<Page>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q



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

For the quarterly period ended           September 30, 2001
                              -----------------------------------------
                                       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
                        -------

                               MICHAEL FOODS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Minnesota                                      41-0498850
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

Suite 324, Signal Bank Building
5353 Wayzata Boulevard
Minneapolis, MN                                                 55416
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip code)

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

         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.          /X/  Yes       / /  No

<Page>
                         PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<Table>
<Caption>
                                                           Company            Predecessor
                                                        ---------------     ---------------
                                                         September 30,       December 31,
                                                             2001                2000
                                                        ---------------     ---------------
<S>                                                     <C>                 <C>
ASSETS
------
CURRENT ASSETS
   Cash and equivalents                                 $    40,783,000     $     4,421,000
   Accounts receivable, less allowances                     100,164,000         112,767,000
   Inventories                                               81,242,000          75,734,000
   Prepaid expenses and other                                 9,829,000           4,803,000
                                                        ---------------     ---------------
        Total current assets                                232,018,000         197,725,000

PROPERTY, PLANT AND EQUIPMENT-AT COST
   Land                                                       4,690,000           4,106,000
   Buildings and improvements                                91,040,000         143,160,000
   Machinery and equipment                                  226,707,000         377,911,000
                                                        ---------------     ---------------
                                                            322,437,000         525,177,000
   Less accumulated depreciation                             26,162,000         243,360,000
                                                        ---------------     ---------------
                                                            296,275,000         281,817,000
OTHER ASSETS
   Goodwill, net                                            341,436,000         114,255,000
   Joint ventures and other assets                           44,898,000          19,107,000
                                                        ---------------     ---------------
                                                            386,334,000         133,362,000
                                                        ---------------     ---------------
                                                        $   914,627,000     $   612,904,000
                                                        ===============     ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES
   Current maturities of long-term debt                 $    17,515,000     $     2,865,000
   Accounts payable                                          60,306,000          54,212,000
   Accrued liabilities
     Compensation                                            13,626,000          11,795,000
     Insurance                                                8,732,000           7,422,000
     Customer programs                                       18,910,000          19,307,000
     Income taxes                                             7,362,000          10,622,000
     Interest                                                17,178,000           3,713,000
     Other                                                   17,430,000           9,161,000
                                                        ---------------     ---------------
        Total current liabilities                           161,059,000         119,097,000

LONG-TERM DEBT, less current maturities                     554,460,000         195,944,000
DEFERRED INCOME TAXES                                        52,359,000          39,130,000
COMMITMENTS AND CONTINGENCIES                                         -                   -
MINORITY INTEREST                                               475,000                   -

SHAREHOLDERS' EQUITY
   Common stock                                                       -             183,000
   Additional paid-in capital                               146,762,000          58,506,000
   Retained earnings                                          4,966,000         201,361,000
   Accumulated other comprehensive loss                      (5,454,000)         (1,317,000)
                                                        ---------------     ---------------
                                                            146,274,000         258,733,000
                                                        ---------------     ---------------
                                                        $   914,627,000     $   612,904,000
                                                        ===============     ===============
</Table>

See accompanying notes to condensed consolidated financial statements.
                                        2
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                        Three Months Ended September 30,
                                   (Unaudited)

<Table>
<Caption>
=======================================================

                                                           Company            Predecessor
                                                        --------------      ---------------
                                                             2001                2000
                                                        --------------      ---------------
<S>                                                     <C>                 <C>
Net sales                                               $  299,225,000      $   276,568,000

Cost of sales                                              248,436,000          228,820,000
                                                        --------------      ---------------
     Gross profit                                           50,789,000           47,748,000

Selling, general and administrative expenses                30,066,000           25,506,000
                                                        --------------      ---------------
     Operating profit                                       20,723,000           22,242,000

Interest expense, net                                       13,416,000            3,524,000
                                                        --------------      ---------------
     Earnings before income taxes                            7,307,000           18,718,000

Income tax expense                                           4,010,000            6,900,000
                                                        --------------      ---------------
     NET EARNINGS                                       $    3,297,000      $    11,818,000
                                                        ==============      ===============
=======================================================
</Table>

See accompanying notes to condensed consolidated financial statements.

                                        3
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                   (Unaudited)

<Table>
<Caption>
==============================================================================
                                                           Company                      Predecessor
                                                        -------------       ------------------------------------
                                                          Six Months         Three Months         Nine Months
                                                            Ended                Ended               Ended
                                                        September 30,       March 31, 2001       September 30,
                                                             2001                                     2000
                                                        --------------      ---------------     ----------------
<S>                                                     <C>                 <C>                 <C>
Net sales                                               $  594,334,000      $   275,627,000     $    795,110,000

Cost of sales                                              493,291,000          227,707,000          650,872,000
                                                        --------------      ---------------     ----------------
     Gross profit                                          101,043,000           47,920,000          144,238,000

Selling, general and administrative expenses                60,360,000           27,376,000           79,168,000
Transaction expenses                                                 -           11,050,000                    -
                                                        --------------      ---------------     ----------------
     Operating profit                                       40,683,000            9,494,000           65,070,000

Interest expense, net                                       29,657,000            3,293,000            9,778,000
                                                        --------------      ---------------     ----------------
     Earnings before income taxes and extraordinary
        item                                                11,026,000            6,201,000           55,292,000

Income tax expense                                           6,060,000            2,430,000           21,710,000
                                                        --------------      ---------------     ----------------
     Earnings before extraordinary item                      4,966,000            3,771,000           33,582,000

Extraordinary item - early extinguishment of debt,
   net of taxes                                                      -           (9,424,000)                   -
                                                        --------------      ---------------     ----------------
     NET EARNINGS (LOSS)                                $    4,966,000      $    (5,653,000)    $     33,582,000
                                                        ==============      ===============     ================
==============================================================================
</Table>

See accompanying notes to condensed consolidated financial statements.

                                        4
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<Table>
<Caption>
==============================================================================
                                                           Company                     Predecessor
                                                        --------------      ------------------------------------
                                                         Six Months         Three Months          Nine Months
                                                            Ended               Ended                 Ended
                                                        September 30,       March 31, 2001        September 30,
                                                            2001                 2001                 2000
                                                        --------------      ---------------      ---------------
<S>                                                     <C>                 <C>                  <C>
Net cash provided by operating activities               $   84,290,000      $    14,016,000      $    50,179,000

Cash flows from investing activities:
   Capital expenditures                                    (13,528,000)         (10,837,000)         (25,967,000)
   Business acquisition                                   (626,925,000)                   -                    -
   Investments in joint ventures and other assets           (3,949,000)           3,888,000              835,000
                                                        --------------      ---------------      ---------------

Net cash used in investing activities                     (644,402,000)          (6,949,000)         (25,132,000)

Cash flows from financing activities:
   Payments on notes payable                               (46,450,000)         (52,000,000)        (127,400,000)
   Proceeds from notes payable                              29,500,000           45,500,000          158,100,000
   Payments on long-term debt and other                   (131,225,000)            (109,000)          (2,983,000)
   Proceeds from long-term debt                            570,000,000                    -                    -
   Extension of stock options                                        -              310,000                    -
   Proceeds from issuance of common stock                  174,800,000              546,000              545,000
   Repurchase of common stock                                        -                    -          (46,125,000)
   Dividends                                                         -           (1,465,000)          (4,463,000)
                                                        --------------      ---------------      ---------------
Net cash provided by (used in) financing  activities       596,625,000           (7,218,000)         (22,326,000)
                                                        --------------      ---------------      ---------------
Net increase (decrease) in cash and equivalents             36,513,000             (151,000)           2,721,000

Cash and equivalents at beginning of period                  4,270,000            4,421,000            4,961,000
                                                        --------------      ---------------      ---------------

Cash and equivalents at end of period                   $   40,783,000      $     4,270,000      $     7,682,000
                                                        ==============      ===============      ===============
==============================================================================
</Table>

See accompanying notes to condensed consolidated financial statements.

                                       5
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
                                   (Unaudited)

NOTE A - MERGER AGREEMENT

On April 10, 2001, Michael Foods, Inc. and its subsidiaries ("Michael Foods",
"Company", "we", "us", "our") was acquired in a transaction (the "Merger") led
by an investor group comprised of a management group led by Michael Foods'
Chairman, President and Chief Executive Officer, Gregg Ostrander, affiliates of
Jeffrey Michael, a member of the Michael Foods Board of Directors, and
affiliates of two private equity investment firms, Vestar Capital Partners and
Goldner Hawn Johnson & Morrison Incorporated, (collectively, "M-Foods Investors,
LLC"). Under the terms of the Merger agreement, all outstanding shares of
Michael Foods common stock were converted into the right to receive $30.10 per
share in cash, or value equal thereto, and all outstanding stock options were
converted into the right to receive, in cash, $30.10 per share reduced by the
exercise price per share for all shares subject to such stock options. The
purchase of the outstanding shares was financed through new equity financing of
approximately $175,000,000, a senior secured credit facility of up to
$470,000,000 at market-based variable interest rates (effective rate of 7.3% at
September 30, 2001), and $200,000,000 of senior subordinated notes at an 11.75%
annual interest rate. As a result of the Merger, the stock of pre-merger Michael
Foods ("Predecessor") is no longer publicly traded and, therefore, earnings per
share calculations are no longer included for financial statement presentation.

Immediately after the close of the Merger, the Company contributed the assets of
its Dairy division into two limited liability corporations, M-Foods Dairy, LLC
and M-Foods Dairy TXCT, LLC (collectively, the "Dairy LLCs") and in exchange
received voting preferred and voting common units from these entities equal to
the fair value of the net assets contributed, which collectively were
approximately $40,000,000. The preferred units issued to the Company have an
annual 10% preferred return guarantee and represent 100% of the preferred units
issued and outstanding. In addition, the Company received 5% of the common units
issued by the Dairy LLCs, with the common units held by the Company representing
100% of the voting common units issued and outstanding. These common units have
a stated value of $25,000. The remaining 95% of the common units, which are
non-voting, are owned by M-Foods Dairy Holdings, LLC, which is owned by the same
owners or affiliates of such owners, in the same proportion, as the unit holders
of M-Foods Investors, LLC. The common unit interests owned by M-Foods Dairy
Holdings, LLC were issued in exchange for $475,000 and are reflected as minority
interest in the accompanying consolidated balance sheet as of September 30,
2001.

The Merger was accounted for as a purchase in accordance with Accounting
Principles Board Opinion 16, Business Combinations and EITF 88-16, Basis in
Leveraged Buyout Transactions. Accordingly, the acquired assets and liabilities
have been recorded at fair value for the interests acquired by new investors and
at the carryover basis for continuing investors. As a result, the assets and

                                        6
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE A - MERGER AGREEMENT (cont.)

liabilities were assigned new values, which are part Predecessor cost and part
fair value in the same proportions as the carryover basis of the residual
interests retained by the continuing management investors and continuing
affiliate investors of the Michael family, and the new interests acquired by the
new investors. The amount of carryover basis was reflected as a deemed dividend
of $66,631,000.

For ease of presentation, the Merger was accounted for as if it had occurred on
April 1, 2001. Management determined that results of operations were not
significant and no material transactions occurred during the period from
April 1 through April 9, 2001. The Company's consolidated financial statements
have been presented on a comparative basis with the Predecessor's historical
consolidated financial statements prior to the date of Merger. Different bases
of accounting have been used to prepare the Company and Predecessor consolidated
financial statements. The primary differences relate to additional interest
expense for new debt and depreciation and amortization of fixed assets and other
intangible assets recorded at fair value at the date of Merger.

For accounting purposes the Merger is considered a leveraged buyout. The total
purchase price of approximately $562,881,000 was allocated to the acquired
assets and assumed liabilities based on their fair values at April 1, 2001, net
of the deemed dividend. The allocation of the purchase price was as follows:

<Table>
<S>                                 <C>
Working capital                     $      88,663,000
Property, plant & equipment               309,517,000
Other assets                               43,001,000
Goodwill                                  345,819,000
Long-term debt                            588,426,000
Other liabilities                          52,389,000
</Table>

These allocations were based primarily on a preliminary valuation by a third
party appraisal firm. Accordingly, the allocations related to property, plant
and equipment and intangible assets, including goodwill, could change when the
final valuation report is received. However, management believes the final
allocations will not vary significantly from the allocations indicated above.

In connection with the Merger, the Predecessor incurred transaction expenses of
approximately $26,600,000 associated with the Merger and change-in-control
provisions of various compensation, debt and other agreements, which have been
reflected in the Predecessor financial statements. These transaction expenses
include the extraordinary item related to the early extinguishment of debt
resulting from the change-in-control. In addition, the Company incurred other
merger related and debt issuance costs of approximately $40,000,000, which have
been capitalized as direct costs of the Merger and deferred financing costs in
the Company's consolidated balance sheet.

                                        7
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE A - MERGER AGREEMENT (cont.)

The following unaudited pro forma revenue and net earnings for the year ended
December 31, 2000 and nine months ended September 30, 2001 are derived from the
application of pro forma adjustments to the Predecessor historical statements of
earnings, and assumes the Merger had occurred on January 1, 2000:

<Table>
<Caption>
                                                   Nine months                   Year
                                                      ended                      ended
                                                  September 30,              December 31,
                                                       2001                      2000
                                                ---------------------------------------------
<S>                                             <C>                       <C>
Revenue                                         $      869,961,000        $     1,080,601,000
Net earnings before extraordinary item                   7,196,000                 11,977,000
</Table>

NOTE B - 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 utilizes, and the Predecessor utilized, 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, 2001 and 2000 each included thirteen
weeks of operations. For clarity of presentation, the Company and Predecessor
have described both periods presented as if the quarters ended on September 30.

The accompanying Predecessor Balance Sheet as of December 31, 2000, the
Predecessor Statements of Earnings for the three and nine months ended September
30, 2000 and the three months ended March 31, 2001, and the Predecessor
Statements of Cash Flows for the nine months ended September 30, 2000 and the
three months ended March 31, 2001 have been prepared from the historical books
and records of the Predecessor. The accompanying unaudited financial statements
and footnote information for the three and nine month periods ended September
30, 2000 have been prepared in accordance with Regulation S-X pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") using
the historical cost basis of assets and liabilities of the Predecessor. The
accompanying unaudited financial statements and footnote information of the
Company as of and for the three and six month periods ended September 30, 2001
have been prepared in accordance with Regulation S-X pursuant to the rules and
regulations of the SEC using the new basis of assets and liabilities of the
Company. 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.
The historical financial results of the Company and Predecessor are not
necessarily indicative of their results for a full year.

                                        8
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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.

NEWLY ADOPTED ACCOUNTING STANDARDS
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended. This standard establishes accounting and
reporting standards for derivative financial instruments and hedge
activities. Certain of our operating segments hold derivative instruments,
such as corn, soybean meal, cheese and natural gas futures that we believe
provide an economic hedge of future transactions and are  designated as cash
flow hedges. As the commodities being hedged are either grain ingredients fed
to the Company's flocks, raw materials or production inputs, the changes in
the market value of such contracts have historically been, and are expected
to continue to be, highly effective at offsetting changes in price movements
of these items. In addition, the Company has also entered into several
interest rate swap agreements which correspond with the interest payment
terms of a portion of the Company's variable rate senior secured credit
facility. As the significant components of the swap agreements and the credit
facility are high correlative, the Company expects the swaps to be highly
effective over the terms of the agreements. The amount of hedge
ineffectiveness was immaterial for the six months ended September 30, 2001.

The Company actively monitors its exposure to commodity price risks and uses
derivative commodity instruments to manage the impact of certain of these
risks. We use derivatives only for the purpose of managing risks associated
with underlying exposures, primarily futures contracts, to manage our
exposures. Our futures contracts are cash flow hedges of firm purchase
commitments and anticipated production requirements, as they reduce our
exposure to changes in the cash price of the respective items and generally
extend for less than one year.

The Company does not trade or use instruments with the objective of earning
financial gains on the commodity price, nor does it use instruments where
there are not underlying exposures. Gains and losses on futures contracts are
deferred as a component of Accumulated Other Comprehensive Loss ("AOCL") in
the Company's equity section of the balance sheet and recognized as an
adjustment to current assets or liabilities, and subsequently recognized in
cost of sales when the associated products are sold. The cost or benefit of
contracts closed prior to the execution of the underlying purchase is
deferred until the anticipated purchase occurs. As a result of the volatility
of the markets, deferred gains and losses in AOCL may fluctuate until the
related contract is closed.

Initially, upon adoption of the new derivative accounting standard, and
prospectively as required by the standard on the date new derivatives are
entered into, we formally document all relationships between hedging instruments
and hedged items, as well as our risk management objectives and strategy for
undertaking the hedge. This process includes specific identification of the
hedging instrument and the hedge transaction, the nature of the risk being
hedged and how the hedging instrument's effectiveness will be assessed. Both at
the inception of the hedge and on an ongoing basis, we assess whether the
derivatives that are used in hedging transactions are highly effective in
offsetting changes in cash flows of hedged items. If it is determined that a
derivative ceases to be a highly effective hedge or the forecasted transaction
being hedged will no longer occur, we will discontinue hedge accounting, and any
gains or losses on the

                                        9
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NEWLY ADOPTED ACCOUNTING STANDARDS, cont.

derivative instrument would be recognized in earnings during the period it no
longer qualifies as a hedge. No such instances occurred in the three months
ended September 30, 2001 and the six months ended September 30, 2001.

NOTE C - 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.

<Table>
<Caption>
Inventories consisted of the following:        COMPANY                PREDECESSOR
                                             September 30,            December 31,
                                                 2001                     2000
                                          ----------------------   ----------------------
<S>                                       <C>                      <C>
Raw materials and supplies                $        15,742,000      $        15,107,000
Work in process and finished goods                 44,011,000               41,366,000
Flocks                                             21,489,000               19,261,000
                                          ----------------------   ----------------------
                                          $        81,242,000      $        75,734,000
                                          ======================   ======================
</Table>

NOTE D - GOODWILL

The Predecessor's acquisitions were accounted for as purchases and the excess
of the total acquisition costs over the fair value of the net assets acquired
were recorded as goodwill. Goodwill is amortized on a straight-line basis
over 40 years. Predecessor accumulated amortization was $23,549,000 at
December 31, 2000, while the Company had accumulated amortization of
$4,383,000 at September 30, 2001. At April 1, 2001, goodwill was recorded for
the excess of the purchase price of the Merger over the fair value of net
assets acquired. The Company amortizes its goodwill over a 40 year period.
Goodwill has been assigned to each of the operating subsidiaries down to the
reporting unit level. The Company evaluates its goodwill annually to
determine potential impairment by comparing its carrying value to the
undiscounted future cash flows of the related assets.

In July 2001, the FASB issued two statements: Statement 141 BUSINESS
COMBINATIONS and Statement 142 GOODWILL AND INTANGIBLE ASSETS. These
pronouncements, among other things, eliminated the pooling-of-interests method
of accounting for business combinations, requires intangible assets acquired in
business combinations be recorded separately from goodwill if certain
requirements are met, and eliminates the amortization of goodwill for financial
reporting purposes effective for the Company beginning in January 2002. However,
thereafter goodwill will be tested for impairment annually
or whenever an impairment indicator arises. The amount of goodwill amortization
expense for the six months ended September 30, 2001 was $4,383,000. Goodwill
amortization for the nine months ending December 31, 2001 is expected to be
approximately $6,600,000.

                                       10
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE E - COMMITMENTS AND CONTINGENCIES

LICENSE AGREEMENT
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
patents. We may apply 50% of our costs of defending the patents to future
royalty payments under the license agreements.

The U.S. Federal Court of Appeals has upheld the validity of the patents which
are the subject of the license agreement. Subsequently, a patent examiner at the
U.S. Patent and Trademark Office rejected the patents. We and the patent holder
appealed the decision of the examiner and the validity of the patents was
upheld. In September 2000, the U.S. Patent and Trademark Office allowed product
claims beyond the process claims previously allowed under the patents for the
extended shelf-life egg product. The patents remain valid and in full force and
effect. These patents are scheduled to expire beginning in 2006.

In 2000, we settled litigation with one party related to the infringement of
these patents and issued a sub-license to the infringing party granting them the
right to manufacture and distribute extended shelf-life liquid whole egg
products subject to a royalty payable to us and the patent holder on all future
product sold. In connection with this settlement the patent holder received a
lump sum payment for the past production and sale of the product and other
matters related to the infringement. We continue to pursue litigation related to
other parties who are infringing these product and process patents.

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

NOTE F - COMPREHENSIVE INCOME (LOSS)

The components and changes in accumulated other comprehensive loss, net of
taxes, during the nine months ended September 30, 2001 were as follows:

<Table>
<Caption>

                                                     Cash Flow        Foreign Currency        Total
                                                      Hedges             Translation           AOCL
                                                  ---------------     ----------------    ---------------
<S>              <C>                              <C>                  <C>                <C>
Balance at April 1, 2001                          $             -      $             -    $             -
Predecessor carry-over basis                             (506,000)             (71,000)          (577,000)
Foreign currency translation adjustment                         -               26,000             26,000
Net unrealized change on cash flow hedges              (4,995,000)                   -         (4,995,000)
Less reclassification adjustments                          92,000                    -             92,000
                                                  ---------------      ---------------    ---------------
Balance at September 30, 2001                     $    (5,409,000)     $       (45,000)   $    (5,454,000)
                                                  ===============      ===============    ===============
<Caption>
PREDECESSOR                                                               Foreign
                                                     Cash Flow            Currency             Total
                                                      Hedges             Translation           AOCL
                                                  ---------------      ---------------    ---------------
<S>                <C>                            <C>                  <C>                <C>
Balance at January 1, 2001                        $             -      $    (1,317,000)   $    (1,317,000)
Foreign currency translation adjustment                         -              (47,000)           (47,000)
Translation loss realized on termination
of joint venture                                                -            1,135,000          1,135,000
Transition adjustment                                     775,000                    -            775,000
Net unrealized change on cash flow hedges              (2,651,000)                   -         (2,651,000)
Less reclassification adjustments                         244,000                    -            244,000
                                                  ---------------      ---------------    ---------------
Balance at March 31, 2001                         $    (1,632,000)     $      (229,000)   $    (1,861,000)
                                                  ===============      ===============    ===============
</Table>

                                       11
<Page>

                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

NOTE F - COMPREHENSIVE INCOME (LOSS), cont.

Comprehensive income (loss), net of taxes, for the three months ended March 31,
2001 and the six months ended September 30, 2001 is as follows:

<Table>
<S>                                                                      <C>                <C>
COMPANY
Net income for the six months ended September 30, 2001                                      $    4,966,000
Net gains (losses) arising during the period from cash
   Flow hedges:
   Net unrealized derivative gains during period                         (4,995,000)
   Reclassification adjustment                                               92,000
   Foreign currency translation adjustment                                   26,000
                                                                         ----------
     Other comprehensive loss                                                                   (4,877,000)
                                                                                            ---------------
Comprehensive income for the six months ended September 30, 2001                            $       89,000
                                                                                            ===============
PREDECESSOR
Net loss for the three months ended March 31, 2001                                          $   (5,653,000)
Net gains (losses) arising during the period from cash flow
   hedges:

   Net derivative transition gain                                           775,000
   Net unrealized derivative losses during period                        (2,651,000)
   Reclassification adjustment                                              244,000
   Foreign currency translation adjustment                                  (47,000)
   Foreign currency loss realized                                         1,135,000
                                                                         ----------
     Other comprehensive loss                                                                     (544,000)
                                                                                            ---------------
Comprehensive loss for the three months ended March 31, 2001                                $   (6,197,000)
                                                                                            ===============
</Table>

NOTE G - BUSINESS SEGMENTS

We operate in four reportable segments - Egg Products, Refrigerated
Distribution, Dairy Products and Potato Products. The Merger, as more fully
described in Note A, did not change our segment classification or the
interaction between the segments. Certain financial information on our operating
segments, and the Predecessor's, is as follows (unaudited, in thousands):

<Table>
<Caption>
                                                                                       Company
                                                 -----------------------------------------------------------------------------------
                                                       Egg         Refrigerated     Dairy        Potato
                                                     Products      Distribution   Products      Products     Corporate      Total
                                                 -----------------------------------------------------------------------------------
<S>                                              <C>               <C>           <C>             <C>          <C>         <C>
THREE MONTHS ENDED SEPTEMBER 30, 2001:
External net sales                               $    163,334      $  63,692     $   54,889      $  17,310        N/A     $ 299,225
Intersegment sales                                      2,829              -              -            861        N/A         3,690
Operating profit (loss)                                17,292            170          2,634          1,914     (1,287)       20,723
Depreciation and amortization                          12,647            680          1,090          1,612          9        16,038

SIX MONTHS ENDED SEPTEMBER 30, 2001:
External net sales                               $    325,916      $ 128,123     $  106,710      $  33,585        N/A     $ 594,334
Intersegment sales                                      5,691              1              -          1,706        N/A         7,398
Operating profit (loss)                                32,822          2,405          4,633          3,473     (2,650)       40,683
Depreciation and amortization                          25,027          1,322          2,100          3,173         19        31,641
Total assets                                          627,791         86,506         54,253         81,255     64,822       914,627

</Table>


                                       12

<Page>


                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

<Table>
<Caption>
                                                                                     Predecessor
                                                 -----------------------------------------------------------------------------------
<S>                                              <C>               <C>           <C>             <C>          <C>         <C>
THREE MONTHS ENDED SEPTEMBER 30, 2000:
External net sales                               $    162,461      $  57,636     $   41,305      $  15,166        N/A     $ 276,568
Intersegment sales                                      2,849             10             22            632        N/A         3,513
Operating profit (loss)                                16,665          3,829          1,329          1,548     (1,129)       22,242
Depreciation and amortization                           9,862            309          1,163          1,335         31        12,700

NINE MONTHS ENDED SEPTEMBER 30, 2000:
External net sales                               $    472,849      $ 169,073     $  109,237      $  43,951        N/A     $ 795,110
Intersegment sales                                      8,676             68            507          1,800        N/A        11,051
Operating profit (loss)                                50,757         11,962          2,271          4,534     (4,454)       65,070
Depreciation and amortization                          27,726            986          3,493          4,038         93        36,336

THREE MONTHS ENDED MARCH 31, 2001:
External net sales                               $    163,529      $  61,185     $   35,328      $  15,585        N/A     $ 275,627
Intersegment sales                                      4,246              -              -          1,003        N/A         5,249
Operating profit (loss)                                12,915          3,639          3,958          1,688    (12,706)        9,494
Depreciation and amortization                           9,610            316          1,271          1,278         34        12,509
</Table>


                                       13
<Page>
                               MICHAEL FOODS, INC.
              (A WHOLLY-OWNED SUBSIDIARY OF M-FOODS HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE H - SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The Company's revolving credit facility, A and B term loans and senior
subordinated notes have been guaranteed, on a joint and several basis, by the
Company and its domestic subsidiaries. The revolving credit facility and A and B
term loans are also guaranteed by the Company's parent, M-Foods Holdings, Inc.

The following condensed consolidating financial information presents the
Company's consolidated balance sheet as of September 30, 2001 and the Statements
of Earnings and Cash Flows for the three months and six months then ended; and
the Predecessor's consolidated balance sheet as of December 31, 2000 and the
consolidated statements of earnings for the three months ended September 30,
2000 and March 31, 2001 and the nine months ended September 30, 2000 and cash
flows for the three months ended March 31, 2001 and the nine months ended
September 30, 2000. These financial statements reflect Michael Foods, Inc. (the
parent), the wholly owned guarantor subsidiaries (on a combined basis), the
non-wholly owned guarantor subsidiaries, and elimination entries necessary to
combine such entities on a consolidated basis. Included elsewhere in this Form
10-Q are the unaudited financial statements of the non-wholly owned guarantor
subsidiaries.
                                     COMPANY
                UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
                                SEPTEMBER 30, 2001
                                 (in thousands)
<Table>
<Caption>
                                                                                  NON-WHOLLY OWNED
                                                                               GUARANTOR SUBSIDIARIES
                                                                               ----------------------
                                                                WHOLLY
                                                                 OWNED         M-FOODS        M-FOODS
                                                                GUARANTOR       DAIRY,         DAIRY
                                                PARENT        SUBSIDIARIES       LLC         TXCT, LLC   ELIMINATIONS  CONSOLIDATED
                                               ------------------------------------------------------------------------------------
<S>                                            <C>            <C>           <C>            <C>           <C>            <C>
ASSETS
Current Assets:
   Cash and equivalents                        $     44,780   $     (3,021) $      (261)   $       (715) $          -   $   40,783
   Accounts receivable, less allowances                 230         86,188        7,001           7,947        (1,202)     100,164
   Inventories                                            -         73,152        3,377           4,713             -       81,242
   Notes receivable - related party                       -              -        9,987              37       (10,024)           -
   Prepaid expenses and other                           382          9,242          153              52             -        9,829
                                               ------------------------------------------------------------------------------------
     Total current assets                            45,392        165,561       20,257          12,034       (11,226)     232,018
Property, Plant and Equipment - net                      88        269,199       15,535          11,453             -      296,275
Other assets:
Goodwill, net                                             -        337,527        3,909               -             -      341,436
Preferred return receivable for subs                      -          4,878            -               -        (4,878)           -
Joint ventures and other assets                      20,305         23,266            -           1,327             -       44,898
Investment in subsidiaries                          682,951              -            -               -      (682,951)           -
                                               ------------------------------------------------------------------------------------
                                                    703,256        365,671        3,909           1,327      (687,829)     386,334
                                               ------------------------------------------------------------------------------------
                                               $    748,736   $    800,431  $    39,701    $     24,814  $   (699,055)  $  914,627
                                               ====================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Current maturities of long-term debt        $     14,700   $        415  $         -    $      2,400  $         -    $   17,515
   Accounts payable                                     344         52,388        3,296           5,241         (963)       60,306
   Notes payable - related party                          -         10,024            -               -      (10,024)            -
   Accrued liabilities                               34,739         45,214        2,509           1,015         (239)       83,238
                                               ------------------------------------------------------------------------------------
     Total current liabilities                       49,783        108,041        5,805           8,656      (11,226)      161,059
Long-term debt, less current maturities             551,625            435            -           2,400            -       554,460
Deferred income taxes                                   579         51,780            -               -            -        52,359
Preferred shareholder return payable                      -              -        4,372             506       (4,878)            -
Minority interest                                       475              -            -               -            -           475
                                               ------------------------------------------------------------------------------------
     Total liabilities                              602,462        160,256       10,177          11,562      (16,104)      768,353
Shareholders' Equity                                146,274        640,175       29,524          13,252     (682,951)      146,274
                                               ------------------------------------------------------------------------------------
                                               $    748,736   $    800,431  $    39,701    $     24,814  $  (699,055)   $  914,627
                                               ====================================================================================
</Table>
                                       14
<Page>

                                     PREDECESSOR
                     CONDENSED CONSOLIDATING BALANCE SHEETS
                                DECEMBER 31, 2000
                                 (in thousands)

<Table>
<Caption>
                                                                              NON-WHOLLY OWNED
                                                                           GUARANTOR SUBSIDIARIES
                                                                           ------------------------
                                                                             WHOLLY
                                                                OWNED        M-FOODS     M-FOODS
                                                              GUARANTOR      DAIRY,       DAIRY
                                                  PARENT     SUBSIDIARIES      LLC      TXCT, LLC   ELIMINATIONS  CONSOLIDATED
                                               -------------------------------------------------------------------------------
<S>                                             <C>          <C>          <C>          <C>           <C>          <C>
ASSETS
Current Assets:
   Cash and equivalents                         $     8,787  $    (4,366) $         -  $         -   $         -  $     4,421
   Accounts receivable, less allowances                 420      102,968        6,326        5,684        (2,631)     112,767
   Inventories                                            -       71,077        2,262        2,395             -       75,734
   Prepaid expenses and other                           238        4,414           94           57             -        4,803
                                               -------------------------------------------------------------------------------
        Total current assets                          9,445      174,093        8,682        8,136        (2,631)     197,725
Property, Plant and Equipment - net                     103      255,485       11,800       14,429             -      281,817
Other assets:
   Goodwill, net                                          -      112,468        1,787            -             -      114,255
   Joint ventures and other assets                    1,343        9,090            7        8,667             -       19,107
   Investment in subsidiaries                       459,773            -            -            -      (459,773)           -
                                               -------------------------------------------------------------------------------
                                                    461,116      121,558        1,794        8,667      (459,773)     133,362
                                               -------------------------------------------------------------------------------
                                                $   470,664  $   551,136  $    22,276  $    31,232   $  (462,404) $   612,904
                                               ===============================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Current maturities of long-term debt         $         -  $       465  $         -  $     2,400   $         -  $     2,865
   Accounts payable                                     111       51,636        1,962        3,134        (2,631)      54,212
   Accrued liabilities                               21,077       38,799        1,381          763             -       62,020
                                               -------------------------------------------------------------------------------
        Total current liabilities                    21,188       90,900        3,343        6,297        (2,631)     119,097
Long-term debt, less current maturities             190,500          644            -        4,800             -      195,944
Deferred income taxes                                   243       38,133          690           64             -       39,130
                                               -------------------------------------------------------------------------------
        Total liabilities                           211,931      129,677        4,033       11,161        (2,631)     354,171
Shareholders' Equity                                258,733      421,459       18,243       20,071      (459,773)     258,733
                                               -------------------------------------------------------------------------------

                                                $   470,664  $   551,136  $    22,276  $    31,232   $  (462,404) $   612,904
                                               ===============================================================================
</Table>

                                       15

<Page>
                                     COMPANY
              UNAUDITED CONDENSED CONSOLIDATING EARNINGS STATEMENTS
                      THREE MONTHS ENDED SEPTEMBER 30, 2001
                                 (in thousands)
<Table>
<Caption>
                                                                              NON-WHOLLY OWNED
                                                                           GUARANTOR SUBSIDIARIES
                                                                           ----------------------
                                                                             WHOLLY
                                                                OWNED        M-FOODS     M-FOODS
                                                              GUARANTOR      DAIRY,       DAIRY
                                                  PARENT     SUBSIDIARIES      LLC      TXCT, LLC   ELIMINATIONS  CONSOLIDATED
                                               -------------------------------------------------------------------------------
<S>                                             <C>          <C>          <C>          <C>           <C>          <C>
Net sales                                       $         -  $   248,027  $   24,542   $   30,346    $    (3,690) $   299,225
Cost of sales                                             -      201,990      21,126       29,010         (3,690)     248,436
                                               -------------------------------------------------------------------------------
   Gross profit                                           -       46,037       3,416        1,336              -       50,789
Selling, general and administrative expenses          1,287       27,711       1,093        1,255         (1,280)      30,066
                                               -------------------------------------------------------------------------------
   Operating profit (loss)                           (1,287)      18,326       2,323           81          1,280       20,723
Interest (income) expense, net                       13,433          117        (145)          11              -       13,416
Other income                                          1,280            -           2           (2)        (1,280)           -
                                               -------------------------------------------------------------------------------
   Earnings (loss) before equity in earnings of
     subsidiaries and income taxes
                                                    (13,440)      18,209       2,470           68              -        7,307
Equity in earnings of subsidiary                      9,342        2,538      (2,470)         (68)        (9,342)           -
                                               -------------------------------------------------------------------------------
   Earnings (loss) before income taxes               (4,098)      20,747           -            -         (9,342)       7,307
Income tax expense (benefit)                         (7,395)      11,405           -            -              -        4,010
                                               -------------------------------------------------------------------------------
   NET EARNINGS (LOSS)                                3,297        9,342           -            -         (9,342)       3,297
Other comprehensive income (loss):
   Change in foreign currency translation                 -           53           -            -              -           53
   Change in cash flow hedges                        (3,364)      (1,913)          -            -              -       (5,277)
                                               -------------------------------------------------------------------------------
Comprehensive income (loss)                     $       (67) $     7,482  $        -   $        -    $    (9,342) $    (1,927)
                                               ===============================================================================
</Table>
                                       16
<Page>

                                   PREDECESSOR
              UNAUDITED CONDENSED CONSOLIDATING EARNINGS STATEMENTS
                      THREE MONTHS ENDED SEPTEMBER 30, 2000
                                 (in thousands)
<Table>
<Caption>
                                                                              NON-WHOLLY OWNED
                                                                           GUARANTOR SUBSIDIARIES
                                                                          ------------------------
                                                                            WHOLLY
                                                               OWNED        M-FOODS     M-FOODS
                                                             GUARANTOR      DAIRY,       DAIRY
                                                  PARENT    SUBSIDIARIES     LLC       TXCT, LLC   ELIMINATIONS CONSOLIDATED
                                               ------------------------------------------------------------------------------
<S>                                             <C>          <C>         <C>          <C>          <C>          <C>
Net sales                                       $        -   $  238,753  $    19,215  $    22,113  $    (3,513) $   276,568
Cost of sales                                            -      194,936       16,969       20,428       (3,513)     228,820
                                               ------------------------------------------------------------------------------
   Gross profit                                          -       43,817        2,246        1,685            -       47,748
Selling, general and administrative expenses         1,129       22,790          967        1,823       (1,203)      25,506
                                               ------------------------------------------------------------------------------
   Operating profit (loss)                          (1,129)      21,027        1,279         (138)       1,203       22,242
Interest (income) expense, net                       3,547          (17)          (6)           -            -        3,524
Other income                                         1,203            -            -            -       (1,203)           -
                                               ------------------------------------------------------------------------------
   Earnings (loss) before equity in earnings of
     subsidiaries and income taxes
                                                    (3,473)      21,044        1,285         (138)           -       18,718
Equity in earnings of subsidiaries                  13,698            -            -            -      (13,698)           -
                                               ------------------------------------------------------------------------------
   Earnings (loss) before income taxes              10,225       21,044        1,285         (138)     (13,698)      18,718
Income tax expense (benefit)                        (1,869)       8,259          510            -            -        6,900
                                               ------------------------------------------------------------------------------
   NET EARNINGS (LOSS)                              12,094       12,785          775         (138)     (13,698)      11,818
Foreign currency translation adjustment loss             -         (174)           -            -            -         (174)
                                               ------------------------------------------------------------------------------
Comprehensive income (loss)                     $   12,094   $   12,611  $       775  $      (138) $   (13,698) $    11,644
                                               ==============================================================================
</Table>

                                      17

<Page>

                                    COMPANY
              UNAUDITED CONDENSED CONSOLIDATING EARNINGS STATEMENTS
                      SIX MONTHS ENDED SEPTEMBER 30, 2001
                                 (in thousands)

<Table>
<Caption>
                                                                              NON-WHOLLY OWNED
                                                                           GUARANTOR SUBSIDIARIES
                                                                          ------------------------
                                                                              WHOLLY
                                                                 OWNED        M-FOODS     M-FOODS
                                                               GUARANTOR       DAIRY,      DAIRY
                                                   PARENT     SUBSIDIARIES      LLC      TXCT, LLC   ELIMINATIONS CONSOLIDATED
                                                ------------------------------------------------------------------------------
<S>                                               <C>          <C>         <C>          <C>          <C>          <C>
Net sales                                         $        -   $  495,023  $    47,484  $    59,225  $    (7,398) $   594,334
Cost of sales                                              -      402,866       41,254       56,569       (7,398)     493,291
                                                ------------------------------------------------------------------------------
   Gross profit                                            -       92,157        6,230        2,656            -      101,043
Selling, general and administrative expenses           2,650       55,563        2,058        2,660       (2,571)      60,360
                                                ------------------------------------------------------------------------------
   Operating profit (loss)                            (2,650)      36,594        4,172           (4)       2,571       40,683
Interest (income) expense, net                        29,680          217         (198)         (42)           -       29,657
Other income                                           2,571            -            2           (2)      (2,571)           -
                                                ------------------------------------------------------------------------------
   Earnings (loss) before equity in earnings of
     subsidiaries and income taxes                   (29,759)      36,377        4,372           36            -       11,026
Equity in earnings of subsidiary                      18,354        4,408       (4,372)         (36)     (18,354)           -
                                                ------------------------------------------------------------------------------
   Earnings (loss) before income taxes               (11,405)      40,785            -            -      (18,354)      11,026
Income tax expense (benefit)                         (16,371)      22,431            -            -            -        6,060
                                                ------------------------------------------------------------------------------
   NET EARNINGS (LOSS)                                 4,966       18,354            -            -      (18,354)       4,966
Other comprehensive income (loss):
   Change in foreign currency translation                  -           26            -            -            -           26
   Change in cash flow hedges                         (3,364)      (1,539)           -            -            -       (4,903)
                                                ------------------------------------------------------------------------------
Comprehensive income (loss)                       $    1,602   $   16,841  $         -  $         -  $   (18,354) $        89
                                                ==============================================================================
</Table>

                                       18
<Page>

                                   PREDECESSOR
                   CONDENSED CONSOLIDATING EARNINGS STATEMENTS
                        THREE MONTHS ENDED MARCH 31, 2001
                                 (in thousands)
<Table>
<Caption>
                                                                              NON-WHOLLY OWNED
                                                                           GUARANTOR SUBSIDIARIES
                                                                          ------------------------
                                                                              WHOLLY
                                                                 OWNED        M-FOODS     M-FOODS
                                                               GUARANTOR       DAIRY,      DAIRY
                                                   PARENT     SUBSIDIARIES      LLC      TXCT, LLC   ELIMINATIONS CONSOLIDATED
                                                ------------------------------------------------------------------------------
<S>                                               <C>         <C>          <C>          <C>          <C>          <C>
Net sales                                         $        -  $   245,548  $    17,684  $    17,644  $    (5,249) $   275,627
Cost of sales                                              -      200,854       14,994       17,108       (5,249)     227,707
                                                ------------------------------------------------------------------------------
   Gross profit                                            -       44,694        2,690          536            -       47,920
Selling, general and administrative expenses           1,656       27,720        1,027        1,712       (1,522)      30,593
Recall insurance settlement                                -            -       (3,217)           -            -       (3,217)
Transaction costs                                     11,050            -            -            -            -       11,050
                                                ------------------------------------------------------------------------------
   Operating profit (loss)                           (12,706)      16,974        4,880       (1,176)       1,522        9,494
Interest (income) expense, net                         3,308          (14)          (1)           -            -        3,293
Other income                                           1,522            -            -            -       (1,522)           -
                                                ------------------------------------------------------------------------------
   Earnings (loss) before equity in earnings
     of subsidiaries, income taxes, and
     extraordinary item                              (14,492)      16,988        4,881       (1,176)           -        6,201

Equity in earnings of subsidiaries                    12,573            -            -            -      (12,573)           -
                                                ------------------------------------------------------------------------------
   Earnings (loss) before income taxes and
     extraordinary item                               (1,919)      16,988        4,881       (1,176)     (12,573)       6,201
Income tax expense (benefit)                          (5,690)       6,649        1,918         (447)           -        2,430
                                                ------------------------------------------------------------------------------
   Earnings (loss) before extraordinary item           3,771       10,339        2,963         (729)     (12,573)       3,771
Extraordinary item - early extinguishment of
   debt, net of taxes                                 (9,424)           -            -            -            -       (9,424)
                                                ------------------------------------------------------------------------------
   NET EARNINGS (LOSS)                                (5,653)      10,339        2,963         (729)     (12,573)      (5,653)
Other comprehensive income (loss):
   Change in foreign currency translation                  -        1,088            -            -            -        1,088
   Change in cash flow hedges                              -       (1,632)           -            -            -       (1,632)
                                                ------------------------------------------------------------------------------
Comprehensive income (loss)                       $   (5,653) $     9,795  $     2,963  $      (729) $   (12,573) $    (6,197)
                                                  ==========  ===========  ===========  ===========  ===========  ===========
</Table>


                                      19

<Page>

                                  PREDECESSOR
              UNAUDITED CONDENSED CONSOLIDATING EARNINGS STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000
                                 (in thousands)

<Table>
<Caption>
                                                                              NON-WHOLLY OWNED
                                                                           GUARANTOR SUBSIDIARIES
                                                                          ------------------------
                                                                              WHOLLY
                                                                 OWNED        M-FOODS     M-FOODS
                                                               GUARANTOR       DAIRY,      DAIRY
                                                   PARENT     SUBSIDIARIES      LLC      TXCT, LLC   ELIMINATIONS CONSOLIDATED
                                                  ----------------------------------------------------------------------------
<S>                                               <C>         <C>          <C>          <C>          <C>          <C>
Net sales                                         $        -  $   696,417  $    52,625  $    57,119  $   (11,051) $   795,110
Cost of sales                                              -      562,318       46,345       53,260      (11,051)     650,872
                                                  ----------------------------------------------------------------------------
   Gross profit                                            -      134,099        6,280        3,859            -      144,238
Selling, general and administrative expenses           4,453       70,244        2,935        5,622       (4,086)      79,168
                                                  ----------------------------------------------------------------------------
   Operating profit (loss)                            (4,453)      63,855        3,345       (1,763)       4,086       65,070
Interest (income) expense, net                         9,823          (41)          (4)           -            -        9,778
Other income                                           4,086            -            -            -       (4,086)           -
                                                  ----------------------------------------------------------------------------
Earnings (loss) before equity in earnings of
   subsidiaries and income taxes
                                                     (10,190)      63,896        3,349       (1,763)           -       55,292
Equity in earnings of subsidiaries                    40,217            -            -            -      (40,217)           -
                                                  ----------------------------------------------------------------------------
   Earnings (loss) before income taxes                30,027       63,896        3,349       (1,763)     (40,217)      55,292
Income tax expense (benefit)                          (3,555)      25,079          900         (714)           -       21,710
                                                  ----------------------------------------------------------------------------
   NET EARNINGS (LOSS)                                33,582       38,817        2,449       (1,049)     (40,217)      33,582
Foreign currency translation adjustment loss               -         (632)           -            -            -         (632)
                                                  ----------------------------------------------------------------------------
Comprehensive income (loss)                       $   33,582  $    38,185  $     2,449  $    (1,049) $   (40,217) $    32,950
                                                  ============================================================================
</Table>

                                       20
<Page>

                                     COMPANY
           UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                       SIX MONTHS ENDED SEPTEMBER 30, 2001
                                 (in thousands)

<Table>
<Caption>
                                                                                NON-WHOLLY OWNED
                                                                              GUARANTOR SUBSIDIARIES
                                                                             ------------------------
                                                                       WHOLLY
                                                                        OWNED          M-FOODS        M-FOODS
                                                                       GUARANTOR        DAIRY,         DAIRY
                                                         PARENT       SUBSIDIARIES       LLC          TXCT, LLC     CONSOLIDATED
                                                       -------------------------------------------------------------------------
<S>                                                    <C>            <C>             <C>            <C>             <C>
Net cash provided by (used in) operating activities    $  27,384      $   50,870      $   1,196      $    4,840      $   84,290
Cash flows from investing activities:
   Capital expenditures                                       (9)         (9,876)        (1,203)         (2,440)        (13,528)
   Business acquisition                                 (626,925)              -              -               -        (626,925)
   Investments in joint ventures and other assets           (339)         (3,610)             -               -          (3,949)
                                                       -------------------------------------------------------------------------

Net cash provided by (used in) investing activities     (627,273)        (13,486)        (1,203)         (2,440)       (644,402)

Cash flows from financing activities:
   Payments on notes payable                             (46,450)              -              -               -         (46,450)
   Proceeds on notes payable                              29,500               -              -               -          29,500
   Payments on long-term debt                           (128,675)           (150)             -          (2,400)       (131,225)
   Proceeds from long-term debt                          570,000               -              -               -         570,000
   Proceeds from issuance of stock                       174,800               -              -               -         174,800
   Investment in subsidiaries                             41,167         (41,167)             -               -               -
                                                       -------------------------------------------------------------------------

Net cash provided by (used in) financing activities      640,342         (41,317)             -          (2,400)        596,625
                                                       -------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents           40,453          (3,933)            (7)              -          36,513
Cash and equivalents at beginning of period                4,327             (64)             7               -           4,270
                                                       -------------------------------------------------------------------------

Cash and equivalents at end of period                  $  44,780      $   (3,997)     $       -      $        -      $   40,783
                                                       =========================================================================
</Table>


                                       21


<Page>

                                  PREDECESSOR
                CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                       THREE MONTHS ENDED MARCH 31, 2001
                                 (in thousands)

<Table>
<Caption>
                                                                                NON-WHOLLY OWNED
                                                                              GUARANTOR SUBSIDIARIES
                                                                             ------------------------
                                                                       WHOLLY
                                                                        OWNED          M-FOODS        M-FOODS
                                                                       GUARANTOR        DAIRY,         DAIRY
                                                         PARENT       SUBSIDIARIES       LLC          TXCT, LLC     CONSOLIDATED
                                                       -------------------------------------------------------------------------
<S>                                                    <C>            <C>             <C>            <C>             <C>
Net cash provided by (used in) operating activities    $  12,000      $    4,487      $  (2,440)     $      (31)     $   14,016
Cash flows from investing activities:
   Capital expenditures                                        -          (4,923)        (3,664)         (2,250)        (10,837)
   Investments in joint ventures and other assets            434           3,454              -               -           3,888
                                                       -------------------------------------------------------------------------
Net cash provided by (used in) investing activities          434          (1,469)        (3,664)         (2,250)         (6,949)
Cash flows from financing activities:
   Payments on notes payable                             (52,000)              -              -               -         (52,000)
   Proceeds on notes payable                              45,500               -              -               -          45,500
   Payments on long-term debt                                  -            (109)             -               -            (109)
   Proceeds from issuance of stock                           546               -              -               -             546
   Extension of stock options                                310               -              -               -             310
   Dividends                                              (1,465)              -              -               -          (1,465)
   Investment in subsidiaries                             (9,785)          1,393          6,111           2,281               -
                                                       -------------------------------------------------------------------------
Net cash provided by (used in) financing activities      (16,894)          1,284          6,111           2,281          (7,218)
                                                       -------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents           (4,460)          4,302              7               -            (151)
Cash and equivalents at beginning of period                8,787          (4,366)             -               -           4,421
                                                       -------------------------------------------------------------------------
Cash and equivalents at end of period                  $   4,327      $      (64)     $       7      $        -      $    4,270
                                                       =========================================================================
</Table>

                                       22
<Page>

                                  PREDECESSOR
           UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000
                                 (in thousands)

<Table>
<Caption>
                                                                                NON-WHOLLY OWNED
                                                                              GUARANTOR SUBSIDIARIES
                                                                             ------------------------
                                                                       WHOLLY
                                                                        OWNED          M-FOODS        M-FOODS
                                                                       GUARANTOR        DAIRY,         DAIRY
                                                         PARENT       SUBSIDIARIES       LLC          TXCT, LLC     CONSOLIDATED
                                                       -------------------------------------------------------------------------
<S>                                                    <C>            <C>             <C>            <C>             <C>
Net cash provided by (used in) operating activities    $  33,265      $   16,186      $    (993)     $    1,721      $   50,179
Cash flows from investing activities:
   Capital expenditures                                        -         (20,665)        (1,340)         (3,962)        (25,967)
   Investments in joint ventures and other assets            119             716              -               -             835
                                                       -------------------------------------------------------------------------
Net cash provided by (used in) investing activities          119         (19,949)        (1,340)         (3,962)        (25,132)
Cash flows from financing activities:
   Payments on notes payable                            (127,400)              -              -               -        (127,400)
   Proceeds from notes payable                           158,100               -              -               -         158,100
   Payments on long-term debt                                  -            (583)             -          (2,400)         (2,983)
   Proceeds from issuance of stock                           545               -              -               -             545
   Repurchase of common stock                            (46,125)              -              -               -         (46,125)
   Dividends                                              (4,463)              -              -               -          (4,463)
   Investment in subsidiaries                            (10,398)          3,424          2,333           4,641               -
                                                       -------------------------------------------------------------------------

Net cash provided by (used in) financing activities      (29,741)          2,841          2,333           2,241         (22,326)
                                                       -------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents            3,643            (922)             -               -           2,721
Cash and equivalents at beginning of period                6,677          (1,716)             -               -           4,961
                                                       -------------------------------------------------------------------------

Cash and equivalents at end of period                  $  10,320      $   (2,638)     $       -      $        -      $    7,682
                                                       =========================================================================
</Table>

                                       23
<Page>

                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                  Page
<S>                                                                <C>
Balance Sheets                                                     25
Statements of Earnings                                             26
Statements of Cash Flows                                           28
Notes to Financial Statements                                      29
</Table>


                                       24
<Page>

                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                                 BALANCE SHEETS
                            (unaudited, in thousands)

==============================================================================

<Table>
<Caption>
                                                              COMPANY           PREDECESSOR
                                                           -------------       -------------
                                                            SEPTEMBER 30,       DECEMBER 31,
                                                                2001                2000
                                                           -------------       -------------
<S>                                                          <C>                  <C>
ASSETS
CURRENT ASSETS
   Accounts receivable, less allowances                      $    7,001           $    6,326
   Note receivable - related party                                9,987                    -
   Inventories                                                    3,377                2,262
   Prepaid expenses and other                                       153                   94
                                                           -------------       -------------
        Total current assets                                     20,518                8,682
PROPERTY, PLANT AND EQUIPMENT - AT COST
   Land                                                             855                  855
   Buildings and improvements                                     4,045                7,828
   Machinery and equipment                                       11,439               13,721
                                                           -------------       -------------
                                                                 16,339               22,404
   Less accumulated depreciation                                    804               10,604
                                                           -------------       -------------
                                                                 15,535               11,800
OTHER ASSETS
   Goodwill, net                                                  3,909                1,787
   Other assets                                                       -                    7
                                                           -------------       -------------
                                                                  3,909                1,794
                                                           -------------       -------------
                                                             $   39,962           $   22,276
                                                           =============       =============
LIABILITIES AND UNIT HOLDER AND OPERATING UNIT EQUITY
CURRENT LIABILITIES
   Accounts payable                                          $    3,557           $    1,962
   Accrued liabilities:
     Compensation                                                   577                  419
     Insurance                                                      136                  208
     Customer programs                                            1,376                  550
     Other                                                          420                  204
                                                           -------------       -------------
        Total current liabilities                                 6,066                3,343
DEFERRED INCOME TAXES                                                 -                  690
COMMITMENTS AND CONTINGENCIES                                         -                    -
PREFERRED SHAREHOLDER RETURN PAYABLE                              4,372                    -
UNIT HOLDER AND OPERATING UNIT EQUITY                            29,524               18,243
                                                           -------------       -------------
                                                             $   39,962           $   22,276
                                                           =============       =============
</Table>
---------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       25
<Page>

                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                             STATEMENTS OF EARNINGS
                    FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                            (unaudited, in thousands)
==============================================================================
<Table>
<Caption>
                                                           Company              Predecessor
                                                          -----------          ------------
                                                             2001                  2000
                                                          -----------          ------------
<S>                                                       <C>                  <C>
Net sales                                                 $   24,542           $    19,215

Cost of sales                                                 21,126                16,969
                                                          -----------          ------------
   Gross profit                                                3,416                 2,246

Selling, general and administrative expenses                   1,093                   967
                                                          -----------          ------------
   Operating profit                                            2,323                 1,279

Other income (expense)                                           147                     6
                                                          -----------          ------------
   Earnings before income taxes                                2,470                 1,285
Income tax expense                                                 -                   510
                                                          -----------          ------------
   NET EARNINGS                                           $    2,470           $       775
                                                          ===========          ============
</Table>
---------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       26
<Page>

                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                             STATEMENTS OF EARNINGS
                            (unaudited, in thousands)
==============================================================================
<Table>
<Caption>
                                                           COMPANY                        PREDECESSOR
                                                      ----------------        -----------------------------------
                                                         SIX MONTHS            THREE MONTHS           NINE MONTHS
                                                            ENDED                  ENDED                 ENDED
                                                        SEPTEMBER 30,            MARCH 31,           SEPTEMBER 30,
                                                            2001                   2001                  2000
                                                      ----------------        -----------------------------------
<S>                                                     <C>                     <C>                  <C>
Net sales                                               $       47,484          $     17,684         $    52,625
Cost of sales                                                   41,254                14,994              46,345
                                                      ----------------        -----------------------------------
   Gross profit                                                  6,230                 2,690               6,280
Selling, general and administrative expenses                     2,058                 1,027               2,935
Recall insurance settlement                                          -                (3,217)                  -
                                                      ----------------        -----------------------------------
   Operating profit                                              4,172                 4,880               3,345
Other income                                                       200                     1                   4
                                                      ----------------        -----------------------------------
   Earnings before income taxes                                  4,372                 4,881               3,349
Income tax expense                                                   -                 1,918                 900
                                                      ----------------        -----------------------------------
   NET EARNINGS                                         $        4,372          $      2,963         $     2,449
                                                      ================        ===================================
</Table>
---------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       27
<Page>

                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                            STATEMENTS OF CASH FLOWS
                            (unaudited, in thousands)
============================================================================
<Table>
<Caption>
                                                           COMPANY                        PREDECESSOR
                                                      -----------------       -----------------------------------
                                                         SIX MONTHS            THREE MONTHS           NINE MONTHS
                                                            ENDED                  ENDED                 ENDED
                                                        SEPTEMBER 30,            MARCH 31,           SEPTEMBER 30,
                                                            2001                   2001                  2000
                                                      -----------------       -----------------------------------
<S>                                                     <C>                     <C>                 <C>
Net cash provided by (used in) operating activities     $        1,196          $     (2,440)       $       (993)

Cash flows from investing activities:
Capital expenditures                                            (1,203)               (3,664)             (1,340)
                                                      -----------------       -----------------------------------
Net cash used in investing activities                           (1,203)               (3,664)             (1,340)

Cash flows from financing activities:
Net additional capital invested                                      -                 6,111               2,333
                                                      -----------------       -----------------------------------
Net cash provided by financing activities                            -                 6,111               2,333
                                                      -----------------       -----------------------------------
Net increase (decrease) in cash and equivalents                     (7)                    7                   -
Cash and equivalents at beginning of period                          7                     -                   -
                                                      -----------------       -----------------------------------
Cash and equivalents at end of period                   $            -          $          7        $          -
                                                      =================       ===================================
</Table>
-----------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       28
<Page>

                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS

==============================================================================

NOTE A - ORGANIZATION, BUSINESS AND MERGER

Organization
M-Foods Dairy, LLC (the "Company") is a majority owned subsidiary of Michael
Foods, Inc., a wholly owned subsidiary of M-Foods Holdings, Inc. Prior to the
Merger described below, Kohler Mix - MN (the "Predecessor," "Operating Unit" or
the "Unit") was an operating unit of Michael Foods, Inc. The change in control
of Michael Foods, Inc. and the reorganization of the operating unit into M-Foods
Dairy, LLC are more fully described below.

Business
The Company processes and distributes soft serve ice cream mix, frozen yogurt
mix, milk and specialty dairy products, many of which are ultra-high temperature
pasteurized, from its facility in Minnesota.

Merger
On April 10, 2001, Michael Foods, Inc. and its subsidiaries ("Michael Foods")
was acquired in a transaction (the Merger") led by an investor group
comprised of a management group led by Michael Foods' Chairman, President and
Chief Executive Officer, Gregg Ostrander, affiliates of Jeffrey Michael, a
member of the Michael Foods Board of Directors, and affiliates of two private
equity investment firms, Vestar Capital Partners and Goldner Hawn Johnson &
Morrison Incorporated, collectively, M-Foods Investors, LLC. Under the terms
of the Merger agreement, all outstanding shares of Michael Foods common stock
were converted into the right to receive $30.10 per share in cash, or value
equal thereto, and all outstanding stock options were converted into the
right to receive, in cash, $30.10 per share reduced by the exercise price per
share for all shares subject to such stock options. The purchase of the
outstanding shares was financed through new equity financing of approximately
$175,000,000, a senior secured credit facility of up to $470,000,000 at
market-based variable interest rates (effective rate of 7.3% at September 30,
2001), and $200,000,000 of senior subordinated notes at an 11.75% annual
interest rate.

Immediately after the close of the Merger, Michael Foods contributed the assets
of its Dairy division into two limited liability corporations, M-Foods Dairy,
LLC and M-Foods Dairy TXCT, LLC (collectively, the "Dairy LLCs") and in exchange
received voting preferred and voting common units from these entities equal to
the fair value of the net assets contributed, which collectively were
approximately $40,000,000 (the approximate fair value contributed to M-Foods
Dairy, LLC was $30,000,000). The preferred units issued to Michael Foods have an
annual 10% preferred return guarantee and represent 100% of the preferred units
issued and outstanding. In addition, Michael Foods received 5% of the common
units issued by each of the Dairy LLCs with the common units held by Michael
Foods representing 100% of the voting common units issued and outstanding. These
common units have a stated value of $25,000. The remaining 95% of the common
units, which are non-voting, are owned by M-Foods Dairy Holdings, LLC, which is
owned by the same owners, or affiliates of such owners, in the same proportion,
as the unit holders of M-Foods Investors, LLC. The Dairy LLCs common unit
interest owned by M-Foods Dairy Holdings, LLC was purchased for $475,000 as of
April 1, 2001.

                                       29
<Page>


                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS

==============================================================================
NOTE A - ORGANIZATION, BUSINESS AND MERGER, (cont.)

Following the Merger, Michael Foods, Inc. became an indirect wholly-owned
subsidiary of M-Foods Investors, LLC and M-Foods Dairy LLC became a majority
owned subsidiary of Michael Foods, Inc.

The Merger has been accounted for as a purchase in accordance with Accounting
Principles Board Opinion 16, Business Combinations and EITF 88-16, Basis in
Leveraged Buyout Transactions. Accordingly, the acquired assets and liabilities
have been recorded at fair value for the interests acquired by new investors and
at the carryover basis for continuing investors. As a result, the assets and
liabilities are assigned new values, which are part Predecessor cost and part
fair value, in the same proportions as the carryover basis of the residual
interests retained by the continuing management investors and continuing
affiliate investors of the Michael family and the new interests acquired by the
new investors. The deemed dividend related to the Michael Foods investment in
the assets and liabilities of the Dairy LLCs was pushed down to these majority
owned subsidiaries, as if they were wholly owned subsidiaries since Michael
Foods owns all of the voting stock and the Dairy LLCs are being operated by the
management of Michael Foods. The amount of the deemed dividend at Michael Foods
was $66,631,000 and the portion attributable to M-Foods Dairy, LLC was $832,000.

For ease of presentation, the Merger has been reflected in the accompanying
financial statements as if it had occurred on April 1, 2001. Management
determined that no material transactions occurred during the period from April 1
through April 9, 2001. The Company's financial statements have been presented on
a comparative basis with the Predecessor's historical operating unit financial
statements, prior to the date of Merger. Different bases of accounting have been
used to prepare the Company and Predecessor financial statements. The primary
differences relate to the 10% yield on preferred units, depreciation and
amortization of fixed assets and other intangible assets recorded at fair value
at the date of acquisition, and income taxes which are payable by the Company's
unit holders.

The fair value contributed by Michael Foods to M-Foods Dairy, LLC was
$30,000,000. In addition, $356,250 was contributed by new investors in exchange
for Class B non-voting common units. This combined amount was allocated to the
acquired assets and liabilities based on their fair values at April 1, 2001, net
of the deemed dividend. The fair values of long-term assets were obtained from a
preliminary valuation report issued by a third party appraisal firm. The
allocations were as follows:

<Table>
<S>                                                  <C>
Working capital                                      $      10,427,000
Property, plant & equipment                                 15,135,000
Other assets, including goodwill                             3,962,000
</Table>

The following unaudited pro forma revenue and net earnings for the year ended
December 31, 2000 and for the nine months ended September 30, 2001 are derived
from the application of pro forma adjustments to the Predecessor historical
statements of earnings and assumes the Merger had occurred on January 1, 2000:

<Table>
<Caption>
                            Nine months ended               Year ended
                            September 30, 2001           December  31, 2000
                           -------------------------------------------------
<S>                          <C>                          <C>
Revenue                      $   65,168,000               $  68,102,000
Net earnings                      7,325,000                   2,693,000
</Table>

                                       30
<Page>


                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS

==============================================================================
NOTE B  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The accompanying Predecessor Balance Sheet as of December 31, 2000, the
Predecessor Statements of Earnings for the three and nine months ended September
30, 2000 and the three months ended March 31, 2001, and the Predecessor
Statements of Cash Flows for the nine months ended September 30, 2000 and the
three months ended March 31, 2001 have been prepared from the historical books
and records of Michael Foods. The respective Statements of Earnings include an
allocation of general and administrative costs incurred by Michael Foods and
allocations from this Operating Unit to the other Dairy LLC operating unit,
M-Foods Dairy TXCT, LLC. The accompanying unaudited financial statements and
footnote information for the three and nine month periods ended September 30,
2000 have been prepared in accordance with Regulation S-X pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") using the
historical cost basis of assets and liabilities of the Predecessor. The
accompanying unaudited financial statements and footnote information as of and
for the three and six month periods ended September 30, 2001 have been prepared
in accordance with Regulation S-X pursuant to the rules and regulations of the
SEC using the adjusted cost basis of assets and liabilities of the Company. 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 and cash flows for the periods
indicated. The Unit's financial statements include an allocation for general and
administrative costs incurred by Michael Foods. Management believes its
allocations to these Operating Unit financial statements are reasonable.
Additionally, Operating Unit equity includes the cumulative net advances between
the Operating Unit and Michael Foods, which are considered additional capital
invested from, or constructive dividends to, Michael Foods. Accordingly, the
accompanying financial statements may not necessarily be indicative of the
results that could have been obtained if the Operating Unit had been operated as
a stand-alone entity. The historical results of the Company and Predecessor for
the periods indicated are not necessarily indicative of the results of the
Company for a full year.

The accounting policies of the Predecessor have been adopted by the Company.

Use of Estimates
Preparation of the accompanying financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect reported
amounts of assets and liabilities, related revenues and expenses and disclosure
about contingent assets and liabilities at the date of the financial statements.
Actual results could differ from the estimates used by management.

Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market.

<Table>
<Caption>
Inventories consisted of the following:      Company             Predecessor
                                          ---------------      --------------
                                           September 30,        December 31,
                                               2001                 2000
                                          ---------------      --------------
<S>                                       <C>                  <C>
Raw materials and supplies                $     1,097,000      $      919,000
Work in process and finished goods              2,280,000           1,343,000
                                          ---------------      --------------
                                          $     3,377,000      $    2,262,000
                                          ===============      ==============
</Table>

                                       31
<Page>


                               M-FOODS DAIRY, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS

==============================================================================
NOTE B  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (cont.)

Goodwill
At April 1, 2001, goodwill was recorded for the excess of total acquisition
costs over the fair value of net assets acquired based on the total cost of the
Merger. The Company amortizes its goodwill over a 40 year period. The Company
evaluates its goodwill annually to determine potential impairment by comparing
the carrying value of the goodwill to the undiscounted future cash flows of the
related assets.

In July 2001, the FASB issued two statements: Statement 141 BUSINESS
COMBINATIONS and Statement 142 GOODWILL AND INTANGIBLE ASSETS. These
pronouncements, among other things, eliminated the pooling-of-interest method of
accounting for business combinations and eliminated the amortization of goodwill
for financial reporting purposes. However, goodwill will then be tested for
impairment annually or whenever an impairment indicator arises. The elimination
of goodwill amortization becomes effective for the Company in January 2002. The
amount of goodwill amortization expense for the six months ended September 30,
2001 was approximately $50,000.

NOTE C - SETTLEMENT OF RECALL INSURANCE CLAIM

During the three months ended March 31, 2001, the Unit settled its insurance
claim related to a product recall, which occurred in early 1999. The settlement
reimbursed the Unit for recall related costs incurred as well as a partial
reimbursement for lost business as a result of the recall.

NOTE D - INCOME TAXES

Predecessor
The activity of the Operating Unit has been included in the income tax return of
Michael Foods, Inc. for financial reporting purposes. The Unit has been
allocated a provision for income taxes in an amount generally equivalent to the
provision that would have resulted had the Unit filed a separate income tax
return.

Company
For income tax purposes the Company is a pass-through entity, therefore, income
taxes have not been reflected on the Company's financial statements.

NOTE E - COMMITMENTS AND CONTINGENCIES

Litigation
The Company is engaged in routine litigation incidental to its business.
Management believes the ultimate outcome of this litigation will not have a
material effect on the Unit's financial position, liquidity or results of
operations.

                                       32
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                          Page
<S>                                                                        <C>
Balance Sheets                                                             34
Statements of Operations                                                   35
Statements of Cash Flows                                                   37
Notes to Financial Statements                                              38
</Table>

                                       33
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                                 BALANCE SHEETS
                            (unaudited, in thousands)

================================================================================

<Table>
<Caption>
                                                               COMPANY                PREDECESSOR
                                                         ------------------        -----------------
                                                             SEPTEMBER 30,            DECEMBER 31,
                                                                 2001                     2000
                                                         ------------------        -----------------
<S>                                                           <C>                     <C>
ASSETS
CURRENT ASSETS
   Accounts receivable, less allowances                       $       7,947           $        5,684
   Notes receivable - related party                                      37                        -
   Inventories                                                        4,713                    2,395
   Prepaid expenses and other                                            52                       57
                                                         ------------------        -----------------
        Total current assets                                         12,749                    8,136
PROPERTY, PLANT AND EQUIPMENT - AT COST
   Buildings and improvements                                         3,271                    3,853
   Machinery and equipment                                            9,140                   13,769
                                                         ------------------        -----------------
                                                                     12,411                   17,622
   Less accumulated depreciation                                        958                    3,193
                                                         ------------------        -----------------
                                                                     11,453                   14,429
OTHER ASSETS
   Non-compete agreement                                              1,327                    8,667
                                                         ------------------        -----------------
                                                                      1,327                    8,667
                                                         ------------------        -----------------
                                                              $      25,529           $       31,232
                                                         ==================        =================
LIABILITIES AND UNIT HOLDER AND OPERATING UNIT EQUITY
CURRENT LIABILITIES
   Current maturities of non-compete commitment               $       2,400           $        2,400
   Accounts payable                                                   5,956                    3,134
   Accrued liabilities:
     Compensation                                                       316                      187
     Insurance                                                           37                       34
     Customer programs                                                  302                      139
     Other                                                              360                      403
                                                         ------------------        -----------------
        Total current liabilities                                     9,371                    6,297
DEFERRED INCOME TAXES                                                     -                       64
NON-COMPETE COMMITMENT, less current maturities                       2,400                    4,800
COMMITMENTS AND CONTINGENCIES                                             -                        -
PREFERRED SHAREHOLDER RETURN PAYABLE                                    506                        -
UNIT HOLDER AND OPERATING UNIT EQUITY                                13,252                   20,071
                                                         ------------------        -----------------
                                                              $      25,529           $       31,232
                                                         ==================        =================
</Table>
------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       34
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                             STATEMENTS OF EARNINGS
                    FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                            (unaudited, in thousands)
=============================================================================
<Table>
<Caption>
                                                         COMPANY                PREDECESSOR
                                                     ----------------          --------------
                                                          2001                     2000
                                                     ----------------          --------------
<S>                                                  <C>                       <C>
Net sales                                            $      30,346             $     22,113

Cost of sales                                               29,010                   20,428
                                                     ----------------          --------------

     Gross profit                                            1,336                    1,685

Selling, general and administrative expenses                 1,255                    1,823
                                                     ----------------          --------------
     Operating profit                                           81                     (138)

Other income (expense)                                         (13)                       -
                                                     ----------------          --------------

     Earnings before income taxes                               68                     (138)
Income tax expense                                               -                        -
                                                     ----------------          --------------

     NET EARNINGS                                    $          68             $       (138)
                                                     ================          ==============
</Table>
------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       35
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                             STATEMENTS OF EARNINGS
                            (unaudited, in thousands)
=============================================================================
<Table>
<Caption>
                                                     COMPANY                   PREDECESSOR
                                                 ----------------   -----------------------------------
                                                    SIX MONTHS         THREE MONTHS       NINE MONTHS
                                                       ENDED              ENDED              ENDED
                                                   SEPTEMBER 30,        MARCH 31,         SEPTEMBER 30,
                                                       2001               2001               2000
                                                 ----------------   -----------------------------------
<S>                                                  <C>                 <C>                 <C>
Net sales                                            $59,225             $17,644             $57,119
Cost of sales                                         56,569              17,108              53,260
                                                 ----------------   -----------------------------------
   Gross profit                                        2,656                 536               3,859
Selling, general and administrative expenses           2,660               1,712               5,622
                                                 ----------------   -----------------------------------
   Operating profit                                       (4)             (1,176)             (1,763)
Other income (expense)                                    40                   -                   -
                                                 ----------------   -----------------------------------
   Earnings before income taxes                           36              (1,176)             (1,763)
Income tax expense                                         -                (447)               (714)
                                                 ----------------   -----------------------------------
   NET EARNINGS                                      $    36             $  (729)            $(1,049)
                                                 ================   ===================================
</Table>
------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       36
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                            STATEMENTS OF CASH FLOWS
                            (unaudited, in thousands)
============================================================================
<Table>
<Caption>
                                                                COMPANY                       PREDECESSOR
                                                         ---------------------  ---------------------------------------
                                                              SIX MONTHS           THREE MONTHS       NINE MONTHS
                                                                 ENDED                 ENDED              ENDED
                                                           SEPTEMBER 30, 2001      MARCH 31, 2001   SEPTEMBER 30, 2000
                                                         ---------------------  ---------------------------------------
<S>                                                           <C>                      <C>                <C>
Net cash provided by (used in) operating activities           $  4,840                 $   (31)           $  1,721

Cash flows from investing activities:
   Capital expenditures                                         (2,440)                 (2,250)             (3,962)
                                                         ---------------------  ---------------------------------------
Net cash used in investing activities                           (2,440)                 (2,250)             (3,962)

Cash flows from financing activities:
   Payments on non-compete commitment                           (2,400)                      -              (2,400)
   Net additional capital invested                                   -                   2,281               4,641
                                                         ---------------------  ---------------------------------------
Net cash provided by (used in) financing activities             (2,400)                  2,281               2,241
                                                         ---------------------  ---------------------------------------
Net decrease in cash and equivalents                                 -                       -                   -
Cash and equivalents at beginning of period                          -                       -                   -
                                                         ---------------------  ---------------------------------------
Cash and equivalents at end of period                         $      -                 $     -            $      -
                                                         =====================  =======================================
</Table>
------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.

                                       37
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS
===============================================================================
NOTE A - ORGANIZATION, BUSINESS AND MERGER

Organization
M-Foods Dairy TXCT, LLC (the "Company") is a majority owned subsidiary of
Michael Foods, Inc., a wholly owned subsidiary of M-Foods Holdings, Inc. Prior
to the Merger described below, Kohler Mix - TXCT (the "Predecessor," "Operating
Unit" or the "Unit") was an operating unit of Michael Foods, Inc. The change in
control of Michael Foods, Inc. and the reorganization of the operating unit into
M-Foods Dairy TXCT, LLC are more fully described below.

Business
The Company processes and distributes soft serve ice cream mix, frozen yogurt
mix, milk and specialty dairy products, many of which are ultra-high temperature
pasteurized, from its facilities in Texas and Connecticut.

Merger
On April 10, 2001, Michael Foods, Inc. and its subsidiaries ("Michael Foods")
was acquired in a transaction (the Merger") led by an investor group comprised
of a management group led by Michael Foods' Chairman, President and Chief
Executive Officer, Gregg Ostrander, affiliates of Jeffrey Michael, a member of
the Michael Foods Board of Directors, and affiliates of two private equity
investment firms, Vestar Capital Partners and Goldner Hawn Johnson & Morrison
Incorporated, collectively, M-Foods Investors, LLC. Under the terms of the
Merger agreement, all outstanding shares of Michael Foods common stock were
converted into the right to receive $30.10 per share in cash, or value equal
thereto, and all outstanding stock options were converted into the right to
receive, in cash, $30.10 per share reduced by the exercise price per share for
all shares subject to such stock options. The purchase of the outstanding shares
was financed through new equity financing of approximately $175,000,000, a
senior secured credit facility of up to $470,000,000 at market-based variable
interest rates (effective rate of 7.3% at September 30, 2001), and $200,000,000
of senior subordinated notes at an 11.75% annual interest rate.

Immediately after the close of the Merger, Michael Foods contributed the assets
of its Dairy division into two limited liability corporations, M-Foods Dairy,
LLC and M-Foods Dairy TXCT, LLC (collectively, the "Dairy LLCs") and in exchange
received voting preferred and voting common units from these entities equal to
the fair value of the net assets contributed, which collectively were
approximately $40,000,000 (the approximate fair value contributed to M-Foods
Dairy TXCT, LLC was $10,000,000). The preferred units issued to Michael Foods
have an annual 10% preferred return guarantee and represent 100% of the
preferred units issued and outstanding. In addition, Michael Foods received 5%
of the common units issued by each of the Dairy LLCs with the common units held
by Michael Foods representing 100% of the voting common units issued and
outstanding. These common units have a stated value of $25,000. The remaining
95% of the common units, which are non-voting, are owned by M-Foods Dairy
Holdings, LLC, which is owned by the same owners, or affiliates of such owners,
in the same proportion, as the unit holders of M-Foods Investors, LLC. The Dairy
LLCs common unit interest owned by M-Foods Dairy Holdings, LLC was purchased for
$475,000 as of April 1, 2001.

                                       38
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS
===============================================================================

NOTE A - ORGANIZATION, BUSINESS AND MERGER, (cont.)

Following the Merger, Michael Foods, Inc. became an indirect wholly-owned
subsidiary of M-Foods Investors, LLC and M-Foods Dairy TXCT, LLC became a
majority owned subsidiary of Michael Foods, Inc.

The Merger has been accounted for as a purchase in accordance with Accounting
Principles Board Opinion 16, Business Combinations and EITF 88-16, Basis in
Leveraged Buyout Transactions. Accordingly, the acquired assets and liabilities
have been recorded at fair value for the interests acquired by new investors and
at the carryover basis for continuing investors. As a result, the assets and
liabilities are assigned new values, which are part Predecessor cost and part
fair value, in the same proportions as the carryover basis of the residual
interests retained by the continuing management investors and continuing
affiliate investors of the Michael family and the new interests acquired by the
new investors. The deemed dividend related to the Michael Foods investment in
the assets and liabilities of the Dairy LLCs was pushed down to these majority
owned subsidiaries, as if they were wholly owned subsidiaries since Michael
Foods owns all of the voting stock and the Dairy LLCs are being operated by the
management of Michael Foods. The amount of the deemed dividend at Michael Foods
was $66,631,000. However, the historical cost basis equity of the continuing
investors of the Company was $21,623,000, which exceeded the Company's fair
market value by $11,623,000. This resulted in an allocation of carryover basis
in excess of the fair market value of the Company in the amount of $3,603,000.

For ease of presentation, the Merger has been reflected in the accompanying
financial statements as if it had occurred on April 1, 2001. Management
determined that no material transactions occurred during the period from April 1
through April 9, 2001. The Company's financial statements have been presented on
a comparative basis with the Predecessor's historical operating unit financial
statements, prior to the date of Merger. Different bases of accounting have been
used to prepare the Company and Predecessor financial statements. The primary
differences relate to the 10% yield on preferred units, depreciation and
amortization of fixed assets and other intangible assets recorded at fair value
at the date of acquisition, and income taxes which are payable by the Company's
unit holders.

The fair value contributed by Michael Foods to M-Foods Dairy TXCT, LLC was
$10,000,000 and this amount, plus an additional carryover basis of $3,603,000
was allocated to the acquired assets and liabilities based on their fair values
at April 1, 2001. In addition, $118,750 was contributed by new investors in
exchange for Class B - non voting common units. The fair values of long-term
assets was obtained from a preliminary valuation report issued by a third party
appraisal firm. The allocations were as follows:

<Table>
           <S>                                      <C>
           Working capital                          $6,968,000
           Property, plant & equipment               9,971,000
           Other assets, including goodwill          1,583,000
           Other liabilities                         4,800,000
</Table>

                                       39
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS
===============================================================================

NOTE A - ORGANIZATION, BUSINESS AND MERGER, (cont.)

The following unaudited pro forma revenue and net earnings for the year ended
December 31, 2000 and for the nine months ended September 30, 2001 are derived
from the application of pro forma adjustments to the Predecessor historical
statements of earnings and assumes the Merger had occurred on January 1, 2000:

<Table>
<Caption>
                          Nine months ended              Year ended
                          September 30, 2001          December 31, 2000
                          ----------------------------------------------
<S>                          <C>                         <C>
Revenue                      $76,869,000                 $73,814,000
Net earnings                    (609,000)                 (1,883,000)
</Table>

NOTE B  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The accompanying Predecessor Balance Sheet as of December 31, 2000, the
Predecessor Statements of Operations for the three and nine months ended
September 30, 2000 and the three months ended March 31, 2001, and the
Predecessor Statements of Cash Flows for the nine months ended September 30,
2000 and the three months ended March 31, 2001 have been prepared from the
historical books and records of Michael Foods. The respective Statements of
Operations include an allocation of general and administrative costs incurred by
Michael Foods and allocations from this Operating Unit to the other Dairy LLC
operating unit, M-Foods Dairy, LLC. The accompanying unaudited financial
statements and footnote information for the three and nine month periods ended
September 30, 2000 have been prepared in accordance with Regulation S-X pursuant
to the rules and regulations of the Securities and Exchange Commission ("SEC")
using the historical cost basis of assets and liabilities of the Predecessor.
The accompanying unaudited financial statements and footnote information as of
and for the three and six month periods ended September 30, 2001 have been
prepared in accordance with Regulation S-X pursuant to the rules and regulations
of the SEC using the adjusted cost basis of assets and liabilities of the
Company. 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 and cash flows for the
periods indicated. The Unit's financial statements include an allocation for
general and administrative costs incurred by Michael Foods. Management believes
its allocations to these Operating Unit financial statements are reasonable.
Additionally, Operating Unit equity includes the cumulative net advances between
the Operating Unit and Michael Foods, which are considered additional capital
invested from or, constructive dividends to, Michael Foods. Accordingly, the
accompanying financial statements may not necessarily be indicative of the
results that could have been obtained if the Operating Unit had been operated as
a stand-alone entity. The historical results of the Company and Predecessor for
the periods indicated are not necessarily indicative of the results of the
Company for a full year.

The accounting policies of the Predecessor have been adopted by the Company.

                                       40
<Page>

                             M-FOODS DAIRY TXCT, LLC
              (A MAJORITY OWNED SUBSIDIARY OF MICHAEL FOODS, INC.)
                          NOTES TO FINANCIAL STATEMENTS
===============================================================================

NOTE B  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (cont.)

Use of Estimates
Preparation of the accompanying financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect reported
amounts of assets and liabilities, related revenues and expenses and disclosure
about contingent assets and liabilities at the date of the financial statements.
Actual results could differ from the estimates used by management.

Inventories
Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market.

<Table>
<Caption>
      Inventories consisted of the following:           Company               Predecessor
                                                      -------------           ------------
                                                      September 30,           December 31,
                                                          2001                    2000
                                                      -------------           ------------
      <S>                                               <C>                    <C>
      Raw materials and supplies                        $2,725,000             $1,505,000
      Work in process and finished goods                 1,988,000                890,000
                                                      -------------           ------------
                                                        $4,713,000             $2,395,000
                                                      =============           ============
</Table>

NOTE C - INCOME TAXES

Predecessor
The activity of the Operating Unit has been included in the income tax return of
Michael Foods, Inc. for financial reporting purposes. The Unit has been
allocated a provision for income taxes in an amount generally equivalent to the
provision that would have resulted had the Unit filed a separate income tax
return.


Company
For income tax purposes the Company is a pass through entity, therefore, income
taxes have not been reflected on the Company's financial statements.

NOTE D - COMMITMENTS AND CONTINGENCIES

Litigation
The Company is engaged in routine litigation incidental to its business.
Management believes the ultimate outcome of this litigation will not have a
material effect on the accompanying statements of financial position, liquidity
or results of operations.

                                       41
<Page>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

RESULTS OF OPERATIONS

Readers are directed to Note G - Business Segments for data on the unaudited
financial results of the Company's four business segments for the three months
ended September 30, 2001 and for data on the unaudited financial results of the
Predecessor's four business segments for the three months ended September 30,
2000.

Net sales for the 2001 period were $299,225,000, an increase of 8% compared to
the Predecessor's net sales of $276,568,000 in the 2000 period. Net sales
increased because of the factors discussed in the below divisional reviews,
but were higher in the 2001 period due largely to unit sales growth in three
divisions and inflationary impacts in two divisions.

Egg Products Division net sales for the 2001 period reflected slightly decreased
unit sales and slight price increases for certain egg products. Unit sales rose
for egg substitutes, hardcooked items and precooked products, and declined
slightly for other products, except for dried products, where a moderate decline
was recorded. Graded shell egg prices decreased approximately 8% compared to
third quarter 2000 levels, as reported by Urner Barry Publications - a widely
quoted industry pricing service. Related egg market decreases lowered the cost
of purchased eggs slightly. Approximately two-thirds of the Division's annual
egg needs are purchased under contracts or in the spot market. A substantial
majority of these eggs 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 lower in
the 2001 period, compared to the 2000 period, due mainly to lower prices for
corn. Decreased egg costs from both internal and external sources in the 2001
period, as compared to the 2000 period, were generally met with
flat-to-modestly-higher egg products prices, creating higher margins for certain
egg products, particularly egg substitutes and dried products, and higher
divisional margins in total.

Refrigerated Distribution Division net sales for the 2001 period reflected unit
sales increases for several product lines, with margarine, bagels, and ethnic
items showing particular strength. Unit sales growth resulted primarily from new
customers gained over the past year, as the Crystal Farms brand continues to
expand beyond its traditionally Midwestern core business base. Higher retail
price points for dairy-related products also contributed to the dollar sales
gain in the 2001 period. Margins declined in the key cheese category and for
butter items. A combination of high demand and a low milk supply, due to weather
impacts, caused dairy-related ingredient costs to rise sharply in the first nine
months of 2001. The lack of commensurate increases in selling prices caused
divisional operating profit margins and dollars to weaken considerably compared
to strong 2000 levels, when the relationship between product costs and retail
pricing was more favorable.

                                       42
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
================================================================================

THREE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30,2000, CONT.

Dairy Products Division net sales for the 2001 period reflected higher unit
sales, due mainly to strong creamer and specialty cartoned products sales.
Further, sales of the division's main product line, ultra-high temperature
pasteurized("UHT") dairy mixes, rose on a unit basis. Inflationary impacts from
a year-over-year rise in the national dairy ingredient markets added to dollar
sales growth. The divisional operating profit margin and dollars increased as a
result of the strong volume growth, an improved sales mix, and more efficient
plant operations.

Potato Products Division net sales for the 2001 period reflected unit sales
increases in all product categories. Sales were particularly strong for retail
items. New account activity, same-account sales growth and higher marketing
spending levels all contributed to the sales gain. The operating profit increase
in the 2001 period reflected improved operating costs and the impact of a
favorable sales mix, with retail sales rising as a percent of the divisional
total.

The decrease in our gross profit margin for the period ended September 30, 2001,
as compared to the results of the Predecessor in the 2000 period, reflected the
factors discussed above, particularly increased raw material costs, which were
not able to be fully recovered within the Refrigerated Distribution segment. It
is our 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 increased as a percent of sales in
the period ended September 30, 2001, as compared to the results of the
Predecessor in the 2000 period. This increased expense ratio reflected the
impact of incremental amortization related to the Merger completed in April
2001. Without such Merger effects, operating expenses would have been a roughly
comparable percentage of net sales between periods.

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000

RESULTS OF OPERATIONS

Readers are directed to Note G - Business Segments for data on the unaudited
financial results of the Company's and the Predecessor's four business segments
and must combine three month and six month periods to evaluate the nine months
ended September 30, 2001 with nine months ended September 30, 2000.

Net sales for the Company and the Predecessor in the 2001 period were
$869,961,000, an increase of 9% compared to the Predecessor's net sales of
$795,110,000 in the 2000 period. Net sales increased because of the factors
discussed in the below divisional reviews, but were higher in the 2001 period
due largely to unit sales growth in three divisions and inflationary impacts in
two divisions.

                                       43
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
================================================================================

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000, CONT.

RESULTS OF OPERATIONS, CONT.

Egg Products Division net sales for the 2001 period reflected flat unit sales
and price increases for certain egg products and for shell eggs. Unit sales
rose for several product categories, though frozen and dried products showed
a moderate decline. Graded shell egg prices increased approximately 4%
compared to levels in the first nine months of 2000, as reported by Urner
Barry. Related egg market increases raised the cost of purchased eggs.
Approximately two-thirds of the Division's annual egg needs are purchased
under contracts, or in the spot market. A substantial majority of these eggs
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 lower in the
2001 period, compared to the 2000 period, due mainly to lower prices for
corn. In total, combining the higher cost external eggs with the lower cost
internal eggs, divisional egg costs rose slightly in the 2001 period as
compared to the 2000 period. Such increased egg costs were generally not met
with comparable price changes in egg products prices, creating margin
pressure for certain egg products, particularly frozen items. Also
contributing to the divisional operating profit decline was the impact of
incremental depreciation and amortization related to the Merger completed in
April 2001.

Refrigerated Distribution Division net sales for the 2001 period reflected unit
sales increases for most product lines, with bagels, potato products and ethnic
items showing particular strength. Unit sales growth resulted primarily from new
customers gained over the past year, as the Crystal Farms brand continues to
expand beyond its traditionally Midwestern core business
base. Higher retail price points for dairy-related products also contributed to
the dollar sales gain in the 2001 period. Margins declined in the key cheese
category and for butter items. A combination of high demand and a low milk
supply, due to weather impacts, caused dairy-related ingredient costs to rise
sharply in the first nine months of 2001. The lack of commensurate increases in
selling prices caused divisional operating profit margins and dollars to weaken
considerably compared to strong 2000 levels, when the relationship between
product costs and retail pricing was more favorable.

Dairy Products Division net sales for the 2001 period reflected higher unit
sales due mainly to strong creamer and specialty cartoned products sales.
Further, sales of the division's main product line, UHT dairy mixes, rose on a
unit basis. Inflationary impacts from a year-over-year rise in the national
dairy ingredient markets added to dollar sales growth. The divisional operating
profit margin and dollars increased as a result of the strong volume growth, an
improved sales mix, and more efficient plant operations.

Potato Products Division net sales for the 2001 period reflected unit sales
increases in all product categories. Sales were particularly strong for retail

                                       44
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
================================================================================

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000, CONT.

RESULTS OF OPERATIONS, CONT.

items. New account activity, same-account sales growth and higher marketing
spending levels all contributed to the sales gain. The operating profit increase
in the 2001 period reflected improved operating costs and the impact of a
favorable sales mix, with retail sales rising as a percent of the divisional
total. These favorable developments offset the impacts of increased marketing
spending and incremental depreciation and amortization related to the Merger
completed in April 2001.

The decrease in our gross profit margin for the period ended September 30, 2001,
as compared to the results of the Predecessor in the 2000 period, reflected the
factors discussed above, particularly the increased raw material costs within
the Refrigerated Distribution segment. It is our 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 increased as a percent of sales for
the period ended September 30, 2001, as compared to the results of the
Predecessor in the 2000 period. Operating expenses reflected the impact of
incremental amortization related to the Merger of the Company (see Note A)
completed in April 2001 and expenses associated with terminating our investment
in a Egg Products Division joint venture, which were offset by the final
insurance settlement related to a 1999 Dairy Products Division product
recall. Separate from selling, general and administrative expenses in the
2001 period, the Predecessor recorded non-recurring expenses related to the
Merger for financial, legal, advisory and regulatory filing fees. These
expenses of $11,050,000 are reflected in the Predecessor Consolidated
Statements of Earnings as transaction expenses. Exclusive of such Merger
expenses, selling, general and administrative expenses were a comparable
percentage of net sales in the 2001 period as compared to the 2000 period.

GENERAL

Certain of our products are sensitive to changes in commodity prices.
Value-added egg products, such as extended shelf-life liquid and precooked
products, account for approximately 60% of the Egg Products Division's net
sales. The remainder of Egg Products Division sales is derived from the sale
of other egg products and shell eggs, which vary from being very
commodity-sensitive to somewhat 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. Graded shell egg
pricing in the 2001 period was approximately 4% above 2000 levels, as
measured by a widely quoted pricing service, while feed costs declined
slightly year-over-year. Gross profit margins for extended shelf-life liquid
eggs, egg substitutes, and precooked and hardcooked egg products are less
sensitive to commodity price fluctuations than are other egg products or
shell eggs.

                                       45
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
===============================================================================

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000, CONT.

GENERAL, CONT.

Our Refrigerated Distribution Division derives approximately 75% of its net
sales from refrigerated products produced by others, thereby reducing the
effects of commodity price swings. However, in periods of sharp and
accelerated cost increases there is typically a lag in retail pricing
adjustments, which can result in margin compression. The balance of
refrigerated distribution 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 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 75%-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 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. We plan to continue to invest in
state-of-the-art production facilities to enhance our competitive position.
Historically, we have financed our growth principally from internally generated
funds, bank borrowings, and the issuance of senior debt. We believe such sources
remain viable financing alternatives to meet our anticipated needs.

We invested approximately $13,528,000 in capital expenditures during the six
months ended September 30, 2001. The Predecessor invested approximately
$10,800,000 in capital expenditures during the three months ended March 31,
2001. On a combined basis, we plan to spend approximately $40,000,000 on capital
expenditures in 2001, the majority of which is to expand or update production
capacity for value-added products.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the three months ended September 30, 2001 period were $37,393,000, an increase
of 6% compared to the Predecessor's EBITDA of $35,362,000 in the comparable
three month 2000 period. EBITDA for the Company and the Predecessor in the
nine month 2001 period was $106,169,000, an increase of 4% compared to the
Predecessor's EBITDA of $102,269,000 in the nine month 2000 period. EBITDA
increased because of the factors discussed in the above results of operations
divisional reviews. Our management believes that EBITDA is a relevant
measurement of the Company's financial results, as it is indicative of the
relative strength of the Company's cash flows and is a key measurement
contained in the financial

                                       46
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
================================================================================

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000, CONT.

GENERAL, CONT.

covenants of our senior indebtedness. In addition, as a highly leveraged
company, the holders of the Company's debt have a significant interest in our
cash flows. We compute EBITDA as it is defined in our senior credit agreement
(see Exhibit 10.1 of our Amendment No. 1 to Form S-4 filed with the Securities
and Exchange Commission on July 18, 2001). This definition may not be comparable
to that used by other companies reporting similar financial information.

We believe EBITDA is a widely accepted financial indicator used to analyze and
compare companies on the basis of operating performance. It should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with generally accepted accounting principles and is not
indicative of operating profit or cash flow from operations as determined under
generally accepted accounting principles.

We have senior secured credit facilities in the amount of $470,000,000 with
numerous banks, other financial institutions and investment groups, which
includes a $100,000,000 line of credit expiring in 2007. At September 30, 2001,
there were no borrowings under the line of credit.

The senior credit facility contains various restrictive covenants. It prohibits
us from prepaying other indebtedness, including the notes, and it requires us to
maintain specified financial ratios, such as a minimum ratio of EBITDA to
interest expense, a minimum fixed charge coverage ratio and a maximum ratio of
total debt to EBITDA, and satisfy financial condition tests. In addition, the
senior credit facility prohibits us from declaring or paying any dividends and
prohibits us from making any payments with respect to the notes if we fail to
perform our obligations under, or fail to meet the conditions of, the senior
credit facility or if payment create a default under the senior credit facility.

The indenture governing the notes, among other things, (a) restricts the ability
of the issuer and its subsidiaries, including the guarantors of the notes, to
incur additional indebtedness, issue shares of preferred stock, incur liens, pay
dividends or make certain other restricted payments and enter into certain
transactions with affiliates, (b) places certain restrictions on the ability
of certain of the issuer's subsidiaries, including the guarantors of the notes,
to pay dividends or make certain payments to the issuer and (c) places
restrictions on the ability of the issuer and its subsidiaries, including the
guarantors of the notes, to merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the issuer. The indenture related to these notes and the senior
credit facility also contain various covenants which limit our discretion in the
operation of our businesses.

Our principal sources of funds are anticipated to be cash flows from operating
activities and borrowings under our senior credit facility. We believe that
these funds will provide us with sufficient liquidity and

                                       47
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
===============================================================================

NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2000, CONT.

GENERAL, CONT.

capital resources for us to meet our current and future financial obligations,
as well as to provide funds for our working capital, capital expenditures and
other needs for at least the next 12 months. No assurance can be given, however,
that this will be the case. We may require additional equity or debt financing
to meet our working capital requirements or to fund our acquisition activities,
if any. There can be no assurance that additional financing will be available
when required or, if available, will be on terms satisfactory to us.

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.

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. Our actual financial results could differ
materially from the results estimated by, forecasted by, or implied by us in
such forward-looking statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in the Company's or the Predecessor's market risk
during the nine month period ended September 30, 2001.

                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         None

                                       48
<Page>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K, CONT.

(b)      Reports on Form 8-K

The Company filed a Form 8-K on July 26, 2001 regarding a news release issued to
the Company's debtholders pertaining to the Company's financial results for the
three months ended June 30, 2001 and the pro forma financial results for the six
month period ended June 30, 2001.

Subsequent to the reporting period herein, the Company filed a Form 8-K on
November 8, 2001 regarding a news release issued to the Company's debtholders
pertaining to the Company's financial results for the three months ended
September 30, 2001 and the pro forma financial results for the nine month period
ended September 30, 2001.

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 14, 2001                      By: /s/ Gregg A. Ostrander
                                                -------------------------------
                                                   Gregg A. Ostrander
                                                  (Chairman, President and Chief
                                                   Executive Officer)

Date:  November 14, 2001                      By: /s/ John D. Reedy
                                                -------------------------------
                                                   John D. Reedy
                                                   (Executive Vice President,
                                                   Treasurer, Chief Financial
                                                   Officer and Principal
                                                   Accounting Officer)

                                       49