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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-Q

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

For the quarterly period ended September 30, 2000

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: 0-15638

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Michael Foods, Inc.(Exact name of registrant as specified in its charter)

Minnesota(State or other jurisdiction of
incorporation or organization)

41-0498850(I.R.S. Employer Identification No.)Suite 324, Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, MN,(Address of principal executive offices)

55416(Zip code)


(952) 546-1500(Registrant's telephone number, including area code)

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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 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

The
number of shares outstanding of the registrant's Common Stock, $.01 par value, as of November 6, 2000 was 18,284,991 shares.

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PART IFINANCIAL INFORMATION

MICHAEL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                                        |                                         | September 30,
2000   |                           | December 31,
1999 |            
|--------------------------------------- | --------------------------------------- | -------------------- | ------------------------- | ----------------- | -----------
|ASSETS                                  |                                        
|CURRENT ASSETS                          |                                         |                      |                           |                   |            
|                                        | Cash and equivalents                    |                      | $                         | 7,682,000         |            
|                                        | Accounts receivable, less allowances    |                      |                           | 98,895,000        |            
|                                        | Inventories                             |                      |                           | 82,721,000        |            
|                                        | Prepaid expenses and other              |                      |                           | 4,668,000         |            
|                                        |                                         |                      |                           |                   |            
|                                        |                                         | Total current assets |                           |                   | 193,966,000
|PROPERTY, PLANT AND EQUIPMENT-AT COST   |                                         |                      |                           |                   |            
|                                        | Land                                    |                      |                           | 4,106,000         |            
|                                        | Buildings and improvements              |                      |                           | 133,890,000       |            
|                                        | Machinery and equipment                 |                      |                           | 376,741,000       |            
|                                        |                                         |                      |                           |                   |            
|                                        |                                         |                      | 514,737,000               |                   |            
|                                        | Less accumulated depreciation           |                      |                           | 233,992,000       |            
|                                        |                                         |                      |                           |                   |            
|                                        |                                         |                      | 280,745,000               |                   |            
|OTHER ASSETS                            |                                         |                      |                           |                   |            
|                                        | Goodwill, net                           |                      |                           | 114,146,000       |            
|                                        | Joint ventures and other assets         |                      |                           | 18,660,000        |            
|                                        |                                         |                      |                           |                   |            
|                                        |                                         |                      | 132,806,000               |                   |            
|                                        |                                         |                      |                           |                   |            
|                                        |                                         | $                    | 607,517,000               |                   | $          
|                                        |                                         |                      |                           |                   |            
|LIABILITIES AND SHAREHOLDERS' EQUITY    |                                        
|CURRENT LIABILITIES                     |                                         |                      |                           |                   |            
|                                        | Current maturities of long-term debt    |                      | $                         | 2,881,000         |            
|                                        | Accounts payable                        |                      |                           | 51,076,000        |            
|                                        | Accrued liabilities                     |                      |                           |                   |            
|                                        |                                         | Compensation         |                           |                   | 13,071,000 
|                                        |                                         | Insurance            |                           |                   | 7,292,000  
|                                        |                                         | Customer programs    |                           |                   | 18,567,000 
|                                        |                                         | Income taxes         |                           |                   | 11,643,000 
|                                        |                                         | Other                |                           |                   | 13,432,000 
|                                        |                                         |                      |                           |                   |            
|                                        |                                         |                      | Total current liabilities |                   |            
|LONG-TERM DEBT, less current maturities |                                         |                      | 203,370,000               |                   |            
|DEFERRED INCOME TAXES                   |                                         |                      | 37,507,000                |                   |            
|COMMITMENTS AND CONTINGENCIES           |                                         |                      |                          |                   |            
|SHAREHOLDERS' EQUITY                    |                                         |                      |                           |                   |            
|                                        | Common stock                            |                      |                           | 182,000           |            
|                                        | Additional paid-in capital              |                      |                           | 58,390,000        |            
|                                        | Retained earnings                       |                      |                           | 191,696,000       |            
|                                        | Accumulated comprehensive income (loss) |                      |                           | (1,590,000        | )          
|                                        |                                         |                      |                           |                   |            
|                                        |                                         |                      | 248,678,000               |                   |            
|                                        |                                         |                      |                           |                   |            
|                                        |                                         | $                    | 607,517,000               |                   | $          
|                                        |                                         |                      |                           |                   |            

See accompanying notes to condensed consolidated financial statements.

2

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MICHAEL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended September 30, (Unaudited)

|                                             |                              | 2000 |             | 1999      
|-------------------------------------------- | ---------------------------- | ---- | ----------- | ----------
|Net sales                                    |                              | $    | 276,568,000 |           
|Cost of sales                                |                              |      | 228,820,000 |           
|                                             |                              |      |             |           
|                                             | Gross profit                 |      |             | 47,748,000
|Selling, general and administrative expenses |                              |      | 25,506,000  |           
|                                             |                              |      |             |           
|                                             | Operating profit             |      |             | 22,242,000
|Interest expense, net                        |                              |      | 3,524,000   |           
|                                             |                              |      |             |           
|                                             | Earnings before income taxes |      |             | 18,718,000
|Income tax expense                           |                              |      | 6,900,000   |           
|                                             |                              |      |             |           
|                                             | NET EARNINGS                 |      | $           | 11,818,000
|                                             |                              |      |             |           
|Net Earnings Per Share                       |                              |      |             |           
|                                             | Basic                        |      | $           | 0.65      
|                                             | Diluted                      |      | $           | 0.64      
|                                             |                              |      |             |           
|Weighted average shares outstanding          |                              |      |             |           
|                                             | Basic                        |      |             | 18,278,000
|                                             | Diluted                      |      |             | 18,516,000
|                                             |                              |      |             |           

See
accompanying notes to condensed consolidated financial statements.

3

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MICHAEL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Nine Months Ended September 30, (Unaudited)

|                                             |                              | 2000 |             | 1999       
|-------------------------------------------- | ---------------------------- | ---- | ----------- | -----------
|Net sales                                    |                              | $    | 795,110,000 |            
|Cost of sales                                |                              |      | 650,872,000 |            
|                                             |                              |      |             |            
|                                             | Gross profit                 |      |             | 144,238,000
|Selling, general and administrative expenses |                              |      | 79,168,000  |            
|                                             |                              |      |             |            
|                                             | Operating profit             |      |             | 65,070,000 
|Interest expense, net                        |                              |      | 9,778,000   |            
|                                             |                              |      |             |            
|                                             | Earnings before income taxes |      |             | 55,292,000 
|Income tax expense                           |                              |      | 21,710,000  |            
|                                             |                              |      |             |            
|                                             | NET EARNINGS                 |      | $           | 33,582,000 
|                                             |                              |      |             |            
|Net Earnings Per Share                       |                              |      |             |            
|                                             | Basic                        |      | $           | 1.75       
|                                             | Diluted                      |      | $           | 1.73       
|                                             |                              |      |             |            
|Weighted average shares outstanding          |                              |      |             |            
|                                             | Basic                        |      |             | 19,172,000 
|                                             | Diluted                      |      |             | 19,394,000 
|                                             |                              |      |             |            

See
accompanying notes to condensed consolidated financial statements.

4

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MICHAEL FOODS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, (Unaudited)

|                                                    |                                                | 2000 |             | 1999         |  
|--------------------------------------------------- | ---------------------------------------------- | ---- | ----------- | ------------ | -
|Net cash provided by operating activities           |                                                | $    | 50,179,000  |              | $
|Cash flows from investing activities:               |                                                |      |             |              |  
|                                                    | Capital expenditures                           |      |             | (25,967,000  | )
|                                                    | Investments in joint ventures and other assets |      |             | 835,000      |  
|                                                    |                                                |      |             |              |  
|Net cash used in investing activities               |                                                |      | (25,132,000 | )            |  
|Cash flows from financing activities:               |                                                |      |             |              |  
|                                                    | Payments on long-term debt                     |      |             | (130,383,000 | )
|                                                    | Proceeds from long-term debt                   |      |             | 158,100,000  |  
|                                                    | Proceeds from issuance of common stock         |      |             | 545,000      |  
|                                                    | Repurchase of common stock                     |      |             | (46,125,000  | )
|                                                    | Dividends                                      |      |             | (4,463,000   | )
|                                                    |                                                |      |             |              |  
|Net cash provided by (used in) financing activities |                                                |      | (22,326,000 | )            |  
|                                                    |                                                |      |             |              |  
|Net increase in cash and equivalents                |                                                |      | 2,721,000   |              |  
|Cash and equivalents at beginning of year           |                                                |      | 4,961,000   |              |  
|                                                    |                                                |      |             |              |  
|Cash and equivalents at end of period               |                                                | $    | 7,682,000   |              | $
|                                                    |                                                |      |             |              |  

See
accompanying notes to condensed consolidated financial statements.

5

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MICHAEL FOODS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE ABASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Regulation S-X pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain information and footnote 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.

Michael
Foods, Inc. (the "Company") utilizes a fiscal year consisting of either 52 or 53 weeks, ending on the Saturday nearest to December 31 each year. The quarters
ended September 30, 2000 and 1999 each included thirteen weeks of operations. For clarity of presentation, the Company has described both periods presented as if the quarters ended on
September 30.

In
the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present
fairly the financial position as of September 30, 2000 and the results of operations for the three and nine month periods ended September 30, 2000 and 1999 and cash flows for the nine
months ended September 30, 2000 and 1999. The results of operations for the nine months ended September 30, 2000 are not necessarily indicative of the results for the full year.

The
Company's basic net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares. The Company's diluted net earnings per
share is computed by dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock options, when dilutive. Options to purchase
657,676 and 681,878 shares of Common Stock, with weighted average exercise prices of $24.91 and $24.87, which were outstanding during the three and nine month periods ended September 30, 2000,
were excluded from the computation of common share equivalents for those periods because they were anti-dilutive. Options to purchase 390,275 and 734,824 shares of common stock, with a
weighted average exercise price of $25.56 and $24.80, were outstanding during the three and nine month periods ended
September 30, 1999, but were excluded from the computation of common share equivalents for those periods because they were anti-dilutive.

NOTE BINVENTORIES

Inventories, other than flocks, are stated at the lower of cost (determined on a first-in, first-out basis) or market. Flock inventory
represents the cost of purchasing and raising flocks to laying maturity, at which time their cost is amortized to operations over their expected useful life of generally one to two years, assuming no
salvage value.

Inventories
consist of the following:

September 30,
2000

December 31,
1999Raw materials and supplies

$
16,152,000

$
15,720,000Work in process and finished goods


42,885,000


35,447,000Flocks


23,684,000


20,030,000$
82,721,000

$
71,197,000


6

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NOTE CCOMMITMENTS AND CONTINGENCIES

Use of Estimates

Preparation of the Company's consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and
liabilities and related revenues and expenses. Actual results could differ from the estimates used by management.

License Agreement

The Company has an exclusive license agreement for a patented process for the production and sale of extended shelf-life egg products. Under the
license agreement, the Company has the right to defend and prosecute infringement of the licensed patents. The U.S. Federal Court of Appeals has upheld the validity of the four patents subject to the
license agreement. However, subsequently a patent examiner at the U.S. Patent and Trademark Office ("PTO") rejected the patents. In August 1999, the examiner's rejections were largely
overturned by the Board of Appeals and Interferences of the PTO. Reexamination certificates for three of the patents have since been issued by the PTO. In August 2000, the Company and the
patent holder received a Notice of Allowability, followed by a Notice of Allowance, regarding the reissuance of the fourth patent, which included the allowance of product claims beyond the process
claims previously allowed. These patents are scheduled to expire in 2006. In
the second quarter of 2000, the Company and the patent holder completed a new royalty arrangement whereby the Company pays a reduced amount of royalties and, in turn, is responsible for
one-half of any litigation expense incurred to defend the patents.

Litigation

The Company is engaged in routine litigation incidental to its business. Management believes it will not have a material effect upon its consolidated financial
position, liquidity or results of operations.

NOTE DSHAREHOLDERS' EQUITY

During the third quarters of 2000 and 1999 the Company repurchased no shares of Common Stock under the share repurchase program which began in July 1998
and was expanded in February and May 2000. Repurchases for the first nine months of 2000 and 1999 were 2,109,400 and 920,100 shares of Common Stock.

NOTE ECOMPREHENSIVE INCOME

Comprehensive income consists of net earnings and foreign currency translation adjustments. Total comprehensive income was $11,644,000 and $10,713,000 for the
three months ended September 30, 2000 and 1999. The total comprehensive income was $32,950,000 and $30,876,000 for the nine months ended September 30, 2000 and 1999.

7

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NOTE FBUSINESS SEGMENTS

The Company operates in four reportable segmentsEgg Products, Refrigerated Distribution, Dairy Products and Potato Products. Certain financial
information on the Company's operating segments is as follows (unaudited, in thousands):

|                                       |  | Egg
Products |         | Refrigerated
Distribution |   | Dairy
Products |  | Potato
Products |         | Corporate |   | Total 
|-------------------------------------- |  | ------------ | ------- | ------------------------- | - | -------------- |  | --------------- | ------- | --------- | - | ------
|Three Months ended September 30, 2000: |  |              |         |                           |   |                |  |                 |         |           |   |       
|External net sales                     |  | $            | 162,461 |                           | $ | 57,636         |  | $               | 41,305  |           | $ | 15,166
|Intersegment sales                     |  |              | 2,849   |                           |   | 10             |  |                 | 22      |           |   | 632   
|Operating profit (loss)                |  |              | 16,665  |                           |   | 3,829          |  |                 | 1,329   |           |   | 1,548 
|Three Months ended September 30, 1999: |  |              |         |                           |   |                |  |                 |         |           |   |       
|External net sales                     |  | $            | 157,843 |                           | $ | 55,833         |  | $               | 41,498  |           | $ | 14,737
|Intersegment sales                     |  |              | 3,235   |                           |   | 24             |  |                 | 415     |           |   | 577   
|Operating profit (loss)                |  |              | 17,935  |                           |   | 2,462          |  |                 | 319     |           |   | 2,006 
|Nine Months ended September 30, 2000:  |  |              |         |                           |   |                |  |                 |         |           |   |       
|External net sales                     |  | $            | 472,849 |                           | $ | 169,073        |  | $               | 109,237 |           | $ | 43,951
|Intersegment sales                     |  |              | 8,676   |                           |   | 68             |  |                 | 507     |           |   | 1,800 
|Operating profit (loss)                |  |              | 50,757  |                           |   | 11,962         |  |                 | 2,271   |           |   | 4,534 
|Nine Months ended September 30, 1999:  |  |              |         |                           |   |                |  |                 |         |           |   |       
|External net sales                     |  | $            | 460,481 |                           | $ | 166,382        |  | $               | 112,251 |           | $ | 42,206
|Intersegment sales                     |  |              | 12,723  |                           |   | 69             |  |                 | 993     |           |   | 1,775 
|Operating profit (loss)                |  |              | 52,537  |                           |   | 7,046          |  |                 | 3,272   |           |   | 4,565 

8

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Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations

THREE MONTHS ENDED SEPTEMBER 30, 2000 VS THREE MONTHS ENDED
SEPTEMBER 30, 1999

Results of Operations

Readers are directed to Note FBusiness Segments for data on the unaudited financial results of the Company's four business segments for the
three months ended September 30, 2000 and 1999.

Egg
Products Division net sales for the 2000 period reflected unit sales increases, particularly for value-added products, which more than offset significant deflationary pricing
impacts on industrial products. Significant unit sales increases were recorded for extended shelf-life liquid eggs, egg substitutes and dried egg products. Unit sales declined in two
categoriesfrozen and short shelf-life eggsas the Division chose not to pursue sales with little or no profit margin. Egg prices increased approximately 1%
compared to third quarter 1999 levels, as reported by Urner Barry Publicationsa widely quoted industry pricing service. This increase raised the cost of purchased eggs during a period
where prices for industrial egg products were generally lower than normal. Moreover, extreme volatility in egg prices occurred during the quarter, making it difficult to realize typical spreads
between raw material costs and finished industrial egg products prices for any significant length of time. However, earnings increases from value-added egg products largely off-set the
margin weakness seen from industrial egg product sales.

Approximately
two-thirds of the Division's annual egg needs are purchased under contracts, or in the spot market. While a portion of these eggs are secured under fixed
price contracts, a majority are priced according to the cost of grain inputs or to egg market prices as reported by Urner Barry. Approximately one-third of annual egg needs are sourced
from internal flocks, where feed costs typically represent roughly two-thirds of the cost of producing such eggs. Feed costs were slightly higher in the 2000 period, compared to the 1999
period, due to higher prices for corn and soybean meal. Increased
egg costs, for both internally and externally procured eggs, in the 2000 period, compared to the 1999 period, were generally not met with comparable price changes in egg products prices, creating
margin pressure for certain industrial egg products. Egg Products results in the 1999 period were impacted by two non-recurring items. First, a gain was recorded on the sale of a shell egg
production facility. Second, a Belgium animal feed contamination scare resulted in losses at the Company's two European egg products joint ventures. The net effect of these items was a modest addition
to earnings.

Refrigerated
Distribution Division net sales for the 2000 period reflected strong unit sales increases, with cheese and butter showing particular strength. Sales growth resulted from
a brand repositioning over the past two years and a broadening consumer advertising campaign in selected markets, along with notable new account activity and new product introductions. The volume
growth, along with more normal product costs for items related to the national butterfat market, resulted in margin expansion in the 2000 period.

The
Dairy Products Division's flat net sales for the 2000 period reflected lower unit sales volumes for the core dairy mix business, in part due to the loss of a major industrial
(tanker) customer in late 1999, which offset increased volumes for cartoned specialty products and creamer products, and slightly higher unit pricing compared to the 1999 period. Divisional operating
profit increased in the 2000 period as a result of the higher sales of specialty products, and improvements in overhead expenses and operating expenses.

Potato
Products Division net sales for the 2000 period reflected increased unit sales, particularly for both retail and foodservice mashed potato items. New account activity and
same-account sales growth contributed to the sales gain. The operating profit decrease in the 2000 period resulted from a less favorable sales mix, reflecting a slight sales decrease for
retail shredded products, and increased marketing spending.

9

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The gross profit margin of the Company for the period ended September 30, 2000 was comparable to that of the same period in 1999, reflecting the factors discussed above,
particularly the margin pressures within the industrial egg products category and the margin increases within the Refrigerated Distribution Division. It is management's strategy to increase
value-added product sales as a percent of total sales over time, while decreasing commodity-sensitive products' contribution to consolidated sales. These efforts historically have been beneficial to
gross profit margins in most periods.

Selling,
general and administrative expenses decreased slightly as a percent of sales in the period ended September 30, 2000, as compared to the results of the same period in
1999. Favorable impacts from effective expense management more than offset increased expenses related to amortization of the costs associated with the Company's information systems upgrade project and
additional marketing efforts.

NINE MONTHS ENDED SEPTEMBER 30, 2000 VS NINE MONTHS ENDED
SEPTEMBER 30, 1999

Results of Operations

Readers are directed to Note FBusiness Segments for data on the unaudited financial results of the Company's four business segments for the
nine months ended September 30, 2000 and 1999.

Egg
Products Division net sales for the 2000 period reflected unit sales increases, particularly for value-added products, which more than offset significant deflationary pricing
impacts on certain products and an approximate 40% decline in shell egg sales. The latter was by plan and reflects, in part, the sale of a small shell egg facility in the summer of 1999. Sales were
particularly strong for extended shelf-life liquid eggs, dried egg products and precooked frozen omelets, patties and curds. Egg prices decreased approximately 3% compared to 1999 levels,
as reported by Urner Barry Publications. This decrease lowered the cost of purchased eggs, but this occurred during a period where prices for industrial egg products were generally depressed.
Moreover, extreme volatility in egg prices occurred during the 2000 period, making it difficult to realize typical spreads between raw material costs and finished industrial egg products prices for
any significant length of time. However, earnings increases from value-added egg products largely off-set the margin weakness seen from industrial egg product sales.

Approximately
two-thirds of the Division's annual egg needs are purchased under contracts, or in the spot market. While a portion of these eggs are secured under fixed
price contracts, a majority are priced according to the cost of grain inputs or to egg market prices as reported by Urner Barry. Approximately one-third of annual egg needs are sourced
from internal flocks, where feed costs typically represent roughly two-thirds of the cost of producing such eggs. Feed costs in the 2000 period were comparable to the 1999 period.
Decreased egg costs, for externally procured eggs, in the 2000 period, compared to the 1999 period, and improved value-added egg products earnings, were more than offset by pricing and margin weakness
in certain industrial egg products.

Divisional
operating profit for the 2000 period also reflected the benefit of reduced royalty expense, a portion of which was a retroactive adjustment to January 1, 1999. Under
an agreement reached during the second quarter of 2000 period, royalties related to products produced and sold by the Company under a license with NCSU are limited to a fixed portion of the annual
production. In consideration of the reduced royalty arrangement, the Company is responsible for one-half of any future litigation expense incurred to defend the patented egg
ultra-pasteurization processing technology. Egg Products results in the 1999 period were impacted by two non-recurring items.

First,
a gain was recorded on the sale of a shell egg production facility. Second, a Belgium animal feed contamination scare resulted in losses at the Company's two European egg
products joint ventures. The net effect of these items was a modest addition to earnings.

10

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Refrigerated Distribution Division net sales for the 2000 period reflected strong unit sales increases, with cheese and butter showing particular strength. Sales growth resulted from
a brand repositioning over the past two years and a broadening consumer advertising campaign in selected markets, along with notable new account activity and new product introductions. The volume
growth, along with more normal product costs for items related to the national butterfat market, resulted in margin expansion in the 2000 period.

The
Dairy Products Division net sales decline for the 2000 period reflected lower unit sales volumes for the core dairy mix business, in part due to the loss of a major industrial
(tanker) customer in late 1999, which offset increased volumes for cartoned specialty products and creamer products. Divisional operating profit declined in the 2000 period as a result of the reduced
sales volumes, high overhead expenses and above average operating expenses.

Potato
Products Division net sales for the 2000 period reflected a strong unit sales increase, particularly for mashed items and retail shredded products. New account activity,
same-account sales growth and new product introductions all contributed to the sales gain. The flat operating profits in the 2000 period compared to the 1999 period reflect benefits from
the volume growth, as plant operations at the main potato processing facility benefited from the increased production throughput, which were offset by increased marketing spending.

The
increase in gross profit margin of the Company for the period ended September 30, 2000, as compared to the results of the same period in 1999, reflected the factors
discussed above, particularly the strength in the Refrigerated Distribution Division. It is management's strategy to increase value-added product sales as a percent of total sales over time, while
decreasing commodity-sensitive products' contribution to consolidated sales. These efforts historically have been beneficial to gross profit margins in most periods.

Selling,
general and administrative expenses remained approximately constant as a percent of sales in the period ended September 30, 2000, as compared to the results of the
same period in 1999. Expenses increased due to amortization of the costs associated with the Company's information systems upgrade project, amortization of a non-compete agreement related
to a May 1999 Dairy Products acquisition, increases in bad debt expense resulting from a foodservice distributor's bankruptcy filing, and additional marketing efforts. However, these increased
expenses were offset by effective expense controls in other areas and the favorable impact of the reduced egg products royalty arrangement, including a one-time retroactive benefit.

General

Certain of the Company's products are sensitive to changes in commodity prices. The Company's Egg Products Division derived less than 3% of the Division's net
sales for the first nine months of 2000 from shell eggs, which are sensitive to commodity price swings. Value-added extended shelf-life liquid egg products lines and precooked egg products accounted
for approximately 50% of the Egg Products Division's net sales. The remainder of Egg Products Division sales is derived from the sale of other egg products, which vary from being commodity-sensitive
to value-added. Gross profit from shell eggs is primarily dependent upon the relationship between shell egg prices and the cost of feed, both of which can fluctuate significantly. Shell egg pricing in
the 2000 period was approximately 3% below 1999 levels as measured by Urner Barry Publications. Gross profit margins for extended shelf-life liquid eggs, egg substitutes, and precooked egg
products are less sensitive to commodity price fluctuations than are other egg products or shell eggs.

The
Company's Refrigerated Distribution Division derives approximately 70% of its net sales from refrigerated products produced by others, thereby reducing the effects of commodity
price swings. The balance of refrigerated distribution sales are from shell eggs, some of which are produced by the Egg

11

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Products Division and are sold on a distribution, or non-commodity, basis by the Refrigerated Distribution Division.

The
Dairy Products Division sells its products primarily on a cost-plus basis and, therefore, the Division's earnings are not typically affected greatly by raw ingredient
price fluctuations, except over short time periods.

The
Potato Products Division typically purchases 70%-90% 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 Potato Products Division operating results.

Inflation
is not expected to have a significant impact on the Company's business. The Company generally has been able to offset the impact of inflation through a combination of
productivity gains and price increases.

Capital Resources and Liquidity

Acquisitions and capital expenditures have been, and will likely continue to be, a significant capital requirement. The Company plans to continue to invest in
state-of-the-art production facilities to enhance its competitive position. Historically, the Company has financed its growth principally from internally generated
funds, bank borrowings, issuance of senior debt and the sale of Common Stock. The Company believes that these financing alternatives will continue to meet its anticipated needs.

The
Company invested $25,967,000 in capital expenditures during the nine months ended September 30, 2000. The Company plans to spend approximately $45,000,000 in total capital
expenditures in 2000, the majority of which is to expand production capacity for value-added products.

The
Company has two unsecured lines of credit for $80,000,000 and $20,000,000 with its principal banks. As of September 30, 2000, $73,000,000 was outstanding under these lines
of credit.

In
July 1998, the Company's Board of Directors authorized the purchase of up to 2,000,000 shares of Common Stock on the open market or in privately negotiated transactions. In
February 2000, the Board
authorized an additional purchase of up to 2,000,000 shares of Common Stock on the open market or in privately negotiated transactions, with an additional 500,000 share authorization made in
May 2000. Through September 30, 2000, the Company had repurchased 4,012,200 shares of Common Stock for $89,121,000. During the third quarter of 2000 the Company did not repurchase any
shares of Common Stock.

Seasonality

Consolidated quarterly operating results are affected by the seasonality of the Company's net sales and operating profits. Specifically, shell egg prices
typically rise seasonally in the first and fourth quarters of the year due to increased demand during holiday periods. Generally, refrigerated distribution operations experience higher net sales and
operating profits in the fourth quarter, coinciding with incremental consumer demand during the holiday season. Net sales and operating profits from dairy operations typically are significantly higher
in the second and third quarters due to increased consumption of ice milk and ice cream products during the summer months. Operating profits from potato products are less seasonal, but tend to be
higher in the second half of the year coinciding with the potato harvest.

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Forward-Looking Statements

Certain items in this Form 10-Q may be forward-looking statements, which are made in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous risks and uncertainties, including variances in the demand for the Company's products due to consumer
developments and industry developments, as well as variances in the costs to produce such products, including normal volatility in egg and feed costs. The Company's actual financial results could
differ materially from the results estimated by, forecasted by, or implied by the Company in such forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in the Company's market risk during the nine month period ended September 30, 2000.

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PART IIOTHER INFORMATION

Item 5Other Information

On November 3, 2000, the Company's Crystal Farms Refrigerated Distribution Company ("Crystal Farms") subsidiary initiated a voluntary recall of two
cheese items after learning of their possible contamination with Listeria monocytogenes. It is estimated that less than 80,000 pounds of Crystal Farms cheese are affected by the recall. The cheese was
produced by a Wisconsin-based dairy cooperative and packaged for Crystal Farms by a contract packaging company. Management believes the ultimate outcome of this recall will not have a material effect
on the Company's consolidated financial position, liquidity or results of operations.

Item 6Exhibits and Reports on Form 8-K

(a)

Exhibits10.77

Consolidated, restated and amended License Agreement by and between North Carolina State University and Michael Foods, Inc.10.78

Settlement Agreement and Mutual Release entered into by and between Nulaid Foods, Inc., Valley Fresh Foods, Inc., and Nulaid Nest-Best, and North Carolina State University and Michael Foods, Inc.27.1

Financial Data Schedule(b)

Reports on Form 8-K


There
were no reports on Form 8-K in the three month period ended September 30, 2000.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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. (Registrant)
|Date: November 13, 2000 |  | By:                              |  | /s/GREGG A. OSTRANDERGregg A. Ostrander
(Chairman, President and Chief
Executive Officer)                                    
|Date: November 13, 2000 |  | By:                              |  | /s/JOHN D. REEDYJohn D. Reedy
(Executive Vice President, Treasurer, Chief
Financial Officer and Principal
Accounting Officer)

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