##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended August 30, 2003

OR

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

For
the transaction period from  to

Commission File Number: 0-7277

PIERRE FOODS, INC.

(Exact name of registrant as specified in its charter)


North Carolina
(State or other jurisdiction of incorporation or organization)

56-0945643
(I.R.S. Employer 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



---

(Former name or former address, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



|        |  |        
|------- |  | -------
|Yes [X] |  | No [  ]

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

|                     |  |                                 
|-------------------- |  | --------------------------------
|Class                |  | Outstanding at November 15, 2003
|                     |  |                                 
|Class A Common Stock |  | 100,000                         





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##### 



PIERRE FOODS, INC.

INDEX

|                                                                                              |                                                                                                                                                 |  |         |          |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | -------- |  | 
|                                                                                              |                                                                                                                                                 |  |         | Page No.
|                                                                                              |                                                                                                                                                 |  |         |         
|Part I. Financial Information:                                                                |                                                                                                                                                 |  |         |         
|Item 1. Financial Statements                                                                  |                                                                                                                                                 |  |         |         
|                                                                                              | Consolidated Balance Sheets -
August 30, 2003 and March 1, 2003                                                                                 |  |         | 3 - 4    | 
|                                                                                              | Consolidated Statements of
Operations and Retained Earnings -
Thirteen Weeks Ended August 30, 2003
and Thirteen Weeks Ended August 31, 2002     |  |         | 5 - 6    | 
|                                                                                              | Consolidated Statements of
Operations and Retained Earnings -
Twenty-Six Weeks Ended August 30, 2003
and Twenty-Six Weeks Ended August 31, 2002 |  |         | 7 - 8    | 
|                                                                                              | Consolidated Statements of Cash Flows -
Twenty-Six Weeks Ended August 30, 2003 and
Twenty-Six Weeks Ended August 31, 2002                       |  |         | 9 - 10   | 
|                                                                                              | Notes to Consolidated Financial
Statements                                                                                                      |  |         | 11 - 13  | 
|Item 2. Managements Discussion and Analysis
of Financial Condition and Results of
Operations |                                                                                                                                                 |  | 14 - 18 |         
|Item 3. Quantitative and Qualitative Disclosures About Market
Risk                            |                                                                                                                                                 |  | 19      |         
|Item 4. Controls and
Procedures                                                               |                                                                                                                                                 |  | 20      |         
|Part II. Other Information:                                                                   |                                                                                                                                                 |  |         |         
|Item 5. Other Information                                                                     |                                                                                                                                                 |  | 21 - 23 |         
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                                 |  | 24      |         
|                                                                                              | Signatures                                                                                                                                      |  |         | 25       | 
|                                                                                              | Index to Exhibits                                                                                                                               |  |         | 26 - 27  | 

2



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##### 



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

|                                   |                                                                                                                  |                      |            |                 |             |               |            |            |             | 
|---------------------------------- | ---------------------------------------------------------------------------------------------------------------- | -------------------- | ---------- | --------------- | ----------- | ------------- | ---------- | ---------- | ----------- | 
|                                   |                                                                                                                  |                      |            | (Unaudited)     |             |               |            |           
|                                   |                                                                                                                  |                      |            | August 30, 2003 |             | March 1, 2003
|                                   |                                                                                                                  |                      |            |                 |             |              
|ASSETS                             |                                                                                                                  |                      |            |                 |             |               |            |           
|CURRENT ASSETS:                    |                                                                                                                  |                      |            |                 |             |               |            |           
|                                   | Cash and cash equivalents                                                                                        |                      | $          | 146,977         |             |               | $          | 274,329    |            
|                                   | Certificates of deposit of special purpose entity                                                                |                      |            | 1,240,000       |             |               |            | 1,240,000  |            
|                                   | Accounts receivable, net                                                                                         |                      |            | 24,759,993      |             |               |            | 23,654,358 |            
|                                   | Inventories                                                                                                      |                      |            | 34,644,667      |             |               |            | 32,584,777 |            
|                                   | Refundable income taxes                                                                                          |                      |            | 818,941         |             |               |            | 165,829    |            
|                                   | Deferred income taxes                                                                                            |                      |            | 2,642,526       |             |               |            | 2,642,526  |            
|                                   | Prepaid expenses and other current assets (includes prepayments
to related parties of $375,000 at March 1, 2003) |                      |            | 1,758,015       |             |               |            | 3,264,746  |            
|                                   |                                                                                                                  |                      |            |                 |             |               |            |            |            
|                                   |                                                                                                                  | Total current assets |            |                 | 66,011,119  |               |            |            | 63,826,565  | 
|                                   |                                                                                                                  |                      |            |                 |             |               |            |           
|PROPERTY, PLANT AND EQUIPMENT, NET |                                                                                                                  |                      | 60,562,108 |                 |             |               | 55,549,083 |           
|                                   |                                                                                                                  |                      |            |                 |             |               |            |           
|OTHER ASSETS:                      |                                                                                                                  |                      |            |                 |             |               |            |           
|                                   | Trade name, net                                                                                                  |                      |            | 38,808,636      |             |               |            | 38,808,636 |            
|                                   | Note receivable  related party                                                                                  |                      |            | 993,247         |             |               |            | 993,247    |            
|                                   | Deferred income taxes                                                                                            |                      |            | 6,283,871       |             |               |            | 6,283,871  |            
|                                   | Deferred loan origination fees, net                                                                              |                      |            | 1,920,139       |             |               |            | 2,950,109  |            
|                                   | Other                                                                                                            |                      |            | 333,788         |             |               |            | 369,500    |            
|                                   |                                                                                                                  |                      |            |                 |             |               |            |           
|                                   |                                                                                                                  | Total other assets   |            |                 | 48,339,681  |               |            |            | 49,405,363  | 
|                                   |                                                                                                                  |                      |            |                 |             |               |            |           
|                                   |                                                                                                                  | Total Assets         |            | $               | 174,912,908 |               |            | $          | 168,781,011 | 
|                                   |                                                                                                                  |                      |            |                 |             |               |            |           

See accompanying notes to unaudited consolidated financial statements.

3



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##### 



PIERRE FOODS, INC. AND SUBSIDIARIES

|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |             |             | 
|----------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | --------------- | ----------- | ------------- | ----------- | ----------- | ----------- | 
|                                          |                                                                                                                                              |                                            |             | (Unaudited)     |             |               |             |            
|                                          |                                                                                                                                              |                                            |             | August 30, 2003 |             | March 1, 2003
|                                          |                                                                                                                                              |                                            |             |                 |             |              
|LIABILITIES AND SHAREHOLDERS EQUITY      |                                                                                                                                              |                                            |             |                 |             |               |             |            
|CURRENT LIABILITIES:                      |                                                                                                                                              |                                            |             |                 |             |               |             |            
|                                          | Current installments of long-term debt                                                                                                       |                                            | $           | 377,155         |             |               | $           | 369,467     |            
|                                          | Trade accounts payable                                                                                                                       |                                            |             | 6,531,221       |             |               |             | 9,422,256   |            
|                                          | Accrued interest                                                                                                                             |                                            |             | 3,039,959       |             |               |             | 3,056,662   |            
|                                          | Accrued payroll and payroll taxes                                                                                                            |                                            |             | 5,706,695       |             |               |             | 5,929,464   |            
|                                          | Accrued promotions                                                                                                                           |                                            |             | 3,016,592       |             |               |             | 2,280,788   |            
|                                          | Accrued taxes (other than income and payroll)                                                                                                |                                            |             | 899,725         |             |               |             | 561,642     |            
|                                          | Other accrued liabilities (includes related party liabilities of
$4,527,040 and $425,330 at August 30, 2003 and March 1, 2003,
respectively) |                                            |             | 5,685,580       |             |               |             | 1,490,086   |            
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |             |            
|                                          |                                                                                                                                              | Total current liabilities                  |             |                 | 25,256,927  |               |             |             | 23,110,365  | 
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            
|LONG-TERM DEBT, less current installments |                                                                                                                                              |                                            | 136,494,023 |                 |             |               | 130,387,174 |            
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            
|OBLIGATION OF SPECIAL PURPOSE ENTITY      |                                                                                                                                              |                                            | 5,440,710   |                 |             |               | 5,591,813   |            
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            
|OTHER LONG-TERM LIABILITIES               |                                                                                                                                              |                                            | 514,219     |                 |             |               | 693,750     |            
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            
|SHAREHOLDERS EQUITY:                     |                                                                                                                                              |                                            |             |                 |             |               |             |            
|                                          | Common stock  Class A, 100,000 shares authorized, issued and
outstanding at August 30, 2003 and March 1, 2003                               |                                            |             | 29,438,172      |             |               |             | 29,438,172  |            
|                                          | Retained earnings (deficit)                                                                                                                  |                                            |             | (17,231,143     | )           |               |             | (15,440,263 | )          
|                                          | Note receivable  related party                                                                                                              |                                            |             | (5,000,000      | )           |               |             | (5,000,000  | )          
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            
|                                          |                                                                                                                                              | Total shareholders equity                 |             |                 | 7,207,029   |               |             |             | 8,997,909   | 
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            
|                                          |                                                                                                                                              | Total Liabilities and Shareholders Equity |             | $               | 174,912,908 |               |             | $           | 168,781,011 | 
|                                          |                                                                                                                                              |                                            |             |                 |             |               |             |            

See accompanying notes to unaudited consolidated financial statements.

4



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##### 



PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings

(Unaudited)

|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                 |   |            |            |  
|------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ------------------------ | ------------------ | - | -------------------- | ---------- | --------------- | - | ---------- | ---------- | -
|                               |                                                                                                                                                                    |   |                          |                    |   | Thirteen Weeks Ended
|                               |                                                                                                                                                                    |   |                          |                    |   |                     
|                               |                                                                                                                                                                    |   |                          |                    |   | August 30, 2003      |            | August 31, 2002
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|REVENUES                       |                                                                                                                                                                    | $ | 81,248,052               |                    |   | $                    | 61,843,102 |                
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|COSTS AND EXPENSES:            |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|                               | Cost of goods sold (includes related party transactions totaling
$1,089,235 and $1,013,356 in fiscal 2004 and fiscal 2003,
respectively)                           |   |                          | 58,209,167         |   |                      |            | 40,979,098      |  
|                               | Selling, general and administrative expenses (includes related
party transactions totaling $7,568,055 and $6,449,381 in fiscal 2004 and fiscal 2003, respectively) |   |                          | 18,964,282         |   |                      |            | 17,309,562      |  
|                               | (Gain) loss on disposition of property, plant and equipment, net                                                                                                   |   |                          | 632                |   |                      |            | (13,000         | )
|                               | Depreciation                                                                                                                                                       |   |                          | 1,164,222          |   |                      |            | 978,693         |  
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|                               |                                                                                                                                                                    |   | Total costs and expenses |                    |   | 78,338,303           |            |                 |   | 59,254,353 |           
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|OPERATING INCOME               |                                                                                                                                                                    |   | 2,909,749                |                    |   |                      | 2,588,749  |                
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|OTHER INCOME (EXPENSE):        |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|                               | Interest expense                                                                                                                                                   |   |                          | (5,883,160         | ) |                      |            | (3,615,736      | )
|                               | Other income, net - (including interest) (includes related party
income of $192,484 in fiscal 2003)                                                                |   |                          |                   |   |                      |            | 213,616         |  
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|                               |                                                                                                                                                                    |   |                          | Other expense, net |   |                      | (5,883,160 | )               |   |            | (3,402,120 | )
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|LOSS BEFORE INCOME TAX BENEFIT |                                                                                                                                                                    |   | (2,973,411               | )                  |   |                      | (813,371   | )              
|INCOME TAX BENEFIT             |                                                                                                                                                                    |   | 1,039,296                |                    |   |                      | 142,233    |                
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                
|NET LOSS                       |                                                                                                                                                                    | $ | (1,934,115               | )                  |   | $                    | (671,138   | )              
|                               |                                                                                                                                                                    |   |                          |                    |   |                      |            |                

See accompanying notes to unaudited consolidated financial statements.

5



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##### 



|                                                        |                                                 |   |         |             |   |                      |         |                 |   |  |  | 
|------------------------------------------------------- | ----------------------------------------------- | - | ------- | ----------- | - | -------------------- | ------- | --------------- | - |  |  | 
|                                                        |                                                 |   |         |             |   | Thirteen Weeks Ended
|                                                        |                                                 |   |         |             |   |                     
|                                                        |                                                 |   |         |             |   | August 30, 2003      |         | August 31, 2002
|                                                        |                                                 |   |         |             |   |                      |         |                
|RETAINED EARNINGS (DEFICIT):                            |                                                 |   |         |             |   |                      |         |                
|                                                        | Balance at beginning of period                  |   | $       | (15,250,028 | ) |                      | $       | (15,949,291     | )
|                                                        | Net loss                                        |   |         | (1,934,115  | ) |                      |         | (671,138        | )
|                                                        | Distributions of special purpose leasing entity |   |         | (47,000     | ) |                      |         | (1,009,196      | )
|                                                        |                                                 |   |         |             |   |                      |         |                
|                                                        | Balance at end of period                        |   | $       | (17,231,143 | ) |                      | $       | (17,629,625     | )
|                                                        |                                                 |   |         |             |   |                      |         |                
|NET LOSS PER COMMON SHARE  BASIC AND DILUTED           |                                                 | $ | (19.34  | )           |   | $                    | (6.71   | )              
|                                                        |                                                 |   |         |             |   |                      |         |                
|WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND
DILUTED |                                                 |   | 100,000 |             |   |                      | 100,000 |                

See accompanying notes to unaudited consolidated financial statements.

6



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##### 



PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings

(Unaudited)

|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |            |             |            |  
|------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------------------ | ----------- | ---------------------- | ---------- | --------------- | ---------- | ----------- | ---------- | -
|                                                                                                  |                                                                                                                                                                      |                          |                    |             | Twenty-Six Weeks Ended
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                       
|                                                                                                  |                                                                                                                                                                      |                          |                    |             | August 30, 2003        |            | August 31, 2002
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                
|REVENUES                                                                                          |                                                                                                                                                                      | $                        | 162,727,921        |             |                        | $          | 123,721,531     |           
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|COSTS AND EXPENSES:                                                                               |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|                                                                                                  | Cost of goods sold (includes related party transactions totaling
$2,529,440 and $2,200,157 in fiscal 2004 and fiscal 2003,
respectively)                             |                          |                    | 114,429,082 |                        |            |                 | 81,231,933 |            
|                                                                                                  | Selling, general and administrative expenses (includes related
party transactions totaling $15,408,207 and $12,748,123 in
fiscal 2004
and fiscal 2003, respectively) |                          |                    | 39,061,557  |                        |            |                 | 34,886,063 |            
|                                                                                                  | Loss on disposition of property, plant and equipment, net                                                                                                            |                          |                    | 632         |                        |            |                 | 10,408     |            
|                                                                                                  | Depreciation                                                                                                                                                         |                          |                    | 2,314,979   |                        |            |                 | 1,967,360  |            
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|                                                                                                  |                                                                                                                                                                      | Total costs and expenses |                    |             | 155,806,250            |            |                 |            | 118,095,764 |           
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|OPERATING INCOME                                                                                  |                                                                                                                                                                      |                          | 6,921,671          |             |                        |            | 5,625,767       |           
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|OTHER INCOME (EXPENSE):                                                                           |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|                                                                                                  | Interest expense                                                                                                                                                     |                          |                    | (9,330,640  | )                      |            |                 | (7,033,251 | )          
|                                                                                                  | Other income, net - (including interest) (includes related party
income of $387,484 in fiscal 2003)                                                                  |                          |                    |            |                        |            |                 | 426,558    |            
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|                                                                                                  |                                                                                                                                                                      |                          | Other expense, net |             |                        | (9,330,640 | )               |            |             | (6,606,693 | )
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|LOSS BEFORE INCOME TAX BENEFIT AND CUMMULATIVE
EFFECT OF ACCOUNTING CHANGE                        |                                                                                                                                                                      |                          | (2,408,969         | )           |                        |            | (980,926        | )         
|INCOME TAX BENEFIT                                                                                |                                                                                                                                                                      |                          | 851,089            |             |                        |            | 196,186         |           
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|LOSS BEFORE CUMMULATIVE EFFECT OF
ACCOUNTING CHANGE                                               |                                                                                                                                                                      |                          | (1,557,880         | )           |                        |            | (784,740        | )         
|CUMMULATIVE EFFECT OF ACCOUNTING CHANGE (net of
income tax benefit of $10,415,037 in fiscal 2003) |                                                                                                                                                                      |                          |                   |             |                        |            | (18,604,534     | )         
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           
|NET LOSS                                                                                          |                                                                                                                                                                      | $                        | (1,557,880         | )           |                        | $          | (19,389,274     | )         
|                                                                                                  |                                                                                                                                                                      |                          |                    |             |                        |            |                 |           

See accompanying notes to unaudited consolidated financial statements.

7



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##### 



|                                                        |                                                    |  |         |             |                        |  |                 |             |   |  | 
|------------------------------------------------------- | -------------------------------------------------- |  | ------- | ----------- | ---------------------- |  | --------------- | ----------- | - |  | 
|                                                        |                                                    |  |         |             | Twenty-Six Weeks Ended
|                                                        |                                                    |  |         |             |                       
|                                                        |                                                    |  |         |             | August 30, 2003        |  | August 31, 2002
|                                                        |                                                    |  |         |             |                        |  |                
|RETAINED EARNINGS (DEFICIT):                            |                                                    |  |         |             |                        |  |                 |            
|                                                        | Balance at beginning of period                     |  | $       | (15,440,263 | )                      |  | $               | 2,768,845   |  
|                                                        | Net loss                                           |  |         | (1,557,880  | )                      |  |                 | (19,389,274 | )
|                                                        | Distributions of special purpose leasing entity    |  |         | (233,000    | )                      |  |                 | (1,009,196  | )
|                                                        |                                                    |  |         |             |                        |  |                 |            
|                                                        | Balance at end of period                           |  | $       | (17,231,143 | )                      |  | $               | (17,629,625 | )
|                                                        |                                                    |  |         |             |                        |  |                 |            
|NET INCOME PER COMMON SHARE  BASIC AND DILUTED         |                                                    |  |         |             |                        |  |                 |            
|                                                        | Loss before cumulative effect of accounting change |  | $       | (15.58      | )                      |  | $               | (7.85       | )
|                                                        | Cumulative effect of accounting change             |  |         |            |                        |  |                 | (186.05     | )
|                                                        |                                                    |  |         |             |                        |  |                 |            
|                                                        | Net loss                                           |  | $       | (15.58      | )                      |  | $               | (193.90     | )
|                                                        |                                                    |  |         |             |                        |  |                 |            
|WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND
DILUTED |                                                    |  | 100,000 |             |                        |  | 100,000         |            

See accompanying notes to unaudited consolidated financial statements.

8



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##### 



PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                 |   |            |            |  
|------------------------------------ | ----------------------------------------------------------------------------------------- |  | --------------------------------------------------------- | ------------------------------------------------------------------ | - | ---------------------- | ---------- | --------------- | - | ---------- | ---------- | -
|                                     |                                                                                           |  |                                                           |                                                                    |   | Twenty-Six Weeks Ended
|                                     |                                                                                           |  |                                                           |                                                                    |   |                       
|                                     |                                                                                           |  |                                                           |                                                                    |   | August 30, 2003        |            | August 31, 2002
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|CASH FLOWS FROM OPERATING ACTIVITIES |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|                                     | Net loss                                                                                  |  | $                                                         | (1,557,880                                                         | ) |                        | $          | (19,389,274     | )
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                 |  
|                                     | Adjustments to reconcile net loss to net cash provided by (used
in) operating activities: |  |                                                           |                                                                    |   |                        |            |                 |  
|                                     |                                                                                           |  | Cumulative effect of accounting change                    |                                                                    |   |                       |            |                 |   | 18,604,534 |           
|                                     |                                                                                           |  | Depreciation                                              |                                                                    |   | 2,314,979              |            |                 |   | 1,967,360  |           
|                                     |                                                                                           |  | Amortization of deferred loan origination fees            |                                                                    |   | 416,637                |            |                 |   | 339,420    |           
|                                     |                                                                                           |  | Write-off of deferred loan origination fees               |                                                                    |   | 1,233,530              |            |                 |   |           |           
|                                     |                                                                                           |  | Loss on disposition of property, plant and equipment, net |                                                                    |   | 632                    |            |                 |   | 10,408     |           
|                                     |                                                                                           |  | Decrease in other assets                                  |                                                                    |   | 35,716                 |            |                 |   | 35,717     |           
|                                     |                                                                                           |  | Decrease in other long-term liabilities                   |                                                                    |   | (179,531               | )          |                 |   | (166,433   | )         
|                                     |                                                                                           |  | Changes in operating assets and liabilities:              |                                                                    |   |                        |            |                 |   |            |           
|                                     |                                                                                           |  |                                                           | Receivables                                                        |   |                        | (1,105,635 | )               |   |            | (1,876,550 | )
|                                     |                                                                                           |  |                                                           | Inventories                                                        |   |                        | (2,059,890 | )               |   |            | (9,852,094 | )
|                                     |                                                                                           |  |                                                           | Refundable income taxes, prepaid expenses and other
current assets |   |                        | 853,617    |                 |   |            | (1,938,712 | )
|                                     |                                                                                           |  |                                                           | Trade accounts payable and other accrued liabilities               |   |                        | 2,138,874  |                 |   |            | 2,995,353  |  
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|                                     |                                                                                           |  |                                                           | Total adjustments                                                  |   |                        | 3,648,929  |                 |   |            | 10,119,003 |  
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|                                     |                                                                                           |  |                                                           | Net cash provided by (used in) operating activities                |   |                        | 2,091,049  |                 |   |            | (9,270,271 | )
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|CASH FLOWS FROM INVESTING ACTIVITIES |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|                                     | Proceeds from sales of property, plant and equipment                                      |  |                                                           | 500                                                                |   |                        |            | 43,000          |  
|                                     | Capital expenditures                                                                      |  |                                                           | (7,329,138                                                         | ) |                        |            | (8,828,745      | )
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                
|                                     |                                                                                           |  |                                                           | Net cash used in investing activities                              |   |                        | (7,328,638 | )               |   |            | (8,785,745 | )
|                                     |                                                                                           |  |                                                           |                                                                    |   |                        |            |                

See accompanying notes to unaudited consolidated financial statements.

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|                                               |  |                                                            |          |                                           |             |                        |            |                 |            |   |            | 
|---------------------------------------------- |  | ---------------------------------------------------------- | -------- | ----------------------------------------- | ----------- | ---------------------- | ---------- | --------------- | ---------- | - | ---------- | 
|                                               |  |                                                            |          |                                           |             | Twenty-Six Weeks Ended
|                                               |  |                                                            |          |                                           |             |                       
|                                               |  |                                                            |          |                                           |             | August 30, 2003        |            | August 31, 2002
|                                               |  |                                                            |          |                                           |             |                        |            |                
|CASH FLOWS FROM FINANCING ACTIVITIES           |  |                                                            |          |                                           |             |                        |            |                
|                                               |  | Repayment of revolving credit agreement with former lender |          | $                                         | (15,085,146 | )                      |            | $               |           |  
|                                               |  | Net borrowings under new revolving credit agreement        |          |                                           | 21,109,082  |                        |            |                 | 16,249,527 |  
|                                               |  | Principal payments on long-term debt                       |          |                                           | (60,502     | )                      |            |                 | (93,061    | )
|                                               |  | Loan origination fees                                      |          |                                           | (620,197    | )                      |            |                 | (1,583,467 | )
|                                               |  | Distributions by special purpose leasing entity            |          |                                           | (233,000    | )                      |            |                 | (1,009,196 | )
|                                               |  |                                                            |          |                                           |             |                        |            |                
|                                               |  |                                                            |          | Net cash provided by financing activities |             |                        | 5,110,237  |                 |            |   | 13,563,803 | 
|                                               |  |                                                            |          |                                           |             |                        |            |                
|NET DECREASE IN CASH AND CASH EQUIVALENTS      |  |                                                            | (127,352 | )                                         |             |                        | (4,492,213 | )              
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |  |                                                            | 274,329  |                                           |             |                        | 4,577,982  |                
|                                               |  |                                                            |          |                                           |             |                        |            |                
|CASH AND CASH EQUIVALENTS, END OF PERIOD       |  | $                                                          | 146,977  |                                           |             | $                      | 85,769     |                
|                                               |  |                                                            |          |                                           |             |                        |            |                

See accompanying notes to unaudited consolidated financial statements.

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PIERRE FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

The financial information as of March 1, 2003, included in these financial
statements has been derived from the audited consolidated financial statements
included in that report. In the opinion of the Company, the accompanying
unaudited consolidated financial statements contain all adjustments necessary
to present fairly the financial position of the Company as of August 30, 2003
and March 1, 2003, the results of operations for the thirteen weeks and
twenty-six weeks ended August 30, 2003 and August 31, 2002, and the cash flows
of the Company for the twenty-six weeks ended August 30, 2003 and August 31,
2002. The thirteen week period ended August 30, 2003 is referred to as second
quarter 2004 and the thirteen week period ended August 31, 2002 is referred to
as second quarter 2003. Financial statement presentation used for the
year-to-date period ended August 31, 2002 (fiscal 2003) have been
reclassified, where applicable, to conform to financial statement presentation
used for the year-to-date period ended August 30, 2003 (fiscal 2004).

The Company reports the results of its operations using a 52-53 week
basis. In line with this, each quarter of the fiscal year will contain 13
weeks except for the infrequent fiscal years with 53 weeks.

The results of interim operations for fiscal 2004 are not necessarily
indicative of the results to be expected for the full fiscal year. These
interim unaudited consolidated financial statements should be read in
conjunction with the Companys March 1, 2003 audited consolidated financial
statements and notes thereto.

2. Inventories

A summary of inventories, by major classifications, follows:

|                       |       |   |                 |            |               |   |            |            | 
|---------------------- | ----- | - | --------------- | ---------- | ------------- | - | ---------- | ---------- | 
|                       |       |   | August 30, 2003 |            | March 1, 2003
|                       |       |   |                 |            |              
|Manufacturing supplies |       | $ | 1,370,065       |            |               | $ | 1,361,313  |           
|Raw materials          |       |   | 5,086,640       |            |               |   | 6,688,473  |           
|Finished goods         |       |   | 28,183,353      |            |               |   | 24,531,036 |           
|Work in process        |       |   | 4,609           |            |               |   | 3,955      |           
|                       |       |   |                 |            |               |   |            |           
|                       | Total |   | $               | 34,644,667 |               |   | $          | 32,584,777 | 
|                       |       |   |                 |            |               |   |            |           

3. Intangible Assets

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142 (SFAS 142) Goodwill and
Other Intangible Assets, which was effective for the fiscal year beginning
March 3, 2002. SFAS 142 required, among other things, the discontinuance of
goodwill amortization. In addition, the standard included provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential
future impairments of goodwill. Upon the Companys adoption of SFAS 142 on
March 3, 2002, the Company ceased amortizing goodwill and indefinite-lived
intangibles. Prior to the Companys adoption of SFAS 142, Goodwill and other
intangible assets were being amortized using the straight line method over a
period of 30 years. Also effective March 3, 2002, the Company reclassified the
value of its assembled workforce to goodwill.

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As prescribed under SFAS 142, the Company tested goodwill for impairment
during fiscal 2003 using a two-step process. 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. At the date of adoption management
determined that the entire carrying amount of the goodwill balance was
impaired. The carrying amount, $29,019,571, was written-off as the Cumulative
Effect of an Accounting Change, net of income taxes of $10,415,037 in the
statement of operations for the quarter ended June 1, 2002.

4. Long-Term Debt

Effective August 13, 2003, the Company terminated its five-year
variable-rate $50 million revolving credit facility. Existing debt issuance
costs related to the Companys former $50 million facility in the amount of
$1.2 million were written off and charged to interest expense in conjunction
with the termination of this facility. A prepayment penalty in the amount of
$1 million was paid to the former lender and charged to interest expense, also
in conjunction with the termination of this facility. Also effective August
13, 2003, the Company obtained a three year variable rate $40 million revolving
credit facility from a new lender, which includes a $5 million real estate term
loan subline, a $5 million equipment term loan subline and a $7.5 million
letter of credit subfacility. Funds available under this facility are
available for working capital requirements, permitted investments and general
corporate purposes. Borrowings under the 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. In addition, the Company is required to satisfy
certain financial covenants regarding cash flow and capital expenditures.

As of August 30, 2003, the Company had borrowings under this new facility
of $21.1 million and borrowing availability of approximately $15.1 million. As
of August 31, 2002, the Company had borrowings under its former $50 million
credit facility of $16.2 and borrowing availability of approximately $3.6
million. In addition, at August 30, 2003 and August 31, 2002, the Company was
in compliance with the financial covenants under each of the facilities
(seeItem 5 Other Information).

The Companys Chairman and Vice Chairman agreed to guarantee payment of
the former $50 million facility in exchange for guarantee fees to be paid
annually in advance, equal to 1.5% each of the amount committed for lending
under the former facility. The Companys Chairman and Vice Chairman were not
required to guarantee payment under the new $40 million credit facility.

5. Common Stock

On July 26, 2002, PF Management, Inc. closed its management buyout of the
Company. This going-private transaction resulted in the exchange of each share
of common stock owned by a person other than PF Management for the right to
receive $2.50 in cash. There were 5,781,480 shares issued and outstanding
immediately before the closing. Of that amount, 2,151,268 shares were owned by
persons other than PF Management. 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 have been
issued to PF Management. All per share amounts have been retroactively
restated for all periods presented to reflect the transaction.

6.     Comprehensive Income

Total comprehensive loss is comprised solely of net loss in fiscal 2004
and fiscal 2003. Comprehensive loss was $1,934,115 and $671,138 for the second
quarter 2004 and the second quarter 2003, respectively; and $1,557,880 and
$19,389,274 for fiscal 2004 and fiscal 2003, respectively.

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7. Supplemental
Cash Flow Disclosures - Cash Paid (Received) During the
Period

|                                     |  |                 |           |                 |  |   |           |  
|------------------------------------ |  | --------------- | --------- | --------------- |  | - | --------- | -
|                                     |  | Twenty-six      |           | Twenty-six     
|                                     |  | Weeks Ended     |           | Weeks Ended    
|                                     |  | August 30, 2003 |           | August 31, 2002
|                                     |  |                 |           |                
|Interest                             |  | $               | 7,650,248 |                 |  | $ | 6,710,719 |  
|                                     |  |                 |           |                 |  |   |           |  
|Income taxes net of
refunds received |  | $               | (197,977  | )               |  | $ | (152,616  | )
|                                     |  |                 |           |                 |  |   |           |  

8. Recently Issued Accounting Guidance.

In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149 (SFAS 149),  Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. The Statement amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities under Statement of Financial Accounting
Standards No. 133. SFAS 149 is effective for all contracts entered into or
modified after June 30, 2003. This Statement is not expected to have an impact
on the Companys financial statements.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 (SFAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This Statement requires
certain freestanding financial instruments to be reported as liabilities by
their issuers. The provisions of SFAS 150, which also include a number of new
disclosure requirements, are effective for instruments entered into or modified
after May 31, 2003 and pre-existing instruments as of the beginning of the
first interim period that commences after June 15, 2003. This Statement is not
expected to have an impact on the Companys financial statements.

9. Related Party Transactions

At August 30, 2003, there were no significant changes in related party
transactions from those described at March 1, 2003. However, as described in
Part II, Item 5 of this report, Item 13 of the 10-K for the fiscal year ended
March 1, 2003, as well as in Note 17 Subsequent Events in the Companys
annual report for the year ended March 1, 2003, 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.

13



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

Results of Operations

Second Quarter 2004 Compared to Second Quarter 2003

Revenues, net.Net revenues increased by $19.4 million, or 31.4%. The
increase in net revenues was primarily due to the substantial development of
national business with an existing customer, increased retail business with an
existing customer, short term co-packing operations and an increase in sales of
existing product lines.

Cost of goods sold.Cost of goods sold increased by $17.2 million, or
42.0%. As a percentage of revenues, cost of goods sold increased from 66.3% to
71.6%. This increase primarily was due to a change in product mix to lower
margin products, offset by lower fixed overhead due to increased production as
a result of the Cincinnati plant expansion.

Selling, general and administrative. Selling, general and administrative
expenses increased by $1.7 million, or 9.6%, primarily due to an increase in
distribution expense on higher product volumes. As a percentage of revenues,
selling, general and administrative expenses decreased from 28.0% to 23.3%.

Depreciation.Depreciation expense increased by $0.2 million, or 19.0%,
due primarily to capital expenditures associated with the fiscal 2003 and
fiscal 2004 Cincinnati plant expansions.

Other expense, net. The primary component of net other expense for
second quarter 2004 and second quarter 2003 is interest expense. Interest
expense consists primarily of interest on fixed and variable rate long-term
debt, in addition to expense incurred due to the early extinguishment of the
Companys $50 million revolving loan in second quarter 2004. Net other expense
increased by $2.5 million or 72.9% in second quarter 2004 primarily due to the
write-off of loan commitment fees and a prepayment penalty associated with the
early extinguishment of that credit facility and due to increased borrowings
under the revolving credit facility, both of which were charged to interest
expense (see - Liquidity and Capital Resources below for further discussion
on the change in credit facilities).

Income taxes. The effective tax rate for second quarter 2004 was 35.0%
compared to 17.5% for second quarter 2003. The increase in the effective tax
rate is due primarily to the effects of permanent differences and compensation
deduction limitations in fiscal 2003.

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Results of Operations

Fiscal 2004 Compared to Fiscal 2003

Revenues, net.Net revenues increased by $39.0 million, or 31.5%. The
increase in net revenues was primarily due to the substantial development of
national business with an existing customer, increased retail business with an
existing customer, short term co-packing operations and an increase in sales of
existing product lines.

Cost of goods sold.Cost of goods sold increased by $33.2 million, or
40.9%. As a percentage of revenues, cost of goods sold increased from 65.7% to
70.3%. The increase primarily was due to a change in product mix to lower
margin products, offset by lower fixed overhead due to increased production as
a result of the Cincinnati plant expansion.

Selling, general and administrative. Selling, general and administrative
expenses increased by $4.2 million, or 12.0%, primarily due to an increase in
distribution expense on higher product volumes. As a percentage of revenues,
selling, general and administrative expenses decreased from 28.2% to 24.0%.

Depreciation.Depreciation expense increased by $0.3 million, or 17.7%,
due primarily to capital expenditures associated with the fiscal 2003 and
fiscal 2004 Cincinnati plant expansions.

Other expense, net. The primary component of net other expense for
fiscal 2004 and fiscal 2003 is interest expense. Interest expense consists
primarily of interest on fixed and variable rate long-term debt, in addition to
expense incurred due to the early extinguishment of the Companys $50 million
revolving credit loan in fiscal 2004. Net other expense increased by $2.7
million or 41.2% in fiscal 2004 due to increased borrowings under the revolving
credit facility and due to the write-off of loan commitment fees and a
prepayment penalty associated with the change in credit facilities and early
extinguishment of that credit facility, both of which were charged to interest
expense (see - Liquidity and Capital Resources below for further discussion
on the change in credit facilities).

Income taxes. The effective tax rate for fiscal 2004 was 35.3% compared
to 20.0% for fiscal 2003. The increase in the effective tax rate is due
primarily to the effects of permanent differences and compensation deduction
limitations in fiscal 2003.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
appropriate application of certain accounting policies, many of which require
the Company to make estimates and assumptions about future events and their
impact on amounts reported in the financial statements and related notes.
Since future events and the impact of those events cannot be determined with
certainty, the actual results will inevitably differ from the Companys
estimates. Such differences could be material to the financial statements.

The Company believes its application of accounting policies, and the
estimates inherently required therein, are reasonable. These accounting
policies and estimates are constantly reevaluated, and adjustments are made
when facts and circumstances dictate a change. Historically, the Companys
application of accounting policies has been appropriate, and actual results
have not differed materially from those determined using necessary estimates.

The following critical accounting policies affect the Companys more
significant judgments and estimates used in the preparation of its financial
statements.

Revenue Recognition.Revenue from sales of food processing 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 Promotionsbelow).

Goodwill and Other Intangible Assets. During fiscal 2003, upon adoption of SFAS 142, the Company determined that
the entire carrying amount of the goodwill balance was impaired. The carrying
amount, $29,019,571, was written-off at March 3, 2002 as the Cumulative Effect
of an Accounting Change, net of income taxes of $10,415,037 in the statement of
operations. See Note 2 Summary of Significant Accounting Policies  for
further discussion.

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 expected future payments to be made under these
programs. The Company believes the estimates recorded in the financial
statements are reasonable estimates of the Companys liability.

Concentration of Credit Risk and Significant Customers.Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash equivalents and trade receivables. The Company
places its cash equivalents with high credit quality financial institutions.
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 22.2% and 22.5% of revenues for the three and six-month periods
ended August 30, 2003, respectively. Accounts receivable at August 30, 2003
included receivables from the Companys largest customer totaling $2.4 million.

Going Concern Assumption.Significant assumptions underlie the belief
that the Company anticipates that its fiscal 2004 cash requirements for working
capital and debt service will be met through a combination of funds provided by
operations and borrowings under its $40 million 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.

16



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Liquidity and Capital Resources

Net cash provided by operating activities was $2.1 million for fiscal
2004, as compared to net cash used in operating activities of $9.3 million for
fiscal 2003. The primary components of the net cash provided by operating
activities were 1) an increase in trade accounts payable and other accrued
liabilities of $2.1 million and 2) the write-off of deferred loan fees of $1.2
million in conjunction with the termination of the Companys $50 million
revolving credit facility; offset by 3) an increase in inventory of $2.1
million; and 4) an increase in accounts receivable of $1.1 million.

Net cash used in investing activities was $7.3 million for fiscal 2004,
compared to $8.8 million for fiscal 2003. Significant capital expenditures for
a plant expansion and various plant improvements occurred in both fiscal 2004
and fiscal 2003.

Net cash provided by financing activities was $5.1 million for fiscal
2004, compared to $13.6 million for fiscal 2003. The decrease in cash provided
by financing activities was due primarily to the repayment of the revolving
credit agreement with the former lender offset by the net borrowings under the
new revolving credit agreement.

Effective August 13, 2003, the Company terminated its five-year
variable-rate $50 million revolving credit facility. Existing debt issuance
costs related to the Companys former $50 million facility in the amount of
$1.2 million were written off and charged to interest expense in conjunction
with the termination of this facility. A prepayment penalty in the amount of
$1 million was paid to the former lender and charged to interest expense, also
in conjunction with the termination of this facility. Also effective August
13, 2003, the Company obtained a three year variable rate $40 million revolving
credit facility from a new lender, which includes a $5 million real estate term
loan subline, a $5 million equipment term loan subline and a $7.5 million
letter of credit subfacility. Funds available under this facility are
available for working capital requirements, permitted investments and general
corporate purposes. Borrowings under the 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 the new
facility at August 13, 2003 was 5% (prime plus 1%). In addition, the Company
is required to satisfy certain financial covenants regarding cash flow and
capital expenditures.

As of August 30, 2003, the Company had borrowings under this new facility
of $21.1 million and borrowing availability of approximately $15.1 million. As
of August 31, 2002, the Company had borrowings under its former $50 million
credit facility of $16.2 and borrowing availability of approximately $3.6
million. In addition, at August 30, 2003 and August 31, 2002, the Company was
in compliance with the financial covenants under each of the facilities (see
Item 5 Other Information).

The Company has budgeted approximately $8.8 million for capital
expenditures for the remainder of fiscal 2004. These expenditures are primarily
for the routine food processing capital improvement projects and other
miscellaneous expenditures. The Company believes that funds from operations
and funds from the new $40 million credit facility, as well as the Companys
ability to enter into capital or operating leases, will be adequate to finance
these capital expenditures.

If the Company continues its historical revenue growth trend as expected,
then the Company will be required to raise and invest additional capital for
additional plant expansion projects to provide operating capacity to satisfy
increased demand. Management believes that future cash requirements for these
plant expansion projects would need to be met through other long-term financing
sources, such as an increase in borrowing availability under the new $40
million credit facility, the issuance of industrial revenue bonds or equity
investment. The incurrence of additional long-term debt is governed and
restricted by the Companys existing debt instruments. Furthermore, there can
be no assurance that additional long-term financing will be available on
advantageous terms (or any terms) when needed by the Company.

The Company anticipates continued sales growth in key market areas. As
noted above, however, this growth will require future capital expansion
projects to increase existing plant capacity to satisfy increased demand.
Sales growth, improved operating performance and expanded plant
capacity - none
of which is assured - will be necessary for the Company to continue to service
existing debt.

17



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Seasonality

Except for sales to school districts, which represent approximately 21% of
total sales and which decline during the early spring and summer and early
January, there is no significant seasonal variation in sales.

Management Buyout

On July 26, 2002, 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 and the management buyout of the Company was
completed on July 26, 2002.

18



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As discussed in its annual report for the fiscal year ended March 1, 2003,
the Company is exposed to market risks stemming from changes in interest rates,
foreign exchange rates and commodity prices. Changes in these factors could
cause fluctuations in the Companys financial condition, results of operations
and cash flows. The Company owned no derivative financial instruments or
nonderivative financial instruments held for trading purposes at August 30,
2003 or March 1, 2003. Certain of the Companys outstanding nonderivative
financial instruments at August 30, 2003 are subject to interest rate risk, but
not subject to foreign currency or commodity price risk.

The Companys major market risk exposure is potential loss arising from
changing interest rates and its impact on long-term debt. The Companys policy
is to manage interest rate risk by maintaining a combination of fixed and
variable rate financial instruments in amounts and with maturities that
management considers appropriate. The risks associated with long-term debt at
August 30, 2003 have not changed materially since March 1, 2003. Of the
long-term debt outstanding at August 30, 2003, the $115.0 million of Senior
Notes accrued interest at a fixed rate, while the $21.1 million of outstanding
borrowings under the revolving credit facility and the $5.4 million of
obligation of special purpose entity accrued interest at variable rates. A
rise in prevailing interest rates could have adverse effects on the Companys
financial condition and results of operations. A 25 basis point increase in
the reference rates for the Companys average variable rate debt outstanding
during fiscal 2004 would have decreased net income for that period by
approximately $21,326.

Cautionary Statement As To Forward Looking Information

Certain statements made in this document are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties that may cause
actual results to differ materially from expected results. These risks and
uncertainties include: substantial leverage and insufficient cash flow from
operations; restrictions imposed by the Companys debt instruments; management
control; restriction of payment of dividends; competitive considerations;
government regulation; general risks of the food industry; adverse changes in
food costs and availability of supplies; dependence on key personnel; potential
labor disruptions and other factors, risks and uncertainties identified in
Exhibit 99.1 to our Annual Report on Form 10-K filed with the SEC on March 9,
2004 and in our other filings with the SEC. This list of risks and
uncertainties is not exhaustive. Also, new risk factors emerge over time.
Investors should not place undue reliance on the predictive value of
forward-looking statements.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Companys President and Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of Companys disclosure controls and
procedures (as such term is defined in Exchange Act Rules 13a-14(c) and
15d-14(c)) as of the end of the period covered by this report. Based upon that
evaluation, the Companys President and Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of the period covered by
this report, the Companys disclosure controls and procedures are effective in
alerting them on a timely basis to material information relating to the Company
(including its consolidated subsidiaries) required to be included in the
Companys reports filed or submitted under the Exchange Act. There have been
no significant changes in the Companys internal controls or in other factors
that could significantly affect internal controls subsequent to the date the
Company carried out its evaluation.

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PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

On November 6, 2002, the Company received a notice of default from Cede &
Co., a nominee for the Depository Trust Company (DTC), as the recordholder
for the beneficial owners of approximately $50.5 million in principal amount of
the Companys 10-3/4% Senior Notes due 2006 (the Notes). This notice alleged
that the Company was in non-financial default of the Indenture governing the
Notes. On November 21, 2002, the Company received a letter from Foothill
Capital Corporation (Foothill), its lender at that time, stating that the
Company was in technical default of its Loan and Security Agreement with
Foothill due to the alleged default under the Indenture. However, Foothill
continued to provide funds to the Company under the loan agreement, including
providing the Company with the funds necessary to make the interest payment due
to the Noteholders under the Indenture on December 2, 2002.

On or about December 27, 2002, the Company received an acceleration notice
given by DTC on behalf of the beneficial owners of approximately $45.0 million
in principal amount of the Notes. This notice said that the due date of the
Notes was being accelerated based on the Companys failure to cure the alleged
defaults described in the November 6 letter. On December 31, 2002, the Company
sent a letter to all Noteholders, in care of U.S. Bank, National Association,
the Indenture trustee (the Trustee), reiterating its position that the
Company had violated no Indenture covenants and that there was therefore no
basis for accelerating the Notes.

On January 6, 2003, the Company received a letter from counsel to the
Trustee requesting instructions from the Company with respect to action the
Trustee should take in light of the alleged default under the Indenture, and
asked the Company to provide information in response to the alleged default.
The Company provided information in response to the alleged defaults. The
Trustee subsequently requested additional information and the Company complied
with that request. In reliance on two officers certificates from the Company,
which the Trustee is entitled to rely on under the terms of the Indenture, that
explained why the alleged covenant violations did not constitute an event of
default, the Trustee took the position in February 2003 that no event of
default had occurred under the Indenture.

While the Company did not believe that it had violated the Indenture and
therefore there was no basis for accelerating the Notes, in order to settle the
dispute with certain noteholders, on August 1, 2003, the Company agreed in
principle with a committee (the Ad Hoc Committee) representing holders of
$53.2 million in principal amount of the Companys Notes (approximately 46% of
the outstanding Notes) to a restructuring of the Notes (the Restructuring).
The Company and the Ad Hoc Committee subsequently engaged in negotiations
regarding the terms of a Fourth Supplemental Indenture and other documents to
effectuate the Restructuring. On January 30, 2004, the Company and the Ad Hoc
Committee completed these negotiations and distributed consent solicitation
materials to all noteholders of record on January 30, 2004.

The Fourth Supplemental Indenture agreed upon by the Company and the Ad
Hoc Committee and sent with the consent solicitation materials to the
noteholders contained the following terms:



| |  |  | an increase in the annual interest rate on the Notes to 12.25%
through March 31, 2005, and 13.25% thereafter;                                                                                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a grant to the noteholders of liens on the assets of the
Company and its subsidiaries, such liens being junior to the senior
liens securing the Companys current credit facility with Fleet
Capital Corporation (Fleet);
|
| |  |  | a repurchase right allowing all of the noteholders to require
the Company to repurchase their Notes at par plus accrued interest on
March 31, 2005;                                                                        
|
| |  |  | the payment of a portion of certain cash flow of the Company
(referred to as excess cash) to reduce the principal amount of
Notes outstanding at the end of the Companys fiscal years;                                  

21



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| |  |  | the addition of restrictive covenants limiting the compensation
payable to certain senior executives of the Company and limiting
future related party transactions;                                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the termination of all related party transactions, except for
certain specifically-permitted transactions;                                                                                                                                                               
|
| |  |  | the assumption by the Company of approximately $15.4 million of
subordinated debt of PF Management;                                                                                                                                                                      
|
| |  |  | a requirement that the Company comply with certain corporate
governance standards, appoint an independent director acceptable to
the Company and the noteholders to its board and hire an independent
auditor to monitor the Companys compliance with the Indenture; and
|
| |  |  | the payment of a cash consent fee payment (the Consent
Payment) equal to 3% of the principal amount of Notes held by each
noteholder that consented to the Restructuring.                                                                                              

In consideration for the Restructuring, the Fourth Supplemental Indenture
also provided that any and all existing defaults under the Indenture would be
waived if holders of a majority in aggregate principal amount of the Notes
approved the Restructuring. In addition, the consenting noteholders would
waive any other claims they may have against the Company and its affiliates.

The consent solicitation terminated at 5:00 P.M. Eastern time, on Monday,
March 1, 2004. Consents of holders of $112.4 million in aggregate principal
amount of the outstanding Notes, representing 97.74% of the outstanding Notes,
consented to the Fourth Supplemental Indenture. In addition, the Company
satisfied the other conditions to the closing of the Restructuring, as follows:



| |  |  | paying the fees of the Ad Hoc Committees legal counsel and financial advisor;                                                                                                                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | paying the fees of the Trustee and its legal counsel;                                                                                                                                                                       
|
| |  |  | obtaining executed Consents to Assignment and Assumption and
Subordination from each creditor of PF Management whose debt was
assumed by the Company;                                                                       
|
| |  |  | paying the Consent Payment to the Trustee (which payment will
be disbursed by the Trustee to the noteholders who consented to the
Restructuring); and                                                                       
|
| |  |  | delivering to the Trustee an officers certificate and an
opinion of counsel concluding that all conditions precedent to the
closing of the Restructuring and all covenants required under the
Indenture had been satisfied.

Accordingly, because consents of holders of a majority in aggregate
principal amount of the Notes were received by the Company and the other
conditions precedent to the closing of the Restructuring were satisfied, the
Trustee and the Company executed the Fourth Supplemental Indenture on March 8,
2004 (the Closing Date). Concurrently with the execution of the Fourth
Supplemental Indenture, the Company terminated all of its contracts with
related parties, except the following related party relationships that are
specifically permitted under the terms of the Fourth Supplemental Indenture:



| |  |  | the Company will continue to compensate its directors and
officers, subject to approval of such compensation by the Companys
board, including the independent director;                                                                                                         
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the Companys $5 million loan to Mr. James Richardson will
remain outstanding until a Change of Control event (as defined in the
Indenture) has occurred. Subject to the lien of Fleet, the note
underlying this loan will be pledged to the Trustee as collateral for
the Notes;
|
| |  |  | the Company will continue to lease its Hickory, North Carolina
office from a related party for aggregate annual rent payments of not
more than $116,000; and                                                                                                                     

22



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| |  |  | the guarantees of value and validity of the collateral securing
the Companys credit facility with Fleet given by Messrs. James
Richardson and David Clark will remain outstanding.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the termination of all other related party transactions,
subsequent to March 8, 2004, the Company will perform the purchasing and
distribution services internally. Other related party services will be
outsourced as necessary at comparable cost. In addition, certain executive
compensation is limited, with provisions for bonuses based on EBITDA and cash
payments made on the Senior Notes which could significantly increase the
limitation.

Also concurrently with the execution of the Fourth Supplemental Indenture,
the Company assumed approximately $15.4 million of debt of PF Management and
took title to an aircraft transferred from a related party subject to existing
purchase money debt. Principal payments of the former PF Management debt will
be approximately $4.8 million during fiscal year 2005, $3.6 million during
fiscal year 2006 and $7.0 million during fiscal year 2007.

As noted above, the Fourth Supplemental Indenture contains a waiver of all
defaults of the Indenture through the Closing Date (the Default Waivers). In
accordance with the terms of the Indenture, the Default Waivers bind all
holders of Notes regardless of whether a particular holder consented to the
Fourth Supplemental Indenture. The waiver of all other claims the consenting
noteholders have against the Company and its affiliates, however, does not bind
the noteholders that did not consent to the Fourth Supplemental Indenture.

23



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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

See the Index to Exhibits provided elsewhere in this report.

(b)  Reports on Form 8-K

None

24



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##### 



SIGNATURES

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



| | PIERRE FOODS, INC.
| | ------------------

|                    |  |     |                                                                                         |                                                                        
|------------------- |  | --- | --------------------------------------------------------------------------------------- | -----------------------------------------------------------------------
|Date: March 9, 2004 |  | By: |                                                                                         | /S/ NORBERT E. WOODHAMS                                                
|                    |  |     |                                                                                         |                                                                        
|                    |  |     | Norbert E.
Woodhams
President and Chief Executive Officer
(Principal Executive Officer)
|                    |  |     |                                                                                         |                                                                        
|Date: March 9, 2004 |  | By: |                                                                                         | /S/ PAMELA M. WITTERS                                                  
|                    |  |     |                                                                                         |                                                                        
|                    |  |     |                                                                                         | Pamela M. Witters
Chief Financial Officer
(Principal Financial Officer)

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INDEX TO EXHIBITS

|            |  |                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                           
|3.1         |  | Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Companys Registration Statement on Form
S-4 (No. 333-58711))                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                           
|3.2         |  | Amended and Restated Bylaws of Pierre Foods, Inc., dated September 18,
2002 (incorporated by reference to Exhibit 10.6 to the Companys Quarterly
Report on Form 10-Q for its fiscal quarter ended August 31, 2002)                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                           
|3.3         |  | Agreement and Restated Agreement and Plan of Share Exchange between
Pierre Foods, Inc. and PF Management, Inc., dated as of December 20, 2001
(incorporated by reference to Appendix A to the Companys Preliminary
Proxy Statement on Schedule 14A file on January 24, 2002)                             
|            |  |                                                                                                                                                                                                                                                                                                           
|3.4         |  | Articles of Restatement of Pierre Foods, Inc., dated July 30, 2002
(incorporated by reference to Exhibit 3.3 to the Companys Quarterly
Report on Form 10-Q for its fiscal quarter ended August 31, 2002)                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                           
|4.1         |  | Note Purchase Agreement, dated June 4, 1998, among the Company, the
Guarantors and the Initial Purchasers (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC
on June 24, 1998)                                                                      
|            |  |                                                                                                                                                                                                                                                                                                           
|4.2         |  | Indenture, dated as of June 9, 1998, among the Company, certain
Guarantors and State Street Bank and Trust Company, Trustee (incorporated
by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K
filed with the SEC on June 24, 1998)                                                    
|            |  |                                                                                                                                                                                                                                                                                                           
|4.3         |  | Registration Rights Agreement, dated June 9, 1998, among the Company,
certain Guarantors and certain Initial Purchasers (incorporated by
reference to Exhibit 4.3 to the Companys Current Report on Form 8-K filed
with the SEC on June 24, 1998)                                                        
|            |  |                                                                                                                                                                                                                                                                                                           
|4.4         |  | Form of Initial Global Note (included as Exhibit A to Exhibit 4.2 to the
Companys Current Report on Form 8-K filed with the SEC on June 24, 1998
and incorporated herein by reference)                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                           
|4.5         |  | Form of Initial Certificated Note (included as Exhibit B to Exhibit 4.2
to the Companys Current Report on Form 8-K filed with the SEC on June 24,
1998 and incorporated herein by reference)                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                           
|4.6         |  | Form of Exchange Global Note (included as Exhibit C to Exhibit 4.2 to the
Companys Current Report on Form 8-K filed with the SEC on June 24, 1998
and incorporated herein by reference)                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                           
|4.7         |  | Form of Exchange Certificated Note (included as Exhibit D to Exhibit 4.2
to the Companys Current Report on Form 8-K filed with the SEC on June 24,
1998 and incorporated herein by reference)                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                           
|4.8         |  | First Supplemental Indenture, dated as of September 5, 1998, among the
Company, State Street Bank and Trust Company, Trustee, and Pierre Leasing,
LLC (incorporated by reference to Exhibit 4.8 to Pre-Effective amendment
No. 1 to the Companys Registration Statement on Form S-4 (No. 333-58711))     
|            |  |                                                                                                                                                                                                                                                                                                           
|4.9         |  | Second Supplemental Indenture dated as of February 26, 1999 among the
Company, State Street Bank and Trust Company, Trustee, and Fresh Foods
Restaurant Group, LLC (incorporated by reference to Exhibit 4.9 to the
Companys Quarterly Report on Form 10-Q for its fiscal quarter ended
December 4, 1999)
|            |  |                                                                                                                                                                                                                                                                                                           
|4.10        |  | Third Supplemental Indenture dated as of October 8, 1999 between the
Company and State Street Bank and Trust Company, Trustee (incorporated by
reference to Exhibit 4.10 to the Companys Quarterly Report on Form 10-Q
for its fiscal quarter ended December 4, 1999)                                    

26



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##### 



|            |  |                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                        
|4.11        |  | Fourth Supplemental Indenture dated as of March 8, 2004 between the
Company and U.S. Bank National Association, Trustee (incorporated by
reference to Exhibit 4.11 to the Companys Annual Report on Form 10-K for
its fiscal year ended March 1, 2003)
|            |  |                                                                                                                                                                                                                                                        
|31.1        |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the Chief Executive Officer                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                        
|31.2        |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the Chief Financial Officer                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                        
|32          |  | Written Statement pursuant to 18
U.S.C. '1350 for the Chief Executive Officer and Chief Financial Officer                                                                                                                                              

The Company hereby agrees to provide to the Commission, upon request,
copies of long-term debt instruments omitted from this report pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K under the Securities Act.

27