##### 



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 June 1, 2002                                             
|      |  |                                                                                         
|      |  | 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 (3) 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 July 15, 2002
|                           |                             
|Common Stock, no par value |                              |  | 5,781,480 | 





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##### 



PIERRE FOODS, INC.

INDEX

|                                                                                              |                                                                                                                                       |  |          |      | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ---- | 
|                                                                                              |                                                                                                                                       |  | Page No.
|                                                                                              |                                                                                                                                       |  |         
|Part I. Financial Information:                                                                |                                                                                                                                       |  |          |     
|                                                                                             
|Item 1. Financial Statements                                                                  |                                                                                                                                       |  |          |     
|                                                                                             
|                                                                                              | Consolidated Balance Sheets 
June 1, 2002 and March 2, 2002                                                                          |  |          | 1-2  | 
|                                                                                             
|                                                                                              | Consolidated Statements of Operations and Retained Earnings 
Thirteen Weeks Ended June 1, 2002 and Thirteen Weeks Ended June 2, 2001 |  |          | 3-4  | 
|                                                                                             
|                                                                                              | Consolidated Statements of Cash Flows 
Thirteen Weeks Ended June 1, 2002 and Thirteen Weeks Ended June 2, 2001                       |  |          | 5-6  | 
|                                                                                             
|                                                                                              | Notes to Consolidated Financial Statements                                                                                            |  |          | 7-10 | 
|                                                                                             
|Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                                                                       |  | 11-13    |     
|                                                                                             
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                                       |  | 14       |     
|                                                                                             
|Part II. Other Information:                                                                   |                                                                                                                                       |  |          |     
|                                                                                             
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                       |  | 15       |     
|                                                                                             
|                                                                                              | Signatures                                                                                                                            |  |          | 16   | 
|                                                                                             
|                                                                                              | Index to Exhibits                                                                                                                     |  |          | 17   | 





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##### 



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

|                                   |                                                                                                                               |                      |            |              |             |               |            |            |             | 
|---------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | -------------------- | ---------- | ------------ | ----------- | ------------- | ---------- | ---------- | ----------- | 
|                                   |                                                                                                                               |                      |            | (Unaudited)  |             |               |            |           
|                                   |                                                                                                                               |                      |            | June 1, 2002 |             | March 2, 2002
|                                   |                                                                                                                               |                      |            |              |             |              
|ASSETS                             |                                                                                                                               |                      |            |              |             |               |            |           
|CURRENT ASSETS:                    |                                                                                                                               |                      |            |              |             |               |            |           
|                                   | Cash and cash equivalents                                                                                                     |                      | $          | 64,351       |             |               | $          | 4,577,982  |            
|                                   | Certificates of deposit of special purpose entity                                                                             |                      |            | 1,240,000    |             |               |            | 1,240,000  |            
|                                   | Accounts receivable, net (includes related party receivables of
$195,000 and employee receivables of $465,000 in fiscal
2003) |                      |            | 18,510,190   |             |               |            | 21,469,035 |            
|                                   | Inventories                                                                                                                   |                      |            | 31,386,151   |             |               |            | 23,852,855 |            
|                                   | Refundable income taxes                                                                                                       |                      |            | 56,675       |             |               |            | 70,622     |            
|                                   | Deferred income taxes                                                                                                         |                      |            | 2,349,617    |             |               |            | 2,349,617  |            
|                                   | Prepaid expenses and other current assets                                                                                     |                      |            | 2,116,307    |             |               |            | 1,624,161  |            
|                                   |                                                                                                                               |                      |            |              |             |               |            |            |            
|                                   |                                                                                                                               | Total current assets |            |              | 55,723,291  |               |            |            | 55,184,272  | 
|                                   |                                                                                                                               |                      |            |              |             |               |            |            |            
|PROPERTY, PLANT AND EQUIPMENT, NET |                                                                                                                               |                      | 44,197,045 |              |             |               | 43,281,303 |           
|                                   |                                                                                                                               |                      |            |              |             |               |            |            |            
|OTHER ASSETS:                      |                                                                                                                               |                      |            |              |             |               |            |           
|                                   | Trade name, net                                                                                                               |                      |            | 38,808,636   |             |               |            | 38,808,636 |            
|                                   | Goodwill, net                                                                                                                 |                      |            | 29,019,571   |             |               |            | 29,019,571 |            
|                                   | Notes receivable  related party                                                                                              |                      |            | 993,247      |             |               |            | 993,247    |            
|                                   | Deferred loan origination fees, net                                                                                           |                      |            | 3,514,365    |             |               |            | 2,092,904  |            
|                                   | Other                                                                                                                         |                      |            | 423,072      |             |               |            | 440,931    |            
|                                   |                                                                                                                               |                      |            |              |             |               |            |            |            
|                                   |                                                                                                                               | Total other assets   |            |              | 72,758,891  |               |            |            | 71,355,289  | 
|                                   |                                                                                                                               |                      |            |              |             |               |            |            |            
|                                   |                                                                                                                               | Total Assets         |            | $            | 172,679,227 |               |            | $          | 169,820,864 | 
|                                   |                                                                                                                               |                      |            |              |             |               |            |            |            

See accompanying notes to unaudited consolidated financial statements.

1



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##### 



PIERRE FOODS, INC. AND SUBSIDIARIES

|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |             | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----------- | ------------ | ----------- | ------------- | ----------- | ---------- | ----------- | 
|                                          |                                                                                                                                      |                                            |             | (Unaudited)  |             |               |             |           
|                                          |                                                                                                                                      |                                            |             | June 1, 2002 |             | March 2, 2002
|                                          |                                                                                                                                      |                                            |             |              |             |              
|LIABILITIES AND SHAREHOLDERS EQUITY      |                                                                                                                                      |                                            |             |              |             |               |             |           
|CURRENT LIABILITIES:                      |                                                                                                                                      |                                            |             |              |             |               |             |           
|                                          | Current installments of long-term debt                                                                                               |                                            | $           | 328,848      |             |               | $           | 325,071    |            
|                                          | Trade accounts payable                                                                                                               |                                            |             | 4,440,936    |             |               |             | 4,972,870  |            
|                                          | Accrued interest                                                                                                                     |                                            |             | 6,181,250    |             |               |             | 3,090,624  |            
|                                          | Accrued payroll and payroll taxes                                                                                                    |                                            |             | 4,033,247    |             |               |             | 6,077,062  |            
|                                          | Accrued promotions                                                                                                                   |                                            |             | 2,137,036    |             |               |             | 1,943,479  |            
|                                          | Accrued taxes (other than income and payroll)                                                                                        |                                            |             | 733,341      |             |               |             | 566,677    |            
|                                          | Other accrued liabilities (includes related party liabilities of
$2,085,265 at June 1, 2002)                                         |                                            |             | 3,089,021    |             |               |             | 1,147,558  |            
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|                                          |                                                                                                                                      | Total current liabilities                  |             |              | 20,943,679  |               |             |            | 18,123,341  | 
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|LONG-TERM DEBT, less current installments |                                                                                                                                      |                                            | 115,605,593 |              |             |               | 115,047,605 |           
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|OBLIGATION OF SPECIAL PURPOSE ENTITY      |                                                                                                                                      |                                            | 5,854,800   |              |             |               | 5,858,139   |           
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|OTHER LONG-TERM LIABILITIES               |                                                                                                                                      |                                            | 950,268     |              |             |               | 1,032,696   |           
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|DEFERRED INCOME TAXES                     |                                                                                                                                      |                                            | 2,552,066   |              |             |               | 2,552,066   |           
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|SHAREHOLDERS EQUITY:                     |                                                                                                                                      |                                            |             |              |             |               |             |           
|                                          | Preferred stock  par value $.10, authorized 2,500,000 shares; no
shares issued                                                      |                                            |             |             |             |               |             |           |            
|                                          | Common stock  no par value, authorized 100,000,000 shares;
issued and outstanding June 1, 2002 and March 2, 2002 
5,781,480 shares |                                            |             | 5,781,480    |             |               |             | 5,781,480  |            
|                                          | Additional paid in capital                                                                                                           |                                            |             | 23,336,098   |             |               |             | 23,656,692 |            
|                                          | Retained earnings                                                                                                                    |                                            |             | 2,655,243    |             |               |             | 2,768,845  |            
|                                          | Note receivable  related party                                                                                                      |                                            |             | (5,000,000   | )           |               |             | (5,000,000 | )          
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|                                          |                                                                                                                                      | Total shareholders equity                 |             |              | 26,772,821  |               |             |            | 27,207,017  | 
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            
|                                          |                                                                                                                                      | Total Liabilities and Shareholders Equity |             | $            | 172,679,227 |               |             | $          | 169,820,864 | 
|                                          |                                                                                                                                      |                                            |             |              |             |               |             |            |            

See accompanying notes to unaudited consolidated financial statements.

2



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PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings

(Unaudited)

|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |            |            |            |  
|------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------ | ------------------ | ---------- | -------------------- | ---------- | ------------ | ---------- | ---------- | ---------- | -
|                               |                                                                                                                                                                    |                          |                    |            | Thirteen Weeks Ended
|                               |                                                                                                                                                                    |                          |                    |            |                     
|                               |                                                                                                                                                                    |                          |                    |            | June 1, 2002         |            | June 2, 2001
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |             
|REVENUES                       |                                                                                                                                                                    | $                        | 61,760,799         |            |                      | $          | 50,825,924   |           
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|COSTS AND EXPENSES:            |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|                               | Cost of goods sold (includes related party transactions totaling
$1,186,801 in fiscal 2003)                                                                        |                          |                    | 40,252,835 |                      |            |              | 33,256,065 |           
|                               | Selling, general and administrative expenses (includes related
party transactions totaling $6,298,742 and $1,438,063 in fiscal
2003 and fiscal 2002, respectively) |                          |                    | 17,458,871 |                      |            |              | 14,310,961 |           
|                               | Loss on disposition of property, plant and equipment, net                                                                                                          |                          |                    | 23,408     |                      |            |              |           |           
|                               | Depreciation and amortization                                                                                                                                      |                          |                    | 988,667    |                      |            |              | 1,581,620  |           
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|                               |                                                                                                                                                                    | Total costs and expenses |                    |            | 58,723,781           |            |              |            | 49,148,646 |           
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|OPERATING INCOME               |                                                                                                                                                                    |                          | 3,037,018          |            |                      |            | 1,677,278    |           
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|OTHER INCOME (EXPENSE):        |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|                               | Interest expense                                                                                                                                                   |                          |                    | (3,417,515 | )                    |            |              | (3,275,357 | )         
|                               | Other income, net  (including interest) (includes related
party income of $195,000 and $14,551 in fiscal 2003 and 2002,
respectively)                             |                          |                    | 212,942    |                      |            |              | 76,809     |           
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|                               |                                                                                                                                                                    |                          | Other expense, net |            |                      | (3,204,573 | )            |            |            | (3,198,548 | )
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|LOSS BEFORE INCOME TAX BENEFIT |                                                                                                                                                                    |                          | (167,555           | )          |                      |            | (1,521,270   | )         
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|INCOME TAX BENEFIT             |                                                                                                                                                                    |                          | 53,953             |            |                      |            | 760,635      |           
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           
|NET LOSS                       |                                                                                                                                                                    | $                        | (113,602           | )          |                      | $          | (760,635     | )         
|                               |                                                                                                                                                                    |                          |                    |            |                      |            |              |           

See accompanying notes to unaudited consolidated financial statements.

3



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##### 



|                                                        |                                |   |           |           |   |   |           |           |  
|------------------------------------------------------- | ------------------------------ | - | --------- | --------- | - | - | --------- | --------- | -
|RETAINED EARNINGS:                                      |                                |   |           |           |   |   |           |          
|                                                        | Balance at beginning of period |   | $         | 2,768,845 |   |   | $         | 2,768,265 |  
|                                                        | Net loss                       |   |           | (113,602  | ) |   |           | (760,635  | )
|                                                        |                                |   |           |           |   |   |           |           |  
|                                                        | Balance at end of period       |   | $         | 2,655,243 |   |   | $         | 2,007,630 |  
|                                                        |                                |   |           |           |   |   |           |           |  
|                                                       
|NET LOSS PER COMMON SHARE  BASIC AND
DILUTED           |                                | $ | (.02      | )         |   | $ | (.13      | )        
|                                                       
|WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND
DILUTED |                                |   | 5,781,480 |           |   |   | 5,781,480 |          

See accompanying notes to unaudited consolidated financial statements.

4



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PIERRE FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |           |            |            |  
|------------------------------------ | ----------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------- | ---------- | -------------------- | ---------- | ------------ | --------- | ---------- | ---------- | -
|                                     |                                                                                           |                                                           |                                                                    |                                       |            | Thirteen Weeks Ended
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                     
|                                     |                                                                                           |                                                           |                                                                    |                                       |            | June 1, 2002         |            | June 2, 2001
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |             
|CASH FLOWS FROM OPERATING ACTIVITIES |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |             
|                                     | Net loss                                                                                  |                                                           | $                                                                  | (113,602                              | )          |                      | $          | (760,635     | )        
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |          
|                                     | Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: |                                                           |                                                                    |                                       |            |                      |            |              |          
|                                     |                                                                                           | Depreciation and amortization                             |                                                                    |                                       | 988,667    |                      |            |              | 1,581,620 |           
|                                     |                                                                                           | Amortization of deferred loan origination fees            |                                                                    |                                       | 137,150    |                      |            |              | 131,966   |           
|                                     |                                                                                           | Loss on disposition of property, plant and equipment, net |                                                                    |                                       | 23,408     |                      |            |              |           |           
|                                     |                                                                                           | Decrease in other assets                                  |                                                                    |                                       | 17,859     |                      |            |              |          |           
|                                     |                                                                                           | Decrease in other long-term liabilities                   |                                                                    |                                       | (82,428    | )                    |            |              | (76,414   | )         
|                                     |                                                                                           | Changes in operating assets and liabilities:              |                                                                    |                                       |            |                      |            |              |           |           
|                                     |                                                                                           |                                                           | Receivables                                                        |                                       |            | 2,958,845            |            |              |           | 2,290,651  |           
|                                     |                                                                                           |                                                           | Inventories                                                        |                                       |            | (7,533,296           | )          |              |           | (2,428,612 | )         
|                                     |                                                                                           |                                                           | Refundable income taxes, prepaid expenses and other
current assets |                                       |            | (478,199             | )          |              |           | (1,168,646 | )         
|                                     |                                                                                           |                                                           | Trade accounts payable and other accrued liabilities               |                                       |            | 2,816,561            |            |              |           | (3,733,816 | )         
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |          
|                                     |                                                                                           |                                                           |                                                                    | Total adjustments                     |            |                      | (1,151,433 | )            |           |            | (3,403,251 | )
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |          
|                                     |                                                                                           |                                                           |                                                                    | Net cash used in operating activities |            |                      | (1,265,035 | )            |           |            | (4,163,886 | )
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |          
|CASH FLOWS FROM INVESTING ACTIVITIES |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |             
|                                     |                                                                                           | Proceeds from sales of property, plant and equipment      |                                                                    |                                       | 30,000     |                      |            |              |          |           
|                                     |                                                                                           | Capital expenditures                                      |                                                                    |                                       | (1,957,817 | )                    |            |              | (808,855  | )         
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |          
|                                     |                                                                                           |                                                           |                                                                    | Net cash used in investing activities |            |                      | (1,927,817 | )            |           |            | (808,855   | )
|                                     |                                                                                           |                                                           |                                                                    |                                       |            |                      |            |              |          

See accompanying notes to unaudited consolidated financial statements.

5



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|                                               |                                                 |                                                     |            |            |            |   |            |           |           | 
|---------------------------------------------- | ----------------------------------------------- | --------------------------------------------------- | ---------- | ---------- | ---------- | - | ---------- | --------- | --------- | 
|CASH FLOWS FROM FINANCING ACTIVITIES           |                                                 |                                                     |            |            |            |   |            |          
|                                               | Net borrowings under revolving credit agreement |                                                     |            | 659,319    |            |   |            | 3,192,822 |          
|                                               | Principal payments on long-term debt            |                                                     |            | (100,893   | )          |   |            | (33,266   | )        
|                                               | Loan origination fees                           |                                                     |            | (1,558,611 | )          |   |            |          |          
|                                               | Distributions by special purpose leasing entity |                                                     |            | (320,594   | )          |   |            |          |          
|                                               |                                                 |                                                     |            |            |            |   |            |           |          
|                                               |                                                 | Net cash provided by (used in) financing activities |            |            | (1,320,779 | ) |            |           | 3,159,556 | 
|                                               |                                                 |                                                     |            |            |            |   |            |           |          
|NET DECREASE IN CASH AND CASH EQUIVALENTS      |                                                 |                                                     | (4,513,631 | )          |            |   | (1,813,185 | )        
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |                                                 |                                                     | 4,577,982  |            |            |   | 1,813,185  |          
|                                               |                                                 |                                                     |            |            |            |   |            |           |          
|CASH AND CASH EQUIVALENTS, END OF PERIOD       |                                                 | $                                                   | 64,351     |            |            | $ |           |          
|                                               |                                                 |                                                     |            |            |            |   |            |           |          

See accompanying notes to unaudited consolidated financial statements.

6



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##### 



PIERRE FOODS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)

1.  Basis of Presentation

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 June 1, 2002 and March 2, 2002, the
results of operations for the thirteen weeks ended June 1, 2002 and June 2,
2001, and the cash flows of the Company for the thirteen weeks ended June 1,
2002 and June 2, 2001. Financial statements for the thirteen weeks ended June
2, 2001 have been reclassified, where applicable, to conform to financial
statement presentation used for the thirteen weeks ended June 1, 2002. The
thirteen week period ended June 1, 2002 is referred to as first quarter 2003
and the thirteen week period ended June 2, 2001 is referred to as first
quarter 2002.

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 first quarter 2003 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 2, 2002 audited consolidated financial
statements and notes thereto.

2.  Inventories

A summary of inventories, by major classifications, follows:

|                       |       |   |              |            |               |   |            |            | 
|---------------------- | ----- | - | ------------ | ---------- | ------------- | - | ---------- | ---------- | 
|                       |       |   | June 1, 2002 |            | March 2, 2002
|                       |       |   |              |            |              
|Manufacturing supplies |       | $ | 1,351,961    |            |               | $ | 1,199,647  |           
|Raw materials          |       |   | 5,531,152    |            |               |   | 4,975,188  |           
|Finished goods         |       |   | 24,503,038   |            |               |   | 17,678,020 |           
|                       |       |   |              |            |               |   |            |           
|                       | Total |   | $            | 31,386,151 |               |   | $          | 23,852,855 | 
|                       |       |   |              |            |               |   |            |           

3.  Intangible Assets

The Company adopted FASB Statement of Financial Accounting Standards No.
142 (SFAS 142), Goodwill and Other Intangible Assets, effective March 3,
2002. SFAS 142 requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes 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. SFAS 142 also requires the Company to complete
a transitional goodwill impairment test six months from the date of adoption,
which will occur during the Companys second quarter ending August 31, 2002.
Any impairment loss resulting from the transitional impairment test would be
recorded as a cumulative effect of a change in accounting principle effective
March 3, 2002. Accordingly, the financial statements for first quarter 2003
would be restated for any such impairment loss.

The Company is currently assessing the impact of SFAS 142 on its financial
position and results of operation. As a result, the assembled work force, with
an amortized balance of $2,171,067 at June 1, 2002, was reclassified as
goodwill. In addition, there are indications that the revised goodwill amount
of $29,019,571 may be impaired. The

7



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##### 



reason for the potential impairment loss
is the result of the change (effective March 3, 2002) in the evaluation
criteria for goodwill from an undiscounted cash flow approach, which was
previously utilized under the guidance in Accounting Principles Board Opinion
No. 17, to the fair value approach which is stipulated in SFAS 142. The
intangible asset established for trade name is deemed to have an indefinite
life because the trade name is expected to generate cashflows indefinitely.
Accordingly, as required by SFAS 142, amortization of both goodwill and
tradename has been discontinued. The assessment of the impact of SFAS 142 will
be completed by second quarter ending August 31, 2002.

As of June 1, 2002, the Company had the following acquired intangible
assets recorded:

|                                         |       |            |            |                |            |              |            |              |            |   |            |            |            | 
|---------------------------------------- | ----- | ---------- | ---------- | -------------- | ---------- | ------------ | ---------- | ------------ | ---------- | - | ---------- | ---------- | ---------- | 
|                                         |       |            |            | June 1, 2002   |            | June 1, 2002 |            | June 1, 2002
|                                         |       |            |            | Gross Carrying |            | Accumulated  |            | Net Carrying
|                                         |       |            |            | Amount         |            | Amortization |            | Amount      
|                                         |       |            |            |                |            |              |            |             
|Goodwill                                 |       | $          | 33,571,687 |                |            | $            | (4,552,116 | )            |            | $ | 29,019,571 |           
|                                         |       |            |            |                |            |              |            |              |            |   |            |           
|Intangible assets with
indefinite lives: |       |            |            |                |            |              |            |              |            |   |            |           
|                                         |       | Trade name |            | $              | 44,340,000 |              |            | $            | (5,531,364 | ) |            | $          | 38,808,636 | 
|                                         |       |            |            |                |            |              |            |              |            |   |            |           
|                                         | Total |            | $          | 77,911,687     |            |              | $          | (10,083,480  | )          |   | $          | 67,282,207 |           
|                                         |       |            |            |                |            |              |            |              |            |   |            |           

As required by SFAS 142, the results for first quarter 2002 have not been
restated. The table below presents the effect on net loss and loss per share
as if SFAS 142 had been in effect for first quarter 2002:

|                                                 |                   |   |              |      |              |   |          |      |  
|------------------------------------------------ | ----------------- | - | ------------ | ---- | ------------ | - | -------- | ---- | -
|                                                 |                   |   | Thirteen     |      | Thirteen    
|                                                 |                   |   | Weeks Ended  |      | Weeks Ended 
|                                                 |                   |   | June 1, 2002 |      | June 2, 2001
|                                                 |                   |   |              |      |             
|Reported net loss                                |                   | $ | (113,602     | )    |              | $ | (760,635 | )   
|Add back:                                        |                   |   |              |      |              |   |          |     
|Goodwill and tradename amortization (net of tax) |                   |   |             |      |              |   | 336,688  |     
|                                                 |                   |   |              |      |              |   |          |     
|Adjusted net loss                                |                   | $ | (113,602     | )    |              | $ | (423,947 | )   
|                                                 |                   |   |              |      |              |   |          |     
|Basic and diluted net loss per share:            |                   |   |              |      |              |   |          |     
|                                                 | Reported net loss |   | $            | (.02 | )            |   | $        | (.13 | )
|                                                 | Adjusted net loss |   | $            | (.02 | )            |   | $        | (.07 | )

8



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##### 



4.  Long-Term Debt

Effective May 29, 2002, the Company terminated its $25 million credit
facility, and obtained a new five-year variable rate secured credit facility in
an aggregate amount up to $50 million. The new facility includes a $16 million
term loan subline, a $10 million capital expenditures subline and a $7 million
letter of credit subfacility. The collateral for the facility includes
substantially all of the Companys assets. As of June 1, 2002, the Company had
borrowings under this new facility of $.6 million and borrowing availability of
approximately $18.2 million. As of June 2, 2001, the Company had borrowings
under its former $25 million credit facility of $3.2 million and borrowing
availability of approximately $18.4 million. In addition, at June 1, 2002 and
June 2, 2001, the Company was in compliance with the financial covenants under
each facility.

The Companys Chairman and Vice Chairman agreed to guarantee payment of
the new $50 million facility in exchange for guarantee fees to be paid
annually, equal to 1.5% each of the amount committed for lending under the
facility. As of June 1, 2002, no payments had been made under these
agreements.

5.  Comprehensive Income

Total comprehensive loss is comprised solely of the net loss in fiscal
2003 and fiscal 2002. Comprehensive loss was $113,602 and $760,635 for first
quarter 2003 and first quarter 2002, respectively.

6.  Supplemental cash flow disclosures
 cash paid (received) during the period



|                                     |  |              |         |              |  |   |           |  
|------------------------------------ |  | ------------ | ------- | ------------ |  | - | --------- | -
|                                     |  | Thirteen     |         | Thirteen    
|                                     |  | Weeks Ended  |         | Weeks Ended 
|                                     |  | June 1, 2002 |         | June 2, 2001
|                                     |  |              |         |             
|Interest                             |  | $            | 189,739 |              |  | $ | 6,234,934 |  
|                                     |  |              |         |              |  |   |           |  
|Income taxes net of
refunds received |  | $            | (67,900 | )            |  | $ | (47,397   | )
|                                     |  |              |         |              |  |   |           |  

7.  Recently Issued Accounting Guidance.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 (SFAS 142), Goodwill and Other Intangible Assets. See Note 3 for
discussion of the Companys adoption of SFAS 142.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 (SFAS 143), Accounting for Asset Retirement Obligations, which is
effective for the Company beginning March 3, 2002. SFAS 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
cost. The adoption of SFAS 143 did not have a material impact on the Companys
financial position and results of operations.

In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of
Long-Lived Assets, which is effective for the Companys fiscal year beginning
March 3, 2002. SFAS 144 addresses the financial accounting and reporting for
the impairment or disposal of long-lived assets. The adoption of SFAS 144 did
not have a material impact on the Companys financial position and results of
operations.

9



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##### 



8.  Related Party Transactions

Effective March 3, 2002, the Company entered into a one-year logistics
agreement with PF Distribution, LLC (PF Distribution), owned 50% each by the
Companys Chairman and Vice Chairman. Under the agreement, PF Distribution
will serve as an exclusive logistics agent for the Company, and will provide
all warehousing, fulfillment and transportation services to the Company. In
first quarter 2003, distribution expense recorded in selling, general and
administrative expense was approximately $5.9 million, of which approximately
$4.8 million had been paid to PF Distribution as of June 1, 2002.

9.  Subsequent Event

A definitive proxy statement was filed with the Securities and Exchange
Commission and mailed to shareholders on June 25, 2002, in connection with a
special meeting of shareholders scheduled to be held on July 26, 2002, at which
the shareholders will be asked to adopt and approve the Amended and Restated
Agreement and Plan of Share Exchange dated as of December 20, 2001, and amended
as of June 20, 2002.

10



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##### 



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

Results of Operations

First Quarter 2003 Compared to First Quarter 2002

Revenues, net.Net revenues increased by $10.9 million, or 21.5%. The
increase in net revenues was due to the introduction of new products and to an
increase in demand in all core customer channels. The significant new product
line introduced was the Chop House burger line, marketed primarily to
restaurants. This new line added significant volume to the lower margin
customer channel. Of all core customer channels, which include restaurants,
schools, vending and convenience stores, the restaurant channel had the
greatest increase in demand.

Cost of goods sold.Cost of goods sold increased by $7.0 million, or
21.0%. As a percentage of revenues, cost of goods sold decreased from 65.4% to
65.2%. This decrease primarily was due to a decrease in beef, pork and chicken
raw material prices and improved production efficiencies, offset by a change in
product mix to lower margin products. Production efficiencies were realized
through process improvements, including equipment modifications and labor
reduction, combined with an increase in production volume spread over a stable
fixed overhead base.

Selling, general and administrative. Selling, general and administrative
expenses increased by $3.1 million, or 22.0%, primarily due to an increase in
overhead costs to support the increase in sales volume. As a percentage of
revenues, selling, general and administrative expenses increased from 28.2% to
28.3%.

Depreciation and amortization.Depreciation and amortization expense
decreased by $.6 million, or 37.5%, due primarily to the adoption of SFAS 142
in fiscal 2003 which discontinued amortization of goodwill and intangibles with
indefinite lives.

Other expense, net. The primary component of net other expense for first
quarter 2003 and first quarter 2002 is interest expense. Interest expense
consists primarily of interest on fixed rate long-term debt (see - Liquidity
and Capital Resources below). Net other expense remained constant at $3.2
million for each of fiscal years 2003 and 2002.

Income tax benefit. The effective tax rate for first quarter 2003 was
32.2% compared to 50% for first quarter 2002. The decrease in the effective
tax rate is due primarily to the effects of permanent timing differences and
compensation deduction limitations in fiscal 2002.

Liquidity and Capital Resources

Net cash used in operating activities was $1.3 million for first quarter
2003, as compared to $4.2 million for first quarter 2002. The primary
components of the change in net cash used in operating activities were 1) an
increase in inventory of $7.5 million due to the seasonal building of
inventories which normally occurs during the late spring and early summer to
service market channels that require heavy shipments in late summer and early
fall; offset by 2) a decrease in accounts receivable by $3.0 million and 3) an
increase in accrued interest by $3.1 million due to the timing of the Companys
semi-annual interest payment on the Senior Notes.

Net cash used in investing activities was $1.9 million for first quarter
2003, compared to $.8 million for first quarter 2002, due to an increase in
capital expenditures for plant improvements.

Net cash used in financing activities was $1.3 million for first quarter
2003, compared to net cash provided by financing activities of $3.2 million for
first quarter 2002. The decrease in cash provided by financing activities
was

11



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##### 



due primarily to a decrease in borrowings under the revolving credit
facility of $2.5 million for first quarter 2003 compared to first quarter 2002,
and loan origination fees of $1.6 million incurred in first quarter 2003 that
did not occur in first quarter 2002.

Effective May 29, 2002, the Company terminated its $25 million credit
facility. Also, effective May 29, 2002, the Company obtained a five-year
variable-rate $50 million revolving credit facility from a new lender, which
includes a $16 million term loan subline, a $10 million capital expenditures
subline and a $7 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 June 1, 2002, the Company had borrowings under this new facility of
$.6 million and borrowing availability of approximately $18.2 million. As of
June 2, 2001, the Company had borrowings under its former $25 million credit
facility of approximately $3.2 million and borrowing availability of
approximately $18.4 million. In addition, at June 1, 2002 and June 2, 2001,
the Company was in compliance with the financial covenants under each of the
facilities.

The Company has budgeted approximately $11.2 million for capital
expenditures for the remainder of fiscal 2003. These expenditures are primarily
devoted to a plant expansion in order to maintain the current revenue growth
trend. Additional expenditures are designated for routine food processing
capital improvement projects and other miscellaneous expenditures. The Company
believes that funds from operations and funds from the $50 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 $50 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.

Logistics Agreement

Effective March 3, 2002, the Company entered into a one-year logistics
agreement with PF Distribution, LLC (PF Distribution), owned 50% each by the
Companys Chairman and Vice Chairman. Under the agreement, PF Distribution
will serve as an exclusive logistics agent for the Company, and will provide
all warehousing, fulfillment and transportation services to the Company. The
cost of PF Distributions services is based on flat rates per pound, which are
calculated based on weight and volume characteristics of products, inventory
pounds maintained and inventory pounds shipped. Rates were determined based on
historical costs and industry standards. In first quarter 2003, distribution
expense recorded in selling, general and administrative expense was
approximately $5.9 million, of which approximately $4.8 million had been paid
to PF Distribution as of June 1, 2002.

12



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##### 



Seasonality

Except for sales to school districts, which represent approximately 26% 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

A definitive proxy statement was filed with the Securities and Exchange
Commission on June 25, 2002, in connection with a special meeting of
shareholders, at which the shareholders will be asked to adopt and approve the
Amended and Restated Agreement and Plan of Share Exchange dated as of December
20, 2001, and amended as of June 20, 2002.

13



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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 2, 2002,
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 June 1, 2002
or March 2, 2002. Certain of the Companys outstanding nonderivative financial
instruments at June 1, 2002 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
June 1, 2002 have not changed materially since March 2, 2002. All long-term
debt outstanding at June 1, 2002, comprised of $115.0 million of Senior Notes,
$.6 million of outstanding borrowings under the revolving credit facility and
$5.9 million of obligation of special purpose entity, was accruing interest at
fixed rates. In the future, should the Company borrow funds under its existing
credit facility or other long-term financing sources, a rise in prevailing
interest rates could have adverse effects on the Companys financial condition
and results of operations.

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; factors inhibiting takeover; limited secondary market for common
stock; price volatility; 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 the effects of the pending
management buyout. Shareholder approval of the management buyout is not
assured. The Companys failure to close that transaction for any reason could
have material adverse effects on the Company and the markets for its
securities. 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.

14



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##### 



PART II.  OTHER INFORMATION

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.

(c)  Other Filings



| |                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A definitive proxy statement was filed with the Securities and
Exchange Commission on June 25, 2002, in connection with a special
meeting of shareholders, at which the shareholders will be asked to
adopt and approve the Amended and Restated Agreement and Plan of Share
Exchange dated as of December 20, 2001, and amended as of June 20,
2002.

15



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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: July 16, 2002 |  | By:                |  | /s/ Norbert E.
Woodhams                                                                
|                    |  |                    |  |                                                                                        
|                    |  |                    |  | Norbert E.
Woodhams
President and Chief Executive Officer
(Principal Executive Officer)
|                    |  |                    |  |                                                                                        
|Date: July 16, 2002 |  | By:                |  | /s/ Pamela M.
Witters                                                                  
|                    |  |                    |  |                                                                                        
|                    |  |                    |  | Pamela M. Witters
Chief Financial Officer
(Principal Financial Officer)                

16



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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         |  | Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the
Companys Annual Report on Form 10-K for its fiscal year ended February
27, 1998)                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                           
|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)                                    
|            |  |                                                                                                                                                                                                                                                                                                           
|10.1        |  | Guarantee Fee Agreement between the Company and James C. Richardson,
dated as of May 23, 2002                                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                           
|10.2        |  | Guarantee Fee Agreement between the Company and David R. Clark, dated as
of May 23, 2002                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                           
|10.3        |  | Loan and Security Agreement by and among the Company and Foothill Capital
Corporation, as Lender, dated as of May 29, 2002 (schedules omitted)                                                                                                                                                            

17



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##### 



|     |  |                                                                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.4 |  | Amendment No. 1 to Amended and Restated Agreement and Plan of Share
Exchange between the Company, PF Management, Inc., James C. Richardson,
Jr. and David R. Clark, dated as of June 20, 2002
|     |  |                                                                                                                                                                                              
|99.1 |  | Risk Factors (incorporated by reference to Exhibit 99.1 to the Companys
Annual Report on Form 10-K for its fiscal year ended March 2, 2002)                                                 

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.

18