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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the quarterly period ended March 31, 2005



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



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MICHAEL FOODS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-4151741                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                             |  |           
|-------------------------------------------- |  | ----------
|301 Carlson Parkway Suite 400 Minnetonka, MN |  | 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)



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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 (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 is an accelerated filer (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 May 4, 2005.



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PART IFINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



MICHAEL FOODS, INC.

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



CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)



|                                                                                                                       |  |               |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                       |  | March 31,2005 |           |   | December 31,2004 |  
|                                                                                                                       |  | (Unaudited)   |           |   |                  |  
|ASSETS                                                                                                                 |  |               |           |   |                  |   |           |  
|CURRENT ASSETS                                                                                                         |  |               |           |   |                  |   |           |  
|Cash and equivalents                                                                                                   |  | $             | 31,463    |   |                  | $ | 31,816    |  
|Accounts receivable, less allowances                                                                                   |  |               | 106,770   |   |                  |   | 101,552   |  
|Inventories                                                                                                            |  |               | 95,167    |   |                  |   | 91,044    |  
|Prepaid expenses and other                                                                                             |  |               | 8,921     |   |                  |   | 7,492     |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|Total current assets                                                                                                   |  |               | 242,321   |   |                  |   | 231,904   |  
|                                                                                                                       |  |              
|PROPERTY, PLANT AND EQUIPMENT                                                                                          |  |               |           |   |                  |   |           |  
|Land                                                                                                                   |  |               | 4,044     |   |                  |   | 4,044     |  
|Buildings and improvements                                                                                             |  |               | 113,781   |   |                  |   | 112,856   |  
|Machinery and equipment                                                                                                |  |               | 247,915   |   |                  |   | 238,888   |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|                                                                                                                       |  |               | 365,740   |   |                  |   | 355,788   |  
|Less accumulated depreciation                                                                                          |  |               | 68,998    |   |                  |   | 55,227    |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|                                                                                                                       |  |               | 296,742   |   |                  |   | 300,561   |  
|                                                                                                                       |  |              
|OTHER ASSETS                                                                                                           |  |               |           |   |                  |   |           |  
|Goodwill                                                                                                               |  |               | 525,035   |   |                  |   | 525,035   |  
|Intangible assets, net                                                                                                 |  |               | 243,904   |   |                  |   | 246,794   |  
|Other assets                                                                                                           |  |               | 36,069    |   |                  |   | 37,261    |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|                                                                                                                       |  |               | 805,008   |   |                  |   | 809,090   |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|                                                                                                                       |  | $             | 1,344,071 |   |                  | $ | 1,341,555 |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                   |  |               |           |   |                  |   |           |  
|CURRENT LIABILITIES                                                                                                    |  |               |           |   |                  |   |           |  
|Current maturities of long-term debt                                                                                   |  | $             | 635       |   |                  | $ | 651       |  
|Accounts payable                                                                                                       |  |               | 58,136    |   |                  |   | 65,725    |  
|Accrued liabilities                                                                                                    |  |               |           |   |                  |   |           |  
|Compensation                                                                                                           |  |               | 9,520     |   |                  |   | 21,761    |  
|Customer programs                                                                                                      |  |               | 45,345    |   |                  |   | 40,062    |  
|Interest                                                                                                               |  |               | 8,078     |   |                  |   | 5,144     |  
|Income taxes                                                                                                           |  |               | 17,857    |   |                  |   | 5,614     |  
|Other                                                                                                                  |  |               | 24,665    |   |                  |   | 32,403    |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|Total current liabilities                                                                                              |  |               | 164,236   |   |                  |   | 171,360   |  
|LONG-TERM DEBT, less current maturities                                                                                |  |               | 749,986   |   |                  |   | 750,132   |  
|DEFERRED INCOME TAXES                                                                                                  |  |               | 147,334   |   |                  |   | 148,590   |  
|DEFERRED COMPENSATION                                                                                                  |  |               | 14,322    |   |                  |   | 14,080    |  
|COMMITMENTS AND CONTINGENCIES                                                                                          |  |               |          |   |                  |   |          |  
|                                                                                                                       |  |              
|SHAREHOLDERS EQUITY                                                                                                   |  |               |           |   |                  |   |           |  
|Common stock, $0.01 par value, 3,000 shares authorized, issued and outstanding on March 31, 2005 and December 31, 2004 |  |               |          |   |                  |   |          |  
|Additional paid-in capital                                                                                             |  |               | 254,618   |   |                  |   | 254,618   |  
|Retained earnings                                                                                                      |  |               | 13,595    |   |                  |   | 6,751     |  
|Accumulated other comprehensive loss                                                                                   |  |               | (20       | ) |                  |   | (3,976    | )
|                                                                                                                       |  |               |           |   |                  |   |           |  
|                                                                                                                       |  |               | 268,193   |   |                  |   | 257,393   |  
|                                                                                                                       |  |               |           |   |                  |   |           |  
|                                                                                                                       |  | $             | 1,344,071 |   |                  | $ | 1,341,555 |  
|                                                                                                                       |  |               |           |   |                  |   |           |  



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



I-1



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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 March 31,

(Unaudited, in thousands)



|                                             |  |      |         |      |   |         |  
|-------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                             |  | 2005 |         | 2004 |  
|Net sales                                    |  | $    | 304,964 |      | $ | 340,612 |  
|Cost of sales                                |  |      | 247,662 |      |   | 285,346 |  
|                                             |  |      |         |      |   |         |  
|Gross profit                                 |  |      | 57,302  |      |   | 55,266  |  
|Selling, general and administrative expenses |  |      | 33,747  |      |   | 31,292  |  
|                                             |  |      |         |      |   |         |  
|Operating profit                             |  |      | 23,555  |      |   | 23,974  |  
|Interest expense, net                        |  |      | 11,978  |      |   | 10,780  |  
|Other expense (income)                       |  |      | 629     |      |   | (106    | )
|                                             |  |      |         |      |   |         |  
|Earnings before income taxes                 |  |      | 10,948  |      |   | 13,300  |  
|Income tax expense                           |  |      | 4,104   |      |   | 5,119   |  
|                                             |  |      |         |      |   |         |  
|Net earnings                                 |  | $    | 6,844   |      | $ | 8,181   |  
|                                             |  |      |         |      |   |         |  



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



I-2



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MICHAEL FOODS, INC.

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



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31,

(Unaudited, in thousands)



|                                                    |  |      |         |   |      |   |         |  
|--------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                    |  | 2005 |         |   | 2004 |  
|Net cash provided by operating activities           |  | $    | 9,854   |   |      | $ | 34,448  |  
|Cash flows from investing activities:               |  |      |         |   |      |   |         |  
|Capital expenditures                                |  |      | (10,100 | ) |      |   | (10,158 | )
|Other assets                                        |  |      | (324    | ) |      |   | (1,839  | )
|                                                    |  |      |         |   |      |   |         |  
|Net cash used in investing activities               |  |      | (10,424 | ) |      |   | (11,997 | )
|Cash flows from financing activities:               |  |      |         |   |      |   |         |  
|Payments on long-term debt                          |  |      | (110    | ) |      |   | (1,387  | )
|Proceeds from long-term debt                        |  |      | 352     |   |      |   | 677     |  
|                                                    |  |      |         |   |      |   |         |  
|Net cash provided by (used in) financing activities |  |      | 242     |   |      |   | (710    | )
|Effect of exchange rate changes on cash             |  |      | (25     | ) |      |   | 8       |  
|                                                    |  |      |         |   |      |   |         |  
|Net increase (decrease) in cash and equivalents     |  |      | (353    | ) |      |   | 21,749  |  
|Cash and equivalents at beginning of period         |  |      | 31,816  |   |      |   | 45,594  |  
|                                                    |  |      |         |   |      |   |         |  
|Cash and equivalents at end of period               |  | $    | 31,463  |   |      | $ | 67,343  |  
|                                                    |  |      |         |   |      |   |         |  



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



I-3



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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 AND RECENT ACCOUNTING PRONOUNCEMENTS



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 fifty-two/fifty-three week fiscal year ending on the Saturday
nearest to December 31 each year. The quarter ended March 31, 2005 was a 13 week period ended April 2, 2005 and the quarter ended March 31, 2004 was a 13 week period ended April 3, 2004. For clarity of presentation, we describe both periods as if
the quarters ended on March 31st.



In the opinion of management, the unaudited financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the results of operations for the periods indicated. Our results of operations and cash flows for the period ended March 31, 2005 are not necessarily indicative of the results expected for the full
year.



In November 2004, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 151, Inventory CostsAn amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4. SFAS 151 clarifies that
abnormal amounts of idle facility expense, freight, handling costs and spoilage should be expensed as incurred and not included in overhead. Further, SFAS 151 requires that allocation of fixed production overheads to conversion costs should be based
on normal capacity of the production facilities. The provisions in SFAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of this statement, required effective January 1, 2006, will not
have a significant effect on our financial condition or results of operations.



In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary AssetsAn Amendment of Accounting Principals Board (APB) Opinion No. 29. This statement amends APB Opinion No.29
and is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. SFAS 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning June 15, 2005. The adoption
of this statement, required effective July 1, 2005, will have no effect on our financial condition or results of operations.



On December 16, 2004, the FASB issued SFAS 123(R), Share Based Payment, which is a revision of SFAS No. 123 and supersedes APB Opinion No. 25.
SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Pro forma disclosure of the income
statement effects of share-based payments is no longer an alternative. SFAS No. 123(R) is effective for private entities as defined on or after January 1, 2006. In addition, companies must also recognize compensation expense related to any awards
that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions
of SFAS No. 123(R). We are currently assessing the impact to our consolidated results of operations of adopting SFAS No. 123(R).



I-4



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Goodwill and Intangible Assets with Indefinite Lives



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 an impairment indicated. Fair values are estimated based on our best estimate of the future cash flows 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.



Other Intangibles



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. 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.



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



|                          |  |                |         |                   |   |        
|------------------------- |  | -------------- | ------- | ----------------- | - | -------
|                          |  | March 31, 2005 |         | December 31, 2004
|Egg Products              |  | $              | 431,891 |                   | $ | 431,891
|Refrigerated Distribution |  |                | 32,507  |                   |   | 32,507 
|Potato Products           |  |                | 60,637  |                   |   | 60,637 
|                          |  |                |         |                   |   |        
|                          |  | $              | 525,035 |                   | $ | 525,035
|                          |  |                |         |                   |   |        



Our intangible assets
were as follows (in thousands):



|                                                                          |  |                |         |   |                  |   |         |  
|------------------------------------------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                                                          |  | March 31, 2005 |         |   | December 31,2004 |  
|Amortized intangible assets (various, principally customer relationships) |  | $              | 230,615 |   |                  | $ | 230,615 |  
|Accumulated amortization                                                  |  |                | (20,736 | ) |                  |   | (16,846 | )
|                                                                          |  |                |         |   |                  |   |         |  
|                                                                          |  |                | 209,879 |   |                  |   | 213,769 |  
|Unamortized intangible assets (trademarks)                                |  |                | 34,025  |   |                  |   | 33,025  |  
|                                                                          |  |                |         |   |                  |   |         |  
|                                                                          |  | $              | 243,904 |   |                  | $ | 246,794 |  
|                                                                          |  |                |         |   |                  |   |         |  



The aggregate
amortization expense for the three months ended March 31, 2005 and 2004 was $3,890,000 and $3,898,000, respectively. The estimated amortization expense for the years ended December 31, 2005 through December 31, 2009 is as follows (in thousands):



|     |  |   |       
|---- |  | - | ------
|2005 |  | $ | 15,573
|2006 |  |   | 15,554
|2007 |  |   | 15,328
|2008 |  |   | 15,328
|2009 |  |   | 15,328



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 interest method over the lives of the respective debt agreements. Our deferred financing costs were as follows (in thousands)



|                         |  |                |        |   |                   |   |        |  
|------------------------ |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                         |  | March 31, 2005 |        |   | December 31, 2004 |  
|Deferred financing costs |  | $              | 35,030 |   |                   | $ | 35,030 |  
|Accumulated amortization |  |                | (2,732 | ) |                   |   | (2,216 | )
|                         |  |                |        |   |                   |   |        |  
|                         |  | $              | 32,298 |   |                   | $ | 32,814 |  
|                         |  |                |        |   |                   |   |        |  



I-5



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NOTE BOTHER FINANCIAL STATEMENT DATA



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, assuming no salvage value.



Inventories consisted of the following (in thousands):



|                                   |  |               |        |                   |   |       
|---------------------------------- |  | ------------- | ------ | ----------------- | - | ------
|                                   |  | March 31,2005 |        | December 31, 2004
|Raw materials and supplies         |  | $             | 15,755 |                   | $ | 13,661
|Work in process and finished goods |  |               | 57,514 |                   |   | 54,222
|Flocks                             |  |               | 21,898 |                   |   | 23,161
|                                   |  |               |        |                   |   |       
|                                   |  | $             | 95,167 |                   | $ | 91,044
|                                   |  |               |        |                   |   |       



NOTE CCOMMITMENTS AND
CONTINGENCIES



Patent Litigation



We have an exclusive license agreement for a patented process for the
production and sale of extended shelf-life liquid egg products. Under the license agreement, we have the right to defend and prosecute infringement of the underlying patents.



The U.S. Federal Court of Appeals has upheld the validity of the patents on two separate occasions. In 2000, the U.S. Patent
and Trademark Office allowed product claims beyond the process claims previously allowed for the extended shelf-life liquid egg product. These patents are scheduled to expire beginning in 2006.



Litigation related to the infringement of these patents has been settled with
three parties, one in 2000 and two in 2004. The proceeds we received from the 2004 settlements aggregated approximately $2.0 million. A sublicense has been issued to each of the infringing parties, granting them the right to manufacture and
distribute extended shelf-life liquid whole egg products subject to a royalty payable to us on all future product sales. In connection with each of these settlements we received lump sum payments to cover the past production and sale of such
products and other matters related to the infringements. Subsequent to the end of the first quarter of 2005, we learned that our appeal of a non-infringement decision in our patent litigation against Sunny Fresh Foods, Inc., a subsidiary of Cargill,
Inc., was rejected by the United States Court of Appeals for the Federal Circuit.



Other Litigation



We are engaged in routine
litigation incidental to our business. We believe the ultimate outcome of this litigation will not have a material effect on our consolidated financial position, liquidity or results of operations.



Other Matters



In March 2003, Belovo S.A., our egg products joint venture company in Belgium, of which we own 35.63%, notified the Belgian
governmental health authorities of a potential processed egg powder contamination issue. Following the notification, production ceased for a month and the egg powders were recalled. The Belgian health authority placed the egg powder in quarantine.
As of December 2004, inventory valued at approximately $1.1 million was still considered questionable for sale. The remainder of the quarantined inventory had been released and sold. Belovos 2003 financial statements included provisions to
cover approximately $5 million of identified risks from the contamination matter. We recorded other expenses of $1.2 million related to this matter in mid-year 2004. Belovo is pursuing a settlement with its insurance company regarding claims from
customers for returned product. The final loss related to this matter has not been determined. Belovos sales decreased for the three months ended March 31, 2005 by $1.9 million, or 20%, to $7.8 million, compared to $9.7 million in the same
period of 2004. Our investment in Belovo is approximately $3.0 million as of March 31, 2005.



I-6



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NOTE DCOMPREHENSIVE INCOME



The components of and changes in accumulated other comprehensive income (loss), net of taxes, during the three months ended
March 31, 2005 were as follows (in thousands):



|                                          |  |                 |        |   |                            |   |       |                      |  |   |       |   |  |   |        |  
|----------------------------------------- |  | --------------- | ------ | - | -------------------------- | - | ----- | -------------------- |  | - | ----- | - |  | - | ------ | -
|                                          |  | Cash FlowHedges |        |   | ForeignCurrencyTranslation |   |       | Interest Rate Caplet |  |   | Total |  
|Balance at December 31, 2004              |  | $               | (6,166 | ) |                            | $ | 2,814 |                      |  | $ | (624  | ) |  | $ | (3,976 | )
|Foreign currency translation adjustment   |  |                 |       |   |                            |   | (616  | )                    |  |   |      |   |  |   | (616   | )
|Interest rate caplet                      |  |                 |       |   |                            |   |      |                      |  |   | (16   | ) |  |   | (16    | )
|Net unrealized change on cash flow hedges |  |                 | 4,588  |   |                            |   |      |                      |  |   |      |   |  |   | 4,588  |  
|                                          |  |                 |        |   |                            |   |       |                      |  |   |       |   |  |   |        |  
|Balance at March 31, 2005                 |  | $               | (1,578 | ) |                            | $ | 2,198 |                      |  | $ | (640  | ) |  | $ | (20    | )
|                                          |  |                 |        |   |                            |   |       |                      |  |   |       |   |  |   |        |  



Comprehensive income, net of taxes,
for the three months ended March 31, 2005 and 2004 was as follows (in thousands):



|                                                               |  |       |   |  |   |       
|-------------------------------------------------------------- |  | ----- | - |  | - | ------
|Net earnings for the three months ended March 31, 2005         |  |       |   |  | $ | 6,844 
|Net losses arising during the period:                          |  |       |   |  |   |       
|Net unrealized derivative gains from cash flow hedges          |  | 4,588 |   |  |   |       
|Interest rate caplet                                           |  | (16   | ) |  |   |       
|Foreign currency translation adjustment                        |  | (616  | ) |  |   |       
|                                                               |  |       |   |  |   |       
|Other comprehensive income                                     |  |       |   |  |   | 3,956 
|                                                               |  |       |   |  |   |       
|Comprehensive income for the three months ended March 31, 2005 |  |       |   |  | $ | 10,800
|                                                               |  |       |   |  |   |       
|Net earnings for the three months ended March 31, 2004         |  |       |   |  | $ | 8,181 
|Net gains arising during the period:                           |  |       |   |  |   |       
|Net unrealized derivative gains from cash flow hedges          |  | 6,223 |   |  |   |       
|Foreign currency translation adjustment                        |  | 558   |   |  |   |       
|                                                               |  |       |   |  |   |       
|Other comprehensive income                                     |  |       |   |  |   | 6,781 
|                                                               |  |       |   |  |   |       
|Comprehensive income for the three months ended March 31, 2004 |  |       |   |  | $ | 14,962
|                                                               |  |       |   |  |   |       



NOTE EBUSINESS SEGMENTS



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



|                                   |  |              |         |                           |   |                 |  |           |        |  |       |        |   |  |   |        
|---------------------------------- |  | ------------ | ------- | ------------------------- | - | --------------- |  | --------- | ------ |  | ----- | ------ | - |  | - | -------
|                                   |  | EGG PRODUCTS |         | REFRIGERATED DISTRIBUTION |   | POTATO PRODUCTS |  | CORPORATE |        |  | TOTAL
|Three months ended March 31, 2005: |  |              |         |                           |   |                 |  |           |        |  |       |        |   |  |   |        
|External net sales                 |  | $            | 215,262 |                           | $ | 65,865          |  | $         | 23,837 |  | $     |       |   |  | $ | 304,964
|Intersegment sales                 |  |              | 1,923   |                           |   |                |  |           | 1,084  |  |       |       |   |  |   | 3,007  
|Operating profit (loss)            |  |              | 19,498  |                           |   | 3,548           |  |           | 3,226  |  |       | (2,717 | ) |  |   | 23,555 
|Depreciation and amortization      |  |              | 14,819  |                           |   | 1,125           |  |           | 1,595  |  |       | 1      |   |  |   | 17,540 
|                                   |  |              |         |                           |  
|Three months ended March 31, 2004: |  |              |         |                           |   |                 |  |           |        |  |       |        |   |  |   |        
|External net sales                 |  | $            | 249,763 |                           | $ | 71,323          |  | $         | 19,526 |  | $     |       |   |  | $ | 340,612
|Intersegment sales                 |  |              | 6,035   |                           |   |                |  |           | 802    |  |       |       |   |  |   | 6,837  
|Operating profit (loss)            |  |              | 21,807  |                           |   | 3,461           |  |           | 1,180  |  |       | (2,474 | ) |  |   | 23,974 
|Depreciation and amortization      |  |              | 14,035  |                           |   | 1,143           |  |           | 1,823  |  |       | 2      |   |  |   | 17,003 



I-7



---

NOTE FSUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION



Our senior credit agreement, senior unsecured term loan and senior
subordinated notes have been guaranteed, on a joint and several basis, by us and our 100% owned domestic subsidiaries. The senior credit agreement is also guaranteed by our parent, M-Foods Holdings, Inc.



The following condensed consolidating financial information presents our
condensed consolidating balance sheets at March 31, 2005 and December 31, 2004, together with our condensed consolidating statements of earnings and cash flows for the three months ended March 31, 2005 and 2004. These financial statements reflect
Michael Foods, Inc. (the parent), 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.



I-8



---

Condensed Consolidating Balance Sheets

March 31, 2005

(Unaudited, in thousands)



|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|------------------------------------------ |  | ------ | --------- | - | --------------------- | - | ----------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ---------
|                                           |  | Parent |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Assets                                     |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current assets                             |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Cash and equivalents                       |  | $      | 30,206    |   |                       | $ |                        |  | $ | 1,257        |   |  | $            |         |   |  | $ | 31,463   
|Accounts receivable, less allowances       |  |        | 2,194     |   |                       |   | 102,475                 |  |   | 7,457        |   |  |              | (5,356   | ) |  |   | 106,770  
|Inventories                                |  |        |          |   |                       |   | 88,331                  |  |   | 6,836        |   |  |              |         |   |  |   | 95,167   
|Prepaid expenses and other                 |  |        | 1,186     |   |                       |   | 7,416                   |  |   | 319          |   |  |              |         |   |  |   | 8,921    
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total current assets                       |  |        | 33,586    |   |                       |   | 198,222                 |  |   | 15,869       |   |  |              | (5,356   | ) |  |   | 242,321  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Property, plant and equipmentnet          |  |        | 26        |   |                       |   | 276,318                 |  |   | 20,398       |   |  |              |         |   |  |   | 296,742  
|Other assets                               |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Goodwill                                   |  |        |          |   |                       |   | 522,009                 |  |   | 3,026        |   |  |              |         |   |  |   | 525,035  
|Other assets                               |  |        | 35,344    |   |                       |   | 263,070                 |  |   |             |   |  |              | (18,441  | ) |  |   | 279,973  
|Investment in subsidiaries                 |  |        | 956,021   |   |                       |   | 3,908                   |  |   |             |   |  |              | (959,929 | ) |  |   |         
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|                                           |  |        | 991,365   |   |                       |   | 788,987                 |  |   | 3,026        |   |  |              | (978,370 | ) |  |   | 805,008  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total assets                               |  | $      | 1,024,977 |   |                       | $ | 1,263,527               |  | $ | 39,293       |   |  | $            | (983,726 | ) |  | $ | 1,344,071
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Liabilities and Shareholders Equity       |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current liabilities                        |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current maturities of long-term debt       |  | $      |          |   |                       | $ | 9                       |  | $ | 626          |   |  | $            |         |   |  | $ | 635      
|Accounts payable                           |  |        | 367       |   |                       |   | 58,386                  |  |   | 4,294        |   |  |              | (4,911   | ) |  |   | 58,136   
|Accrued liabilities                        |  |        | 33,263    |   |                       |   | 71,180                  |  |   | 1,022        |   |  |              |         |   |  |   | 105,465  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total current liabilities                  |  |        | 33,630    |   |                       |   | 129,575                 |  |   | 5,942        |   |  |              | (4,911   | ) |  |   | 164,236  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Long-term debt, less current maturities    |  |        | 740,100   |   |                       |   | 184                     |  |   | 30,143       |   |  |              | (20,441  | ) |  |   | 749,986  
|Deferred income taxes                      |  |        | (31,268   | ) |                       |   | 178,822                 |  |   | (220         | ) |  |              |         |   |  |   | 147,334  
|Deferred compensation                      |  |        | 14,322    |   |                       |   |                        |  |   |             |   |  |              |         |   |  |   | 14,322   
|Shareholders equity                       |  |        | 268,193   |   |                       |   | 954,946                 |  |   | 3,428        |   |  |              | (958,374 | ) |  |   | 268,193  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total liabilities and shareholders equity |  | $      | 1,024,977 |   |                       | $ | 1,263,527               |  | $ | 39,293       |   |  | $            | (983,726 | ) |  | $ | 1,344,071
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          



I-9



---

Condensed Consolidating Balance Sheets

December 31, 2004

(in thousands)



|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|------------------------------------------ |  | ------ | --------- | - | --------------------- | - | ----------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ---------
|                                           |  | Parent |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Assets                                     |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current assets                             |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Cash and equivalents                       |  | $      | 29,954    |   |                       | $ |                        |  | $ | 1,862        |   |  | $            |         |   |  | $ | 31,816   
|Accounts receivable, less allowances       |  |        | 1,704     |   |                       |   | 95,632                  |  |   | 9,086        |   |  |              | (4,870   | ) |  |   | 101,552  
|Inventories                                |  |        |          |   |                       |   | 84,228                  |  |   | 6,816        |   |  |              |         |   |  |   | 91,044   
|Prepaid expenses and other                 |  |        | 800       |   |                       |   | 6,584                   |  |   | 108          |   |  |              |         |   |  |   | 7,492    
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total current assets                       |  |        | 32,458    |   |                       |   | 186,444                 |  |   | 17,872       |   |  |              | (4,870   | ) |  |   | 231,904  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Property, plant and equipmentnet          |  |        | 27        |   |                       |   | 279,692                 |  |   | 20,842       |   |  |              |         |   |  |   | 300,561  
|Other assets:                              |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Goodwill                                   |  |        |          |   |                       |   | 522,009                 |  |   | 3,026        |   |  |              |         |   |  |   | 525,035  
|Other assets                               |  |        | 35,865    |   |                       |   | 264,363                 |  |   | 0            |   |  |              | (16,173  | ) |  |   | 284,055  
|Investment in subsidiaries                 |  |        | 941,962   |   |                       |   | 4,438                   |  |   | 0            |   |  |              | (946,400 | ) |  |   |         
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|                                           |  |        | 977,827   |   |                       |   | 790,810                 |  |   | 3,026        |   |  |              | (962,573 | ) |  |   | 809,090  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total assets                               |  | $      | 1,010,312 |   |                       | $ | 1,256,946               |  | $ | 41,740       |   |  | $            | (967,443 | ) |  | $ | 1,341,555
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Liabilities and Shareholders Equity       |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current liabilities                        |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Current maturities of long-term debt       |  | $      |          |   |                       | $ | 17                      |  | $ | 634          |   |  | $            |         |   |  | $ | 651      
|Accounts payable                           |  |        | 321       |   |                       |   | 65,051                  |  |   | 5,132        |   |  |              | (4,779   | ) |  |   | 65,725   
|Accrued liabilities                        |  |        | 25,963    |   |                       |   | 77,438                  |  |   | 1,583        |   |  |              |         |   |  |   | 104,984  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total current liabilities                  |  |        | 26,284    |   |                       |   | 142,506                 |  |   | 7,349        |   |  |              | (4,779   | ) |  |   | 171,360  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Long-term debt, less current maturities    |  |        | 740,100   |   |                       |   | 184                     |  |   | 30,773       |   |  |              | (20,925  | ) |  |   | 750,132  
|Deferred income taxes                      |  |        | (27,545   | ) |                       |   | 176,197                 |  |   | (62          | ) |  |              |         |   |  |   | 148,590  
|Deferred compensation                      |  |        | 14,080    |   |                       |   |                        |  |   | 0            |   |  |              |         |   |  |   | 14,080   
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Shareholders equity                       |  |        | 257,393   |   |                       |   | 938,059                 |  |   | 3,680        |   |  |              | (941,739 | ) |  |   | 257,393  
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          
|Total liabilities and shareholders equity |  | $      | 1,010,312 |   |                       | $ | 1,256,946               |  | $ | 41,740       |   |  | $            | (967,443 | ) |  | $ | 1,341,555
|                                           |  |        |           |   |                       |   |                         |  |   |              |   |  |              |          |   |  |   |          



I-10



---

Condensed Consolidating Statements of Earnings

Three months ended March 31, 2005

(Unaudited, in thousands)



|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|--------------------------------------------------------------------------------- |  | ------ | ------- | - | ---------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | -------
|                                                                                  |  | Parent |         |   | Guarantor Subsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Net sales                                                                         |  | $      |        |   |                        | $ | 296,316 |                         |  | $ | 14,685       |   |  | $            | (6,037  | ) |  | $ | 304,964
|Cost of sales                                                                     |  |        |        |   |                        |   | 239,898 |                         |  |   | 13,801       |   |  |              | (6,037  | ) |  |   | 247,662
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Gross profit                                                                      |  |        |        |   |                        |   | 56,418  |                         |  |   | 884          |   |  |              |        |   |  |   | 57,302 
|Selling, general and administrative expenses                                      |  |        | 2,717   |   |                        |   | 31,189  |                         |  |   | 1,284        |   |  |              | (1,443  | ) |  |   | 33,747 
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Operating profit (loss)                                                           |  |        | (2,717  | ) |                        |   | 25,229  |                         |  |   | (400         | ) |  |              | 1,443   |   |  |   | 23,555 
|Interest expense, net                                                             |  |        | 11,376  |   |                        |   | 142     |                         |  |   | 460          |   |  |              |        |   |  |   | 11,978 
|Other expense (income)                                                            |  |        | (1,443  | ) |                        |   | 629     |                         |  |   |             |   |  |              | 1,443   |   |  |   | 629    
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Earnings (loss) before equity in earnings (loss) of subsidiaries and income taxes |  |        | (12,650 | ) |                        |   | 24,458  |                         |  |   | (860         | ) |  |              |        |   |  |   | 10,948 
|Equity in earnings (loss) of subsidiaries                                         |  |        | 14,792  |   |                        |   | (447    | )                       |  |   |             |   |  |              | (14,345 | ) |  |   |       
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Earnings (loss) before income taxes                                               |  |        | 2,142   |   |                        |   | 24,011  |                         |  |   | (860         | ) |  |              | (14,345 | ) |  |   | 10,948 
|Income tax expense (benefit)                                                      |  |        | (4,702  | ) |                        |   | 9,219   |                         |  |   | (413         | ) |  |              |        |   |  |   | 4,104  
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Net earnings (loss)                                                               |  | $      | 6,844   |   |                        | $ | 14,792  |                         |  | $ | (447         | ) |  | $            | (14,345 | ) |  | $ | 6,844  
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        



I-11



---

Condensed Consolidating Statements of Earnings

Three months ended March 31, 2004

(Unaudited, in thousands)



|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|--------------------------------------------------------------------------------- |  | ------ | ------- | - | ---------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | -------
|                                                                                  |  | Parent |         |   | Guarantor Subsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Eliminations |   |  | Consolidated
|Net sales                                                                         |  | $      |        |   |                        | $ | 331,719 |                         |  | $ | 18,495       |   |  | $            | (9,602  | ) |  | $ | 340,612
|Cost of sales                                                                     |  |        |        |   |                        |   | 278,058 |                         |  |   | 16,890       |   |  |              | (9,602  | ) |  |   | 285,346
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Gross profit                                                                      |  |        |        |   |                        |   | 53,661  |                         |  |   | 1,605        |   |  |              |        |   |  |   | 55,266 
|Selling, general and administrative expenses                                      |  |        | 2,474   |   |                        |   | 28,620  |                         |  |   | 1,630        |   |  |              | (1,432  | ) |  |   | 31,292 
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Operating profit (loss)                                                           |  |        | (2,474  | ) |                        |   | 25,041  |                         |  |   | (25          | ) |  |              | 1,432   |   |  |   | 23,974 
|Interest expense, net                                                             |  |        | 10,064  |   |                        |   | 301     |                         |  |   | 415          |   |  |              |        |   |  |   | 10,780 
|Other income (expense)                                                            |  |        | 1,432   |   |                        |   | 106     |                         |  |   |             |   |  |              | (1,432  | ) |  |   | 106    
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Earnings (loss) before equity in earnings (loss) of subsidiaries and income taxes |  |        | (11,106 | ) |                        |   | 24,846  |                         |  |   | (440         | ) |  |              |        |   |  |   | 13,300 
|Equity in earnings (loss) of subsidiaries                                         |  |        | 14,838  |   |                        |   | (438    | )                       |  |   |             |   |  |              | (14,400 | ) |  |   |       
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Earnings (loss) before income taxes                                               |  |        | 3,732   |   |                        |   | 24,408  |                         |  |   | (440         | ) |  |              | (14,400 | ) |  |   | 13,300 
|Income tax expense (benefit)                                                      |  |        | (4,449  | ) |                        |   | 9,570   |                         |  |   | (2           | ) |  |              |        |   |  |   | 5,119  
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        
|Net earnings (loss)                                                               |  | $      | 8,181   |   |                        | $ | 14,838  |                         |  | $ | (438         | ) |  | $            | (14,400 | ) |  | $ | 8,181  
|                                                                                  |  |        |         |   |                        |   |         |                         |  |   |              |   |  |              |         |   |  |   |        



I-12



---

Condensed Consolidating Statements of Cash Flows

Three months ended March 31, 2005

(Unaudited, in thousands)



|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|--------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                    |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Consolidated |  
|Net cash provided by (used in) operating activities |  | $      | (3,884 | ) |                       | $ | 13,688  |                         |  | $ | 50           |   |  | $ | 9,854   |  
|Cash flows from investing activities:               |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Capital expenditures                                |  |        |       |   |                       |   | (9,702  | )                       |  |   | (398         | ) |  |   | (10,100 | )
|Other assets                                        |  |        | 6      |   |                       |   | (330    | )                       |  |   |             |   |  |   | (324    | )
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net cash provided by (used in) investing activities |  |        | 6      |   |                       |   | (10,032 | )                       |  |   | (398         | ) |  |   | (10,424 | )
|Cash flows from financing activities:               |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Payments on long-term debt                          |  |        |       |   |                       |   | (9      | )                       |  |   | (101         | ) |  |   | (110    | )
|Proceeds from long-term debt                        |  |        |       |   |                       |   | 483     |                         |  |   | (131         | ) |  |   | 352     |  
|Investment in subsidiaries                          |  |        | 4,130  |   |                       |   | (4,130  | )                       |  |   |             |   |  |   |        |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net cash provided by (used in) financing activities |  |        | 4,130  |   |                       |   | (3,656  | )                       |  |   | (232         | ) |  |   | 242     |  
|Effect of exchange rate changes on cash             |  |        |       |   |                       |   |        |                         |  |   | (25          | ) |  |   | (25     | )
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net increase (decrease) in cash and equivalents     |  |        | 252    |   |                       |   |        |                         |  |   | (605         | ) |  |   | (353    | )
|Cash and equivalents at beginning of period         |  |        | 29,954 |   |                       |   |        |                         |  |   | 1,862        |   |  |   | 31,816  |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Cash and equivalents at end of period               |  | $      | 30,206 |   |                       | $ |        |                         |  | $ | 1,257        |   |  | $ | 31,463  |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  



I-13



---

Predecessor

Condensed Consolidating Statements of Cash Flows

Three months ended March 31, 2004

(Unaudited, in thousands)



|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|--------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ----------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                    |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiary |  |   | Consolidated |  
|Net cash provided by operating activities           |  | $      | 24,832 |   |                       | $ | 9,237   |                         |  | $ | 379          |   |  | $ | 34,448  |  
|Cash flows from investing activities:               |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Capital expenditures                                |  |        | (5     | ) |                       |   | (9,493  | )                       |  |   | (660         | ) |  |   | (10,158 | )
|Investments in joint ventures and other assets      |  |        | 146    |   |                       |   | (1,985  | )                       |  |   |             |   |  |   | (1,839  | )
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net cash provided by (used in) investing activities |  |        | 141    |   |                       |   | (11,478 | )                       |  |   | (660         | ) |  |   | (11,997 | )
|Cash flows from financing activities:               |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Payments on long-term debt                          |  |        | (1,238 | ) |                       |   | (8      | )                       |  |   | (141         | ) |  |   | (1,387  | )
|Proceeds from long-term debt                        |  |        |       |   |                       |   |        |                         |  |   | 677          |   |  |   | 677     |  
|Investment in subsidiaries                          |  |        | (5,319 | ) |                       |   | 5,319   |                         |  |   |             |   |  |   |        |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net cash provided by (used in) financing activities |  |        | (6,557 | ) |                       |   | 5,311   |                         |  |   | 536          |   |  |   | (710    | )
|Effect of exchange rate changes on cash             |  |        |       |   |                       |   |        |                         |  |   | 8            |   |  |   | 8       |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Net increase in cash and equivalents                |  |        | 18,416 |   |                       |   | 3,070   |                         |  |   | 263          |   |  |   | 21,749  |  
|Cash and equivalents at beginning of period         |  |        | 52,201 |   |                       |   | (7,915  | )                       |  |   | 1,308        |   |  |   | 45,594  |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  
|Cash and equivalents at end of period               |  | $      | 70,617 |   |                       | $ | (4,845  | )                       |  | $ | 1,571        |   |  | $ | 67,343  |  
|                                                    |  |        |        |   |                       |   |         |                         |  |   |              |   |  |   |         |  



I-14



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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 specialty egg products to the
foodservice, retail and industrial 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 low-cost
production. Our strategic focus on value-added processing of food products 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 growth of food consumption away from home. In recent years, our net sales and operating profit, excluding transaction expenses, have each increased as a result of our focus on value-added products and favorable food industry
trends such as an increasing percentage of the total annual spending on food in the U.S. being devoted to eating away from home.



Commodities and Product Pricing



The profit margins we earn on certain of our products are sensitive to changes in commodity prices. Higher value-added egg products, such as extended
shelf-life liquid and precooked products, account for approximately 60% of the Egg Products Divisions annual net sales. Although gross profit margins for higher value-added egg products are generally less sensitive to commodity price
fluctuations than are other egg products or shell eggs, we are also unable to adjust pricing for these products as quickly as we are for other egg products and shell eggs when our costs change. The remainder of the products sold by our Egg Products
Division are mainly used in the industrial ingredients market, or are shell eggs, and 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. Graded shell egg pricing in the first quarter of 2005 was substantially lower than in the first quarter of 2004 (as measured by Urner Barry Publications) and resulted
in significantly lower industrial egg products prices. Feed costs declined year-over-year during the first quarter of 2005.



The Refrigerated Distribution Division derives approximately 80% of its net sales from refrigerated products produced by others, thereby somewhat reducing
the effects of commodity price swings. However, a majority of the approximately 80% 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 expansion or compression. The balance of the Refrigerated Distribution Divisions 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 60%-95% of its raw potatoes from contract producers under 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.



Results of Operations



Three Months Ended March 31, 2005 as Compared to Three Months Ended March 31, 2004



Readers are directed to Note EBusiness Segments for data on the
unaudited financial results of our business segments for the three months ended March 31, 2005 and 2004.



Net Sales.Net sales for the three months ended March 31, 2005 decreased $35.6 million, or approximately 10%, to $305.0 million from $340.6
million for the three months ended March 31, 2004, reflecting substantial egg market deflation, which reduced selling prices within both the Egg Products and Refrigerated Distribution divisions.



Egg Products Division Net Sales.Egg Products Division external net
sales for the three months ended March 31, 2005 decreased $34.5 million, or 14%, to $215.3 million from $249.8 million for the three months ended March 31, 2004. External net sales decreased for most product lines. Sales decreased notably for
dried and short shelf-life egg products, with pricing down approximately 37% for each. Sales increased for egg substitutes and precooked egg products. Divisional unit sales increased 2% in the 2005 period compared to the 2004 period, with precooked
unit sales showing the strongest gains at approximately 30%. Egg market pricing in the 2005 period returned to more normal levels relative to historical pricing after being significantly above historical levels in the first half of 2004.During the 2005 period, shell egg prices were approximately 42% lower than in the 2004 period (as reported by Urner Barry Publications), resulting in lower pricing for market-sensitive egg products and shell eggs.Sales of higher value-added egg products represented approximately 64% of the Egg Products Divisions external net sales in the 2005 period and 54% in the 2004 period.





I-15



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Refrigerated Distribution Division Net Sales.Refrigerated Distribution Division external net
sales for the three months ended March 31, 2005 decreased $5.4 million, or 8%, to $65.9 million from $71.3 million for the three months ended March 31, 2004. This decrease was mostly due to much lower pricing for shell eggs. Also, overall
distributed products unit sales declined 3% in the 2005 period compared to the 2004 period, as butter and private label cheese unit sales declined. Our most important product line, branded cheese, saw a 5% increase in unit sales, with a 13% increase
in net sales, in the 2005 period as compared to the 2004 period.



Potato Products Division Net Sales.Potato Products Division external net sales for the three months ended March 31, 2005 increased $4.3 million, or 22%, to $23.8 million from $19.5 million for the three months ended March 31, 2004.
This increase was attributable to strong unit sales growth for both foodservice and retail potato products, with the latter increasing 21% from 2004 period levels. Retail mashed items continued to show notable sales growth. Pricing of our potato
products increased moderately year-over-year.



Gross Profit.Gross profit for the three months ended March 31, 2005 increased $2.0 million, or 4%, to $57.3 million from $55.3 million for the three months ended March 31, 2004. Our gross profit margin increased to 18.8% compared to
the 2004 period at 16.2%. The higher gross profit margin reflected an increased gross profit margin from all divisions, with particular strength seen from our Potato Products Division. Reduced raw material costs, particularly related to external egg
purchases, and generally favorable sales mix shifts, combined with improved pricing for certain products, caused the rise in gross profit margin.



Selling, General and Administrative Expenses.Selling, general and administrative expenses for the three months ended March 31, 2005 increased
$2.4 million, or 8%, to $33.7 million from $31.3 million for the three months ended March 31, 2004. Selling, general and administrative expenses increased to 11.1% of net sales in the 2005 period compared with 9.2% for the 2004 period. The 2004
period included a $2.0 million expense reduction related to litigation settlements. Salaries, wages and employee benefits costs increased year-over-year in the 2005 period, while deflationary pressures caused a reduction in net sales. These factors
resulted in the operating expense ratio increase.



Operating
Profit.Operating profit for the three months ended March 31, 2005 decreased $0.4 million, or approximately 2%, to $23.6 million from $24.0 million for the three months ended March 31, 2004. This decrease is primarily attributable to the
increase in operating expenses noted above offsetting the increased gross profit. Our operating profit margin increased to 7.7% in the 2005 period from 7.1% in the 2004 period due to net sales declining while operating expenses increased.



Egg Products Division Operating Profit.Egg Products
Division operating profit for the three months ended March 31, 2005 decreased $2.3 million, or 11%, to $19.5 million from $21.8 million for the three months ended March 31, 2004. Operating profits for higher value-added egg products increased
significantly due to a decline in both external and internal egg costs. Collectively, lower value-added egg products and shell eggs had an operating loss in the 2005 period, compared to notable profitability in the 2004 period, as a result of
depressed market-driven pricing levels.



Refrigerated Distribution Division Operating Profit.Refrigerated Distribution Division operating profit for the three months ended March 31, 2005 increased modestly from the three months ended March 31, 2004. Operating profits for
our key product line, branded cheese, increased in the 2005 period due to sales volume growth. These gains were largely offset by operating profit declines from other product lines, such as butter and bagels.



Potato Products Division Operating Profit.Potato Products Division
operating profit for the three months ended March 31, 2005 increased to $3.2 million from $1.2 million for the three months ended March 31, 2004. This increase reflected a notable improvement, from a small loss to a meaningful profit, from the
foodservice business in the 2005 period, while operating profits from our retail potato products sales declined slightly. The foodservice improvement resulted from improved pricing and strong processing yields (related, in part, to improved raw
material quality), while the decline in retail operations was caused by promotional activities to support the Simply Potatoes® brand following its relaunch in the fall of 2004.



Other Expense (Income). Other expense of $0.6 million was recorded in the 2005 period as compared to other income of
$(0.1) million in the 2004 period, which related to an increased net loss from our Belgium joint venture (see Note C to the condensed consolidated financial statements).



Interest Expense and Income Taxes.Interest expense increased by approximately $1.3 million in the 2005 period
compared to the 2004 period, reflecting higher interest rates. Our tax rate was 37.5% in the 2005 period compared to 38.5% in the 2004 period. The reduction of the effective tax rate for the first quarter of 2005 is related to the Domestic
Production Activities deduction of Section 199 of the Internal Revenue Code, which was enacted as part of the American Jobs Creation Act of 2004.



I-16



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Liquidity and Capital Resources



Historically, we have financed our liquidity requirements through internally generated funds, senior 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 enhance our competitive position.



Cash flow provided by operating activities was $9.9 million for the three months ended March 31, 2005 compared to $34.5 million in the 2004 period. The decrease in cash flow provided by operating activities relates to
decrease in net earnings and increases in working capital in the 2005 period, with higher accounts receivable recorded as of March 31, 2005. Our cash flows used in investing activities decreased to $10.4 million for the three months ended March 31,
2005 from $12.0 million for the 2004 period. Cash flows provided by financing activities were $0.2 million for the three months ended March 31, 2005 compared to a use of cash of $0.7 million in the 2004 period as a result of changes in our scheduled
debt repayments which resulted from the repayment of $35 million of credit facility debt in December 2004.



In the third quarter of 2004, our immediate parent, M-Foods Holdings, Inc., paid a dividend in the amount of approximately $98.1 million to our ultimate
parent, Michael Foods Investors LLC, with the proceeds of an offering of its $100 million 9.75% Senior Discount Notes due October 1, 2013. As the wholly-owned subsidiary of M-Foods Holdings, Inc., we are responsible for servicing these notes. We
then issued dividends in the amount of approximately $70.1 million to M-Foods Holdings, Inc. in the fourth quarter of 2004. The dividends were subsequently distributed to Michael Foods Investors LLC. Michael Foods Investors LLC includes members of
our management. We now expect to use excess cash flow primarily to reduce debt levels in the coming years, unless there is acquisition activity.



On September 17, 2004, we amended our senior secured credit facility and our senior unsecured term loan facility to, among other things, permit the
offering of the senior discount notes by our parent and the dividends, as described above, and to replace the existing term loans outstanding under the term loan facility of the senior secured credit facility with new term loans in the same amount
with lower interest rates.



We continue to have substantial
annual cash interest expense. Our senior credit facility requires us to meet a minimum interest coverage ratio and a maximum leverage ratio. In addition, the senior credit facility, the senior unsecured term loan facility 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
senior credit facility, the senior unsecured term loan agreement and the indenture as of March 31, 2005.



The following is a calculation of our minimum interest coverage and maximum leverage ratios under our senior credit facility for the twelve-month periods
ended March 31, 2005 and 2004. The terms and related calculations are defined in our senior credit facility, which agreement was included as Exhibit 10.1 of our registration statement on Form S-4 (Registration No. 333-112714) which went effective
May 19, 2004 (in thousands, except ratios).



|                                          |  |                |         |   |      |   |         |  
|----------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                          |  | 2005           |         |   | 2004 |  
|                                          |  | (in thousands) |        
|Calculation of Interest Coverage Ratio:   |  |                |         |   |      |   |         |  
|Consolidated EBITDA (1)                   |  | $              | 170,993 |   |      | $ | 168,604 |  
|Consolidated Cash Interest Expense (2)    |  |                | 43,163  |   |      |   | 41,616  |  
|Actual Interest Coverage Ratio (3)        |  |                | 3.96    | x |      |   | 4.05    | x
|Minimum Permitted Interest Coverage Ratio |  |                | 2.15    | x |      |   | 2.10    | x
|Calculation of Leverage Ratio:            |  |                |         |   |      |   |         |  
|Funded Indebtedness (4)                   |  | $              | 764,026 |   |      | $ | 802,346 |  
|Less: Cash and equivalents                |  |                | (31,463 | ) |      |   | (67,343 | )
|                                          |  |                |         |   |      |   |         |  
|                                          |  |                | 732,563 |   |      |   | 735,003 |  
|Consolidated EBITDA (1)                   |  |                | 170,993 |   |      |   | 168,604 |  
|Actual Leverage Ratio (5)                 |  |                | 4.28    | x |      |   | 4.36    | x
|Maximum Permitted Leverage Ratio          |  |                | 5.75    | x |      |   | 5.95    | x

---

|(1) | Consolidated EBITDA is defined in our senior credit facility as follows:
|--- | ------------------------------------------------------------------------



I-17



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|                                                                  |  |                                   |         |      |   |         |  
|----------------------------------------------------------------- |  | --------------------------------- | ------- | ---- | - | ------- | -
|                                                                  |  | Last Twelve Months EndedMarch 31, |        
|                                                                  |  | 2005                              |         | 2004 |  
|                                                                  |  | (in thousands)                    |        
|Net earnings (loss)                                               |  | $                                 | 32,177  |      | $ | (20,398 | )
|Interest expense, excluding amortization of debt issuance costs   |  |                                   | 41,480  |      |   | 40,682  |  
|Amortization of debt issuance costs                               |  |                                   | 2,052   |      |   | 4,496   |  
|Income tax expense (benefit)                                      |  |                                   | 19,966  |      |   | (12,824 | )
|Depreciation and amortization                                     |  |                                   | 67,394  |      |   | 56,208  |  
|Equity sponsor management fee (a)                                 |  |                                   | 1,800   |      |   | 1,370   |  
|Industrial revenue bonds related expenses (b)                     |  |                                   | 917     |      |   | 804     |  
|Other non-recurring charges related to acquisition accounting (c) |  |                                   | 1,268   |      |   | 6,755   |  
|Transaction expenses (d)                                          |  |                                   |        |      |   | 22,838  |  
|Loss on early extinguishment of debt                              |  |                                   |        |      |   | 61,226  |  
|Loss on Dairy Division disposition                                |  |                                   |        |      |   | 16,288  |  
|Dairy Division net earnings                                       |  |                                   |        |      |   | (5,555  | )
|Income tax expense related to Dairy Division                      |  |                                   |        |      |   | (3,480  | )
|Corporate costs allocated to the Dairy Division                   |  |                                   |        |      |   | (1,077  | )
|Other (e)                                                         |  |                                   | 4,644   |      |   | 1,271   |  
|                                                                  |  |                                   |         |      |   |         |  
|                                                                  |  |                                   | 171,698 |      |   | 168,604 |  
|Unrealized gains (losses) on swap contracts                       |  |                                   | 705     |      |   |        |  
|                                                                  |  |                                   |         |      |   |         |  
|Consolidated EBITDA, as defined in our senior credit facility     |  | $                                 | 170,993 |      | $ | 168,604 |  
|                                                                  |  |                                   |         |      |   |         |  

---

|(a) | Reflects management fees paid to equity sponsors.
|--- | -------------------------------------------------

|(b) | Reflects fees associated with industrial revenue bonds guaranteed by certain of our subsidiaries.
|--- | -------------------------------------------------------------------------------------------------

|(c) | Reflects loss associated with SFAS 141 purchase accounting primarily for inventories.
|--- | -------------------------------------------------------------------------------------

|(d) | Reflects expenses incurred in connection with our acquisition by an investor group, including members of our management, in November 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Reflects the following:
|--- | -----------------------



|                                                                                                        |  |      |       |      |   |      
|------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                                                        |  | 2005 |       | 2004
|Equity (earnings) losses of unconsolidated subsidiaries                                                 |  | $    | 1,195 |      | $ | 342  
|Losses (gains) from the sale of assets not in the ordinary course of business                           |  |      | 996   |      |   |     
|Preferred return on deferred compensation                                                               |  |      | 1,534 |      |   | 711  
|Letter of credit fees                                                                                   |  |      | 146   |      |   | 163  
|Fees and expenses in connection with the exchange of the Senior Subordinated Notes for registered notes |  |      | 291   |      |   |     
|Other non-recurring charges                                                                             |  |      | 482   |      |   | 55   
|                                                                                                        |  |      |       |      |   |      
|                                                                                                        |  | $    | 4,644 |      | $ | 1,271
|                                                                                                        |  |      |       |      |   |      

|(2) | Consolidated cash interest expense for the twelve-month periods ended March 31, as calculated in our senior credit facility, was as follows (in thousands):
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|                                           |  |      |        |      |   |       
|------------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                           |  | 2005 |        | 2004
|Interest expense, net                      |  | $    | 44,483 |      | $ | 10,780
|Interest income                            |  |      | 732    |      |   | 134   
|                                           |  |      |        |      |   |       
|Gross interest expense                     |  |      | 45,215 |      |   | 10,914
|                                           |  |     
|minus: Amortization of debt issuance costs |  |      | 2,052  |      |   | 510   
|                                           |  |      |        |      |   |       
|                                           |  |      | 43,163 |      |   | 10,404
|                                           |  |      | X 1    |      |   | X 4   
|                                           |  |      |        |      |   |       
|Consolidated cash interest expense         |  | $    | 43,163 |      | $ | 41,616
|                                           |  |      |        |      |   |       

|(3) | Represents ratio of consolidated EBITDA to consolidated interest expense.
|--- | -------------------------------------------------------------------------

|(4) | Funded indebtedness as of March 31 was as follows (in thousands):
|--- | -----------------------------------------------------------------



|                                                                          |  |      |         |      |   |        
|------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                          |  | 2005 |         | 2004
|Term loan facility                                                        |  | $    | 455,050 |      | $ | 493,763
|Senior unsecured term loan facility                                       |  |      | 135,000 |      |   | 135,000
|8% senior subordinated notes                                              |  |      | 150,000 |      |   | 150,000
|Insurance bonds                                                           |  |      | 878     |      |   | 806    
|Guarantee obligations (see Debt Guarantees described below)               |  |      | 6,038   |      |   | 6,326  
|Capital leases                                                            |  |      | 6,751   |      |   | 6,987  
|Standby letters of credit (primarily with our casualty insurance carrier) |  |      | 6,489   |      |   | 6,489  
|Funded indebtedness of Trilogy Egg Products, Inc.                         |  |      | 3,577   |      |   | 2,698  
|Other                                                                     |  |      | 243     |      |   | 277    
|                                                                          |  |      |         |      |   |        
|                                                                          |  | $    | 764,026 |      | $ | 802,346
|                                                                          |  |      |         |      |   |        



|(5) | Represents ratio of funded indebtedness less cash and equivalents to consolidated EBITDA.
|--- | -----------------------------------------------------------------------------------------



I-18



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As of March 31, 2005, (i) approximately $455.1 million was outstanding under the senior credit facility,
and additional capacity of approximately $6.5 million was used under the revolving line of credit for letters of credit, and (ii) a $135.0 million senior unsecured term loan was outstanding. The weighted average interest rate for our borrowings
under the senior credit facility and the unsecured term loan was approximately 5.4% at March 31, 2005. Given our business trends and cash flow forecast, we do not anticipate any use of the revolving line of credit in the near future, except for
letters of credit purposes. However, it is possible that one or more acquisitions could arise, which could result in much of the revolving line of credit being utilized at some point.



We have guaranteed, through our Waldbaum subsidiary, the repayment of three industrial revenue bonds used for expansions of
wastewater treatment facilities of three municipalities where we operate food processing plants. The repayment of these bonds is funded through the wastewater treatment fees we pay. Should such fees be insufficient to fund the bond payments as they
become due, we have agreed to pay any shortfall. The principal balance of these bonds as of March 31, 2005 was approximately $6.0 million.



Our ability to make payments on and to refinance our debt, including the notes and to fund planned capital expenditures 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 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 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 notes, our senior credit facility and our senior unsecured term loan
may limit our ability to pursue any of these alternatives.



We
invested approximately $10.1 million in capital expenditures in the three months ended March 31, 2005. We plan to spend approximately $45.6 million in total capital expenditures for 2005, which has been, or will be, used to maintain existing
production facilities, expand refrigerated warehouse capacity, and to expand our value-added egg products capacity. We expect to fund this spending from operating cash flows.



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. Generally, the Refrigerated Distribution
Division 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





I-19



---

developments, as well as variances in the costs to produce such products, including normal 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 were no material changes
in our market risk during the three months ended March 31, 2005. 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 December 31, 2004.



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 officer, 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 March 31, 2005. Based on these evaluations, our principal executive and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2005.



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 March 31, 2005, 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



On April 15, 2005, we were notified that the United States Court of Appeals
for the Federal Circuit rejected our appeal of a jury verdict of non-infringement of our patented extended shelf-life liquid egg technology in our long standing litigation with Sunny Fresh Foods, Inc., a subsidiary of Cargill, Inc. While our failure
to overturn the jury verdict is not expected to be material to our business, increased competition in this key product line could result. The primary patent licensed to us expires in 2006.



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.



ITEM 6. EXHIBITS



EXHIBIT INDEX



|            |  |                                                                                                   
|----------- |  | --------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                       
|31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|            | 
|31.2        |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



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---

SIGNATURES



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



|                   |  |                     |  |                                                                     
|------------------ |  | ------------------- |  | --------------------------------------------------------------------
|                   |  | MICHAEL FOODS, INC.
|                   |  |                    
|Date: May 12, 2005 |  | By:                 |  | /s/ GREGG A. OSTRANDER                                              
|                   |  |                     |  | Gregg A. Ostrander (Chairman, Chief Executive Officer and President)
|                   |  |                    
|                   |  | By:                 |  | /s/ JOHN D. REEDY                                                   
|                   |  |                     |  | John D. Reedy (Executive Vice President and Chief Financial Officer)





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