UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended October 3, 2009

or



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

For the transition period from  to

Commission File Number:
333-112714





MICHAEL FOODS, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 13-4151741                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               | 
|301 Carlson Parkway, Suite 400 Minnetonka, Minnesota           |  | 55305                            
|(Address of principal executive offices)                       |  | (Zip Code)                       

(952) 258-4000

(Registrants telephone number, including area code)

None

(Former name, former address and former fiscal year, 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 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  | x |  | Smaller Reporting Company |  |  ̈

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

The registrants Common Stock is not publicly traded. The Registrant had 3,000 shares of $0.01 par value common stock outstanding as of
November 13, 2009.









---

PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, In thousands, except for share data)



|                                                                                                                      |  |                |           |                |   |           |  
|--------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | -------------- | - | --------- | -
|                                                                                                                      |  | October 3,2009 |           | January 3,2009 |  
|ASSETS                                                                                                                |  |                |           |                |   |           |  
|Current Assets                                                                                                        |  |                |           |                |   |           |  
|Cash and equivalents                                                                                                  |  | $              | 85,792    |                | $ | 78,054    |  
|Accounts receivable, less allowances                                                                                  |  |                | 127,455   |                |   | 124,518   |  
|Inventories                                                                                                           |  |                | 127,156   |                |   | 127,153   |  
|Prepaid expenses and other                                                                                            |  |                | 12,224    |                |   | 18,248    |  
|                                                                                                                      |  |                |           |                |   |           |  
|Total Current Assets                                                                                                  |  |                | 352,627   |                |   | 347,973   |  
|                                                                                                                      |  |               
|Property, Plant and Equipment                                                                                         |  |                |           |                |   |           |  
|Land                                                                                                                  |  |                | 7,279     |                |   | 7,279     |  
|Buildings and improvements                                                                                            |  |                | 152,437   |                |   | 146,923   |  
|Machinery and equipment                                                                                               |  |                | 392,990   |                |   | 355,406   |  
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  |                | 552,706   |                |   | 509,608   |  
|Less accumulated depreciation                                                                                         |  |                | 308,959   |                |   | 278,058   |  
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  |                | 243,747   |                |   | 231,550   |  
|                                                                                                                      |  |               
|Other Assets                                                                                                          |  |                |           |                |   |           |  
|Goodwill                                                                                                              |  |                | 522,916   |                |   | 522,916   |  
|Intangible assets, net                                                                                                |  |                | 174,744   |                |   | 186,318   |  
|Other assets                                                                                                          |  |                | 13,178    |                |   | 10,101    |  
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  |                | 710,838   |                |   | 719,335   |  
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  | $              | 1,307,212 |                | $ | 1,298,858 |  
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  |               
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                  |  |                |           |                |   |           |  
|Current Liabilities                                                                                                   |  |                |           |                |   |           |  
|Current maturities of long-term debt                                                                                  |  | $              | 2,967     |                | $ | 4,306     |  
|Accounts payable                                                                                                      |  |                | 61,267    |                |   | 90,507    |  
|Accrued liabilities                                                                                                   |  |                |           |                |   |           |  
|Compensation                                                                                                          |  |                | 19,041    |                |   | 24,265    |  
|Interest                                                                                                              |  |                | 10,237    |                |   | 4,537     |  
|Customer programs                                                                                                     |  |                | 41,290    |                |   | 39,556    |  
|Other                                                                                                                 |  |                | 29,845    |                |   | 27,674    |  
|                                                                                                                      |  |                |           |                |   |           |  
|Total Current Liabilities                                                                                             |  |                | 164,647   |                |   | 190,845   |  
|Long-term debt, less current maturities                                                                               |  |                | 575,012   |                |   | 593,078   |  
|Deferred income taxes                                                                                                 |  |                | 88,177    |                |   | 88,554    |  
|Other long-term liabilities                                                                                           |  |                | 23,293    |                |   | 22,393    |  
|Commitments and contingencies                                                                                         |  |                |          |                |   |          |  
|Shareholders Equity                                                                                                  |  |                |           |                |   |           |  
|Common stock, $0.01 par value, 3,000 shares authorized, issued and outstanding on October 3, 2009 and January 3, 2009 |  |                |          |                |   |          |  
|Additional paid-in capital                                                                                            |  |                | 276,321   |                |   | 271,261   |  
|Retained earnings                                                                                                     |  |                | 177,664   |                |   | 135,271   |  
|Accumulated other comprehensive income (loss)                                                                         |  |                | 2,098     |                |   | (2,544    | )
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  |                | 456,083   |                |   | 403,988   |  
|                                                                                                                      |  |                |           |                |   |           |  
|                                                                                                                      |  | $              | 1,307,212 |                | $ | 1,298,858 |  
|                                                                                                                      |  |                |           |                |   |           |  

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



2



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MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the three months ended October 3, 2009 and
September 27, 2008

(Unaudited, In thousands)



|                                             |  |      |         |      |   |        
|-------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                             |  | 2009 |         | 2008
|Net sales                                    |  | $    | 382,116 |      | $ | 450,058
|Cost of sales                                |  |      | 306,503 |      |   | 383,922
|                                             |  |      |         |      |   |        
|Gross profit                                 |  |      | 75,613  |      |   | 66,136 
|Selling, general and administrative expenses |  |      | 34,982  |      |   | 41,650 
|                                             |  |      |         |      |   |        
|Operating profit                             |  |      | 40,631  |      |   | 24,486 
|Interest expense, net                        |  |      | 12,001  |      |   | 8,833  
|                                             |  |      |         |      |   |        
|Earnings before income taxes                 |  |      | 28,630  |      |   | 15,653 
|Income tax expense                           |  |      | 10,105  |      |   | 4,629  
|                                             |  |      |         |      |   |        
|Net earnings                                 |  | $    | 18,525  |      | $ | 11,024 
|                                             |  |      |         |      |   |        

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



3



---

MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the nine months ended October 3, 2009 and
September 27, 2008

(Unaudited, In thousands)



|                                             |  |      |           |      |   |          
|-------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                             |  | 2009 |           | 2008
|Net sales                                    |  | $    | 1,152,488 |      | $ | 1,320,070
|Cost of sales                                |  |      | 926,719   |      |   | 1,115,891
|                                             |  |      |           |      |   |          
|Gross profit                                 |  |      | 225,769   |      |   | 204,179  
|Selling, general and administrative expenses |  |      | 113,585   |      |   | 122,820  
|                                             |  |      |           |      |   |          
|Operating profit                             |  |      | 112,184   |      |   | 81,359   
|Interest expense, net                        |  |      | 31,975    |      |   | 32,120   
|Loss on early extinguishment of debt         |  |      | 3,237     |      |   |         
|                                             |  |      |           |      |   |          
|Earnings before income taxes                 |  |      | 76,972    |      |   | 49,239   
|Income tax expense                           |  |      | 27,068    |      |   | 15,689   
|                                             |  |      |           |      |   |          
|Net earnings                                 |  | $    | 49,904    |      | $ | 33,550   
|                                             |  |      |           |      |   |          

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



4



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MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended October 3, 2009 and
September 27, 2008

(Unaudited, In thousands)



|                                                                              |  |      |          |   |      |   |         |  
|----------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | -
|                                                                              |  | 2009 |          |   | 2008 |  
|Net cash provided by operating activities                                     |  | $    | 91,861   |   |      | $ | 49,786  |  
|Cash flows from investing activities:                                         |  |      |          |   |      |   |         |  
|Capital expenditures                                                          |  |      | (45,861  | ) |      |   | (19,927 | )
|Business acquisition                                                          |  |      |         |   |      |   | (8,652  | )
|Other assets                                                                  |  |      | 38       |   |      |   |        |  
|                                                                              |  |      |          |   |      |   |         |  
|Net cash used in investing activities                                         |  |      | (45,823  | ) |      |   | (28,579 | )
|Cash flows from financing activities:                                         |  |      |          |   |      |   |         |  
|Payments on long-term debt                                                    |  |      | (463,033 | ) |      |   | (1,853  | )
|Proceeds from long-term debt                                                  |  |      | 455,525  |   |      |   |        |  
|Original issue discount on long-term debt                                     |  |      | (14,075  | ) |      |   |        |  
|Deferred financing costs                                                      |  |      | (9,089   | ) |      |   |        |  
|Investment by (dividend to) parent                                            |  |      | (8,011   | ) |      |   | 125     |  
|                                                                              |  |      |          |   |      |   |         |  
|Net cash used in financing activities                                         |  |      | (38,683  | ) |      |   | (1,728  | )
|Effect of exchange rate changes on cash                                       |  |      | 383      |   |      |   | (66     | )
|                                                                              |  |      |          |   |      |   |         |  
|Net increase in cash and equivalents                                          |  |      | 7,738    |   |      |   | 19,413  |  
|Cash and equivalents at beginning of period                                   |  |      | 78,054   |   |      |   | 30,077  |  
|                                                                              |  |      |          |   |      |   |         |  
|Cash and equivalents at end of period                                         |  | $    | 85,792   |   |      | $ | 49,490  |  
|                                                                              |  |      |          |   |      |   |         |  
|                                                                              |  |     
|Supplemental disclosures:                                                     |  |      |          |   |      |   |         |  
|Non-cash capital investment by parent                                         |  | $    | 5,194    |   |      | $ | 4,625   |  
|                                                                              |  |      |          |   |      |   |         |  
|Non-cash write-off of deferred financing costs                                |  | $    | 3,171    |   |      | $ |        |  
|                                                                              |  |      |          |   |      |   |         |  
|Reclassification of non-current other assets to property, plant and equipment |  | $    |         |   |      | $ | 16,250  |  
|                                                                              |  |      |          |   |      |   |         |  

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



5



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MICHAEL FOODS, INC.

(A wholly owned subsidiary of M-Foods Holdings, Inc.)

(Unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE ABASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The
accompanying condensed consolidated financial statements have been prepared in accordance with Regulation S-X of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information
presented not misleading.

We utilize a 52/53week fiscal year ending on the Saturday nearest to
December 31 each year. The quarterly periods ended October 3, 2009 and September 27, 2008 were 13-week periods.

In the opinion of management, the unaudited financial statements contain all adjustments necessary to present fairly the results of operations for the periods indicated. Our results of operations and cash flows for the nine month period
ended October 3, 2009 are not necessarily indicative of the results expected for the full year.

We have evaluated all
subsequent events through November 13, 2009, the issuance date of our financial statements.

Recent Accounting Pronouncements

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for transfers of financial assets.
The amendment eliminates the concept of a qualifying special-purpose entity and also introduces the concept of a participating interest, which will limit the circumstances where the transfer of a portion of a financial asset will qualify
as a sale, assuming all other derecognition criteria are met. Furthermore, it clarifies and amends the derecognition criteria for determining whether a transfer qualifies for sale accounting. The amendment will be effective for us beginning after
January 2, 2010. We are currently evaluating this amendment, but do not believe that it will have a significant impact on the determination or reporting of our financial results.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable-interest
entities. The amendment includes: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is
necessary to reassess who should consolidate a variable-interest entity. The amendment will be effective for us beginning after January 2, 2010. We are currently evaluating the amendment, but do not believe that it will have a significant
impact on the determination or reporting of our financial results.

In June 2009, the FASB issued the FASB Accounting and
Standards Codification (Codification). The Codification will become the single source for all authoritative GAAP recognized by the FASB to be applied for financial statements issued for periods ending after September 15, 2009. We have
implemented the Codification, it does not change GAAP and will not have an effect on our determination or reporting of our financial results.

Significant Accounting Policies

Marketing Costs

The Company promotes its products with advertising, consumer incentives, and trade promotions. Such programs include, but are not limited to,
discounts, coupons, and fixed and volume-based incentive programs. Advertising costs are expensed as incurred and included in selling expenses. At retail, we predominately use in-store promotional spending, discounts and coupons. Such spending
is recorded as a reduction to sales based on amounts estimated as being due to customers and consumers at the end of a period. In foodservice, we predominately use fixed and volume-based programs. Fixed marketing programs are expensed over
the period to which sales relate and are included in selling expenses. Volumebased programs are recorded as a reduction to sales based on amounts estimated as being due to customers at the end of a period. Late in fiscal 2008, a
marketing program with one of our foodservice customers changed from a fixed-dollar marketing program recorded as selling expense to a volume-based allowance program, which was recorded in net sales in the current period. This effect and other
program changes resulted in reductions in selling expenses and net sales of $1.8 million and $4.9 million for the three and nine month periods ended October 3, 2009 as compared to 2008.



6



---

Financial Instruments and Fair Value Measurements

We are exposed to market risks from changes in commodity prices, which may adversely affect our operating results and financial position.
When appropriate, we seek to minimize our risks from commodity price fluctuations through the use of derivative financial instruments, such as commodity purchase contracts which are classified as derivatives along with other instruments relating
primarily to corn, soybean meal, cheese and energy related needs. We estimate fair values based on exchange quoted prices, adjusted as appropriate for differences in local markets. These differences are generally valued using inputs from broker or
dealer quotations, or market transactions in either the listed or over-the-counter commodity markets. In such cases, these derivative contracts are classified within Level 2 of the accounting guidance fair value hierarchy. Changes in the fair
values of these contracts are recognized in the consolidated financial statements as a component of cost of sales or other comprehensive income (loss). At October 3, 2009, our hedging-related financial assets, measured on a recurring basis,
were carried at a fair value of $2,073,000 and are included in prepaid expenses and other current assets.

We have two
financial debt instruments. For both instruments, we utilize debt securities market trading prices to compute the fair value of our financial debt instruments owed to our lenders. The first debt instrument is our Credit Agreement facilities that
include two term loans, a term A loan and a term B loan. The fair value of the term A loan was $201.0 million compared to issuance value of $200 million at period end. The fair value of the term B loan was $252.5 million compared to its issuance
value of $250 million. The second debt instrument is our senior subordinated notes. The fair value of our senior notes was $150.9 million compared to the issuance value of $150 million.

Accounting for Hedging Activities

Certain of our operating segments
enter into derivative instruments, such as corn and soybean meal futures and cheese commitments, which we believe provide an economic hedge on future transactions and are designated as cash flow hedges. As the commodities being hedged are either
grain ingredients fed to our flocks or raw material production inputs, the changes in the market value of such contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of these
items.

We actively monitor exposure to commodity price risks and use derivative commodity instruments to manage the impact of
certain of these risks. We use derivatives, primarily futures contracts, only for the purpose of managing risks associated with underlying exposures. Our futures contracts for grains and raw materials are cash flow hedges of firm purchase
commitments and anticipated production requirements, as they reduce our exposure to changes in the cash price of the respective items and generally extend for less than one year. We expect that within the next twelve months we will reclassify, as
earnings or losses, substantially all of the amount recorded in accumulated other comprehensive income (loss) related to futures at quarter end.

In addition, we use derivative instruments to mitigate some of the risk associated with our energy related needs. We do not treat those futures contracts as hedging instruments and, therefore, record the
gains or losses related to them as a component of earnings in the period of change.

We do not trade or use instruments with
the objective of earning financial gains on the commodity price, nor do we use instruments where there are not underlying exposures. All derivatives are recognized at their fair value. For derivative instruments designated and qualifying as cash
flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income or (loss) (AOCI or AOCL) in the equity section of our balance sheet and a corresponding amount
is recorded in prepaid and other current assets or other current liabilities, as appropriate. We offset certain derivative asset and liability amounts where a legal right of offset exists. The amounts deferred are subsequently recognized in cost of
sales when the associated products are sold. The cost or benefit of contracts closed prior to the execution of the underlying purchase is deferred until the anticipated purchase occurs. As a result of the volatility of the markets, deferred gains
and losses in AOCI or AOCL may fluctuate until the related contract is closed. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings. During the three and nine month periods ended October 3,
2009, we did not discontinue any cash flow hedges, therefore no reclassification of gains or losses into earnings were made during the periods.

On October 3, 2009, we had the following outstanding commodity-forward contracts that were entered into to hedge forecasted purchases of grain:



|                    |  |          
|------------------- |  | ---------
|Commodity           |  | Quantity 
|Corn (bushels)      |  | 3,700,000
|Soybean Meal (tons) |  | 36,700   



7



---

The following table represents our derivative assets and (liabilities) at October 3,
2009 (In thousands):



|                                                  |  |                            |  |            |     |           |   |        |  
|------------------------------------------------- |  | -------------------------- |  | ---------- | --- | --------- | - | ------ | -
|                                                  |  |                            |  | Fair Value |    
|                                                  |  | Balance Sheet Location     |  | Asset      |     | Liability |  
|Derivatives designated as hedging instruments     |  |                            |  |            |     |           |   |        |  
|                                                  |  |                            | 
|Commodity contracts  Grain                       |  | Prepaid expenses and other |  | $          | 45  |           | $ | (1,329 | )
|                                                  |  |                            |  |            |     |           |   |        |  
|                                                  |  |                            | 
|Derivatives not designated as hedging instruments |  |                            |  |            |     |           |   |        |  
|                                                  |  |                            | 
|Commodity contracts  Energy                      |  | Prepaid expenses and other |  | $          | 258 |           | $ | (772   | )
|                                                  |  |                            |  |            |     |           |   |        |  

The following tables represent the effect of derivative instruments on our Condensed
Consolidated Statement of Earnings for the three and nine month periods ended October 3, 2009 (In thousands, net of tax impact):



|                                               |  |                                           |        |   |                                                          |               |                                              |   |        |                                                          |  |                                               |  |   |      |  
|---------------------------------------------- |  | ----------------------------------------- | ------ | - | -------------------------------------------------------- | ------------- | -------------------------------------------- | - | ------ | -------------------------------------------------------- |  | --------------------------------------------- |  | - | ---- | -
|Derivatives in Cash Flow Hedging Relationships |  | Gain (Loss)Recognizedin AOCI onDerivative |        |   | Location ofGain (Loss)Reclassifiedfrom AOCIinto Earnings |               | Gain (Loss)Reclassifiedfrom AOCIintoEarnings |   |        | Location ofGain (Loss)Recognized inEarnings onDerivative |  | Gain (Loss)Recognized inEarnings onDerivative | 
|                                               |  | (Effective Portion)                       |        |   | (Ineffective Portion)                                    |              
|                                               |  | Three Months Ended October 3, 2009        |       
|Commodity contracts  Grain                    |  | $                                         | (1,029 | ) |                                                          | Cost of sales |                                              | $ | (174   | )                                                        |  | Cost of sales                                 |  | $ | (164 | )
|                                               |  |                                           |        |   |                                                          |               |                                              |   |        |                                                          |  |                                               |  |   |      |  
|                                               | 
|                                               |  | Nine Months Ended October 3, 2009         |       
|Commodity contracts  Grain                    |  | $                                         | (1,290 | ) |                                                          | Cost of sales |                                              | $ | (4,696 | )                                                        |  | Cost of sales                                 |  | $ | (130 | )
|                                               |  |                                           |        |   |                                                          |               |                                              |   |        |                                                          |  |                                               |  |   |      |  



|                                                  |  |                                                          |  |                                               |      |  
|------------------------------------------------- |  | -------------------------------------------------------- |  | --------------------------------------------- | ---- | -
|Derivatives not designated as hedging instruments |  | Location ofGain (Loss)Recognized inEarnings onDerivative |  | Gain (Loss)Recognized inEarnings onDerivative |     
|                                                  |  | Three Months Ended October 3,2009                        | 
|Commodity contracts  Energy                      |  | Cost of sales                                            |  | $                                             | 8    |  
|                                                  |  |                                                          |  |                                               |      |  
|                                                  | 
|                                                  |  | Nine Months Ended October 3,2009                         | 
|Commodity contracts  Energy                      |  | Cost of sales                                            |  | $                                             | (495 | )
|                                                  |  |                                                          |  |                                               |      |  

Goodwill and Intangible Assets

We recognize the excess cost of an acquired entity over the net amount assigned to assets acquired, including intangible assets with
indefinite lives, and liabilities assumed, as goodwill. Goodwill and intangible assets with indefinite lives (trademarks) are tested for impairment on an annual basis during the fourth quarter, and between annual tests whenever there is a potential
impairment indicated. Fair values are estimated based on our best assessment of market value compared with the corresponding carrying value of the reporting unit, including goodwill. Impairment losses will be recognized whenever the implied fair
value is less than the carrying value of the related asset.



8



---

Each segments share of goodwill was as follows as of (In thousands):



|                |  |                |         |                |   |        
|--------------- |  | -------------- | ------- | -------------- | - | -------
|                |  | October 3,2009 |         | January 3,2009
|Egg Products    |  | $              | 430,992 |                | $ | 430,992
|Crystal Farms   |  |                | 32,068  |                |   | 32,068 
|Potato Products |  |                | 59,856  |                |   | 59,856 
|                |  |                |         |                |   |        
|                |  | $              | 522,916 |                | $ | 522,916
|                |  |                |         |                |   |        

We recognize an acquired intangible asset apart from goodwill whenever the asset
arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract,
asset or liability. An intangible asset other than goodwill is amortized over its estimated useful life unless that life is determined to be indefinite. Straight-line amortization reflects an appropriate allocation of the cost of intangible assets
to earnings in proportion to the amount of economic benefit obtained by the Company in each reporting period. Impairment losses are recognized if the carrying amount of an intangible asset subject to amortization is not recoverable from expected
future cash flows, and its carrying amount exceeds its fair value.

Our intangible assets, other than goodwill, were as
follows as of (In thousands):



|                                                                |  |                |         |   |                |   |         |  
|--------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | - | ------- | -
|                                                                |  | October 3,2009 |         |   | January 3,2009 |  
|Amortized intangible assets, principally customer relationships |  | $              | 230,215 |   |                | $ | 230,215 |  
|Accumulated amortization                                        |  |                | (89,596 | ) |                |   | (78,022 | )
|                                                                |  |                |         |   |                |   |         |  
|                                                                |  |                | 140,619 |   |                |   | 152,193 |  
|Indefinite lived intangible assets, trademarks                  |  |                | 34,125  |   |                |   | 34,125  |  
|                                                                |  |                |         |   |                |   |         |  
|                                                                |  | $              | 174,744 |   |                | $ | 186,318 |  
|                                                                |  |                |         |   |                |   |         |  

The aggregate amortization expense was $11,574,000 for the nine months ended
October 3, 2009 and was $11,382,000 for the nine months ended September 27, 2008. The estimated amortization expense for the years 2009 through 2013 is as follows (In thousands):



|     |  |   |       
|---- |  | - | ------
|2009 |  | $ | 15,431
|2010 |  |   | 15,431
|2011 |  |   | 15,331
|2012 |  |   | 15,331
|2013 |  |   | 15,331

The above amortization expense forecast is an estimate. Actual amounts may change
from such estimated amounts due to additional intangible asset acquisitions, potential impairment, accelerated amortization, or other events.

Deferred Financing Costs

Deferred financing costs are included in other assets and are being amortized using
the effective interest rate method over the lives of the respective debt agreements. Our deferred financing costs are as follows for the periods ended (In thousands):



|                         |  |                |         |   |                |   |         |  
|------------------------ |  | -------------- | ------- | - | -------------- | - | ------- | -
|                         |  | October 3,2009 |         |   | January 3,2009 |  
|Deferred financing costs |  | $              | 37,978  |   |                | $ | 32,060  |  
|Accumulated amortization |  |                | (25,334 | ) |                |   | (22,531 | )
|                         |  |                |         |   |                |   |         |  
|                         |  | $              | 12,644  |   |                | $ | 9,529   |  
|                         |  |                |         |   |                |   |         |  

In connection with the May 1, 2009 amended and restated credit agreement
financing, deferred financing costs of $9,083,000 were capitalized. These costs are included in other assets and are being amortized using the effective interest rate method over the lives of the respective debt agreements. In conjunction with the
extinguishment of the 2003 term loan B portion of our prior credit facility, we incurred costs of $66,000 and wrote-off $3,171,000 of non-cash deferred financing costs.



9



---

NOTE BINVENTORIES

Inventories, other than flocks, are stated at the lower of cost (determined on a first-in, first-out basis) or market. Flock inventory
represents the cost of purchasing and raising flocks to laying maturity, at which time their cost is amortized to operations over their expected useful lives of generally one to two years.

Inventories consisted of the following as of (In thousands):



|                                   |  |                |         |                |   |        
|---------------------------------- |  | -------------- | ------- | -------------- | - | -------
|                                   |  | October 3,2009 |         | January 3,2009
|Raw materials and supplies         |  | $              | 21,141  |                | $ | 19,312 
|Work in process and finished goods |  |                | 78,909  |                |   | 77,604 
|Flocks                             |  |                | 27,106  |                |   | 30,237 
|                                   |  |                |         |                |   |        
|                                   |  | $              | 127,156 |                | $ | 127,153
|                                   |  |                |         |                |   |        

NOTE CDEBT

Long-term debt consisted of the following as of (In thousands):



|                                    |  |                |         |                |   |        
|----------------------------------- |  | -------------- | ------- | -------------- | - | -------
|                                    |  | October 3,2009 |         | January 3,2009
|Revolving credit facility           |  | $              |        |                | $ |       
|Term loans                          |  |                | 416,250 |                |   | 427,300
|Senior subordinated notes payable   |  |                | 150,050 |                |   | 150,050
|Guaranteed bonds                    |  |                | 12,847  |                |   | 14,039 
|Capital leases                      |  |                | 8,969   |                |   | 3,743  
|MFI Food Canada, Ltd note payable   |  |                | 2,530   |                |   | 2,252  
|                                    |  |                |         |                |   |        
|                                    |  |                | 590,646 |                |   | 597,384
|                                    |  |               
|Less:                               |  |                |         |                |   |        
|Current maturities                  |  |                | 2,967   |                |   | 4,306  
|Unamortized original issue discount |  |                | 12,667  |                |   |       
|                                    |  |                |         |                |   |        
|                                    |  | $              | 575,012 |                | $ | 593,078
|                                    |  |                |         |                |   |        

On May 1, 2009, we entered into an amended and restated credit agreement
(Credit Agreement), which consisted of a $75,000,000 revolving credit facility, a $200,000,000 term A loan and a $250,000,000 term B loan. The revolving credit facility and the term A loan mature November 1, 2012 and the term B loan
matures May 1, 2014. Both the term A loan and term B loan were issued at a discount. The original issue discount on the term A loan was $4,075,000 and on the term B loan it was $10,000,000. The original issue discount is being amortized using
the effective interest rate method over the respective lives of the loans. In conjunction with the extinguishment of the 2003 term loan B, we incurred costs of $66,000 and wrote-off $3,171,000 of non-cash deferred financing costs. The facilities
within the Credit Agreement bear interest at a floating base rate plus an applicable margin, as defined in the agreement. The effective interest rates at October 3, 2009, for the term A loan and term B loan were 6.00% and 6.50%. At
October 3, 2009, approximately $6.6 million of capacity was used under the revolving credit facility for letters of credit.

On July 31, 2009, we made voluntary prepayments of $30,000,000 on the term A loan and $3,750,000 on the term B loan. The voluntary prepayments represented the next eighteen months scheduled principal payments of the term loans.
The next scheduled principal payment on the term loans will be in March 2011.

The covenants and collateral on the Credit
Agreement are substantially unchanged. However, the maximum leverage ratio and minimum interest coverage ratio thresholds were adjusted. The Credit Agreement also allows for the funding of the semi-annual interest payments at M-Foods Holdings, Inc.

The Credit Agreement is collateralized by substantially all of our assets. The Credit Agreement and senior subordinated notes
contain restrictive covenants, including restrictions on dividends and distributions to shareholders and unit holders, a maximum leverage ratio, and a minimum interest coverage ratio, in addition to limitations on additional indebtedness and liens.
Covenants related to operating performance are primarily based on earnings before interest expense, income taxes, and depreciation and amortization expense. Our failure to comply with these covenants could result in an event of default, which if not
cured or waived could have a material adverse effect on our results of operations, financial position and cash flow. In general, the debt covenants limit our discretion in the operation of our businesses. We were in compliance with all of the
financial covenants in the Credit Agreement and the senior subordinated notes as of October 3, 2009. In addition, the Credit Agreement includes guarantees by substantially all of our domestic subsidiaries.



10



---

In December 2008, we entered into a $15.6 million variable-rate lease agreement to fund a
portion of the equipment purchases at our new potato products facility. As of October 3, 2009, we have borrowed $5.5 million on this facility and pledged that amount of plant assets as collateral. The borrowing is classified as a capital lease
within long-term debt.

The following is an analysis of the leased property under capital leases by major classes (In
thousands):



|                           |  |                |        |   |                |   |        |  
|-------------------------- |  | -------------- | ------ | - | -------------- | - | ------ | -
|                           |  | October 3,2009 |        |   | January 3,2009 |  
|Buildings and improvements |  | $              | 6,063  |   |                | $ | 5,196  |  
|Machinery and equipment    |  |                | 8,054  |   |                |   | 2,454  |  
|                           |  |                |        |   |                |   |        |  
|                           |  |                | 14,117 |   |                |   | 7,650  |  
|Accumulated depreciation   |  |                | (5,090 | ) |                |   | (4,261 | )
|                           |  |                |        |   |                |   |        |  
|                           |  | $              | 9,027  |   |                | $ | 3,389  |  
|                           |  |                |        |   |                |   |        |  

Aggregate maturities of our long-term debt and capital leases are as follows (In
thousands):



|                                                                             |  |               |       |      |   |         |  |   |        
|---------------------------------------------------------------------------- |  | ------------- | ----- | ---- | - | ------- |  | - | -------
|Year Ending,                                                                 |  | CapitalLeases |       | Debt |   | Total  
|2009                                                                         |  | $             | 403   |      | $ |        |  | $ | 403    
|2010                                                                         |  |               | 2,141 |      |   | 1,856   |  |   | 3,997  
|2011                                                                         |  |               | 2,740 |      |   | 24,511  |  |   | 27,251 
|2012                                                                         |  |               | 2,267 |      |   | 154,581 |  |   | 156,848
|2013                                                                         |  |               | 1,360 |      |   | 154,709 |  |   | 156,069
|Thereafter                                                                   |  |               | 995   |      |   | 246,020 |  |   | 247,015
|                                                                             |  |               |       |      |   |         |  |   |        
|                                                                             |  |               | 9,906 |      |   | 581,677 |  |   | 591,583
|Less: Amounts representing interest and original issue discount amortization |  |               | 937   |      |   | 12,667  |  |   | 13,604 
|                                                                             |  |               |       |      |   |         |  |   |        
|                                                                             |  | $             | 8,969 |      | $ | 569,010 |  | $ | 577,979
|                                                                             |  |               |       |      |   |         |  |   |        

NOTE DCOMMITMENTS AND CONTINGENCIES

Legal Matters

In late 2008
and early 2009, some 22 class-action lawsuits were filed in various federal courts against us and several other defendants (producers of shell eggs, manufacturers of processed egg products, and egg industry organizations) alleging violations of
federal and state antitrust laws in connection with the production and sale of shell eggs and processed-egg products. Plaintiffs seek to represent nationwide classes of direct and indirect purchasers, and allege that defendants conspired to reduce
the supply of eggs by participating in animal husbandry, egg-export and other programs of various egg-industry associations. In December 2008, the Judicial Panel on Multidistrict Litigation ordered the transfer of all cases to the Eastern District
of Pennsylvania for coordinated and/or consolidated pretrial proceedings. Subsequently, the direct-purchaser and indirect-purchaser plaintiffs each filed a Consolidated Amended Complaint (CAC). On April 30, 2009, we filed motions to
be dismissed from each CAC, and joined other defendants in motions for dismissal of both CACs. As of November 13, 2009, there had been no ruling on these motions.

We received a Civil Investigative Demand (CID) issued by the Florida Attorney General on November 17, 2008, regarding an investigation of possible anticompetitive activities
relating to the production and sale of eggs or egg products. The CID requests information and documents related to the pricing and supply of shell eggs and egg products, as well as our participation in various programs of United Egg
Producers. We are fully cooperating with the Florida Attorney Generals office.

We are party to a suit brought by
Feesers, Inc. against Sodexo (formerly Sodexho, Inc.) and us alleging violation of the Robinson-Patman Act. In 2006, we were awarded summary judgment by the United States District Court for the Middle District of Pennsylvania, but that judgment was
reversed in 2007 by the U.S. Court of Appeals for the Third Circuit and the case was remanded to the District Court for fact-finding. A bench trial occurred in January 2008, and on April 27, 2009, the District Court ruled that we violated the
Robinson-Patman Act because it found that we sold products to Feesers at prices that



11



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differed from the prices that we accorded to Sodexo (through its distributor) for the same products. No damages were sought or awarded in the case; the District Court issued an injunction
prohibiting us from charging different prices to Feesers and Sodexo. We appealed the decision to the Third Circuit, which heard oral arguments on October 29, 2009. While the case does not involve damages, Feesers has petitioned the District
Court to have its attorneys fees and costs paid by Sodexo and us. The District Court stayed Feesers fee petition pending appeals. We recorded a liability of $5.1 million in June 2009 relating to this claim for fees and cost reimbursement
that is included in other liabilities and selling, general and administrative expenses.

In addition, we are from time to time
party to litigation, administrative proceedings and union grievances that arise in the ordinary course of business, and occasionally pay small amounts to resolve alleged minor violations of regulatory requirements. There is no pending litigation
that, separately or in the aggregate, would, in the opinion of management, have a material adverse effect on our operations or financial condition.

We cannot predict what, if any, impact these matters and any results from such matters could have on our future results of operations.

NOTE ESUBSEQUENT EVENTS

On October 23, 2009, we entered into an
employment agreement with James E. Dwyer, Jr. as our President and Chief Executive Officer. Mr. Dwyer also entered into a Senior Management Class G Unit Subscription Agreement with Michael Foods Investors, LLC (the LLC) under which
Mr. Dwyer purchased 2,000 Class G Units of the LLC for an aggregate purchase price of $200,000. Concurrently, the LLC entered into Senior Management Class F Unit Subscription Agreements with Mark W. Westphal, Chief Financial Officer and
Senior Vice President of the Company, under which Mr. Westphal purchased 1,000 Class F Units of the LLC for an aggregate purchase price of $100,000 and with Carolyn V. Wolski, General Counsel and Secretary of the Company, under which
Ms. Wolski purchased 500 Class F Units of the LLC for an aggregate purchase price of $50,000. Each of the above mentioned agreements is filed as an exhibit to this Quarterly Report on Form 10-Q.

NOTE FSHAREHOLDERS EQUITY

Additional Paid-in Capital

We recorded non-cash capital investments from our parent, M-Foods Holdings, Inc.
(Holdings), of $5.2 million in the nine month period ended October 3, 2009 and $4.6 million in the nine month period ended September 27, 2008 related to the tax benefit the Company receives on Holdings interest deduction
due to filing a consolidated Federal tax return with Holdings.

On April 10, 2009, our then Chief Executive Officer and
President, David S. Johnson, resigned from the Company. The D Units owned by Mr. Johnson were callable at cost by the LLC. The call notice for Mr. Johnsons D Units was delivered on July 30, 2009 and the payment for and
repurchase of the D Units was completed on August 14, 2009.

Dividend

We are responsible for servicing Holdings 9.75% subordinated notes. On October 1, 2009, we made the $7.5 million semi-annual
interest payment due on the notes. This $7.5 million payment was recorded as a dividend to Holdings and reduced our retained earnings in the period ended October 3, 2009.

Comprehensive Income

The components of and changes in accumulated other
comprehensive income (loss), net of taxes, were as follows (In thousands):



|                                                       |  |                 |        |   |                            |   |                |  |   |        |  
|------------------------------------------------------ |  | --------------- | ------ | - | -------------------------- | - | -------------- |  | - | ------ | -
|                                                       |  | Cash FlowHedges |        |   | ForeignCurrencyTranslation |   | TotalAOCI/AOCL | 
|Balance at January 3, 2009                             |  | $               | (4,445 | ) |                            | $ | 1,901          |  | $ | (2,544 | )
|Foreign currency translation adjustment                |  |                 |       |   |                            |   | 1,236          |  |   | 1,236  |  
|Net change to unrealized positions on cash flow hedges |  |                 | 3,406  |   |                            |   |               |  |   | 3,406  |  
|                                                       |  |                 |        |   |                            |   |                |  |   |        |  
|Balance at October 3, 2009                             |  | $               | (1,039 | ) |                            | $ | 3,137          |  | $ | 2,098  |  
|                                                       |  |                 |        |   |                            |   |                |  |   |        |  



12



---

Comprehensive income, net of taxes was as follows (In thousands):



|                                                       |                |                    |        |                   |                   |   |                |   |                   |   |        |  |   |        |  
|------------------------------------------------------ | -------------- | ------------------ | ------ | ----------------- | ----------------- | - | -------------- | - | ----------------- | - | ------ |  | - | ------ | -
|                                                       |                | Three Months Ended |        |                   | Nine Months Ended |  
|                                                       | October 3,2009 |                    |        | September 27,2008 |                   |   | October 3,2009 |   | September 27,2008 |  
|Net earnings                                           |                | $                  | 18,525 |                   |                   | $ | 11,024         |   |                   | $ | 49,904 |  | $ | 33,550 |  
|Net (gains) losses arising during the period:          |                |                    |        |                   |                   |   |                |   |                   |   |        |  |   |        |  
|Net change to unrealized positions on cash flow hedges |                |                    | (854   | )                 |                   |   | (10,811        | ) |                   |   | 3,406  |  |   | (3,161 | )
|Foreign currency translation adjustment                |                |                    | 1,138  |                   |                   |   | (418           | ) |                   |   | 1,236  |  |   | (1,132 | )
|                                                       |                |                    |        |                   |                   |   |                |   |                   |   |        |  |   |        |  
|Other comprehensive income (loss)                      |                |                    | 284    |                   |                   |   | (11,229        | ) |                   |   | 4,642  |  |   | (4,293 | )
|                                                       |                |                    |        |                   |                   |   |                |   |                   |   |        |  |   |        |  
|Comprehensive income (loss)                            |                | $                  | 18,809 |                   |                   | $ | (205           | ) |                   | $ | 54,546 |  | $ | 29,257 |  
|                                                       |                |                    |        |                   |                   |   |                |   |                   |   |        |  |   |        |  

NOTE GBUSINESS SEGMENTS

We operate in three reportable segmentsEgg Products, Potato Products and Crystal Farms. Certain financial information on our operating
segments is as follows (unaudited, In thousands):



|                                       |  |             |         |                |   |        |              |  |                         |         |  |       |         |   |  |   |          
|-------------------------------------- |  | ----------- | ------- | -------------- | - | ------ | ------------ |  | ----------------------- | ------- |  | ----- | ------- | - |  | - | ---------
|                                       |  | EggProducts |         | PotatoProducts |   |        | CrystalFarms |  | Corporate &Eliminations |         |  | Total
|Three months ended October 3, 2009:    |  |             |         |                |   |        |              |  |                         |         |  |       |         |   |  |   |          
|External net sales                     |  | $           | 261,338 |                | $ | 30,109 |              |  | $                       | 90,669  |  | $     |        |   |  | $ | 382,116  
|Intersegment sales                     |  |             | 3,229   |                |   | 1,669  |              |  |                         |        |  |       | (4,898  | ) |  |   |         
|Operating profit (loss)                |  |             | 32,409  |                |   | 1,193  |              |  |                         | 9,646   |  |       | (2,617  | ) |  |   | 40,631   
|Depreciation and amortization          |  |             | 11,893  |                |   | 2,869  |              |  |                         | 1,096   |  |       | 1       |   |  |   | 15,859   
|                                       |  |             |         |                |  
|Three months ended September 27, 2008: |  |             |         |                |   |        |              |  |                         |         |  |       |         |   |  |   |          
|External net sales                     |  | $           | 318,908 |                | $ | 30,524 |              |  | $                       | 100,626 |  | $     |        |   |  | $ | 450,058  
|Intersegment sales                     |  |             | 3,439   |                |   | 1,451  |              |  |                         |        |  |       | (4,890  | ) |  |   |         
|Operating profit (loss)                |  |             | 20,553  |                |   | 3,548  |              |  |                         | 4,643   |  |       | (4,258  | ) |  |   | 24,486   
|Depreciation and amortization          |  |             | 16,176  |                |   | 1,676  |              |  |                         | 1,131   |  |       | 1       |   |  |   | 18,984   
|                                       |  |             |         |                |  
|Nine months ended October 3, 2009:     |  |             |         |                |   |        |              |  |                         |         |  |       |         |   |  |   |          
|External net sales                     |  | $           | 793,207 |                | $ | 85,806 |              |  | $                       | 273,475 |  | $     |        |   |  | $ | 1,152,488
|Intersegment sales                     |  |             | 8,972   |                |   | 4,623  |              |  |                         |        |  |       | (13,595 | ) |  |   |         
|Operating profit (loss)                |  |             | 99,536  |                |   | (1,080 | )            |  |                         | 29,002  |  |       | (15,274 | ) |  |   | 112,184  
|Depreciation and amortization          |  |             | 35,579  |                |   | 7,837  |              |  |                         | 3,254   |  |       | 3       |   |  |   | 46,673   
|                                       |  |             |         |                |  
|Nine months ended September 27, 2008:  |  |             |         |                |   |        |              |  |                         |         |  |       |         |   |  |   |          
|External net sales                     |  | $           | 939,444 |                | $ | 89,859 |              |  | $                       | 290,767 |  | $     |        |   |  | $ | 1,320,070
|Intersegment sales                     |  |             | 11,734  |                |   | 4,389  |              |  |                         |        |  |       | (16,123 | ) |  |   |         
|Operating profit (loss)                |  |             | 74,780  |                |   | 9,588  |              |  |                         | 9,199   |  |       | (12,208 | ) |  |   | 81,359   
|Depreciation and amortization          |  |             | 48,535  |                |   | 5,027  |              |  |                         | 3,395   |  |       | 3       |   |  |   | 56,960   

NOTE HSUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

Our Credit Agreement and senior subordinated notes have been guaranteed, on a joint and several basis, by us and our domestic subsidiaries.
The Credit Agreement is also guaranteed by our parent, M-Foods Holdings, Inc.

The following condensed consolidating financial
information presents our consolidated balance sheets at October 3, 2009 and January 3, 2009, and the condensed consolidating statements of earnings for the three and nine month periods ended October 3, 2009 and September 27, 2008
and cash flows for the nine months ended October 3, 2009 and September 27, 2008. These financial statements reflect Michael Foods, Inc. (Corporate), the wholly-owned guarantor subsidiaries (on a combined basis), the non-guarantor
subsidiary (MFI Food Canada, Ltd.), and elimination entries necessary to combine such entities on a consolidated basis.



13



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Condensed Consolidating Balance Sheets

October 3, 2009

(Unaudited, In thousands)



|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|------------------------------------------ |  | --------- | --------- | - | --------------------- | - | ----------------------- |  | ------------ | ------ |  | ------------ | -------- | - |  | - | ---------
|                                           |  | Corporate |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiary |  | Eliminations |        |  | Consolidated
|Assets                                     |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Current Assets                             |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Cash and equivalents                       |  | $         | 83,540    |   |                       | $ |                        |  | $            | 2,252  |  | $            |         |   |  | $ | 85,792   
|Accounts receivable, less allowances       |  |           | 17,559    |   |                       |   | 149,533                 |  |              | 5,503  |  |              | (45,140  | ) |  |   | 127,455  
|Inventories                                |  |           |          |   |                       |   | 120,909                 |  |              | 6,247  |  |              |         |   |  |   | 127,156  
|Prepaid expenses and other                 |  |           | 2,941     |   |                       |   | 8,821                   |  |              | 462    |  |              |         |   |  |   | 12,224   
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Total current assets                       |  |           | 104,040   |   |                       |   | 279,263                 |  |              | 14,464 |  |              | (45,140  | ) |  |   | 352,627  
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Property, Plant and Equipmentnet          |  |           | 6         |   |                       |   | 230,989                 |  |              | 12,752 |  |              |         |   |  |   | 243,747  
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Other assets:                              |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Goodwill                                   |  |           |          |   |                       |   | 519,890                 |  |              | 3,026  |  |              |         |   |  |   | 522,916  
|Intangibles and other assets               |  |           | 13,177    |   |                       |   | 187,274                 |  |              | 2,410  |  |              | (14,939  | ) |  |   | 187,922  
|Investment in subsidiaries                 |  |           | 929,344   |   |                       |   | 591                     |  |              |       |  |              | (929,935 | ) |  |   |         
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|                                           |  |           | 942,521   |   |                       |   | 707,755                 |  |              | 5,436  |  |              | (944,874 | ) |  |   | 710,838  
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Total assets                               |  | $         | 1,046,567 |   |                       | $ | 1,218,007               |  | $            | 32,652 |  | $            | (990,014 | ) |  | $ | 1,307,212
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Liabilities and Shareholders Equity       |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Current Liabilities                        |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Current maturities of long-term debt       |  | $         |          |   |                       | $ | 1,350                   |  | $            | 1,617  |  | $            |         |   |  | $ | 2,967    
|Accounts payable                           |  |           | 376       |   |                       |   | 102,831                 |  |              | 3,200  |  |              | (45,140  | ) |  |   | 61,267   
|Accrued liabilities                        |  |           | 21,881    |   |                       |   | 76,866                  |  |              | 1,666  |  |              |         |   |  |   | 100,413  
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Total current liabilities                  |  |           | 22,257    |   |                       |   | 181,047                 |  |              | 6,483  |  |              | (45,140  | ) |  |   | 164,647  
|Long-term debt, less current maturities    |  |           | 553,633   |   |                       |   | 17,021                  |  |              | 21,992 |  |              | (17,634  | ) |  |   | 575,012  
|Deferred income taxes                      |  |           | (8,699    | ) |                       |   | 96,754                  |  |              |       |  |              | 122      |   |  |   | 88,177   
|Other long-term liabilities                |  |           | 23,293    |   |                       |   |                        |  |              |       |  |              |         |   |  |   | 23,293   
|Shareholders equity                       |  |           | 456,083   |   |                       |   | 923,185                 |  |              | 4,177  |  |              | (927,362 | ) |  |   | 456,083  
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          
|Total liabilities and shareholders equity |  | $         | 1,046,567 |   |                       | $ | 1,218,007               |  | $            | 32,652 |  | $            | (990,014 | ) |  | $ | 1,307,212
|                                           |  |           |           |   |                       |   |                         |  |              |        |  |              |          |   |  |   |          



14



---

Condensed Consolidating Balance Sheets

January 3, 2009

(Unaudited, In thousands)



|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|------------------------------------------ |  | --------- | --------- | - | --------------------- | - | ----------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ---------
|                                           |  | Corporate |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Assets                                     |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current Assets                             |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Cash and equivalents                       |  | $         | 76,260    |   |                       | $ |                        |  | $ | 1,794        |   |  | $            |         |   |  | $ | 78,054   
|Accounts receivable, less allowances       |  |           | 231       |   |                       |   | 135,794                 |  |   | 5,780        |   |  |              | (17,287  | ) |  |   | 124,518  
|Inventories                                |  |           |          |   |                       |   | 120,908                 |  |   | 6,245        |   |  |              |         |   |  |   | 127,153  
|Prepaid expenses and other                 |  |           | 1,278     |   |                       |   | 16,846                  |  |   | 124          |   |  |              |         |   |  |   | 18,248   
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total current assets                       |  |           | 77,769    |   |                       |   | 273,548                 |  |   | 13,943       |   |  |              | (17,287  | ) |  |   | 347,973  
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Property, Plant and Equipmentnet          |  |           | 10        |   |                       |   | 219,918                 |  |   | 11,622       |   |  |              |         |   |  |   | 231,550  
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Other assets:                              |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Goodwill                                   |  |           |          |   |                       |   | 519,890                 |  |   | 3,026        |   |  |              |         |   |  |   | 522,916  
|Intangibles and other assets               |  |           | 10,101    |   |                       |   | 198,866                 |  |   | 2,410        |   |  |              | (14,958  | ) |  |   | 196,419  
|Investment in subsidiaries                 |  |           | 924,829   |   |                       |   | 200                     |  |   |             |   |  |              | (925,029 | ) |  |   |         
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|                                           |  |           | 934,930   |   |                       |   | 718,956                 |  |   | 5,436        |   |  |              | (939,987 | ) |  |   | 719,335  
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total assets                               |  | $         | 1,012,709 |   |                       | $ | 1,212,422               |  | $ | 31,001       |   |  | $            | (957,274 | ) |  | $ | 1,298,858
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Liabilities and Shareholders Equity       |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current Liabilities                        |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current maturities of long-term debt       |  | $         | 2,203     |   |                       | $ | 1,186                   |  | $ | 917          |   |  | $            |         |   |  | $ | 4,306    
|Accounts payable                           |  |           | 1,194     |   |                       |   | 103,012                 |  |   | 3,588        |   |  |              | (17,287  | ) |  |   | 90,507   
|Accrued liabilities                        |  |           | 16,508    |   |                       |   | 77,812                  |  |   | 1,712        |   |  |              |         |   |  |   | 96,032   
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total current liabilities                  |  |           | 19,905    |   |                       |   | 182,010                 |  |   | 6,217        |   |  |              | (17,287  | ) |  |   | 190,845  
|Long-term debt, less current maturities    |  |           | 575,147   |   |                       |   | 12,853                  |  |   | 21,024       |   |  |              | (15,946  | ) |  |   | 593,078  
|Deferred income taxes                      |  |           | (8,724    | ) |                       |   | 97,552                  |  |   | (382         | ) |  |              | 108      |   |  |   | 88,554   
|Other long-term liabilities                |  |           | 22,393    |   |                       |   |                        |  |   |             |   |  |              |         |   |  |   | 22,393   
|Shareholders equity                       |  |           | 403,988   |   |                       |   | 920,007                 |  |   | 4,142        |   |  |              | (924,149 | ) |  |   | 403,988  
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total liabilities and shareholders equity |  | $         | 1,012,709 |   |                       | $ | 1,212,422               |  | $ | 31,001       |   |  | $            | (957,274 | ) |  | $ | 1,298,858
|                                           |  |           |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          



15



---

Condensed Consolidating Statements of Earnings

Three months ended October 3, 2009

(Unaudited, In thousands)



|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        
|--------------------------------------------------------------------------------- |  | --------- | ------- | - | --------------------- | - | ------- | ----------------------- |  | ------------ | ------ |  | ------------ | ------- | - |  | - | -------
|                                                                                  |  | Corporate |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiary |  | Eliminations |        |  | Consolidated
|Net sales                                                                         |  | $         |        |   |                       | $ | 380,910 |                         |  | $            | 13,404 |  | $            | (12,198 | ) |  | $ | 382,116
|Cost of sales                                                                     |  |           |        |   |                       |   | 306,936 |                         |  |              | 11,765 |  |              | (12,198 | ) |  |   | 306,503
|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        
|Gross profit                                                                      |  |           |        |   |                       |   | 73,974  |                         |  |              | 1,639  |  |              |        |   |  |   | 75,613 
|Selling, general and administrative expenses                                      |  |           | 2,617   |   |                       |   | 33,470  |                         |  |              | 1,069  |  |              | (2,174  | ) |  |   | 34,982 
|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        
|Operating profit (loss)                                                           |  |           | (2,617  | ) |                       |   | 40,504  |                         |  |              | 570    |  |              | 2,174   |   |  |   | 40,631 
|Interest expense (income), net                                                    |  |           | 12,016  |   |                       |   | (421    | )                       |  |              | 406    |  |              |        |   |  |   | 12,001 
|Other expense (income)                                                            |  |           | (2,174  | ) |                       |   |        |                         |  |              |       |  |              | 2,174   |   |  |   |       
|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        
|Earnings (loss) before equity in earnings (loss) of subsidiaries and income taxes |  |           | (12,459 | ) |                       |   | 40,925  |                         |  |              | 164    |  |              |        |   |  |   | 28,630 
|Equity in earnings (loss) of subsidiaries                                         |  |           | 27,220  |   |                       |   | 33      |                         |  |              |       |  |              | (27,253 | ) |  |   |       
|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        
|Earnings (loss) before income taxes                                               |  |           | 14,761  |   |                       |   | 40,958  |                         |  |              | 164    |  |              | (27,253 | ) |  |   | 28,630 
|Income tax expense (benefit)                                                      |  |           | (3,764  | ) |                       |   | 13,738  |                         |  |              | 131    |  |              |        |   |  |   | 10,105 
|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        
|Net earnings (loss)                                                               |  | $         | 18,525  |   |                       | $ | 27,220  |                         |  | $            | 33     |  | $            | (27,253 | ) |  | $ | 18,525 
|                                                                                  |  |           |         |   |                       |   |         |                         |  |              |        |  |              |         |   |  |   |        



16



---

Condensed Consolidating Statements of Earnings

Three months ended September 27, 2008

(Unaudited, In thousands)



|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|--------------------------------------------------------------------------------- |  | --------- | ------- | - | --------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | -------
|                                                                                  |  | Corporate |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Net sales                                                                         |  | $         |        |   |                       | $ | 444,479 |                         |  | $ | 17,912       |   |  | $            | (12,333 | ) |  | $ | 450,058
|Cost of sales                                                                     |  |           |        |   |                       |   | 381,634 |                         |  |   | 14,621       |   |  |              | (12,333 | ) |  |   | 383,922
|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Gross profit                                                                      |  |           |        |   |                       |   | 62,845  |                         |  |   | 3,291        |   |  |              |        |   |  |   | 66,136 
|Selling, general and administrative expenses                                      |  |           | 4,258   |   |                       |   | 38,910  |                         |  |   | 973          |   |  |              | (2,491  | ) |  |   | 41,650 
|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Operating profit (loss)                                                           |  |           | (4,258  | ) |                       |   | 23,935  |                         |  |   | 2,318        |   |  |              | 2,491   |   |  |   | 24,486 
|Interest expense, net                                                             |  |           | 8,434   |   |                       |   | (28     | )                       |  |   | 427          |   |  |              |        |   |  |   | 8,833  
|Other expense (income)                                                            |  |           | (2,491  | ) |                       |   |        |                         |  |   |             |   |  |              | 2,491   |   |  |   |       
|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Earnings (loss) before equity in earnings (loss) of subsidiaries and income taxes |  |           | (10,201 | ) |                       |   | 23,963  |                         |  |   | 1,891        |   |  |              |        |   |  |   | 15,653 
|Equity in earnings (loss) of subsidiaries                                         |  |           | 17,777  |   |                       |   | 2,450   |                         |  |   |             |   |  |              | (20,227 | ) |  |   |       
|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Earnings (loss) before income taxes                                               |  |           | 7,576   |   |                       |   | 26,413  |                         |  |   | 1,891        |   |  |              | (20,227 | ) |  |   | 15,653 
|Income tax expense (benefit)                                                      |  |           | (3,448  | ) |                       |   | 8,636   |                         |  |   | (559         | ) |  |              |        |   |  |   | 4,629  
|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Net earnings (loss)                                                               |  | $         | 11,024  |   |                       | $ | 17,777  |                         |  | $ | 2,450        |   |  | $            | (20,227 | ) |  | $ | 11,024 
|                                                                                  |  |           |         |   |                       |   |         |                         |  |   |              |   |  |              |         |   |  |   |        



17



---

Condensed Consolidating Statements of Earnings

Nine months ended October 3, 2009

(Unaudited, In thousands)



|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          
|--------------------------------------------------------------------------------- |  | --------- | ------- | - | --------------------- | - | --------- | ----------------------- |  | ------------ | ------ |  | ------------ | ------- | - |  | - | ---------
|                                                                                  |  | Corporate |         |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiary |  | Eliminations |        |  | Consolidated
|Net sales                                                                         |  | $         |        |   |                       | $ | 1,147,909 |                         |  | $            | 39,248 |  | $            | (34,669 | ) |  | $ | 1,152,488
|Cost of sales                                                                     |  |           |        |   |                       |   | 926,703   |                         |  |              | 34,685 |  |              | (34,669 | ) |  |   | 926,719  
|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          
|Gross profit                                                                      |  |           |        |   |                       |   | 221,206   |                         |  |              | 4,563  |  |              |        |   |  |   | 225,769  
|Selling, general and administrative expenses                                      |  |           | 15,274  |   |                       |   | 103,514   |                         |  |              | 2,826  |  |              | (8,029  | ) |  |   | 113,585  
|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          
|Operating profit (loss)                                                           |  |           | (15,274 | ) |                       |   | 117,692   |                         |  |              | 1,737  |  |              | 8,029   |   |  |   | 112,184  
|Interest expense (income), net                                                    |  |           | 31,319  |   |                       |   | (501      | )                       |  |              | 1,157  |  |              |        |   |  |   | 31,975   
|Loss on early extinguishment of debt                                              |  |           | 3,237   |   |                       |   |          |                         |  |              |       |  |              |        |   |  |   | 3,237    
|Other expense (income)                                                            |  |           | (8,029  | ) |                       |   |          |                         |  |              |       |  |              | 8,029   |   |  |   |         
|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          
|Earnings (loss) before equity in earnings (loss) of subsidiaries and income taxes |  |           | (41,801 | ) |                       |   | 118,193   |                         |  |              | 580    |  |              |        |   |  |   | 76,972   
|Equity in earnings (loss) of subsidiaries                                         |  |           | 78,511  |   |                       |   | 392       |                         |  |              |       |  |              | (78,903 | ) |  |   |         
|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          
|Earnings (loss) before income taxes                                               |  |           | 36,710  |   |                       |   | 118,585   |                         |  |              | 580    |  |              | (78,903 | ) |  |   | 76,972   
|Income tax expense (benefit)                                                      |  |           | (13,194 | ) |                       |   | 40,074    |                         |  |              | 188    |  |              |        |   |  |   | 27,068   
|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          
|Net earnings (loss)                                                               |  | $         | 49,904  |   |                       | $ | 78,511    |                         |  | $            | 392    |  | $            | (78,903 | ) |  | $ | 49,904   
|                                                                                  |  |           |         |   |                       |   |           |                         |  |              |        |  |              |         |   |  |   |          



18



---

Condensed Consolidating Statements of Earnings

Nine months ended September 27, 2008

(Unaudited, In thousands)



|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          
|--------------------------------------------------------------------------------- |  | --------- | ------- | - | --------------------- | - | --------- | ----------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ---------
|                                                                                  |  | Corporate |         |   | GuarantorSubsidiaries |   |           | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Net sales                                                                         |  | $         |        |   |                       | $ | 1,302,800 |                         |  | $ | 52,832       |   |  | $            | (35,562 | ) |  | $ | 1,320,070
|Cost of sales                                                                     |  |           |        |   |                       |   | 1,107,226 |                         |  |   | 44,227       |   |  |              | (35,562 | ) |  |   | 1,115,891
|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          
|Gross profit                                                                      |  |           |        |   |                       |   | 195,574   |                         |  |   | 8,605        |   |  |              |        |   |  |   | 204,179  
|Selling, general and administrative expenses                                      |  |           | 12,208  |   |                       |   | 114,608   |                         |  |   | 2,799        |   |  |              | (6,795  | ) |  |   | 122,820  
|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          
|Operating profit (loss)                                                           |  |           | (12,208 | ) |                       |   | 80,966    |                         |  |   | 5,806        |   |  |              | 6,795   |   |  |   | 81,359   
|Interest expense (income), net                                                    |  |           | 30,743  |   |                       |   | (30       | )                       |  |   | 1,407        |   |  |              |        |   |  |   | 32,120   
|Other expense (income)                                                            |  |           | (6,795  | ) |                       |   |          |                         |  |   |             |   |  |              | 6,795   |   |  |   |         
|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          
|Earnings (loss) before equity in earnings (loss) of subsidiaries and income taxes |  |           | (36,156 | ) |                       |   | 80,996    |                         |  |   | 4,399        |   |  |              |        |   |  |   | 49,239   
|Equity in earnings (loss) of subsidiaries                                         |  |           | 59,252  |   |                       |   | 5,914     |                         |  |   |             |   |  |              | (65,166 | ) |  |   |         
|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          
|Earnings (loss) before income taxes                                               |  |           | 23,096  |   |                       |   | 86,910    |                         |  |   | 4,399        |   |  |              | (65,166 | ) |  |   | 49,239   
|Income tax expense (benefit)                                                      |  |           | (10,454 | ) |                       |   | 27,658    |                         |  |   | (1,515       | ) |  |              |        |   |  |   | 15,689   
|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          
|Net earnings (loss)                                                               |  | $         | 33,550  |   |                       | $ | 59,252    |                         |  | $ | 5,914        |   |  | $            | (65,166 | ) |  | $ | 33,550   
|                                                                                  |  |           |         |   |                       |   |           |                         |  |   |              |   |  |              |         |   |  |   |          



19



---

Condensed Consolidating Statements of Cash Flows

Nine months ended October 3, 2009

(Unaudited, In thousands)



|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|--------------------------------------------------- |  | --------- | -------- | - | --------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | - | -------- | -
|                                                    |  | Corporate |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Consolidated |  
|Net cash provided by operating activities           |  | $         | 66,816   |   |                       | $ | 22,956  |                         |  | $ | 2,089        |   |  | $ | 91,861   |  
|Cash flows from investing activities:               |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Capital expenditures                                |  |           |         |   |                       |   | (44,637 | )                       |  |   | (1,224       | ) |  |   | (45,861  | )
|Other assets                                        |  |           | 38       |   |                       |   |        |                         |  |   |             |   |  |   | 38       |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Net cash provided by (used in) investing activities |  |           | 38       |   |                       |   | (44,637 | )                       |  |   | (1,224       | ) |  |   | (45,823  | )
|Cash flows from financing activities:               |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Payments on long-term debt                          |  |           | (461,050 | ) |                       |   | (1,193  | )                       |  |   | (790         | ) |  |   | (463,033 | )
|Proceeds from long-term debt                        |  |           | 450,000  |   |                       |   | 5,525   |                         |  |   |             |   |  |   | 455,525  |  
|Original issue discount on long-term debt           |  |           | (14,075  | ) |                       |   |        |                         |  |   |             |   |  |   | (14,075  | )
|Deferred financing costs                            |  |           | (9,089   | ) |                       |   |        |                         |  |   |             |   |  |   | (9,089   | )
|Investment by (dividend to) parent                  |  |           | (8,011   | ) |                       |   |        |                         |  |   |             |   |  |   | (8,011   | )
|Investment in subsidiaries                          |  |           | (17,349  | ) |                       |   | 17,349  |                         |  |   |             |   |  |   |         |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Net cash provided by (used in) financing activities |  |           | (59,574  | ) |                       |   | 21,681  |                         |  |   | (790         | ) |  |   | (38,683  | )
|Effect of exchange rate changes on cash             |  |           |         |   |                       |   |        |                         |  |   | 383          |   |  |   | 383      |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Net increase in cash and equivalents                |  |           | 7,280    |   |                       |   |        |                         |  |   | 458          |   |  |   | 7,738    |  
|Cash and equivalents at beginning of period         |  |           | 76,260   |   |                       |   |        |                         |  |   | 1,794        |   |  |   | 78,054   |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Cash and equivalents at end of period               |  | $         | 83,540   |   |                       | $ |        |                         |  | $ | 2,252        |   |  | $ | 85,792   |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|                                                    |  |           |          |  
|Supplemental disclosures:                           |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Non-cash capital investment by parent               |  | $         | 5,194    |   |                       | $ |        |                         |  | $ |             |   |  | $ | 5,194    |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  
|Non-cash write-off of deferred financing costs      |  | $         | 3,171    |   |                       | $ |        |                         |  | $ |             |   |  | $ | 3,171    |  
|                                                    |  |           |          |   |                       |   |         |                         |  |   |              |   |  |   |          |  



20



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Condensed Consolidating Statements of Cash Flows

Nine months ended September 27, 2008

(Unaudited, In thousands)



|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|----------------------------------------------------------------------------- |  | --------- | ------ | --------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                              |  | Corporate |        | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Consolidated |  
|Net cash provided by operating activities                                     |  | $         | 10,424 |                       | $ | 37,365  |                         |  | $ | 1,997        |   |  | $ | 49,786  |  
|Cash flows from investing activities:                                         |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Capital expenditures                                                          |  |           |       |                       |   | (19,032 | )                       |  |   | (895         | ) |  |   | (19,927 | )
|Business acquisition                                                          |  |           |       |                       |   | (8,652  | )                       |  |   |             |   |  |   | (8,652  | )
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net cash used in investing activities                                         |  |           |       |                       |   | (27,684 | )                       |  |   | (895         | ) |  |   | (28,579 | )
|Cash flows from financing activities:                                         |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Payments on long-term debt                                                    |  |           |       |                       |   | (1,097  | )                       |  |   | (756         | ) |  |   | (1,853  | )
|Investment by (dividend to) parent                                            |  |           | 125    |                       |   |        |                         |  |   |             |   |  |   | 125     |  
|Investment in subsidiaries                                                    |  |           | 8,584  |                       |   | (8,584  | )                       |  |   |             |   |  |   |        |  
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net cash provided by (used in) financing activities                           |  |           | 8,709  |                       |   | (9,681  | )                       |  |   | (756         | ) |  |   | (1,728  | )
|Effect of exchange rate changes on cash                                       |  |           |       |                       |   |        |                         |  |   | (66          | ) |  |   | (66     | )
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net increase in cash and equivalents                                          |  |           | 19,133 |                       |   |        |                         |  |   | 280          |   |  |   | 19,413  |  
|Cash and equivalents at beginning of period                                   |  |           | 28,505 |                       |   |        |                         |  |   | 1,572        |   |  |   | 30,077  |  
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Cash and equivalents at end of period                                         |  | $         | 47,638 |                       | $ |        |                         |  | $ | 1,852        |   |  | $ | 49,490  |  
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|                                                                              |  |           |        |                      
|Supplemental disclosures:                                                     |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Non-cash capital investment by parent                                         |  | $         | 4,625  |                       | $ |        |                         |  | $ |             |   |  | $ | 4,625   |  
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  
|Reclassification of non-current other assets to property, plant and equipment |  | $         |       |                       | $ | 16,250  |                         |  | $ |             |   |  | $ | 16,250  |  
|                                                                              |  |           |        |                       |   |         |                         |  |   |              |   |  |   |         |  



21



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

General

We
are a producer and distributor of egg products to the foodservice, retail and food ingredient markets. We are also a producer and distributor of refrigerated potato products to the foodservice and retail grocery markets. Additionally, we distribute
refrigerated food items, primarily cheese and other dairy products, to the retail grocery market, predominantly in the central United States. We focus our growth efforts on the specialty sectors within our food categories and strive to be a market
leader in product innovation and efficient production. We have a strategic focus on value-added processing of food products which is designed to capitalize on key food industry trends, such as (i) the desire for improved safety and convenience,
(ii) the focus by foodservice operators on reducing labor and waste, and (iii) the long-term trend toward food consumption away from home, which has been slowed somewhat by the current economic conditions. We believe our operational scale,
product breadth and geographic scope make us an attractive and important strategic partner for our customers, which include foodservice distributors, major restaurant chains, food ingredient companies and the retail grocery market.

Commodities and Product Pricing

The principal market risks to which we are exposed that may adversely affect our results of operations and financial position include changes in future commodity prices. We seek to minimize or manage these market risks through normal
operating and financing activities and through the use of commodity contracts, when appropriate. We do not trade or use instruments with the objective of earning financial gains on the commodity price, nor do we use instruments where there are not
underlying exposures.

The profit margins we earn on many of our products are sensitive to changes in commodity prices.
Generally, 70-75% of the Egg Products Divisions annual net sales come from higher value-added egg products, such as extended shelf-life liquid and precooked products, with the remainder coming from products mainly used in the food ingredients
market, or shell eggs. Gross profit margins for higher value-added egg products are generally less sensitive to commodity price fluctuations, such as in grains used for hen feed and certain externally sourced eggs, than are other egg products or
shell eggs; however, we are unable to adjust product pricing for value-added products as quickly as we are for other egg products and shell eggs when our costs change. Margins for our food ingredient egg products and shell eggs are more commodity
price-sensitive than are higher value-added product sales. Gross profit from shell eggs is primarily dependent upon the relationship between shell egg prices and the cost of feed, both of which can fluctuate significantly. Shell egg pricing was
approximately 51% lower in the first nine months of 2009 than in the comparable 2008 period (as measured by Urner Barry Publications). Prices (as measured by the Chicago Board of Trade) for corn and soybean meal used in our feed, decreased
approximately 36% and 9% compared to 2008.

Crystal Farms derives a majority of its net sales from refrigerated products
produced by others. A majority of those sales represents cheese and butter, and the costs for both fluctuate with national dairy markets. Time lags between cost changes for these lines and wholesale/retail pricing changes can result in significant
margin changes. The national cheese market has exhibited weakness for much of 2009. The block cheese prices in the first nine months of 2009 were down 37% year-over-year. Apart from sales of refrigerated products, the balance of Crystal Farms
sales are mainly from shell eggs, some of which are produced by the Egg Products Division, sold on a distribution, or non-commodity, basis.

The Potato Products Division purchases approximately 90% to 95% of its raw potatoes from contract producers under fixed-price annual contracts. The remainder is purchased at market prices to satisfy
short-term production requirements or to take advantage of market prices when they are lower than contracted prices. Moderate variations in the purchase price of raw materials or the selling price per pound of finished products can have a
significant effect on the Potato Products Divisions operating results. Our cost for delivered raw potatoes during the first nine months of 2009 was up 18% compared to 2008.

Results of Operations

Readers are directed to Note GBusiness
Segments for data on the unaudited financial results of our business segments for the three and nine month periods ended October 3, 2009.

Three Months Ended October 3, 2009 as Compared to Three Months Ended September 27, 2008

Net
Sales.Net sales for 2009 decreased $68.0 million, or 15%, to $382.1 million from $450.1 million in 2008. The decreased net sales reflected volume declines of 4% due primarily to a decrease in foodservice volumes as a result of the economic
slowdown and increased competition. Commodity prices have also declined, resulting in net sales reductions exceeding volume reductions.



22



---

Egg Products Division Net Sales.The Egg Products Division external net sales for
2009 decreased $57.6 million, or 18%, to $261.3 million from $318.9 million in 2008. The change in net sales mainly reflects decreases in volume and lower market-related pricing for frozen, dried and short shelf-life liquid and shell egg product
categories as compared to 2008. Overall, the divisions unit sales decreased by 6% in 2009, as compared to 2008, with the majority in the foodservice sector primarily due to weak economic conditions and increased competition.

Potato Products Division Net Sales.Potato Products Division external net sales for 2009 decreased $0.4 million, or 1%, to $30.1
million from $30.5 million in 2008. The divisions unit sales were down 3% in 2009 due to decreased volumes in the foodservice market, reflecting reduced demand due to weak economic conditions.

Crystal Farms Division Net Sales.Crystal Farms Division external net sales for 2009 decreased $9.9 million, or 10%, to $90.7 million
from $100.6 million in 2008. The net sales decline was mainly a result of shell egg and cheese commodity price declines on a year-over-year basis. The core branded cheese net sales declined by 8% despite 8% volume growth. Unit sales for distributed
products (excluding shell eggs) increased 10% in 2009, primarily reflecting growth in branded cheese, private-label cheese and butter products.

Gross Profit.Gross profit for 2009 increased $9.5 million, or 14%, to $75.6 million from $66.1 million in 2008. Our gross profit margin increased to 19.8% in 2009 as compared to 14.7% in 2008,
reflecting a $3.9 million decrease in depreciation related to plant assets. The plant assets re-valued at the time of our 2003 private equity transaction became fully depreciated by the end of 2008. The gross profit margin increase also reflected
improved gross margin contributions from the Crystal Farms Division and the Egg Products Division, as pricing came more in line with costs, as compared to 2008. Offsetting those margin contributions were declines in the Potato Products
Divisions gross profit margin due to increased raw material and manufacturing costs.

Selling, General and
Administrative Expenses.Selling, general and administrative expenses for 2009 decreased $6.7 million, or 16%, to $35.0 million from $41.7 million in 2008. The decrease was due to decreases in compensation, legal and sales and marketing costs
compared to those incurred in 2008. The latter included a $1.8 million reduction in expense due to changes in marketing programs which were recorded in net sales in 2009 compared to selling expense in 2008.

Operating Profit.Operating profit for 2009 increased $16.1 million, or 66%, to $40.6 million from $24.5 million in 2008, due
primarily to the increased gross profits and reduced selling, general and administrative expenses discussed above.

Egg
Products Division Operating Profit.Egg Products Division operating profit for 2009 increased $11.8 million, or 58%, to $32.4 million from $20.6 million in 2008. Operating profits for foodservice egg products increased, reflecting our continued
focus on moving our customers to more convenient, higher margin value-added products. Operating profits declined for food ingredient egg products as a result of pricing changes coinciding with lower Urner Barry markets and an intense competitive
environment. Operating profits declined for retail egg products mainly due to increased competition.

Potato Products
Division Operating Profit.Potato Products Division operating profit for 2009 decreased $2.3 million, or 66%, to $1.2 million from $3.5 million in 2008. The decrease in operating profit reflected increases in raw material and manufacturing
costs.

Crystal Farms Division Operating Profit.Crystal Farms Division operating profit for 2009 increased $5.0
million, or 108%, to $9.6 million from $4.6 million in 2008. Operating profits improved mainly due to increases in volumes and gross margin for the cheese category, as pricing was better aligned with the lower 2009 cheese costs compared to 2008.

Interest Expense.Net interest expense increased by approximately $3.2 million in 2009 compared to 2008, primarily
reflecting higher interest rates coinciding with the financing transaction completed May 1, 2009.

Income taxes.
Our effective tax rate on earnings before income taxes was 35.3% for 2009 compared to 29.6% in 2008. The effective rate was impacted by the amount of permanent differences between book and taxable income. Additionally, rates were affected by the
results in one of our foreign subsidiaries, which impacted the valuation allowance against its deferred tax assets.



23



---

Nine Months Ended October 3, 2009 as Compared to Nine Months Ended September 27, 2008

Net Sales.Net sales for 2009 decreased $167.6 million, or 13%, to $1,152.5 million from $1,320.1 million in 2008.
The decreased net sales reflected volume declines of 5% primarily due to volume decreases in foodservice and food ingredient egg products as a result of the economic slowdown and, to a lesser extent, the impact of the Potato Products Division
voluntary recall of retail cut potato products and increased competition. Commodity prices have also declined, resulting in net sales reductions exceeding volume reductions.

Egg Products Division Net Sales.Egg Products Division external net sales for 2009 decreased $146.2 million, or 16%, to $793.2
million from $939.4 million in 2008. The change in net sales mainly reflects decreases in volume and lower market-related pricing for frozen, dried and short shelf-life liquid and shell egg product categories as compared to 2008. Overall, the
divisions unit sales decreased by 7% in 2009, as compared to 2008, with the majority of the decrease in the foodservice and food ingredient sectors primarily due to weak economic conditions and increased competition.

Potato Products Division Net Sales.Potato Products Division external net sales for 2009 decreased $4.1 million, or 5%, to $85.8
million from $89.9 million in 2008. The divisions unit sales were down 7% in 2009 due to decreased volumes in the foodservice market, reflecting reduced demand due to weak economic conditions, and the February voluntary recall of retail cut
potato products, which impacted both retail and foodservice volumes in the first quarter.

Crystal Farms Division Net
Sales.Crystal Farms Division external net sales for 2009 decreased $17.3 million, or 6%, to $273.5 million from $290.8 million in 2008. The net sales decline was mainly a result of shell egg and cheese commodity price declines on a
year-over-year basis. The core branded cheese net sales declined 4% despite 5% volume growth. Unit sales for distributed products (excluding shell eggs) increased 9% in 2009, primarily reflecting growth in private-label cheese, branded cheese and
butter products.

Gross Profit.Gross profit for 2009 increased $21.6 million, or 11%, to $225.8 million from $204.2
million in 2008. Our gross profit margin increased to 19.6% in 2009 as compared to 15.5% in 2008. The higher gross profit margin percentage reflected a $11.8 million decrease in depreciation related to plant assets. The plant assets re-valued at the
time of our 2003 private equity transaction became fully depreciated by the end of 2008. The gross profit margin increase also reflected improved gross margin contributions from the Crystal Farms Division and the Egg Products Division, as pricing
came more in line with costs, as compared to 2008. Offsetting those margin contributions were declines in the Potato Products Division due to increased raw material and manufacturing costs, and the impact of the February 2009 voluntary recall of
retail cut potato products.

Selling, General and Administrative Expenses.Selling, general and administrative expenses
for 2009 decreased $9.2 million, or 8%, to $113.6 million from $122.8 million in 2008. The decrease was due primarily to decreases in compensation, legal and sales and marketing costs compared to those incurred in 2008, including a $4.9 million
reduction in marketing expense due to changes in marketing programs recorded in net sales in 2009 compared to selling expense in 2008. A $14.3 million decrease in expenses was partially offset by $5.1 million recorded to cover a possible order to
pay alleged fees and costs incurred by Feesers in litigation against us (see Note DCommitments and Contingencies, in the notes to condensed consolidated financial statements).

Operating Profit.Operating profit for 2009 increased $30.8 million, or 38%, to $112.2 million from $81.4 million in 2008, due
primarily to the increased gross profits and decreased selling, general and administrative expenses discussed above.

Egg
Products Division Operating Profit.Egg Products Division operating profit for 2009 increased $24.7 million, or 33%, to $99.5 million from $74.8 million in 2008. Operating profits for foodservice and retail egg products increased, reflecting our
continued focus on moving our customers to more convenient, higher margin value-added products. Operating profits declined for food ingredient egg products and shell eggs as a result of pricing changes coinciding with lower Urner Barry markets and
an intense competitive environment.

Potato Products Division Operating Profit (Loss).The Potato Products Division had
a $(1.1) million operating loss for 2009 compared to $9.6 million operating profit in 2008. The decrease in operating profit reflected increases in raw material and manufacturing costs, and the costs associated with the February 2009 voluntary
recall.

Crystal Farms Division Operating Profit.Crystal Farms Division operating profit for 2009 increased $19.8
million, or 215%, to $29.0 million from $9.2 million in 2008. Operating profits improved mainly due to increases in volumes and gross margin for the cheese category, as pricing was better aligned with the lower 2009 cheese costs than was the case in
2008.

Interest Expense.Net interest expense decreased slightly in 2009 compared to 2008, reflecting lower interest
rates during the first four months of 2009 compared to 2008, offset by changing debt levels and higher interest rates coinciding with the financing transaction completed May 1, 2009.



24



---

Loss on early extinguishment of debt. In conjunction with the extinguishment of the
2003 term loan B, we incurred costs of $66,000 and wrote-off $3,171,000 of non-cash deferred financing costs.

Income
taxes. Our effective tax rate on earnings before income taxes was 35.2% for 2009 compared to 31.9% in 2008. The effective rate was impacted by the amount of permanent differences between book and taxable income. Additionally, rates were affected
by the results in one of our foreign subsidiaries, which impacted the valuation allowance against its deferred tax assets.

Liquidity and
Capital Resources

Historically, we have financed our liquidity requirements through internally generated funds, bank
borrowings and the issuance of other indebtedness. We believe such sources remain viable financing alternatives to meet our anticipated needs. Our investments in acquisitions, joint ventures and capital expenditures have been a significant use of
capital. We plan to continue to invest in advanced production facilities to maintain our competitive position.

Cash flow
provided by operating activities was $91.9 million for the nine months ended October 3, 2009, compared to $49.8 million in the 2008 period, reflecting higher earnings in 2009 and effective working capital management. Our cash flows used in
investing activities increased to $45.8 million for the nine months ended October 3, 2009 from $28.6 million in the 2008 period. Investment activities in 2009 were mainly infrastructure and equipment purchases for the new potato processing
facility purchased in late 2008. Investment activities for 2008 included the use of $8.7 million of available cash to acquire the assets of Mr. Bs of Abbotsford, Inc. and related entities. Cash flow used in financing activities for the
nine months ended October 3, 2009 reflect a $33.8 million voluntary prepayment on the term loans and the payment of $7.5 million for the semi-annual interest payment on M-Foods Holdings 9.75% senior subordinated notes, classified as a dividend
to our parent.

On May 1, 2009, we entered into an amended and restated credit agreement, which consisted of a
$75,000,000 revolving credit facility, a $200,000,000 term A loan and a $250,000,000 term B loan. The revolving credit facility and the term A loan mature November 1, 2012 and the term B loan matures May 1, 2014. Our Credit Agreement bears
interest at floating base rates plus an applicable margin, as defined in the agreement. The effective interest rates at October 3, 2009, for term A loan and term B loan were 6.00% and 6.50%. At October 3, 2009, approximately $6.6 million
of capacity was used under the revolving credit facility for letters of credit. We chose to make a voluntary prepayment of debt under the amended and restated credit agreement as of July 31, 2009. The payment of $33.8 million represented the
next eighteen months scheduled principal payments of the term A loan and the term B loan.

Our Credit Agreement requires
us to meet a minimum interest coverage ratio and a maximum leverage ratio. The Credit Agreement also allows for the funding of the semi-annual interest payments of M-Foods Holdings, Inc. The first payment was made on October 1, 2009. In
addition, the Credit Agreement and the indenture relating to the 8% senior subordinated notes due 2013 contain certain restrictive covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends,
transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in these agreements. Our failure to comply with these covenants
could result in an event of default, which if not cured or waived could have a material adverse effect on our results of operations, financial position and cash flow. In general, the debt covenants limit our discretion in the operation of our
businesses. We were in compliance with all of the covenants under the Credit Agreement and the indenture as of October 3, 2009.



25



---

The following is a calculation of the minimum interest coverage and maximum leverage ratios
under the Credit Agreement for the twelve-month period ended October 3, 2009. The maximum permitted leverage ratio and minimum permitted interest coverage ratio thresholds were tightened in the May 1, 2009 Credit Agreement. The minimum
interest coverage covenant was tightened due to the change in calculation, as we now include the cash interest for M-Foods Holdings, Inc. The terms and related calculations are defined in the Credit Agreement. The 2008 comparative calculations and
thresholds are presented under the terms of our old agreement.



|                                                                                  |                           |                     |         |                   |  |   |         |  
|--------------------------------------------------------------------------------- | ------------------------- | ------------------- | ------- | ----------------- |  | - | ------- | -
|                                                                                  |                           | Twelve Months Ended |        
|                                                                                  | October 3,2009            |                     |         | September 27,2008 | 
|                                                                                  | (Unaudited, In thousands) |                    
|Calculation of Interest Coverage Ratio:                                           |                           |                     |         |                   |  |   |         |  
|Consolidated EBITDA (1)                                                           |                           | $                   | 214,488 |                   |  | $ | 197,284 |  
|Adjusted Consolidated Interest Charges (2)                                        |                           |                     | 56,359  |                   |  |   | 41,873  |  
|Interest Coverage Ratio (Ratio of EBITDA to interest charges)                     |                           |                     | 3.81    | x                 |  |   | 4.71    | x
|Minimum Permitted Interest Coverage Ratio                                         |                           |                     | 2.25    | x                 |  |   | 2.75    | x
|                                                                                  |                           |                    
|Calculation of Leverage Ratio:                                                    |                           |                     |         |                   |  |   |         |  
|Funded Indebtedness (3)                                                           |                           | $                   | 602,962 |                   |  | $ | 612,500 |  
|Less: Cash and equivalents                                                        |                           |                     | (85,792 | )                 |  |   | (49,490 | )
|                                                                                  |                           |                     |         |                   |  |   |         |  
|                                                                                  |                           | $                   | 517,170 |                   |  | $ | 563,010 |  
|Consolidated EBITDA (1)                                                           |                           |                     | 214,488 |                   |  |   | 197,284 |  
|Leverage Ratio (Ratio of funded indebtedness less cash and equivalents to EBITDA) |                           |                     | 2.41    | x                 |  |   | 2.85    | x
|Maximum Permitted Leverage Ratio                                                  |                           |                     | 3.50    | x                 |  |   | 4.25    | x



|(1) | Consolidated EBITDA (earnings before interest expense, taxes, depreciation and amortization) is defined in the Credit Agreement as follows:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                       |                           |                     |         |                   |  |   |        
|-------------------------------------------------------------------------------------- | ------------------------- | ------------------- | ------- | ----------------- |  | - | -------
|                                                                                       |                           | Twelve Months Ended
|                                                                                       | October 3,2009            |                     |         | September 27,2008
|                                                                                       | (Unaudited, In thousands)
|Net earnings                                                                           |                           | $                   | 63,232  |                   |  | $ | 46,262 
|Interest expense, excluding amortization of financing costs                            |                           |                     | 35,591  |                   |  |   | 40,367 
|Amortization of financing costs                                                        |                           |                     | 5,171   |                   |  |   | 4,308  
|Income tax expense                                                                     |                           |                     | 32,508  |                   |  |   | 22,665 
|Depreciation and amortization                                                          |                           |                     | 67,034  |                   |  |   | 74,832 
|Equity sponsor management fee                                                          |                           |                     | 2,157   |                   |  |   | 1,825  
|Expenses related to industrial revenue bonds guaranteed by certain of our subsidiaries |                           |                     | 976     |                   |  |   | 979    
|Other (a)                                                                              |                           |                     | 10,697  |                   |  |   | 2,657  
|                                                                                       |                           |                     |         |                   |  |   |        
|                                                                                       |                           |                     | 217,366 |                   |  |   | 193,895
|Plus: Unrealized losses (gains) on swap contracts                                      |                           |                     | (2,878  | )                 |  |   | 3,389  
|                                                                                       |                           |                     |         |                   |  |   |        
|Consolidated EBITDA, as defined in the Credit Agreement                                |                           | $                   | 214,488 |                   |  | $ | 197,284
|                                                                                       |                           |                     |         |                   |  |   |        



|(a) | Other reflects the following:
|--- | -----------------------------



|                                                                     |                           |                     |                   |  |   |      
|-------------------------------------------------------------------- | ------------------------- | ------------------- | ----------------- |  | - | -----
|                                                                     |                           | Twelve Months Ended
|                                                                     | October 3,2009            |                     | September 27,2008
|                                                                     | (Unaudited, In thousands)
|Non-cash compensation                                                |                           | $                   | 1,784             |  | $ | 2,094
|Letter of credit fees                                                |                           |                     | 183               |  |   | 129  
|Other non-cash expenses (write-off of 2003 deferred financing costs) |                           |                     | 3,171             |  |   |     
|Other non-recurring charges (b)                                      |                           |                     | 5,559             |  |   | 434  
|                                                                     |                           |                     |                   |  |   |      
|                                                                     |                           | $                   | 10,697            |  | $ | 2,657
|                                                                     |                           |                     |                   |  |   |      



|(b) | Includes the $5.1 million charge related to the Feesers litigation fees and costs
|--- | ----------------------------------------------------------------------------------



26



---

|(2) | Adjusted consolidated interest charges, as calculated in the Credit Agreement, was as follows:
|--- | ----------------------------------------------------------------------------------------------



|                                                                          |                           |                     |                   |  |   |       
|------------------------------------------------------------------------- | ------------------------- | ------------------- | ----------------- |  | - | ------
|                                                                          |                           | Twelve Months Ended
|                                                                          | October 3,2009            |                     | September 27,2008
|                                                                          | (Unaudited, In thousands)
|Gross interest expense                                                    |                           | $                   | 48,313            |  | $ | 46,181
|Minus: Amortization of financing costs                                    |                           |                     | 6,975             |  |   | 4,308 
|                                                                          |                           |                     |                   |  |   |       
|Consolidated interest charges                                             |                           |                     | 41,338            |  | $ | 41,873
|                                                                          |                           |                     |                   |  |   |       
|Plus: M-Foods Holdings, Inc. interest expense on 9.75% Subordinated Notes |                           |                     | 15,021            |  |   |       
|                                                                          |                           |                     |                   |  |   |       
|Adjusted consolidated interest charges                                    |                           | $                   | 56,359            |  |   |       
|                                                                          |                           |                     |                   |  |   |       



|(3) | Funded Indebtedness was as follows:
|--- | -----------------------------------



|                                                                                     |                           |                |         |                   |   |        
|------------------------------------------------------------------------------------ | ------------------------- | -------------- | ------- | ----------------- | - | -------
|                                                                                     |                           | October 3,2009 |         | September 27,2008
|                                                                                     | (Unaudited, In thousands)
|Term loans                                                                           |                           | $              | 416,250 |                   | $ | 427,300
|Subordinated notes                                                                   |                           |                | 150,050 |                   |   | 150,050
|Insurance bonds                                                                      |                           |                | 1,330   |                   |   | 1,330  
|Guarantee obligations (see debt guarantees described below)                          |                           |                | 17,259  |                   |   | 19,636 
|Capital leases                                                                       |                           |                | 8,969   |                   |   | 4,666  
|Standby letters of credit (primarily our casualty insurance carrier, Liberty Mutual) |                           |                | 6,574   |                   |   | 6,574  
|MFI Food Canada, Ltd. note payable                                                   |                           |                | 2,530   |                   |   | 2,944  
|                                                                                     |                           |                |         |                   |   |        
|                                                                                     |                           | $              | 602,962 |                   | $ | 612,500
|                                                                                     |                           |                |         |                   |   |        

We use EBITDA as a measurement of our financial results because we believe it is
indicative of the relative strength of our operating performance, it is used to determine incentive compensation levels and it is a key measurement contained in the financial covenants of our indebtedness.

We have guaranteed, through our Waldbaum subsidiary, the repayment of certain industrial revenue bonds used for the expansion of the
wastewater treatment facilities of three municipalities where we have food processing facilities. In May 2007, a $6.0 million bond financing was completed by one of the three municipalities, the City of Wakefield, Nebraska, at an annual interest
rate of 8.22%, with such proceeds used for the construction of the wastewater treatment facility. The wastewater treatment facility became operational in early 2008. We are required to pay the principal and interest payments related to these bonds,
which mature September 15, 2017. These bonds, along with the original $10.25 million guaranteed in September 2005, are included in current maturities of long-term debt and long-term debt. The remaining principal balance for all guaranteed bonds
at October 3, 2009 was approximately $17.3 million.

In December 2008, we entered into a $15.6 million variable-rate
lease agreement to fund a portion of the equipment purchases at our new potato products facility (see capital spending discussion below). As of October 3, 2009, we had borrowed $5.5 million on this facility. We anticipate full use of the lease
by early 2010. On July 21, 2009, our Board of Directors approved obtaining up to $7.5 million of additional financing for equipment for the new potato products facility. This financing is expected to be finalized in the fourth fiscal quarter
and fully drawn by year end.

Our parent, M-Foods Holdings, Inc., has outstanding 9.75% senior subordinated notes due
October 1, 2013. The fully accreted balance of these notes as of October 3, 2009 was $154.1 million. Beginning October 1, 2009 M-Foods Holdings, Inc. began making semi-annual interest payments on the senior subordinated notes. As the
sole wholly-owned subsidiary of M-Foods Holdings, Inc., we intend to provide our parent the funds sufficient to service these notes.

Our ability to make payments on and to refinance our debt, including the senior subordinated notes, to fund planned capital expenditures and otherwise satisfy our obligations will depend on our ability to generate sufficient cash in the
future. This, to some extent, is subject to general economic, financial, competitive and other factors that are beyond our control. We believe that, based on current levels of operations, we will be able to meet our debt service and other
obligations when due. Significant assumptions underlie this belief, including, among other things, that we will continue to be successful in implementing our business strategy and that there will be no material adverse developments in our business,
liquidity or capital requirements. If our future cash flows from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to reduce or delay our business
activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of our debt, including the senior subordinated notes, on or before maturity. We cannot assure our investors that
we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of our existing and future indebtedness, including the senior subordinated notes and the Credit Agreement, may
limit our ability to pursue any of these alternatives.



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We invested approximately $45.9 million in capital expenditures in the nine months ended
October 3, 2009. We plan to spend approximately $66 million on capital expenditures in 2009. A major new project is the replacement of the existing Northern Star potato plant in Minneapolis with a new plant in Chaska, Minnesota. The new
building has been purchased and is being converted to a food processing facility that will have greater processing efficiencies and capacity than our existing facility. Upon completion of the Chaska, Minnesota plant we intend to sell the potato
plant in Minneapolis. Our other spending continues to be focused on expanding capacity for higher value-added egg products, maintaining existing production facilities, and replacing tractors and trailers, among other projects. Capital spending in
2009 is expected to be funded by a combination of operating cash flows, capital lease and secured note financing. We expect these investments to improve manufacturing efficiencies, customer service and product quality.

Our longer-term planning is focused on growing our sales, earnings and cash flows primarily by focusing on our existing business lines,
through expanding product offerings, increasing production capacity for value-added products and broadening customer bases. We believe our financial resources are sufficient to meet the working capital and capital spending necessary to execute our
longer-term plans. In executing these plans, we expect to reduce debt over the coming years. However, possible significant acquisition activity could result in us seeking additional financing resources, which we would expect would be available to us
if they are sought.

Seasonality

Our consolidated quarterly operating results are affected by the seasonal fluctuations of our net sales and operating profits. Specifically, egg prices typically rise seasonally in the first and fourth
quarters of the year due to increased demand during holiday periods. Consequently, net sales in the Egg Products Division may increase in the first and fourth quarters. Operating profits from the Potato Products Division are less seasonal, but tend
to be higher in the second half of the year coinciding with the potato harvest and incremental consumer demand. Generally, Crystal Farms has higher net sales and operating profits in the fourth quarter, coinciding with incremental consumer demand
during the holiday season.

Forward-looking Statements

Certain items in this Form 10-Q may be forward-looking statements. Such forward-looking statements are subject to numerous risks and uncertainties, including variances in the demand for our products due
to consumer, industry and broad economic developments, as well as variances in the costs to produce such products, including volatility in egg, feed, cheese, and butter costs. Our actual financial results could differ materially from the results
estimated by, forecasted by, or implied by us in such forward-looking statements. Forward-looking statements contained in this Form 10-Q speak only as of the date hereof. We disclaim any obligation or understanding to publicly release updates to, or
revisions of, forward-looking statements to reflect changes in our expectations or events, conditions or circumstances on which any such statement is made.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There was
no material change in our market risk during the nine months ended October 3, 2009. For additional information regarding our market risk, please refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual
Report on Form 10-K for the year ended January 3, 2009.

ITEM 4. CONTROLS AND PROCEDURES

a. Evaluation of disclosure controls and procedures.

Our management evaluated, with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of October 3, 2009. Based on these evaluations, our principal executive and principal financial officer concluded that our disclosure controls
and procedures were effective as of October 3, 2009.

b. Changes in internal controls

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the quarter ended October 3, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Legal Matters

In late 2008 and early 2009, some 22 class-action lawsuits were filed in various federal courts against us and several other defendants
(producers of shell eggs, manufacturers of processed egg products, and egg industry organizations) alleging violations of federal and state antitrust laws in connection with the production and sale of shell eggs and processed-egg products.
Plaintiffs seek to represent nationwide classes of direct and indirect purchasers and allege that defendants conspired to reduce the supply of eggs by participating in animal husbandry, egg-export and other programs of various egg-industry
associations. In December 2008, the Judicial Panel on Multidistrict Litigation ordered the transfer of all cases to the Eastern District of Pennsylvania for coordinated and/or consolidated pretrial proceedings. Subsequently, the direct-purchaser and
indirect-purchaser plaintiffs each filed a Consolidated Amended Complaint (CAC). On April 30, 2009, we filed motions to be dismissed from each CAC, and joined other defendants in motions for dismissal of both CACs. As of
November 13, 2009, there had been no ruling on these motions.

We received a Civil Investigative Demand (CID)
issued by the Florida Attorney General on November 17, 2008, regarding an investigation of possible anticompetitive activities relating to the production and sale of eggs or egg products. The CID requests information and documents
related to the pricing and supply of shell eggs and egg products, as well as our participation in various programs of United Egg Producers. We are fully cooperating with the Florida Attorney Generals office.

We are party to a suit brought by Feesers, Inc. against Sodexo (formerly Sodexho, Inc.) and us alleging violation of the Robinson-Patman
Act. In 2006, we were awarded summary judgment by the United States District Court for the Middle District of Pennsylvania, but that judgment was reversed in 2007 by the U.S. Court of Appeals for the Third Circuit and the case was remanded to the
District Court for fact-finding. A bench trial occurred in January 2008, and on April 27, 2009, the District Court ruled that we violated the Robinson-Patman Act because it found that we sold products to Feesers at prices that differed from the
prices that we accorded to Sodexo (through its distributor) for the same products. No damages were sought or awarded in the case; the District Court issued an injunction prohibiting us from charging different prices to Feesers and Sodexo. We
appealed the decision to the Third Circuit, which heard oral arguments on October 29, 2009. While the case does not involve damages, Feesers has petitioned the District Court to have its attorneys fees and costs paid by Sodexo and us. The
District Court stayed Feesers fee petition pending appeals. We recorded a liability of $5.1 million in June 2009 relating to this claim for fees and cost reimbursement that is included in other liabilities and selling, general and
administrative expenses.

In addition, we are from time to time party to litigation, administrative proceedings and union
grievances that arise in the ordinary course of business, and occasionally pay small amounts to resolve alleged minor violations of regulatory requirements. There is no pending litigation that, separately or in the aggregate, would, in the opinion
of management, have a material adverse effect on our operations or financial condition.

We cannot predict what, if any,
impact these matters and any results from such matters could have on our future results of operations.

ITEM 1A. RISK FACTORS

Readers are directed to our Form 10-K for the year ended January 3, 2009, Item 1A, for a discussion of Risk Factors. We do not
believe there have been any material changes to our Risk Factors since that filing.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.



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ITEM 6. EXHIBITS

EXHIBIT INDEX



|            |  |                                                                                                                                          
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                              
|10.58       |  | Employment Agreement dated October 23, 2009 by and among Michael Foods, Inc., James E. Dwyer, Jr. and Michael Foods Investors, LLC       
|10.59       |  | Senior Management Class G Unit Subscription Agreement dated October 23, 2009 between Michael Foods Investors, LLC and James E. Dwyer, Jr.
|10.60       |  | Senior Management Class F Unit Subscription Agreement dated October 23, 2009 between Michael Foods Investors, LLC and Mark W. Westphal   
|10.61       |  | Senior Management Class F Unit Subscription Agreement dated October 23, 2009 between Michael Foods Investors, LLC and Carolyn V. Wolski  
|10.62       |  | Indemnity Agreement dated October 23, 2009 between Michael Foods, Inc. and James E. Dwyer, Jr.                                           
|10.63       |  | Second Amendment to Michael Foods Investors, LLC Amended and Restated Limited Liability Company Agreement                                
|10.64       |  | Third Amendment to Michael Foods Investors, LLC Securityholders Agreement                                                                
|            | 
|31.1        |  | Certification of Chief Executive Officer                                                                                                 
|31.2        |  | Certification of Chief Financial Officer                                                                                                 

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.



|                        |  |  |  |                     |  |                                                    
|----------------------- |  |  |  | ------------------- |  | ---------------------------------------------------
|                        |  |  |  | MICHAEL FOODS, INC.
|                        |  |  | 
|Date: November 13, 2009 |  |  |  | By:                 |  | /S/    JAMES E. DWYER,
JR.                         
|                        |  |  |  |                     |  | James E. Dwyer, Jr.                                
|                        |  |  |  |                     |  | (Chief Executive Officer and President)            
|                        |  |  | 
|                        |  |  |  | By:                 |  | /S/    MARK W.
WESTPHAL                            
|                        |  |  |  |                     |  | Mark W. Westphal                                   
|                        |  |  |  |                     |  | (Chief Financial Officer and Senior Vice President)



30