  MDP may be paid additional fees from time to time in the future for providing management, consulting or advisory services and will be reimbursed for all future expenses incurred in connection with its investment in Holding.

•In connection with the Acquisition, Mr. Woodhams and Mr. Naylor, invested approximately $4.9 million in a deferred compensation plan.  This deferred compensation plan is funded through a rabbi trust that owns preferred stock of Holding with an aggregate liquidation value of approximately $5.2 million as of March 5, 2005.

•In conjunction with the Acquisition, the Company and the selling shareholders entered into a tax sharing and indemnification agreement which contains certain representations and warranties of the selling shareholders with respect to taxes.  The agreement provides that any net operating loss carryforward (“NOL”) with respect to periods before the Acquisition, and attributable to expenses relating to the Acquisition, will be for the benefit of the selling shareholders.  Accordingly, the Company will pay to the selling shareholders the amount of any tax benefit attributable to such NOL, except that the first $4 million of such tax benefits shall be paid into an escrow account that will secure the selling shareholders indemnification obligations under the tax sharing agreement.  The Company has recorded a net long-term liability to the former shareholders totaling $10,190,051 as of March 5, 2005 for the estimated obligations under the tax sharing agreement.

•Norbert J. Woodhams, one of the Company’s Vice Presidents, is the son of Norbert E. Woodhams.  Norbert E. Woodhams is the Company’s President, Chief Executive Officer, Director and Chairman of the Board.  In predecessor fiscal 2005 and successor fiscal 2005 combined, Norbert J. Woodhams received a base salary of ninety-two thousand and seven hundred dollars and earned a bonus of forty-seven thousand and eight hundred dollars under the Company’s bonus plan.  The base salary and bonus earned by Norbert J. Woodhams is consistent with the earnings of other Company employees with similar responsibilities.

Predecessor Pierre

As described in Note 1 to the Consolidated Financial Statements, on March 8, 2004 the Company and the Trustee under the Company’s Indenture executed a Fourth Supplemental Indenture and, pursuant to the terms of the Fourth Supplemental Indenture, the Company terminated substantially all of its related party transactions.  The following related party transactions were specifically permitted under the terms of the Fourth Supplemental Indenture:

•Columbia Hill Land Company, LLC, owned 50% by each of Messrs. Richardson and Clark, leases office space to the Company in Hickory, North Carolina, pursuant to a ten-year lease that commenced in September 1998.  Rents paid under the lease were approximately $58,000 and $116,000 in predecessor fiscal 2005 and predecessor fiscal 2004, respectively.

•On August 13, 2003, the Company obtained a three year variable rate $40 million revolving credit facility from Fleet Capital Corporation.  Messrs. Richardson and Clark provided guarantees of value and validity of the collateral securing this credit facility; they did not, however, guarantee payment of the facility, nor did they receive guarantee fees.

•The Company had mutual leasing agreements with certain related individuals and with certain companies in which the previous shareholders had substantial ownership interests.  Total payments under such leasing agreements were approximately $260,000 in predecessor fiscal 2004 and $176,000 in predecessor fiscal 2003.

F-26

•On March 8, 2004 the Company took title to an aircraft that was transferred from Columbia Hill Aviation, LLC (“CHA”), owned 100% by PFMI, subject to existing purchase money debt.  The aircraft was originally leased by the Company from CHA beginning in the fourth quarter of predecessor fiscal 2002.  Effective March 1, 2002, the original lease was cancelled and replaced with a non-exclusive lease agreement.  Pursuant to this new lease, the Company was obligated to make 16 quarterly lease payments of $471,500 each for the right to use the aircraft for up to 115 flight hours per quarter, based on availability.  Under this lease agreement, CHA was responsible for all expenses incurred in the operation of the use of the aircraft, except that the Company provided its own flight crew.  During predecessor fiscal 2004 and predecessor fiscal 2003, the Company paid CHA approximately $2.6 million and $3.2 million, respectively, in lease payments.  CHA was not a subsidiary of the Company; however, the Company considered CHA a non-independent special purpose leasing entity.  Accordingly, CHA’s financial condition, results of operations and cash flows have been included in the Company’s Consolidated Financial Statements included herein.  Under the terms of the operating lease with CHA, and the financing agreements between CHA and its creditor, the Company did not maintain the legal rights of ownership to the aircraft, nor did CHA’s creditor maintain any legal recourse to the Company.  Subsequently, as a result of the Acquisition, the aircraft was distributed to a former shareholder.

Any related party transactions described below that were in effect at March 6, 2004 were subsequently terminated as of March 8, 2004 pursuant to the terms of the Fourth Supplemental Indenture.  As a result of the termination of these related party transactions, subsequent to March 8, 2004, the Company performs the purchasing and distribution services internally.  Other related party services are outsourced as necessary at comparable cost.

•Columbia Hill Management, Inc. (“Columbia Hill”), owned 50% by each of Messrs. Richardson and Clark, provided accounting, tax and administrative services to Pierre, as well as professional services for the management of special projects.  Fees paid for these services were approximately $203,000 in predecessor fiscal 2004 and $650,000 in predecessor fiscal 2003.

•During predecessor fiscal 2004, PFMI owed the Company as much as $993,247 pursuant to a promissory note payable on demand and bearing interest at the prime rate.  Prior to the Acquisition, PFMI was owned in part by Messrs. Richardson and Clark, who have unconditionally guaranteed repayment of the note.  As of March 8, 2004, this note was forgiven in connection with the Fourth Supplemental Indenture.

•Effective February 21, 2003, Messrs. Richardson and Clark sold their net assets in Compass Outfitters, LLC, a company that provided team-building opportunities for customers and employees of the Company, to the Company for a total of $270,983.  In exchange for the net assets, the Company issued notes in the amount of $135,491 to each of Messrs. Richardson and Clark.  The notes were five-year notes, bearing interest at 6% per annum, with interest and principal due at maturity.  As of March 8, 2004, in connection with the Fourth Supplemental Indenture, these notes were cancelled.  Fees paid to Compass Outfitters, LLC prior to being sold to the Company were $530,000 in predecessor fiscal 2003.

•PF Purchasing, LLC (“PFP”), previously owned 100% by PFMI, served as the exclusive purchasing agent for the Company, pursuant to a three-year agreement that commenced September 3, 2001.  Under the agreement, PFP made an incentive payment of $100,000 per quarter to the Company in consideration of the opportunity to act as exclusive purchasing agent, and in exchange was entitled to receive all rebates or discounts receivable by Pierre from suppliers and vendors for orders negotiated and placed by PFP.  In predecessor fiscal 2004 and predecessor fiscal 2003, net fees paid to PFP were approximately $2,122,000 and $3,960,000, respectively.

•Effective March 3, 2002, the Company entered into a logistics agreement with PF Distribution, LLC (“PFD”), owned 100% by PFMI.  Under the agreement, PFD served as the exclusive logistics agent for the Company, and provided all warehousing, fulfillment and transportation services to the Company.  The cost of PFD’s services was based on flat rates per pound, which were calculated based on weight and volume characteristics of products, inventory pounds maintained and inventory pounds shipped.  Rates were determined based on historical costs and industry standards.  In predecessor fiscal 2004, distribution expense recorded in selling, general and administrative expense was approximately $31,126,000 of which approximately $30,999,000 million had been paid to PFD as of March 6, 2004.  In predecessor fiscal 2003, distribution expense recorded in selling, general and administrative expense was approximately $21,544,000 of which approximately $21,254,000 million had been paid to PFD as of March 1, 2003.

F-27

•Atlantic Cold Storage of Mocksville, LLC (“ACS”), owned one-third each by Messrs. Richardson and Clark, planned to construct and finance a public cold storage warehouse which would lease space to the Company as well as to others.  The proposed agreement with the Company was for 10 years and a minimum of 4,000 pallet positions to be leased as of the first date the facility became operational.  During predecessor fiscal 2001, the Company paid $250,000 to ACS for specialized construction costs.  As of March 8, 2004, in connection with the Fourth Supplemental Indenture, these costs were written-off.

•The Company purchases pork products from an entity in which one of the Company’s Principal Shareholders has a substantial ownership interest.  During fiscal 2003, the Company purchased pork products totaling $194,170.

•The following transactions were entered into on March 8, 2004 as permitted by the Fourth Supplemental Indenture:

Assumption of PFMI debt	$	(14,274,050	)
Accrued liabilities to PFP cancelled	3,479,007
Assumption of deferred tax liability for aircraft	(1,576,000		)
Note receivable cancelled	(993,247		)
Accrued liabilities to PFD cancelled	535,251
Cash received	763,998
Other	(174,874		)
Total	$	(12,239,915	)

Allocated to the following accounts:
Retained Earnings	$	11,900,276
Common Stock	339,639
Total	$	12,239,915

The $339,639 charge represents the removal of members’ equity of CHA.

All material transactions with affiliates of the Company were reviewed by the entire Board of Directors, where they were approved by a majority of the independent directors.  The directors obtained and relied upon investment banking “fairness” opinions when considering these transactions to the extent required by the indenture governing the Old Notes.

On June 30, 2004, in conjunction with the Acquisition, all previously existing related party transactions were terminated as described in Note 1, “Basis of Presentation and Acquisition,” to the Consolidated Financial Statements.

F-28

17.    RESTATED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following quarterly financial information for the Company’s fiscal year 2005 is, by means of this filing, being restated to reflect the following mistatements previously reported:  1)  the tax basis of assets assumed in connection with the Restructuring, 2)  the tax basis of assets and liabilities following the Acquisition, 3)  the classification of professional fees incurred in connection with the Acquisition and related debt transactions and 4)  the calculation of depreciation expense following the Acquisition.

	Succesor Pierre
	For the Period						For the Period						For the Period
	July 1,2004						September 5,2004						July 1,2004
	Through						Through						Through
	September 4,2004						December 4,2004						December 4,2004
	Previously						Previously						Previously
	Reported			Restated			Reported			Restated			Reported			Restated
	(Dollars in thousands, except per share amounts)
CONSOLIDATED STATEMENT OF OPERATIONS:
REVENUES, NET:	$	75,439		$	75,439		$	111,969		$	111,969		$	187,408		$	187,408
COSTS AND EXPENSES:
Cost of goods sold	59,432			59,432			80,148			80,148			139,580			139,580
Selling, general and administrative expenses	9,555			9,555			15,410			15,410			24,965			24,965
Depreciation and amortization	5,529			5,974			8,146			8,576			13,675			14,550
Total costs and expenses	74,516			74,961			103,704			104,134			178,220			179,095
OPERATING INCOME	923			478			8,265			7,835			9,188			8,313
OTHER INCOME (EXPENSE):
Interest expense	(9,029		)	(9,029		)	(5,203		)	(5,247		)	(14,232		)	(14,276		)
Other income, net	0			0			12			12			12			12
Other expense, net	(9,029		)	(9,029		)	(5,191		)	(5,235		)	(14,220		)	(14,264		)
INCOME (LOSS) BEFORE INCOME TAX (PROVISION) BENEFIT	(8,106		)	(8,551		)	3,074			2,600			(5,032		)	(5,951		)
INCOME TAX (PROVISION) BENEFIT	2,658			2,831			(1,008		)	(823		)	1,650			2,008
NET INCOME (LOSS)	$	(5,448	)	$	(5,720	)	$	2,066		$	1,777		$	(3,382	)	$	(3,943	)
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED	$	(54.48	)	$	(57.20	)	$	20.66		$	17.77		$	(33.82	)	$	(39.43	)
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED	100,000			100,000			100,000			100,000			100,000			100,000

F-29

CONSOLIDATED BALANCE SHEETS:

	Predecessor Pierre						Succesor Pierre						Succesor Pierre
	June 5, 2004						September 4, 2004						December 4, 2004
	Previously						Previously						Previously
	Reported			Restated			Reported			Restated			Reported			Restated
	(Dollars in thousands, except per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	115		$	115		$	—		$	—		$	2,143		$	2,143
Certificate of deposit of special purpose entity	1,240			1,240			—			—			—			—
Accounts receivable, net	22,198			22,198			29,702			29,702			29,338			29,338
Inventories	42,164			42,164			44,314			44,314			42,991			42,991
Refundable income taxes	20			20			—			—			—			—
Deferred income taxes	3,570			3,570			4,581			4,581			4,581			4,581
Prepaid expenses and other current assets	3,091			3,091			4,134			4,134			3,162			3,162
Total current assets	72,398			72,398			82,731			82,731			82,215			82,215
PROPERTY, PLANT AND EQUIPMENT, NET	60,699			60,699			57,337			56,892			57,183			56,308
OTHER ASSETS:
Other intangibles, net	38,809			38,809			171,346			171,346			164,789			164,789
Goodwill, net	—			—			172,515			174,091			178,335			186,535
Note receivable-related party	—			—			—			—			—			—
Deferred income taxes	482			—			—			—			—			—
Deferred loan origination fees, net	4,451			4,451			8,190			8,190			8,583			9,124
Other	279			279			—			—			—			—
Total other assets	44,021			43,539			352,051			353,627			351,707			360,448
Total Assets	$	177,118		$	176,636		$	492,119		$	493,250		$	491,105		$	498,971
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES:
Current installments of long-term debt	$	5,145		$	5,145		$	1,743		$	1,743		$	282		$	282
Trade accounts payable	8,126			8,126			9,927			9,927			8,912			8,912
Accrued payroll and payroll taxes	4,968			4,968			4,813			4,813			5,512			5,512
Accrued interest	173			173			2,479			2,479			5,400			5,400
Accrued promotions	2,910			2,910			3,853			3,853			3,113			3,113
Income taxes payable	—			—			—			—			—			—
Accrued taxes (other than income and payroll)	1,177			1,177			1,315			1,315			1,031			1,031
Other accrued liabilities	722			722			897			897			1,258			1,258
Total current liabilities	23,221			23,221			25,027			25,027			25,508			25,508
LONG-TERM DEBT, less current installments	157,828			157,828			276,555			276,555			267,471			267,471
DEFERRED INCOME TAXES	—			1,094			40,006			41,409			40,962			49,389
OTHER LONG-TERM LIABILITIES	233			233			10,402			10,402			10,523			10,523
COMMITMENTS AND CONTINGENCIES	—			—			—			—			—			—
SHAREHOLDER’S EQUITY:
Common stock - Class A, 100,000 shares authorized, issued and
outstanding at March 5, 2005 and March 6, 2004	29,099			29,099			145,577			145,577			150,023			150,023
Additional paid in capital	—			—			—			—			—			—
Retained earnings (accumulated deficit)	(28,263		)	(29,839		)	(5,448		)	(5,720		)	(3,382		)	(3,943		)
Note receivable-related party	(5,000		)	(5,000		)	—			—			—			—
Total shareholder’s equity	(4,164		)	(5,740		)	140,129			139,857			146,641			146,080
Total Liabilities and Shareholder’s Equity	$	177,118		$	176,636		$	492,119		$	493,250		$	491,105		$	498,971

F-30

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	Predecessor						Successor
				For the Period			For the Period
	Quarter			June 6, 2004			July 1, 2004			Quarter			Quarter
	Ended			Through			Through			Ended			Ended
	June 5, 2004			June 30, 2004			September 4, 2004			December 4, 2004			March 5, 2005
	(Dollars in thousands, except per share amounts)
Revenues, net	$	92,013		$	23,536		$	75,439		$	111,969		$	107,459
Costs and expenses	$	87,410		$	27,948		$	74,961	*	$	104,134	*	$	101,230
Operating income	$	4,604		$	(4,412	)	$	478	*	$	7,835	*	$	6,229
Net income (loss)	$	(121	)	$	(4,143	)	$	(5,720	)*	$	1,777	*	$	(386	)
Net ncome/(loss) per common share - basic and diluted	$	(1.21	)	$	(41.43	)	$	(57.20	)*	$	17.77	*	$	(3.86	)

	Predecessor
	Quarters Ended
	5/31/2003		8/30/2003			11/29/2003		3/6/2004
Revenues, net	$	81,480	$	81,248		$	93,825	$	101,996
Costs and expenses	$	77,468	$	78,338		$	87,430	$	95,597
Operating income	$	4,012	$	2,910		$	6,395	$	6,399
Net income (loss)	$	376	$	(1,934	)	$	1,768	$	1,224
Net ncome/(loss) per common share - basic and diluted	$	3.76	$	(19.34	)	$	17.68	$	12.24

*As restated; see Note 17.

F-31

REPORT OF MANAGEMENT

The management of Pierre Foods, Inc. is responsible for the preparation and integrity of the consolidated financial statements of the Company.  The financial statements and notes have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America and, in the judgment of management, present fairly and consistently the Company’s financial position and results of operations and cash flows.  The financial information contained elsewhere in this annual report is consistent with that in the financial statements.  The financial statements and other financial information in this annual report include amounts that are based on management’s best estimates and judgments.

The Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles.

The Company’s financial statements have been audited by Deloitte & Touche LLP.  Management has made available to them all of the Company’s financial records and related data, and believes that all representations made to Deloitte & Touche LLP during this audit were valid and appropriate.

/S/ NORBERT E. WOODHAMS	/S/ JOSEPH W. MEYERS
Norbert E. Woodhams	Joseph W. Meyers
President and Chief Executive Officer	Vice President, Finance

F-32