<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

                                  ANNUAL REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
                     for the Fiscal Year Ended March 2, 2002
                         Commission File Number--0-7277


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

        North Carolina                                   56-0945643
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


                   9990 Princeton Road, Cincinnati, Ohio 45246
                            Telephone: (513) 874-8741
                    (Address of principal executive offices)


             Securities registered pursuant to Section 12(g) of the
                        Securities Exchange Act of 1934:

                           COMMON STOCK, NO PAR VALUE

         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 twelve months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulations S-K is not contained herein and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The number of shares of Pierre Foods, Inc. Common Stock outstanding as
of May 20, 2002 was 5,781,480. The aggregate market value of Pierre Foods, Inc.
Common Stock held by nonaffiliates of Pierre Foods, Inc. as of May 20, 2002 was
$4,947,916.


<PAGE>







                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

Item Number                                                                                         Page
-----------                                                                                         ----

                                                     PART I

<S>              <C>                                                                                <C>
Item  1.         Description of Business..........................................................   1
                           General Development of Business........................................   1
                           Financial Information About Segments...................................   1
                           Narrative Description of Business......................................   1
Item  2.         Properties.......................................................................   4
Item  3.         Legal Proceedings................................................................   4
Item  4.         Submission of Matters to a Vote of Security Holders..............................   4

                                                     PART II

Item  5.         Market for the Registrant's Common Stock and Related Security
                   Holder Matters.................................................................   5
Item  6.         Selected Financial Data..........................................................   5
Item  7.         Management's Discussion and Analysis of Financial Condition and
                   Results of Operations..........................................................   7
                           Results of Operations..................................................   7
                           Critical Accounting Policies and Estimates.............................   9
                           Liquidity and Capital Resources........................................   9
                           Commercial Commitments, Contingencies and Contractual Obligations......  11
                           Inflation..............................................................  11
Item  7A.        Quantitative and Qualitative Disclosures About Market Risk.......................  11
Item  8.         Financial Statements and Supplementary Data......................................  13
Item  9.         Changes in and Disagreements with Accountants on Accounting and
                   Financial Disclosure...........................................................  13

                                                     PART III

Item  10.        Directors and Executive Officers of the Registrant...............................  14
Item  11.        Executive Compensation...........................................................  15
Item  12.        Security Ownership of Certain Beneficial Owners and Management...................  21
Item  13.        Certain Relationships and Related Transactions...................................  22

                                                     PART IV

Item  14.        Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................  25

</TABLE>







                                        i


<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

         Pierre Foods, Inc. (the "Company" or "Pierre Foods") is a vertically
integrated producer and marketer of fully-cooked branded and private label
protein and bakery products and microwaveable sandwiches for the foodservice
market. The Company's predecessor was founded as a North Carolina corporation in
1966 to own and operate restaurants. The Company's food processing business was
originally developed to support its restaurants, but grew independently to
become its principal business. In recognition of this fact, in May 1998, the
Company, then known as "WSMP, Inc.," changed its name to "Fresh Foods, Inc." In
June 1998, the Company consummated the purchase of substantially all of the
business in Cincinnati, Ohio, and a portion of the business in Caryville,
Tennessee (collectively, "Pierre Cincinnati"), conducted by the Pierre Foods
Division of Hudson Foods, Inc. ("Hudson"), a subsidiary of Tyson Foods, Inc.
Pierre Cincinnati was a value-added food processor selling principally to the
foodservice and packaged foods markets. In September 1998, the Company
implemented a tax-exempt reorganization of its corporate structure. The
reorganization established Fresh Foods, Inc. as a holding company, consolidated
32 subsidiaries into 12 subsidiaries and separated the Company's food processing
and restaurant businesses. In July 1999, the Company sold its ham curing
business, and in October 1999, the Company disposed of its restaurant segment.
The Company now operates solely in the food processing business. In December
1999, the Company implemented another tax-exempt reorganization of its corporate
structure to further streamline its operations into one subsidiary. In July
2000, the Company, then known as "Fresh Foods, Inc.," changed its name to
"Pierre Foods, Inc."

         In this document, unless the context otherwise requires, the term
"Company" refers to Pierre Foods, Inc. and its current and former subsidiaries.
The Company's fiscal year ended March 4, 2000 is referred to as "fiscal 2000,"
its fiscal year ended March 3, 2001 is referred to as "fiscal 2001," and its
fiscal year ended March 2, 2002 is referred to as "fiscal 2002."

FINANCIAL INFORMATION ABOUT SEGMENTS

         During fiscal 2002 and fiscal 2001, the Company operated in the segment
of food processing operations, servicing the foodservice industry. In fiscal
2000, the food processing and ham curing segments are presented in the financial
statements as continuing operations. Due to the disposition of the restaurant
segment during fiscal 2000, the results of the restaurant segment are reported
as discontinued operations. The ham curing business, which also was disposed of
during fiscal 2000, did not qualify for discontinued operations presentation.
Information as to revenue, operating profit, identifiable assets, depreciation
and amortization expense and capital expenditures for the Company's food
processing and ham curing business segments is contained herein by reference to
Item 8, "Financial Statements and Supplementary Data," incorporating the
information under the caption "Major Business Segments" in Note 13 to the
Company's consolidated financial statements. Information as to revenue and
operating profit of the restaurant segment is contained herein by reference to
Item 8, "Financial Statements and Supplementary Data," incorporating the
information under the caption "Disposition of the Restaurant Segment" in Note 1
to the Company's consolidated financial statements.

NARRATIVE DESCRIPTION OF THE BUSINESS

         The Company produces a wide variety of fully-cooked beef, chicken and
pork products, hand-held convenience sandwiches and value-added bakery products.
The Company's current product line consists of over 800 stock keeping units
("SKUs"). At its Cincinnati, Ohio facility, the Company produces specialty beef,
poultry and pork products that are typically custom-developed to meet specific
customer requirements. The Company also offers proprietary product development,
special ingredients and recipes, as well as custom packaging and marketing
programs to its customers. The Company's bakery and sandwich assembly plant is
located at the Company's Claremont, North Carolina facility. The Company's
primary markets and distribution channels include national restaurant chains,
primary and secondary schools, vending, convenience stores, warehouse clubs and
other niche foodservice and packaged foods markets.



                                        1


<PAGE>


The following table sets forth the Company's revenue and percent of revenue
contributed during the past three fiscal years by its various product segments
and classes:

<TABLE>
<CAPTION>

                                                                               Revenues by Source
                                               ---------------------------------------------------------------------------------
                                                Fiscal 2002                 Fiscal 2001                   Fiscal 2000
                                                 Revenues                    Revenues                      Revenues
                                               (In Millions)       %       (In Millions)        %        (In Millions)       %
                                               -------------     -----     -------------      -----      -------------     -----
<S>                                              <C>              <C>         <C>              <C>         <C>              <C>
    Food Processing:
       Fully-Cooked Protein Products........     $   139.0        57.3        $  111.2         54.6        $  103.1         57.5
       Microwaveable Sandwiches.............          95.8        39.5            85.2         41.9            66.4         37.1
       Bakery and Other Products............           7.8         3.2             7.1          3.5             7.5          4.2
                                                 ---------       -----        --------        -----        --------        -----
          Total Food Processing.............         242.6       100.0           203.5        100.0           177.0         98.8

    Ham Curing..............................            --          --              --           --             2.1          1.2
                                                 ---------       -----        --------        -----        --------        -----
        Total...............................     $   242.6       100.0        $  203.5        100.0        $  179.1        100.0
                                                 =========       =====        ========        =====        ========        =====


</TABLE>

SALES AND MARKETING

         The Company's team of sales and marketing professionals has significant
experience in the Company's markets for fully-cooked protein and bakery products
and microwaveable sandwiches. The sales, marketing and new product development
functions are organized predominantly by distribution channel. In addition to
its direct sales force, the Company utilizes a nationwide network of over 100
independent food brokers, all of whom are compensated solely by payment of sales
commissions.

         The Company's marketing strategy includes distributor and consumer
promotions, trade promotions, advertising and participation in trade shows and
exhibitions. The Company participates in numerous conferences and is a member of
18 national industry organizations. Company representatives serve on the boards
of a number of industry organizations, including the American Meat Institute,
the American School Food Service Association, and the National Association of
Convenience Stores.

RAW MATERIALS

         The primary materials used in the food processing operations include
boneless chicken, beef and pork cuts, flour, yeast, seasonings, breading, soy
proteins, and packaging supplies. Meat proteins are generally purchased under
seven day payment terms. Historically, raw material costs have remained stable
and any price increases have generally been passed on to the customer. The
Company does not hedge in the futures markets.

         The Company purchases all of its raw materials from outside sources.
The Company does not depend on a single source for any significant item,
believes that its sources of supply for raw materials are adequate for its
present needs and does not anticipate any difficulty in acquiring such materials
in the future.

TRADEMARKS AND LICENSING

         The Company markets food products under a variety of brand names,
including Pierre and Design(TM), Fast Bites(R), Fast Choice(R), Rib-B-Q(R), Mom
`n' Pop's(R) and Chop House(TM). The Company regards these trademarks and
service marks as having significant value in marketing its food products.
Pursuant to licenses acquired in fiscal 1998, the Company began producing and
marketing microwaveable Checkers, Rally's and Nathan's Famous sandwiches through
its existing distribution channels. The term of each such license is subject to
renewal and satisfaction of sales volume requirements. The Company has national
distribution rights for Rally's and Checkers for vending, as well as
distribution rights for Nathan's Famous products.



                                        2


<PAGE>



SEASONALITY

         Except for sales to school districts, which represent approximately 24%
of total sales and which decline significantly during the summer and early
January, there is no seasonal variation in the Company's sales.

COMPETITION

         The food production business is highly competitive and is often
affected by changes in tastes and eating habits of the public, economic
conditions affecting spending habits and other demographic factors. In sales of
meat products, the Company faces strong price competition from a variety of
large meat processing concerns, including Tyson, ConAgra, Zartic, Inc. and
Advance Food Company, and from smaller local and regional operations. In sales
of biscuit and yeast roll products, the Company competes with a number of large
bakeries in various parts of the country. The sandwich industry is extremely
fragmented, with few large direct competitors but low barriers to entry and
indirect competition in the form of numerous other products. The Company's
competitors in the sandwich industry include Market Fare Foods, Bridgford Foods
Corp., Jimmy Dean Foods and E.A. Sween.

RESEARCH AND DEVELOPMENT

         The Company employs eight food technologists in the product and process
development department. Ongoing food production research and development
activities include development of new products, improvement of existing products
and refinement of food production processes. These activities resulted in the
launch of nearly 200 new SKUs in fiscal 2002. Over 28% of fiscal 2002 food
processing sales were related to products developed in the last two years, the
Company's definition of a new product. In fiscal 2002, 2001 and 2000, the
Company spent approximately $373,000, $465,000 and $354,000 respectively, on
product development programs.

GOVERNMENT REGULATION

         The food production industry is subject to extensive federal, state and
local government regulation. The Company's food processing facilities and food
products are subject to frequent inspection by the United States Department of
Agriculture ("USDA"), Food and Drug Administration ("FDA") and other government
authorities. In July 1996, the USDA issued strict new policies against
contamination by food-borne pathogens and established the Hazard Analysis and
Critical Control Points ("HACCP") system. The Company is in full compliance with
all FDA and USDA regulations, including HACCP standards.

         The Company's operations are governed by laws and regulations relating
to workplace safety and worker health that, among other things, establish noise
standards and regulate the use of hazardous chemicals in the workplace. The
Company also is subject to numerous federal, state and local environmental laws.
Under applicable environmental laws, the Company may be responsible for
remediation of environmental conditions and may be subject to associated
liabilities relating to its facilities and the land on which its facilities are
or had been situated, regardless of whether the Company leases or owns the
facilities or land in question and regardless of whether such environmental
conditions were created by the Company or by a prior owner or tenant. The
Company does not believe that compliance with environmental laws will have a
material effect upon the capital expenditures, earnings or competitive position
of the Company and its subsidiary.

         The Company's operations are subject to licensing and regulation by a
number of state and local governmental authorities, which include health,
safety, sanitation, building and fire agencies. Operating costs are affected by
increases in costs of providing health care benefits, the minimum hourly wage,
unemployment tax rates, sales taxes and other similar matters over which the
Company has no control. The Company is subject to laws governing relationships
with employees, including minimum wage requirements, overtime, working
conditions and citizenship requirements.

EMPLOYEES

         As of March 2, 2002, the Company employed approximately 1,300 persons.
The Company has experienced no work stoppage attributed to labor disputes and
considers its employee relations to be good.



                                        3


<PAGE>


RESTAURANT OPERATIONS

         During fiscal 2000, the Company disposed of its restaurant segment.
Prior to the disposition, the Company owned and operated 67 restaurants and
franchised an additional 36 restaurants operating under the Sagebrush, Western
Steer, Prime Sirloin and Bennett's concepts. The Company's restaurants were
located in North Carolina, South Carolina, Tennessee and Virginia.

HAM CURING OPERATIONS

         During fiscal 2000, the Company sold its ham curing business. Prior to
the disposition, the Company produced cured hams and ham products for
foodservice and retail grocery customers. The Company's revenues from ham curing
operations totaled approximately $2.1 million during fiscal 2000, representing
1.1% of the Company's revenues from continuing operations.

ITEM  2.  PROPERTIES

         The Company believes that its facilities are generally in good
condition and that they are suitable for their current uses. The Company
nevertheless engages periodically in construction and other capital improvement
projects as the Company believes is necessary to expand and improve the
efficiency of its facilities.

         PRINCIPAL OFFICES. The Company's main office is located in the facility
it owns in Cincinnati, Ohio. The Company also leases 6,000 square feet of
executive office space in Hickory, North Carolina from an affiliated party for
$115,700 per year at terms no less favorable than those which could be obtained
from an unaffiliated third party.

         FOOD PROCESSING PLANTS. The Company produces its fully-cooked meat
products, packaged sandwiches and specialty bread products at facilities it owns
in Cincinnati, Ohio and Claremont, North Carolina. The Cincinnati facility
occupies buildings totaling approximately 200,000 square feet. The Claremont
facility occupies buildings totaling approximately 220,000 square feet. The
Company also owns and uses a 23,000 square foot building in Claremont, North
Carolina for additional office space.

ITEM  3.  LEGAL PROCEEDINGS

         Pierre Foods and its subsidiary are parties in various lawsuits arising
in the ordinary course of business. In the opinion of management, any ultimate
liability with respect to these matters will not have a material adverse effect
on the Company's financial condition, results of operations or cash flows.

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

         No matter was submitted to a vote of security holders during the fourth
quarter of fiscal 2002.


                                        4


<PAGE>



                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         The Company's common stock is quoted on the OTC Bulletin Board (OTCBB)
under the symbol "FOOD.OB." As of May 20, 2002, the Company had approximately
1,452 shareholders of record.

         The following table sets forth the quarterly high and low sales price
per share as reported on NASDAQ for the Company's common stock.

                                                            Range of Prices
                                                          ------------------
                                                            High       Low
                                                          -------    -------
Fiscal year ended March 3, 2001:
   First Quarter......................................... $ 4.813    $ 2.375
   Second Quarter........................................   3.094      1.750
   Third Quarter.........................................   2.500      1.125
   Fourth Quarter........................................   1.250      0.750

Fiscal year ended March 2, 2002:
   First Quarter......................................... $ 1.937    $ 0.906
   Second Quarter........................................   2.280      1.190
   Third Quarter.........................................   2.200      1.240
   Fourth Quarter........................................   2.390      1.050

   The closing bid price on May 20, 2002 was $2.30 per share.

   The Company did not declare a cash dividend during fiscal 2002 or fiscal
2001. The Company's debt instruments restrict its ability to pay dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and the Company's consolidated
financial statements and supplementary data. Regardless of the scope of such
restrictions, the Company's policy is to reinvest any earnings rather than pay
dividends.

ITEM  6.  SELECTED FINANCIAL DATA

         The following selected historical financial information has been
derived from audited consolidated financial statements of the Company. Such
financial information should be read in conjunction with the fiscal 2002
consolidated financial statements of the Company, the notes thereto and the
other financial information contained elsewhere herein. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and supplementary data.



                                        5


<PAGE>

<TABLE>
<CAPTION>


                                                                                Fiscal Years Ended
                                                      -------------------------------------------------------------------------
                                                       March 2,        March 3,        March 4,       March 6,         Feb.27,
                                                        2002            2001             2000           1999             1998
                                                      ---------       ---------       ---------       ---------       ---------
                                                                  (dollars in thousands, except per share data)

<S>                                                   <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA:
   Revenues ....................................      $ 242,605       $ 203,475       $ 179,415       $ 150,455       $  66,245
   Cost of goods sold ..........................        160,781         133,385         115,968         101,356          59,153
   Selling, general and administrative .........         61,726          55,752          59,193          33,673          10,356
   Loss on sale of Mom `n' Pop's Country
       Ham, LLC ................................             --              --           2,857              --              --
   Net (gain) loss on disposition of property,
       plant and equipment .....................             84              27             (22)          1,004            (640)
   Depreciation and amortization ...............          6,438           6,238           5,662           4,902           1,615
                                                      ---------       ---------       ---------       ---------       ---------
   Operating income (loss) .....................         13,576           8,073          (4,243)          9,520          (4,239)
   Interest expense ............................         13,206          13,334          14,986          12,332           1,762
   Other income, net ...........................            364             281             169             409             204
   Income tax benefit (provision) ..............           (733)            767           4,825             613           1,926
                                                      ---------       ---------       ---------       ---------       ---------
   Income (loss) from continuing operations ....              1          (4,213)        (14,235)         (1,790)         (3,871)
   Income from discontinued operations (2) .....             --              --           2,828           4,285           6,121
   Gain on disposal of discontinued
       operations (2) ..........................             --              --           6,802              --              --
   Extraordinary item (1) ......................             --            (455)            (52)            (64)             --
                                                      ---------       ---------       ---------       ---------       ---------
   Net income (loss) ...........................      $       1       $  (4,668)      $  (4,657)      $   2,431       $   2,250
                                                      =========       =========       =========       =========       =========

NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:
   Income (loss) from continuing operations ....      $      --       $   (0.73)      $   (2.45)      $   (0.30)      $   (0.68)
   Income from discontinued operations .........             --              --            0.49            0.72            1.08
   Gain on disposal of discontinued operations .             --              --            1.17              --              --
   Extraordinary item ..........................             --           (0.08)          (0.01)          (0.01)             --
                                                      ---------       ---------       ---------       ---------       ---------

   Net income (loss) ...........................      $      --       $   (0.81)      $   (0.80)      $    0.41       $    0.40
                                                      =========       =========       =========       =========       =========

BALANCE SHEET DATA:
   Working capital (deficit) ...................      $  37,061       $  35,890       $  36,403       $  27,126       $    (497)
   Total assets ................................        169,821         160,308         164,727         216,989          71,656
   Total debt ..................................        121,231         115,165         115,479         146,940          20,918
   Shareholders' equity ........................         27,207          26,867          31,533          41,152          39,227

OTHER DATA:
   Capital expenditures ........................      $   5,994       $  2,764        $   5,488       $  15,479       $  13,252

</TABLE>
-----------------

(1)      Reflects an extraordinary loss from early extinguishment of debt in the
         amount of $455 in fiscal 2001, $52 in fiscal 2000 and $64 in fiscal
         1999.

(2)      Reflects income from discontinued operations in the amount of $2,828 in
         fiscal 2000, $4,285 in fiscal 1999 and $6,121 in fiscal 1998. In
         addition, reflects income from discontinued operations of $6,802 in
         fiscal 2000. See Note 1 - Basis of Presentation, Acquisition and
         Discontinued Operations to the consolidated financial statements.




                                        6


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         Certain statements made in this document are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve risks and uncertainties that may
cause actual results to differ materially from expected results. These risks and
uncertainties include: substantial leverage and insufficient cash flow from
operations; restrictions imposed by the Company's debt instruments; management
control; factors inhibiting takeover; limited secondary market for common stock;
price volatility; restriction of payment of dividends; competitive
considerations; government regulation; general risks of the food industry;
adverse changes in food costs and availability of supplies; dependence on key
personnel; potential labor disruptions and the effects of the pending management
buyout. This list of risks and uncertainties is not exhaustive. Also, new risk
factors emerge over time. Investors should not place undue reliance on the
predictive value of forward-looking statements.

RESULTS OF OPERATIONS

         The Company's operations historically have been classified into three
business segments: food processing operations, principally fully-cooked protein
and sandwich production; restaurant operations, comprised of the Sagebrush,
Western Steer, Prime Sirloin and Bennett's concepts; and ham curing operations.
As discussed in Note 1 to the Consolidated Financial Statements, the Company
sold its ham curing business effective July 2, 1999, and sold its restaurant
operations effective October 8, 1999. The results of the restaurant operations
are presented as a discontinued operation in the Company's Consolidated
Statements of Operations, and are excluded from the table below. In fiscal 2000,
the ham curing operations do not qualify for discontinued operations
presentation.

         As a part of the Pierre Cincinnati acquisition, the Company changed its
interim fiscal periods to conform with the standard food processing industry
interim periods. In line with this, each quarter of the fiscal year contains 13
weeks except for the infrequent fiscal years with 53 weeks. The results for
fiscal 2002, 2001 and 2000 contain 52 weeks.

         Results for fiscal 2002, 2001 and 2000 for each segment are shown
below:

<TABLE>
<CAPTION>

                                                                                Fiscal Years Ended
                                                                    ------------------------------------------
                                                                    March 2,         March 3,         March 4,
                                                                      2002             2001             2000
                                                                    --------         --------         --------
                                                                                   (in millions)
<S>                                                                 <C>              <C>              <C>
Revenues, net:
   Food processing .......................................          $  242.6         $  203.5         $  177.0
   Ham curing ............................................                --               --              2.1
                                                                    --------         --------         --------
         Total ...........................................             242.6            203.5            179.1
                                                                    --------         --------         --------
Cost of goods sold:
   Food processing .......................................             160.8            133.4            113.5
   Ham curing ............................................                --               --              2.1
                                                                    --------         --------         --------
         Total ...........................................             160.8            133.4            115.6
                                                                    --------         --------         --------
Selling, general and administrative ......................              61.7             55.8             59.2
Loss on sale of Mom `n' Pop's Country Ham, LLC ...........                --               --              2.8
Net loss on disposition of property, plant and equipment .               0.1               --               --
Depreciation and amortization ............................               6.4              6.2              5.7
                                                                    --------         --------         --------
Operating income (loss) ..................................              13.6              8.1             (4.2)
Interest and other expense, net ..........................             (12.9)           (13.1)           (14.8)
                                                                    --------         --------         --------
Income (loss) from continuing operations before income tax               0.7             (5.0)           (19.0)
Income tax (provision) benefit ...........................              (0.7)             0.8              4.8
                                                                    --------         --------         --------
Income (loss) from continuing operations .................                --             (4.2)           (14.2)
Income from discontinued restaurant segment ..............                --               --              2.8
Gain on disposal of discontinued restaurant segment ......                --               --              6.8
Extraordinary item .......................................                --             (0.5)            (0.1)
                                                                    --------         --------         --------
Net income (loss) ........................................          $     --         $   (4.7)        $   (4.7)
                                                                    ========         ========         ========

</TABLE>


                                        7


<PAGE>



FISCAL 2002 COMPARED TO FISCAL 2001

         REVENUES, NET. Net revenues increased by $39.1 million, or 19.2%. The
increase in net revenues was due the introduction of new products and to an
increase in demand in all core customer channels.

         COST OF GOODS SOLD. Cost of goods sold increased by $27.4 million, or
20.5%. As a percentage of revenues, cost of goods sold increased from 65.6% to
66.3%. This increase primarily was due to an increase in raw material prices and
a change in product mix to lower margin product, offset by improved production
efficiencies.

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased by $6.0 million, or 10.7%, primarily due to an
increase in overhead costs. As a percentage of revenues, selling, general and
administrative expenses decreased from 27.4% to 25.4%, primarily due to cost
reduction initiatives in fiscal 2002.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
by $.2 million, or 3.2%, due to the increase in capital expenditures. As a
percentage of revenues, depreciation and amortization decreased from 3.1% to
2.7%.

         OTHER EXPENSE, NET. The primary component of net other expense for
fiscal 2002 and fiscal 2001 is interest expense. Interest expense consists
primarily of interest on fixed rate long-term debt, and decreased from $13.3
million to $13.2 million.

         INCOME TAX PROVISION. The effective tax rate for fiscal 2002 continuing
operations was 99.9% compared to 15.4% for fiscal 2001. The increase in the
effective tax rate is due primarily to the effects of permanent timing
differences.

FISCAL 2001 COMPARED TO FISCAL 2000

         REVENUES, NET. Net revenues increased by $24.4 million, or 13.6%, due
to a $26.5 million (15.0%) increase in the food processing segment, offset by a
$2.1 million (100.0%) decrease in the ham curing segment. The increase in food
processing revenues was due to an increase in demand in all core customer
channels. The decrease in ham curing net revenues was due to the Company's
strategic decision to exit the ham curing business, which was effective July 2,
1999.

         COST OF GOODS SOLD. Cost of goods sold increased by $17.8 million, or
15.4%, comprised of a $19.9 million (17.5%) increase in the food processing
segment, offset by a $2.1 million (100.0%) decrease in the ham curing segment
due to the Company's sale of the ham curing business. As a percentage of net
food processing revenues, food processing cost of goods sold increased from
62.1% to 63.4%. This increase was due to a shift in demand to product categories
with lower margins.

         SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses decreased by $3.4 million, or 5.8%, primarily due to a
decrease in overhead costs following the divestitures of the restaurant
operations and ham curing business and subsequent corporate restructuring in
fiscal 2000. As a percentage of net operating revenues, selling, general and
administrative expenses decreased from 33.0% to 27.4% for the same reasons.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
by $.6 million, or 10.2%, primarily due to routine capital expenditures. As a
percentage of net operating revenues, depreciation and amortization decreased
from 3.2% to 3.1%.

         OTHER EXPENSE, NET. Net other expense decreased by $1.8 million, or
11.9%. This decrease primarily was due to a change in the credit facility and
decreased borrowings under that facility (see --- "Liquidity and Capital
Resources" below). Other non-operating expenses were not.

         INCOME TAX BENEFIT. The effective tax rate for fiscal 2001 continuing
operations was 15.4% compared to 25.3% for fiscal 2000. The decrease in the
effective tax rate is due primarily to the change in estimated tax benefit from
the prior year in connection with the completion of the income tax return,
combined with the effects of permanent timing differences.



                                        8


<PAGE>



CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
appropriate application of certain accounting policies, many of which require
the Company to make estimates and assumptions about future events and their
impact on amounts reported in the financial statements and related notes. Since
future events and the impact of those events cannot be determined with
certainty, the actual results will inevitably differ from the Company's
estimates. Such differences could be material to the financial statements.

         The Company believes its application of accounting policies, and the
estimates inherently required therein, are reasonable. These accounting policies
and estimates are constantly reevaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, the Company's application of
accounting policies has been appropriate, and actual results have not differed
materially from those determined using necessary estimates.

         The following critical accounting policies affect the Company's more
significant judgments and estimates used in the preparation of its financial
statements.

         REVENUE RECOGNITION. Revenue from sales of food processing products is
recorded at the time title transfers. Standard shipping terms are FOB
destination, therefore title passes at the time the product is delivered to the
customer. Revenue is recognized as the net amount to be received after
deductions for estimated discounts, product returns and other allowances. These
estimates are based on historical trends and expected future payments (see also
PROMOTIONS below).

         PROMOTIONS. Promotional expenses associated with rebates, marketing
promotions and special pricing arrangements are recorded as a reduction of
revenues at the time the sale is recorded. Certain of these expenses are
estimated based on expected future payments to be made under these programs. The
Company believes the estimates recorded in the financial statements are
reasonable estimates of the Company's future liability.

         GOING CONCERN ASSUMPTION. Significant assumptions underlie the belief
that the Company anticipates that its fiscal 2003 cash requirements for working
capital and debt service will be met through a combination of funds provided by
operations and borrowings under the anticipated $50 million Foothill Capital
credit facility, including, among other things, that the Company will succeed in
implementing its business strategy and in closing the Foothill Capital credit
facility and that there will be no material adverse developments in the
business, liquidity or significant capital requirements of the Company.

LIQUIDITY AND CAPITAL RESOURCES

          Net cash provided by operating activities was $9.9 million and $2.1
million for fiscal 2002 and fiscal 2001, respectively, compared to cash used in
operating activities of $6.7 million in fiscal 2000. The increase in net cash
provided by operating activities from fiscal 2001 to fiscal 2002 was primarily
due to the increase in operating income of $5.5 million. The increase in net
cash provided by operating activities from fiscal 2000 to fiscal 2001 was
primarily due to a decrease in overhead costs following the divestitures of the
restaurant operations and ham curing business and subsequent corporate
restructuring in fiscal 2000. The primary components of net cash provided by
operating activities for fiscal 2002 were: (1) a decrease in inventories of $3.0
million and (2) an increase in trade accounts payable and other accrued
liabilities of $2.4 million, offset by (3) an increase in accounts receivable of
$3.3 million. The primary components of net cash provided by operating
activities for fiscal 2001 were: (1) a decrease in net loss from continuing
operations from $14.2 million in fiscal 2000 to $4.2 million in fiscal 2001, (2)
net income tax refunds received of $1.5 million and (3) an increase in accrued
payroll of $1.5 million, offset by (4) a decrease in accounts payable and other
accrued liabilities, excluding accrued payroll, of $1.0 million and (5) an
increase in accounts receivable and inventories of $2.8 million. The Company had
positive working capital at March 2, 2002 and March 3, 2001 of $37.1 million and
$35.9 million, respectively.

         Cash flows used in investing activities were $7.3 million for fiscal
2002. The primary component was for routine capital expenditures totaling $6.0
million. Cash flows used in investing activities were $2.5 million for fiscal
2001. The primary component was for routine capital expenditures totaling $2.8
million, offset by the collection of a related party note receivable of $.2
million. Cash flows provided by investing activities were $45.2 million in
fiscal 2000. The primary components were proceeds from the sales of certain of
the Company's assets and the restaurant segment in the amount of $50.1 million,
offset by capital expenditures for the food processing and restaurant segments
totaling $5.5 million.



                                        9


<PAGE>


         Cash flows provided by financing activities were $0.2 million for
fiscal 2002, due the capital contribution of the special purpose leasing entity
(see AIRCRAFT OPERATING LEASE AGREEMENT below), offset by principal payments on
the Company's capital leases and principal payments related to the obligation of
the special purpose leasing entity. Cash flows used in financing activities were
$0.5 million for fiscal 2001. The major components were principal payments on
the Company's capital leases of $0.3 million and fees of $0.2 million associated
with the Company's $25 million revolving credit facility secured May 24, 2000.
Cash flows used in financing activities were $37.4 million in fiscal 2000. The
major components of the cash flows used in fiscal 2000 were (1) the early payoff
of the Company's industrial revenue bonds of $2.1 million, (2) repayment of
borrowings under the revolving credit facility with proceeds from the
disposition of the restaurant segment of $38.3 million, (3) a loan to a
principal shareholder of $5.0 million and (4) the repurchase of the Company's
common stock of $1.0 million.

         Effective May 24, 2000, the Company secured a three-year $25 million
revolving credit facility, under which the Company may borrow up to an amount
(including standby letters of credit up to $5 million) equal to the lesser of
$25 million less required minimum availability or a borrowing base (comprised of
eligible accounts receivable and inventory). Funds available under the facility
are available for working capital requirements, permitted investments and
general corporate purposes. Borrowings under the facility bear interest at
floating rates based upon the interest rate option selected from time to time by
the Company, and are secured by a first priority security interest in
substantially all of the accounts receivable and inventory of the Company. In
addition, the Company is required to meet certain financial covenants regarding
net worth, cash flow and restricted payments, including limited dividend
payments.

         On May 10, 2002, the Company signed a binding letter agreement with
Foothill Capital Corporation ("Foothill Capital"), the terms of which will
replace the Company's $25 million credit facility. Under the letter agreement,
Foothill Capital will extend a five-year secured credit facility to the Company
in an aggregate amount up to $50 million, which includes a $16 million term loan
subline, a $10 million capital expenditure subline and a $7 million letter of
credit subfacility. The collateral for the facility will include substantially
all of the Company's assets. The Company expects to close on the facility on or
before May 31, 2002, the expiration date of the commitment letter.

         At March 2, 2002, the Company had $4.6 million in cash or cash
equivalents on hand, had no outstanding borrowings under the revolving credit
facility, and had approximately $20.0 million of additional borrowing
availability. At March 2, 2002, the Company was in compliance with the financial
covenants under the facility, but continued compliance will depend upon future
cash flows and net income, which are not assured.

         Fiscal 2002 operating cash flows were sufficient to provide necessary
working capital and to service existing debt. These cash requirements were
satisfied through a combination of funds provided by cash on hand at the end of
fiscal 2001 and borrowings under the $25 million revolving credit facility. The
Company anticipates that its fiscal 2003 cash requirements for working capital
and debt service will be met through a combination of funds provided by
operations and borrowings under the anticipated $50 million Foothill Capital
credit facility.

         The Company has budgeted approximately $13.2 million for capital
expenditures in fiscal 2003. These expenditures are primarily devoted to a plant
expansion in order to maintain the current revenue of growth trend. Additional
expenditures are designated for routine food processing capital improvement
projects and other miscellaneous expenditures. The Company believes that funds
from operations and funds from the anticipated $50 million Foothill Capital
credit facility, as well as the Company's ability to enter into capital or
operating leases, will be adequate to finance these capital expenditures.

         If Pierre continues its historical revenue growth trend as expected,
then the Company will be required to raise and invest additional capital for
additional plant expansion projects to provide operating capacity to satisfy
increased demand. The Company believes that future cash requirements for these
plant expansion projects would need to be met through other long-term financing
sources, such as an increase in borrowing availability under the $25 million
credit facility or its anticipated $50 million credit facility with Foothill
Capital, the issuance of industrial revenue bonds or equity investment. The
incurrence of additional long-term debt is governed and restricted by the
Company's existing debt instruments. Furthermore, there can be no assurance that
additional long-term financing will be available on advantageous terms (or any
terms) when needed by the Company.



                                       10


<PAGE>


         The Company anticipates continued sales growth in key market areas. As
noted above, however, this growth will require future capital expansion projects
to increase existing plant capacity to satisfy increased demand. Sales growth,
improved operating performance and expanded plant capacity - none of which is
assured - will be necessary for the Company to continue to service existing
debt.

         AIRCRAFT OPERATING LEASE AGREEMENT. During the fourth quarter of fiscal
2002, the Company leased an aircraft from Columbia Hill Aviation, LLC ("Columbia
Hill Aviation"), owned 100% by PF Management. Columbia Hill Aviation is not a
subsidiary of the Company, however the Company considers Columbia Hill Aviation
a non-independent special purpose leasing entity. Accordingly, Columbia Hill
Aviation's financial condition, results of operations and cash flows have been
included in the Company's consolidated financial statements.

         Effective March 1, 2002, the Company's original operating lease was
replaced with a four-year non-exclusive operating lease agreement. Pursuant to
the new lease, the Company is obligated to make minimum quarterly lease payments
for the right to use the aircraft for a specified number of hours. Under this
lease arrangement, Columbia Hill Aviation is responsible for all expenses
incurred in the operation and use of the aircraft, except that the Company must
provide its own crew. The Company obtained a fairness opinion that states that
the agreement is fair to the Company from a financial point of view. In
addition, this relationship was reviewed and approved by the Company's Sensitive
Transactions Committee and the Board of Directors. See further discussion at
Note 16 to the Consolidated Financial Statements.

         Under the terms of the operating lease agreement with Columbia Hill
Aviation, and the financing arrangements between Columbia Hill Aviation and its
creditor, the Company does not maintain the legal right of ownership to the
aircraft, nor does Columbia Hill Aviation's creditor maintain any legal recourse
to the Company.

COMMERCIAL COMMITMENTS, CONTINGENCIES AND CONTRACTUAL OBLIGATIONS

         See Note 14 to the Consolidated Financial Statements for a discussion
of commitments, contingencies and contractual obligations.

INFLATION

         The Company believes that inflation has not had a material impact on
its results of operations for fiscal 2002, fiscal 2001 or fiscal 2000. The
Company does not expect inflation to have a material impact on its results of
operations for fiscal 2003.

ITEM  7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risk stemming from changes in interest
rates, foreign exchange rates and commodity prices. Changes in these factors
could cause fluctuations in the Company's financial condition, results of
operations and cash flows. The Company owned no derivative financial instruments
or nonderivative financial instruments held for trading purposes at March 2,
2002, March 3, 2001 or March 4, 2000. Certain of the Company's outstanding
nonderivative financial instruments at March 2, 2002 are subject to interest
rate risk, but not subject to foreign currency or commodity price risk.

INTEREST RATE RISK

         The Company manages the potential loss on long-term debt from changing
interest rates by issuing a combination of fixed and variable-rate debt in
amounts and maturities that management considers appropriate. Of the Company's
long-term debt outstanding at March 2, 2002, all principal amounts were accruing
interest at fixed rates. In the future, should the Company borrow funds under
its variable-rate revolving credit facility, which may include up to $50 million
of variable rate debt under the anticipated Foothill Capital credit facility, a
rise in prevailing interest rates could adversely affect the Company's financial
condition, results of operations and cash flows. The following table summarizes
the Company's market risks associated with long-term debt outstanding at March
2, 2002. The table presents principal cash outflows and related interest rates
by maturity date.


                                       11


<PAGE>


                                                 March 2, 2002
                                        Expected Maturities in Fiscal Years


                                                 Long-Term Debt
                                        -----------------------------------
                                                Weighted Average
                                        -----------------------------------
                                        Fixed Rate            Interest Rate
                                        ----------            -------------

           2003                        $     49,686               9.28%
           2004                              47,605               9.28%
           2005                                  --                 --
           2006                         115,000,000              10.75%
           Thereafter                            --                 --
                                       ------------
           Total                       $115,097,291              10.75%
                                       ============

           Fair Value                  $ 57,597,291              10.75%


FOREIGN EXCHANGE RATE RISK

         The Company primarily bills customers in foreign countries in US
dollars. However, a significant decline in the value of currencies used in
certain regions of the world as compared to the US dollar could adversely affect
product sales in those regions because the Company's products may be more
expensive for those customers to pay for in their local currency. At March 2,
2002, all trade receivables were denominated in US dollars.

COMMODITY PRICE RISK

         Certain raw materials used in food processing products are exposed to
commodity price changes. Increases in the prices of certain commodity products
could result in higher overall production costs. The Company manages this risk
through purchase orders, non-cancelable contracts and by passing on such cost
increases to customers. The Company's primary commodity price exposures relate
to beef, pork, poultry, soy and packaging materials used in food processing
products. At March 2, 2002, the Company evaluated commodity pricing risks and
determined it was not currently beneficial to use derivative financial
instruments to hedge the Company's current positions with respect to such
pricing exposures.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The Company's nonderivative financial instruments consist primarily of
cash and cash equivalents, trade and note receivables, trade payables and
long-term debt. The estimated fair values of the financial instruments have been
determined by the Company using available market information and appropriate
valuation techniques. Considerable judgment is required, however, to interpret
market data to develop the estimates of fair value. Accordingly, the estimates
presented are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts. See further discussion at Note 12 to the Consolidated Financial
Statements.



                                       12


<PAGE>


MANAGEMENT BUYOUT

         On April 26, 2001, the Company signed a definitive exchange agreement
documenting a management buyout proposal by PF Management. In July, the Special
Committee of the Board of Directors of the Company received a competing proposal
from William E. Simon & Sons ("Simon") and Triton Partners ("Triton") in which
Simon and Triton proposed to commence a tender offer to purchase the Company's
common stock for $2.50 per share, subject to certain conditions. The Special
Committee was considering the Simon and Triton proposal in light of the exchange
agreement and other factors when the Company was contacted in August by counsel
to an Ad Hoc Committee of holders of the Company's 10-3/4% Senior Notes Due 2006
who stated that the members of the Ad Hoc Committee, collectively owning at
least $90 million in aggregate principal amount of the Senior Notes, were
interested in negotiating with the Company to restructure the Company's debt and
equity capital. The Special Committee and the Board of Directors decided that
the Company should pursue these negotiations; however, when the Company and the
Ad Hoc Committee were unable to agree on a mutually acceptable proposal, the
Company terminated formal negotiations with the Ad Hoc Committee.

         On December 13, 2001, Simon entered into an agreement with PF
Management, guaranteed by the Company, whereby Simon agreed to assist PF
Management in completing the management buyout and possible subsequent
restructurings of PF Management and the Company. Commensurate with the signing
of this agreement, Simon withdrew its offer made in July with Triton. Following
the signing of this agreement, PF Management and the Company entered into an
amendment of the definitive exchange agreement. The amendment, dated December
20, 2001, provides for an increase in the exchange price to be paid in the
management buyout from $1.21 to $2.50 per share.

         The Company has filed a preliminary proxy statement in preparation for
a special meeting of the shareholders to consider the management buyout
proposal, which is subject to SEC review.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this Item is set forth on pages F-1 through
F-31.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None.



                                       13


<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                        DIRECTORS AND EXECUTIVE OFFICERS

         JAMES C. RICHARDSON, JR., CHAIRMAN, age 53, has been a director since
1987, and became Chairman of the Board of Directors on December 16, 1999. From
1993 until then he had served as Chief Executive Officer of the Company. From
1996 until becoming Chairman, he had served as Vice Chairman. Mr. Richardson has
served the Company as an executive officer since 1987, including Executive Vice
President from 1989 to 1993 and President from 1993 to 1996.

         DAVID R. CLARK, VICE CHAIRMAN, age 45, has been a director since 1996
and Vice Chairman since 1999. He joined the Company as its President and Chief
Operating Officer in 1996 and held those positions until he became Vice
Chairman. From 1994 to 1996, he served as Executive Vice President and Chief
Operating Officer of Bank of Granite, located in Granite Falls, North Carolina.

         E. EDWIN BRADFORD, DIRECTOR, age 59, has been a director since 1993. In
1977, he founded Bradford Communications, Inc., a Hickory, North Carolina
marketing and advertising firm. During fiscal 2001, Mr. Bradford served as a
member of the Sensitive Transactions and Special Committees of the Board of
Directors. He continues to serve on both Committees.

         BOBBY G. HOLMAN, DIRECTOR, age 66, has been a director since 1994. He
served as the Company's Chief Financial Officer and Treasurer from 1994 until
his retirement in 1997. During fiscal 2001, Mr. Holman was a member of the Audit
and Special Committees of the Board of Directors. He continues to serve on and
chairs both Committees.

         RICHARD F. HOWARD, DIRECTOR, age 52, has been a director since 1987. He
served as Chairman of the Board of Directors from 1993 until Mr. Richardson
became Chairman in 1999. Mr. Howard served as Executive Vice President of the
Company from 1989 to 1993 and as Chief Financial Officer and Treasurer from 1989
to 1994. During fiscal 2001, Mr. Howard was a member of the Executive
Compensation Committee of the Board of Directors, and continues to serve on that
Committee.

         LEWIS C. LANIER, DIRECTOR, age 53, has been a director since 1988. He
is a partner in the Orangeburg, South Carolina, law firm of Lanier & Knight,
LLC. Until he co-founded that firm in August 1999, he had been a member of the
Orangeburg law firm of Horger, Horger, Lanier & Knight, L.L.P., since joining
the firm's predecessor in 1985. During fiscal 2001, Mr. Lanier served on the
Executive Compensation and Sensitive Transactions Committees of the Board of
Directors. He continues to serve on both committees and chairs the Executive
Compensation Committee.

         WILLIAM R. McDONALD III, DIRECTOR, age 68, has been a director since
1991. From 1989 until his retirement in 1999, he was Branch Manager of American
Pharmaceutical Services, a subsidiary of Mariner Post-Acute Network, or its
predecessors. American Pharmaceutical Services provides pharmaceutical needs and
prescription services to nursing homes. Mr. McDonald served as Mayor of the City
of Hickory, North Carolina, an elective office he has held from 1981 through
2001. During fiscal 2001, he served on the Audit and Sensitive Transactions
Committees of the Company's Board of Directors. He continues to serve on both
Committees and chairs the Sensitive Transactions Committee.

         BRUCE E. MEISNER, DIRECTOR, age 52, was elected to the Board of
Directors by the Board itself on February 3, 2000 to fill the unexpired term of
L. Dent Miller, who had resigned from the Board concurrent with his retirement
from the Company. Mr. Meisner is the proprietor of Bruce E. Meisner Appraisal
Company in Hickory, North Carolina, a company providing real estate appraisal
services, and has been the proprietor since 1985. During fiscal 2001,
Mr. Meisner served on the Audit, Executive Compensation and Special Committees.
He continues to serve on those Committees.



                                       14


<PAGE>


         NORBERT E. WOODHAMS, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR,
age 56, a director since 1998, became the Company's President and Chief
Executive Officer on December 16, 1999. Immediately prior to his election to
those offices, Mr. Woodhams was President of Pierre Foods, LLC, the Company's
operating subsidiary, having served in that position since the Company's
acquisition of Pierre Cincinnati in June 1998. From 1994 to 1998, he served as
President of Hudson Specialty Foods, a food processing division of Hudson. Upon
the acquisition of Hudson by Tyson in January 1998, Mr. Woodhams became
President of Pierre.

         PAMELA M. WITTERS, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY,
age 45, became the Company's Chief Financial Officer on December 16, 1999, and
Senior Vice President on October 26, 2000. She served the Company as Vice
President of Finance from 1998 to 1999. From 1994 to 1998, she worked with
Deloitte & Touche LLP in Hickory, North Carolina.

         ROBERT C. NAYLOR, SENIOR VICE PRESIDENT OF SALES, age 49, became the
Company's Senior Vice President of Sales on December 16, 1999. Immediately
prior, he was Senior Vice President of Sales of Pierre Foods, LLC, the Company's
operating subsidiary, having served in that position since the Company's
acquisition of Pierre Cincinnati in June 1998. From 1978 to 1998, he served in
various sales positions, including Vice President of Sales.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own ten percent or
more of the Company's common stock to file with the SEC initial reports of
ownership and reports of changes in ownership of the Company's common stock.
Such persons are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based upon
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, no persons failed to make
timely filings during the Company's fiscal year ended March 2, 2002, except for
the untimely filing of a Form 3 filed for Robert C. Naylor.

ITEM 11. EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

         The following information relates to compensation paid by the Company
to its Chief Executive Officer and each of the highly compensated Executive
Officers (collectively, the "Named Executive Officers"). The Company granted no
options during fiscal 2002.


<TABLE>
<CAPTION>


                                                      Annual Compensation
                                                      -------------------                    Long Term
           Name and            Fiscal                                                       Compensation         All Other
      Principal Position        Year        Salary           Bonus        Other            Option Awards       Compensation
      ------------------        ----        ------           -----       -------           -------------       ------------
                                             ($)              ($)        ($) (1)            (# of Shares         $      (2)
                                                                                             Underlying
                                                                                              Options)
 --------------------------------------------------------------------------------------------------------------------------
<S>                             <C>     <C>            <C>               <C>                     <C>              <C>
 James C. Richardson, Jr.       2002    $  481,148(3)  $  750,000(4)     $207,314                0               $     0
     Chairman                   2001             0(3)   1,775,000(4)            0                0                     0
                                2000             0(3)   1,145,748(4)      799,522               (5)                    0
 --------------------------------------------------------------------------------------------------------------------------
 David R. Clark                 2002    $  665,604(6)  $1,368,800        $ 18,876                0               $ 3,200
     Vice Chairman              2001       150,000(6)           0               0                0                 3,200
                                2000       150,000(6)   1,261,969(4)      795,522               (5)                3,200
 --------------------------------------------------------------------------------------------------------------------------

</TABLE>



                                       15


<PAGE>
<TABLE>
<CAPTION>


                                                      Annual Compensation
                                                      -------------------                    Long Term
           Name and            Fiscal                                                       Compensation         All Other
      Principal Position        Year        Salary           Bonus        Other            Option Awards       Compensation
      ------------------        ----        ------           -----       -------           -------------       ------------
                                             ($)              ($)        ($) (1)            (# of Shares          $     (2)
                                                                                             Underlying
                                                                                              Options)
 --------------------------------------------------------------------------------------------------------------------------
<S>                             <C>     <C>            <C>               <C>                      <C>             <C>
 Norbert E. Woodhams            2002    $  307,693     $  324,771        $      0                 0               $3,200
   President and                2001       300,000              0               0                 0                3,200
   Chief Executive Officer      2000       275,622        355,007         179,100                (5)               3,200
 --------------------------------------------------------------------------------------------------------------------------
 Pamela M. Witters              2002    $  184,669     $  201,426        $      0                 0               $3,200
   Chief Financial              2001       152,500         20,000               0            25,000                3,200
   Officer, Treasurer and       2000       104,438         73,546               0                 0                  652
   Secretary
 --------------------------------------------------------------------------------------------------------------------------
 Robert C. Naylor               2002    $  193,860     $  202,416        $      0                 0               $1,040
   Senior Vice President        2001       183,600              0               0                 0                1,040
   of Sales                     2000       180,000        116,607               0                 0                1,040
 --------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      For fiscal 2002, consists of the value of life insurance premiums. For
         fiscal 2000, consists of tax "gross up" payments made in connection
         with the payment of transaction success bonuses. For all periods shown,
         company cars and certain other benefits are excluded, as such items did
         not exceed 10% of the individual's annual salary and bonus.

(2)      Includes matching contributions made by the Company to the Company's
         401(k) plan.

(3)      For fiscal 2002, includes compensation by HERTH Management, Inc.
         ("HERTH") and subsequently PF Management through September 3, 2001,
         plus salary beginning September 3, 2001. For fiscal 2001 and 2000, no
         salary was paid to this individual, who was instead compensated solely
         by HERTH. The Company paid PF Management $967,500 in fiscal 2002,
         consisting of $325,000 under the management services agreement,
         $350,000 as a cancellation fee, and $150,000 as bonuses paid to Mr.
         Richardson. The Company paid HERTH $925,000 in fiscal 2002, consisting
         of $325,000 pursuant to the HERTH agreement and an additional $600,000
         in the aggregate as bonuses paid to Mr. Richardson. The Company paid
         HERTH $2,550,000 in fiscal 2001, consisting of $1,300,000 pursuant to
         the HERTH agreement and an additional $1,250,000 in the aggregate as
         bonuses paid to Mr. Richardson for his leadership on strategic
         initiatives. See "Certain Relationships and Related Party
         Transactions."

(4)      For fiscal 2002, includes management performance bonuses of $600,000
         paid directly to HERTH and management performance bonuses of $150,000
         paid directly to PF Management. For fiscal 2001, includes management
         performance bonuses of $1,250,000 paid directly to HERTH, plus $525,000
         paid directly to Mr. Richardson by the Company. For fiscal 2000,
         includes management performance bonuses and transaction success
         bonuses.

(5)      On February 18, 2000, these Named Executive Officers cancelled all
         outstanding options to purchase common stock that had been issued and
         were then outstanding, including options not yet exercisable as well as
         options exercisable as of the date of cancellation. No value was
         received by any of the Named Executive Officers in connection with the
         cancellation of their options.

(6)      For fiscal 2002, excludes $100,000, and for both fiscal 2001 and fiscal
         2000, excludes $200,000 paid by the Company and offset from amounts
         owing to HERTH and subsequently PF Management. See "Employment
         Contracts and Change in Control Agreements" and "Certain Relationships
         and Related Party Transactions."



                                       16


<PAGE>


                   AGGREGATED OPTION EXERCISES IN FISCAL 2002
                        AND FISCAL YEAR-END OPTION VALUES

         The following table presents the value of unexercised options held by
the Named Executive Officers during fiscal 2002. No stock options were exercised
during fiscal 2002.

<TABLE>
<CAPTION>

                                         No. Shares Underlying                        Value of In-the-Money
                                        Options At March 2, 2002                  Options At March 2, 2002 (1)
                                  ----------------------------------           ----------------------------------
Name                              Exercisable          Unexercisable           Exercisable          Unexercisable
----                              -----------          -------------           -----------          -------------
<S>                                <C>                    <C>                    <C>                 <C>
James C. Richardson, Jr.                --                    --                    --                    --

David R. Clark                          --                    --                    --                    --

Norbert E. Woodhams                     --                    --                    --                    --

Pamela M. Witters                   12,500                25,000                 5,000                20,000

Robert C. Naylor                    30,000                20,000                    --                    --

</TABLE>

--------------------

(1)      The closing bid price of the Company's common stock on Wednesday, May
         20, 2002, was $2.30 per share.


                            COMPENSATION OF DIRECTORS

         During fiscal 2002, directors were paid $10,000 per Board meeting
attended, $5,000 per Audit, Executive Compensation and Sensitive Transactions
Committee meetings attended, and $2,500 per Special Committee meeting attended,
except that directors who were employees of the Company, who were compensated by
HERTH, or who had material contracts with the Company, received no payment for
their service as directors.

              EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS

         On September 3, 2001, each of James C. Richardson, Jr., the Company's
Chairman, and David R. Clark, the Company's Vice Chairman, executed an
Employment Agreement with the Company for three years at an annual base salary
of $1,000,800, which may be increased from time to time by the Board of
Directors. The Company can also award bonuses to Mr. Richardson and Mr. Clark
based upon other considerations. See "Report of the Executive Compensation
Committee." Each of these employment agreements will be automatically extended
for additional, successive one-year terms, unless the Company or the respective
employee gives prior notice of termination. Should Mr. Richardson's or Mr.
Clark's employment be terminated by the Company without cause, or by reason of
death or disability, or should Mr. Richardson or Mr. Clark resign from
employment for good reason, then the Company would be obligated to make a
severance payment to him equal to the sum of his base salary as would be due in
the aggregate for the remainder of the initial three-year term or the one-year
renewal term then in effect, as the case may be, but which shall not be less
than three months of his base salary then in effect.

         In the case of Mr. Clark, the Employment Agreement dated as of
September 3, 2001 replaces the Employment Agreement between the Company and Mr.
Clark dated June 30, 1996, as amended February 23, 1998 (the "superseded
agreement"). As amended, the superseded agreement provided for an annual base
salary of $350,000 and an annual bonus based on the Company's financial
performance. Under this agreement, $200,000 of Mr. Clark's base salary was paid
by HERTH and $150,000 of his base salary was paid by the Company. See "Certain
Relationships and Related Party Transactions." The superseded agreement expired
February 28, 2003, with automatic successive renewals for one-year terms, unless
the Company notified Mr. Clark that it did not intend to extend the term. If Mr.
Clark's employment were terminated by the Company without cause, or by reason of
death or disability, or if Mr. Clark resigned from employment for good reason
during the initial five-year term under the superseded agreement, then the
Company would have been obligated to make a severance payment to him equal to
the sum of his base salary as would be due in the aggregate for the remainder of



                                       17


<PAGE>


the five-year term. In the event of termination without cause, or by reason of
death or disability, or a resignation for good reason during any renewal term
under the superseded agreement, the severance payment would equal three months
of Mr. Clark's then-existing base salary.

         On August 18, 1999, Norbert E. Woodhams, the Company's President, Chief
Executive Officer and Director, and the Company executed an Incentive Agreement,
which provided for an annual salary of $250,000 and a periodic bonus under the
Company's executive bonus plan (the "Woodhams Incentive Agreement"). The Company
also agreed to pay to Mr. Woodhams a "pay to stay bonus" in the amount of
$800,000 (inclusive of a tax "gross up" amount) in the event that the Company
enters into an agreement for the sale of the Company's food processing operation
or if Mr. Woodhams' employment is terminated. Mr. Woodhams is also entitled to
receive a transaction success bonus in the amount of $750,000 (inclusive of a
tax "gross up" amount) and a severance payment of $532,099 (inclusive of a tax
"gross up" amount) in the event that such sale is consummated or Mr. Woodhams'
employment is terminated. The Woodhams Incentive Agreement was amended on
January 1, 2000 and December 31, 2001 to increase Mr. Woodhams annual salary to
$300,000 and $350,000, respectively. The term of the Woodhams Incentive
Agreement expires on June 8, 2003 and will be automatically extended from year
to year unless the Company notifies Mr. Woodhams that it does not intend to
extend the term.

         On July 6, 1999, each of Messrs. Richardson and Clark (each, an
"Officer") entered into a Change in Control Agreement with the Company
(collectively, the "Change in Control Agreements"). The Change in Control
Agreements provide that, if a change in control of the Company occurs, whether
or not an Officer's employment is terminated, then the following benefits will
be provided by the Company: three times the amount of the annual base salary
(paid by the Company and HERTH) of the Officer; three times the amount of the
cash bonus paid or payable by the Company and HERTH (for the most recent
completed fiscal year of the Company) to the Officer; and a "gross-up" payment
for all excise and income tax liabilities resulting from payments under the
Change in Control Agreements. A change in control of the Company is considered
to have occurred if: (1) the individuals who constituted the Board of Directors
as of the date of the applicable Change in Control Agreement cease to constitute
a majority of the Board; (2) any "person" (as defined in the applicable Change
in Control Agreement) acquires 15% of the Company's common stock; (3) any of
certain business combinations is consummated; or (4) the Company is liquidated
or dissolved. Payments under the Change in Control Agreements are payable upon a
change in control of the Company, whether or not an Officer's employment is
terminated. Upon a change in control, Mr. Clark's Employment Agreement would be
terminated immediately prior to the change in control. The term of each Change
in Control Agreement is ten years and is automatically extended for additional,
successive one-year terms unless the Company notifies the Officer that it does
not intend to extend the term.

         On December 31, 2001, each of Pamela M. Witters, the Company's Chief
Financial Officer, and Robert C. Naylor, the Company's Senior Vice President of
Sales, executed an Employment Agreement with the Company for three years. Ms.
Witters' agreement provides for an annual base salary of $210,000, and Mr.
Naylor's agreement provides for an annual base salary of $220,000, each of which
may be increased from time to time by the Board of Directors. The Company can
also award bonuses to Ms. Witters and Mr. Naylor based upon other
considerations. See "Report of the Executive Compensation Committee." Each of
these employment agreements will be automatically extended for additional,
successive one-year terms, unless the Company or the respective employee gives
prior notice of termination. Should Ms. Witters' or Mr. Naylor's employment be
terminated by the Company without cause, or by reason of death or disability, or
should Ms. Witters or Mr. Naylor resign from employment for good reason, then
the Company would be obligated to make a severance payment to that employee
equal to the sum of his or her base salary as would be due in the aggregate for
the remainder of the initial three-year term or the one-year renewal term then
in effect, as the case may be, but which shall not be less than three months of
his or her base salary then in effect. In the event of a change in control of
the Company (excluding the proposed management buyout), Ms. Witters and Mr.
Naylor shall be entitled to receive (a) three times the amount of base salary
paid or payable by the Company to that employee for services rendered during the
most recently completed fiscal year, plus (b) three times the amount of
aggregate cash bonus paid or payable by the Company to that employee for
services rendered during the most recently completed fiscal year.



                                       18


<PAGE>


           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         During  fiscal 2002,  the Executive  Compensation  Committee of the
Company's  Board of Directors  consisted of Messrs.  Lanier,  Howard and
Meisner,  none of whom was an officer or employee of the Company or any of its
subsidiaries during  fiscal  2002.  Messrs.  Lanier and Meisner  have never been
officers of the Company or any of its  subsidiaries. Mr. Howard  served as
Chairman of the Board of Directors  from 1993 until Mr.  Richardson  became
Chairman in 1999.  Mr. Howard served as Executive Vice President of the Company
from 1989 to 1993 and as Chief  Financial  Officer and Treasurer from 1989 to
1994.

                 REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE

         It is the responsibility of the Executive Compensation Committee to
advise management and the Board of Directors on matters pertaining to
compensation arrangements for senior executives. The members of the Committee
are all independent, non-employee directors. Following review and approval by
the Executive Compensation Committee, all issues pertaining to executive
compensation are submitted to the entire Board of Directors for its
consideration.

         Compensation Principles. In determining the compensation of senior
executives, the Company believes that compensation should be (1) based in part
upon the Company's performance, by the use of bonuses, (2) based in part upon
the individual contributions and attainment of goals of each officer and the
performance of management as a group and (3) based in part upon compensation
paid by other companies to similarly situated management. The Company's
executive compensation program consists of salary, bonus, long-term compensation
and other benefits.

         Executive Compensation. The Committee considers the objectives of the
Company in developing criteria to measure management performance and whether
individual executives have accomplished the goals assigned to them. Several
elements of the performance of an executive are based upon non-numerical
performance criteria, such as level of responsibility in the Company, comparable
compensation of other executives, individual meritorious performance and
improvements in administration, customer relations and strategic planning. Other
elements are tied to management's performance individually and as a group in
achieving corporate goals, such as financial performance, profit margins, EBITDA
and acquisitions and dispositions deemed to be advantageous to the Company. No
mathematical weights are assigned to these individual criteria; however, certain
specific bonus incentives may be directly related to financial performance
goals.

         Performance-based criteria are generally considered as a whole,
although specific performance targets may be waived or adjusted in consequence
of unforeseen events or circumstances. Concerning this aspect of compensation,
the Committee considered that during fiscal year 2002 management met and
surpassed many goals set for them by the Board, including retention and
development of customer relationships, negotiating a debt refinancing and the
completion of the restructuring of business units within the Company. The
Committee also considered management's timely actions in positioning the Company
for future growth and strategic initiatives.

         In hiring new officers for the Company, consideration is given to
compensation arrangements in previous employment, compensation averages for such
executives in the food service industry and means of structuring compensation
packages to create incentives to achieve individual and corporate goals.

         Compensation of Chief Executive Officer and other Senior Executives.
The evaluation of the performance of the Chief Executive Officer and the other
senior executives is consistent with the compensation principles described
above. The compensation paid to the Chief Executive Officer and the other senior
executives reflects the performance of the Company and each senior executive.
Determination of adequate compensation is qualitative in nature and is based
upon a variety of factors, including comparison group compensation data,
attainment of various corporate goals, financial and operating performance,
individual performance and other factors.

                                            The Executive Compensation Committee

                                                       Lewis C. Lanier, Chairman
                                                               Richard F. Howard
                                                                Bruce E. Meisner



                                       19


<PAGE>


                             STOCK PERFORMANCE GRAPH

         The following graph presents a five-year comparison of cumulative
shareholder returns for the Company, the Standard & Poor's Composite Index (the
"S&P Composite Index"), and a Company-constructed peer group (the "Peer Group").
The Company-constructed peer group seeks to reflect the performance of various
companies that are similar to the Company in industry or line of business over
the five-year period beginning February 28, 1997 and ending March 2, 2002. The
graph assumes that $100 is invested on February 28, 1997 in each of the
Company's common stock, the Peer Group, and on February 28, 1997 in the Standard
& Poor's Composite Index, and, in each case, that all dividends are reinvested.

         The Company's Peer Group consists of food processing peers ConAgra,
Inc., Sara Lee Corporation, Tyson Foods, Bridgford Foods Corporation and Hormel
Foods. The returns of each group member were weighted according to the member's
stock market capitalization at the beginning of each period for which a return
is indicated.

                 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
                 AMONG PIERRE FOODS, INC., THE S & P  500 INDEX
                                AND A PEER GROUP


                              [PERFORMANCE GRAPH]


   Measurement Period        Pierre Foods,            Peer               S&P
   (Fiscal Year-End)              Inc.               Group               500
   -----------------         -------------           -----               ---

        2/28/97                  100.00              100.00            100.00
        2/27/98                  200.00              133.22            135.00
         3/6/99                   58.33              135.11            161.65
         3/4/00                   45.14               75.71            180.61
         3/3/01                   11.11              106.04            165.80
         3/2/02                   25.56              119.42            150.03



*$100 invested on 2/28/97 in stock or index-including reinvestment of dividends.




                                       20


<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             PRINCIPAL SHAREHOLDERS

         The following table shows, as of April 11, 2002, except as otherwise
indicated, the holdings of Pierre Foods common stock by (1) any entity or person
known to us to be the beneficial owner of more than five percent of the
outstanding shares, (2) each director and each executive officer and (3) by all
directors and executive officers as a group.

<TABLE>
<CAPTION>

                 Name and                             Number of Shares                         Percent of
                Address of                            of Common Stock                         Outstanding
             Beneficial Owner                      Beneficially Owned (1)                     Common Stock
             ----------------                      ----------------------                     ------------
<S>                                                    <C>                                      <C>
PF Management, Inc. (2)
361 Second Street, NW                                    3,630,212                               62.8%
Hickory, NC  28601

James C. Richardson, Jr. (3)
P.O. Box 3967                                            3,630,212                               62.8
Hickory, NC 28603

David R. Clark (3)
P.O. Box 3967                                            3,630,212                               62.8
Hickory, NC 28603

James M. Templeton (3)
P.O. Box 1295                                            3,630,212                               62.8
Claremont, NC 28610

Dimensional Fund Advisors Inc. (4)
1299 Ocean Avenue, 11th Floor                             493,375                                 8.5
Santa Monica, CA 90401

Robert C. Naylor (5)
9990 Princeton Road                                        55,197                                  *
Cincinnati, OH 45246

Pamela M. Witters (6)
9990 Princeton Road                                        13,846                                  *
Cincinnati, OH  45246

Norbert E. Woodhams
9990 Princeton Road                                        7,627                                   *
Cincinnati, OH  45246

Bobby G. Holman
4090 Golf Drive                                            5,728                                   *
Conover, NC 28613

E. Edwin Bradford (7)
2700 Garden Hill Drive, Apt 102                            3,141                                   *
Raleigh, NC 27614

William R. McDonald III (8)
1257 25th Street Pl., SE                                    860                                    *
Hickory, NC 28602

Richard F. Howard
5982 Highway 150 East                                        --                                    *
Denver, NC  28037

Lewis C. Lanier
P.O. Box 518                                                 --                                    *
160 Centre Street, N.E.
Orangeburg, SC 29115

Bruce E. Meisner
1316 2nd Street NE, Suite No. 8                              --                                    *
Hickory, NC 28601

All directors and executive officers as a
group (11 persons)                                       3,716,611                               64.2%
</TABLE>


                                       21


<PAGE>

*        Less than one percent

(1)      The actual number of shares outstanding at April 11, 2002 was
         5,781,480. Each percentage has been calculated on the basis of such
         number.

(2)      All of the shares owned by PF Management are also deemed to be
         beneficially owned by Messrs. Richardson and Clark in their capacity as
         directors. Messrs. Richardson, Clark, and Templeton are also
         shareholders of PF Management. Mr. Templeton disclaims beneficial
         ownership of Pierre Foods shares owned by PF Management. Mr. Templeton
         has agreed with PF Management, and Messrs. Richardson and Clark (a) to
         vote his PF Management shares in the manner directed by Messrs.
         Richardson and Clark and (b) to give Messrs. Richardson and Clark sole
         voting and investment power over the Pierre Foods shares owned by PF
         Management.

(3)      Consists of 3,630,212 shares deemed to be owned beneficially through PF
         Management.

(4)      The information provided for Dimensional Fund Advisors Inc.
         ("Dimensional") was obtained from a Schedule 13G dated January 30,
         2002, filed with the SEC by Dimensional. According to the filing,
         Dimensional is a registered investment advisor with voting and/or
         investment power over the shares disclosed as beneficially owned by it.
         The filing states that the shares are actually owned by investment
         companies, trusts and accounts advised by Dimensional and that
         Dimensional disclaims beneficial ownership of the shares.

(5)      Includes 30,000 shares issuable upon the exercise of currently
         exercisable options at an exercise price of $10.50 per share.

(6)      Includes 5,000 shares issuable upon the exercise of currently
         exercisable options at an exercise price of $2.00 per share, and 7,500
         shares issuable upon the exercise of currently exercisable options at
         an exercise price of $5.13 per share. Excludes 20,000 shares issuable
         upon the exercise of options at an exercise price of $2.00 per share,
         which options are not currently exercisable but will become exercisable
         immediately prior to completion of the management buyout exchange.

(7)      Includes 1,200 shares deemed to be owned beneficially through an
         individual retirement account.

(8)      Consists of 860 shares held directly by this shareholder's spouse.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

         Beginning April 25, 2001 and terminating September 3, 2001, PF
Management provided management services to Pierre Foods, including strategic
planning and the direction of strategic initiatives, including the
identification and pursuit of mergers, acquisitions, other investment
opportunities (both within and without Pierre Foods industry) and divestitures;
management of Pierre Foods' relationships with investment bankers, securities
broker-dealers, significant shareholders, note holders, banks, lawyers and
accountants; facilitating meetings of the board of directors; and general
oversight of Pierre Foods performance. PF Management provided the full time
services of Richardson and Clark to Pierre Foods. In exchange for these
services, PF Management was entitled to $1,500,000 per year pursuant to a
management services agreement. HERTH Management, Inc. previously provided these
services to Pierre Foods, but assigned the management services agreement to PF



                                       22


<PAGE>


Management as of April 25, 2001. The agreement was subsequently cancelled as of
September 3, 2001. Upon termination of the agreement, Richardson and Clark each
entered into employment agreements with Pierre Foods.

         As of April 25, 2001, the shareholders of PF Management were Richardson
(52.9%), Clark (35.2%) and Templeton (11.9%). As of April 17, 2001, HERTH was
owned only by Richardson and Gregory A. Edgell, a former affiliate of Pierre
Foods. Prior to April 17, 2001, the shareholders of HERTH included Richardson
(22.0%), Templeton (11.0%) and Columbia Hill, LLC (45.0%), whose equity owners
included Clark (45.0%) and Richardson (40.0%).

         Pierre Foods paid PF Management $967,500 in the fiscal year ended March
2, 2002, consisting of $325,000 under the management services agreement,
$350,000 as a cancellation fee, an additional $150,000 as bonuses paid to
Richardson, and an additional $142,500 as bonuses paid to Templeton. Pierre
Foods paid HERTH $925,000 in the fiscal year ended March 2, 2002, consisting of
$325,000 under the management services agreement and an additional $600,000 as
bonuses paid to Richardson. Pierre Foods paid HERTH $2,550,000 in fiscal 2001,
consisting of $1,300,000 under the management services agreement and an
additional $1,250,000 as bonuses paid to Richardson. Pierre Foods paid HERTH
$3,241,270 in fiscal 2000, consisting of $1,300,000 under the management
services agreement and an additional $1,941,270 as bonuses paid to Richardson.
The management services agreement provided for $200,000 of Mr. Clark's annual
salary to be paid for by PF Management or HERTH, as applicable. In the fiscal
year ended March 2, 2002, Pierre Foods paid $100,000 directly to Clark and
reduced the amounts owed under the management services agreement accordingly. In
each of fiscal 2001 and 2000, the Company paid $200,000 directly to Clark and
reduced the $1,500,000 owed under the management services agreement. In
addition, in the fiscal year ended March 2, 2002, Pierre Foods paid
approximately $425,000 to PF Management for reimbursement of expenses incurred
in connection with the management buyout exchange as required by the amended
exchange agreement.

         On April 9, 2002, the board of directors of Pierre Foods approved the
payment of up to $2 million as a bonus to Richardson and up to $2 million as a
bonus to Clark. Each bonus is payable in whole or in part at any time, is based
on anticipated fiscal 2003 earnings and is subject to repayment in the board's
discretion to the extent the anticipated earnings are not realized.

         Columbia Hill Management, Inc., owned 50% each by Richardson and Clark,
provides accounting, tax and administrative services to Pierre Foods, as well as
professional services for the management of special projects. During fiscal 2001
and 2002, Columbia Hill Management also provided consulting services for
development of new food service programs, and consulting services for assessment
and development of alternative warehousing and distribution programs. Fees paid
for these services were approximately $1,130,000 in fiscal 2002 and $860,000 in
fiscal 2001.

         During fiscal 2002, 2001 and 2000 Columbia Hill, LLC, owed Pierre Foods
as much as $993,247 pursuant to a promissory note payable on demand and bearing
interest at the prime rate. Columbia Hill LLC is owned in part by Richardson and
Clark, who have unconditionally guaranteed repayment of the note. In April 2001,
the note was assumed by PF Management.

         Columbia Hill Land Company, LLC, owned 50% by each of Richardson and
Clark, leases office space to Pierre Foods in Hickory, North Carolina, pursuant
to a ten-year lease that commenced in September 1998. Rents paid under the lease
were approximately $110,000 in fiscal 2002 and $103,000 in each of fiscal 2001
and 2000.

         Atlantic Cold Storage of Mocksville, LLC , owned one-third each by
Richardson and Clark, plans to construct and finance a public cold storage
warehouse which would lease space to Pierre Foods as well as to others. The
proposed agreement with Pierre Foods is for 10 years and a minimum of 4,000
pallet positions to be leased as of the first date the facility is operational.
Pierre Foods also agreed to pay $250,000 for specialized construction costs.
During fiscal 2001, Pierre Foods paid $250,000 to Atlantic Cold Storage for the
specialized construction costs.

         In fiscal 2002, Pierre Foods began to purchase general construction and
maintenance services from Phoenix Building Systems, Inc., a company owned 43% by
Richardson, but in which Richardson has the right to receive 100% of the profits
and losses of Phoenix on a pass-through basis. The amount paid to Phoenix by
Pierre Foods during fiscal 2002 was approximately $140,000.



                                       23


<PAGE>

         In fiscal 2002, the Company began to purchase services from Compass
Outfitters, LLC ("Compass"), a company owned 45% by each of Richardson and Clark
that provides team-building opportunities for customers and employees. During
fiscal 2002, approximately $90,000 was paid to Compass under this arrangement.

         On December 16, 1999, the board of directors approved a loan to
Richardson in an amount up to $8.5 million for the purpose of enabling
Richardson to purchase shares of Pierre Foods common stock owned by certain
shareholders. The terms of the loan provide that outstanding amounts will bear a
simple interest rate of 8 1/2%, with principal and interest due three years
from the date of the loan. At the end of fiscal 2000, disbursements under the
loan totaled $5 million. No further disbursements have been, or are anticipated
to be, made under this loan.

         PF Purchasing, LLC, owned 50% by each of Richardson and Clark, serves
as an exclusive purchasing agent for Pierre Foods, pursuant to a three-year
agreement that commenced September 3, 2001. Under the agreement, PF Purchasing
will make an incentive payment of $100,000 per quarter in consideration of the
opportunity to act as exclusive purchasing agent, and in exchange will be
entitled to receive all rebates or discounts receivable by Pierre Foods from
suppliers and vendors for orders negotiated and placed by PF Purchasing. In the
fiscal year ended March 2, 2002, net fees paid to PF Purchasing were
approximately $620,000.

         On July 1, 1999, Pierre Foods' subsidiary, Pierre Foods, LLC sold a 1%
membership interest in Mom 'n' Pop's Country Ham, LLC, Pierre Foods' ham
operation, to Richardson for $9,950. In August 1999, effective as of July 2,
1999, Pierre Foods conveyed its 99% membership interest in Mom 'n' Pop's to
Hoggs, LLC in exchange for a promissory note in the principal amount of $985,050
due December 31, 1999. As security, each of the members of Hoggs, LLC pledged
his or her membership interest in Hoggs to Pierre Foods. Richardson holds a 55%
interest in Hoggs, but is entitled to receive 100% of the profits and losses of
Hoggs on a pass-through basis. In addition, Pierre Foods provided a revolving
credit line of $500,000 to Hoggs for working capital. As of the end of fiscal
2000, Hoggs paid the promissory note and the line of credit in full, and the
line of credit has been terminated. In fiscal 2002, Mom `n' Pop's began selling
pork products to Pierre Foods. The amount paid by Pierre Foods during fiscal
2002 was approximately $150,000.

         During the fourth quarter of fiscal 2002, Pierre Foods leased an
aircraft from Columbia Hill Aviation, LLC, owned 100% by PF Management. Under
the terms of the lease, Pierre Foods was obligated to make monthly payments of
approximately $58,000 and paid approximately $170,000 under the lease during
fiscal 2002. Under that arrangement, Pierre Foods was to maintain its own flight
department and was responsible for all operating costs of the aircraft.
Effective March 1, 2002, the December 11, 2001 lease was cancelled and replaced
with a non-exclusive lease agreement. Pursuant to this new lease, Pierre Foods
is obligated to make 16 quarterly lease payments of $471,500 each for the right
to use the aircraft for up to 115 flight hours per quarter, based on
availability. Under this lease agreement, Columbia Hill Aviation is responsible
for all expenses incurred in the operation of the use of the aircraft, except
that Pierre Foods must provide its own crew. On March 1, 2002, Pierre paid
Columbia Hill Aviation $943,000 as a refundable deposit under the lease
agreement and $471,500 for the first quarterly lease payment.

         PF Distribution, LLC, owned 50% by each of Richardson and Clark, serves
as an exclusive logistics agent for Pierre Foods pursuant to a one-year
agreement that commenced on March 3, 2002. Under the agreement, PF Distribution
will provide warehousing, fulfillment and transportation services to Pierre
Foods.

         On May 10, 2002, Pierre Foods signed a binding letter agreement with
Foothill Capital Corporation ("Foothill Capital"), the terms of which will
replace Fleet Capital Corporation as Pierre Foods' principal lender. Under the
letter agreement, Foothill Capital will extend a five-year secured credit
facility to the Company in an aggregate amount up to $50 million, which includes
a $16 million term loan subline, a $10 million capital expenditure subline and a
$7 million letter of credit subfacility. The collateral for the facility will
include substantially all of Pierre Foods' assets. Richardson and Clark have
agreed to guarantee payment of the facility in exchange for guarantee fees.
Pierre Foods has agreed to pay such fees to each of Richardson and Clark,
annually in advance, equal to 1.5% of the amount committed for lending under the
facility. Pierre Foods expects to close on the facility on or before May 31,
2002.

         All material transactions with affiliates of the Company are first
reviewed by the sensitive transactions committee of the board, which is composed
of three independent directors. Upon recommendation of this committee, such
transactions are then presented to the entire board, where they must be approved
by a majority of the independent directors. The directors obtain and rely upon
investment banking "fairness" opinions when considering these transactions to
the extent required by the indenture governing the senior notes.


                                       24


<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      1.       Financial Statements

                  The Financial Statements listed in the accompanying Index on
                  page F-1 are filed as a part of this Report.

         2.       Financial Statement Schedules

                  Financial statement schedules have been omitted because they
                  are not applicable or not required or because the required
                  information is provided in the consolidated financial
                  statements or notes thereto.


         3.       Exhibits

                  See Index to Exhibits.

(b)      Reports On Form 8-K.

         A current report on Form 8-K was filed on March 27, announcing the
         delisting of its common stock from the NASDAQ Small Cap Market, and its
         transfer to the OTC Bulletin Board.

(c)      Other Filings

         A revised preliminary proxy statement was filed with the Securities and
         Exchange Commission on May 15, 2002, in connection with a special
         meeting of shareholders, at which the shareholders will be asked to
         adopt and approve the Amended and Restated Agreement and Plan of Share
         Exchange dated as of December 20, 2001.



                                       25


<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, Pierre Foods, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       PIERRE FOODS, INC.

                                       By:       /s/ DAVID R. CLARK
                                           -------------------------------------
                                                   David R. Clark
                                              Vice Chairman of the Board

Dated: May 30, 2002


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of Pierre Foods,
Inc., in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                Signature                                    Title                               Date
                ---------                                    -----                               ----

<S>                                           <C>                                              <C>
      /s/  JAMES C. RICHARDSON, JR.           Chairman of the Board                            May 30, 2002
-----------------------------------------
        James C. Richardson, Jr.


           /s/ DAVID R. CLARK                 Vice Chairman of the Board                       May 30, 2002
-----------------------------------------       (Principal Executive Officer)
             David R. Clark


        /s/  NORBERT E. WOODHAMS              Chief Executive Officer, President               May 30, 2002
-----------------------------------------       and Director
           Norbert E. Woodhams


         /s/  PAMELA M. WITTERS               Chief Financial Officer, Treasurer               May 30, 2002
-----------------------------------------       and Secretary (Principal
            Pamela M. Witters                   Financial Officer and Principal
                                                Accounting Officer)

         /s/  E. EDWIN BRADFORD               Director                                         May 30, 2002
-----------------------------------------
            E. Edwin Bradford


          /s/  BOBBY G. HOLMAN                Director                                         May 30, 2002
-----------------------------------------
             Bobby G. Holman


         /s/  RICHARD F. HOWARD               Director                                         May 30, 2002
-----------------------------------------
            Richard F. Howard

          /s/  LEWIS C. LANIER                Director                                         May 30, 2002
-----------------------------------------
             Lewis C. Lanier


          /s/  BRUCE E. MEISNER               Director                                         May 30, 2002
-----------------------------------------
            Bruce E. Meisner


      /s/  WILLIAM R. MCDONALD III            Director                                         May 30, 2002
-----------------------------------------
         William R. McDonald III

</TABLE>




                                       26


<PAGE>


                               INDEX TO EXHIBITS

Exhibit No.                       Description
-----------                       -----------

2.1            Purchase Agreement dated as of August 6, 1999, among Mom `n'
               Pop's Country Ham, LLC, Pierre Foods, LLC, the Company and Hoggs,
               LLC (schedules and exhibits omitted) (incorporated by reference
               to Exhibit 2.3 to the Company's Quarterly Report on Form 10-Q for
               its fiscal quarter ended December 4, 1999)

2.2            Purchase Agreement dated as of September 10, 1999 among Claremont
               Restaurant Group, LLC, Fresh Foods Sales, LLC, the Company and
               CRG Holdings Corp. (incorporated by reference to Exhibit 2.4 to
               the Company's Quarterly Report on Form 10-Q for its fiscal
               quarter ended December 4, 1999)

2.3            Plan of Merger dated as of December 27, 1999 among Pierre Foods,
               LLC, Pierre Leasing, LLC and the Company (incorporated by
               reference to Exhibit 2.5 to the Company's Quarterly Report on
               From 10-Q for its fiscal quarter ended December 4, 1999)

3.1            Restated Articles of Incorporation of the Company (incorporated
               by reference to Exhibit 3.1 to the Company's Registration
               Statement on Form S-4 (No. 333-58711))

3.2            Bylaws of the Company (incorporated by reference to Exhibit 3.4
               to the Company's Annual Report on Form 10-K for its fiscal year
               ended February 27, 1998)

4.1            Note Purchase Agreement, dated June 4, 1998, among the Company,
               the Guarantors and the Initial Purchasers (incorporated by
               reference to Exhibit 4.1 to the Company's Current Report on Form
               8-K filed with the SEC on June 24, 1998)

4.2            Indenture, dated as of June 9, 1998, among the Company, certain
               Guarantors and State Street Bank and Trust Company, Trustee
               (incorporated by reference to Exhibit 4.2 to the Company's
               Current Report on Form 8-K filed with the SEC on June 24, 1998)

4.3            Registration Rights Agreement, dated June 9, 1998, among the
               Company, certain Guarantors and certain Initial Purchasers
               (incorporated by reference to Exhibit 4.3 to the Company's
               Current Report on Form 8-K filed with the SEC on June 24, 1998)

4.4            Form of Initial Global Note (included as Exhibit A to Exhibit 4.2
               to the Company's Current Report on Form 8-K filed with the SEC on
               June 24, 1998 and incorporated herein by reference)

4.5            Form of Initial Certificated Note (included as Exhibit B to
               Exhibit 4.2 to the Company's Current Report on Form 8-K filed
               with the SEC on June 24, 1998 and incorporated herein by
               reference)

4.6            Form of Exchange Global Note (included as Exhibit C to Exhibit
               4.2 to the Company's Current Report on Form 8-K filed with the
               SEC on June 24, 1998 and incorporated herein by reference)

4.7            Form of Exchange Certificated Note (included as Exhibit D to
               Exhibit 4.2 to the Company's Current Report on Form 8-K filed
               with the SEC on June 24, 1998 and incorporated herein by
               reference)

4.8            First Supplemental Indenture, dated as of September 5, 1998,
               among the Company, State Street Bank and Trust Company, Trustee,
               and Pierre Leasing, LLC (incorporated by reference to Exhibit 4.8
               to Pre-Effective amendment No. 1 to the Company's Registration
               Statement on Form S-4 (No. 333-58711))

4.9            Second Supplemental Indenture dated as of February 26, 1999 among
               the Company, State Street Bank and Trust Company, Trustee, and
               Fresh Foods Restaurant Group, LLC (incorporated by reference to
               Exhibit 4.9 to the Company's Quarterly Report on Form 10-Q for
               its fiscal quarter ended December 4, 1999)



                                       27


<PAGE>



4.10           Third Supplemental Indenture dated as of October 8, 1999 between
               the Company and State Street Bank and Trust Company, Trustee
               (incorporated by reference to Exhibit 4.10 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended
               December 4, 1999)

10.1           1987 Incentive Stock Option Plan (incorporated by reference to
               Exhibit 4 to the Company's Registration Statement on Form S-8
               (No. 33-15017))

10.2           First Amendment to 1987 Incentive Stock Option Plan (incorporated
               by reference to Exhibit 4(b) to Post-Effective Amendment No. 1 to
               the Company's Registration Statement on Form S-8 (No. 33-15017))

10.3           1987 Special Stock Option Plan (restated as of May 15, 1997)
               (incorporated by reference to Exhibit 99 to the Company's
               Registration Statement on Form S-8 (No. 333-29111))

10.4           1997 Incentive Stock Option Plan (as amended and restated
               February 23, 1998) (incorporated by reference to Post-Effective
               Amendment No. 1 to Exhibit 99(a) to the Company's Registration
               Statement on Form S-8 (No. 333-32455))

10.5           First Amendment to 1997 Incentive Stock Option Plan, dated
               February 23, 1998 (incorporated by reference to Exhibit 99(b) to
               Post-Effective Amendment No. 1 to the Company's Registration
               Statement on Form S-8 (No. 333-32455))

10.6           1997 Special Stock Option Plan (as amended and restated February
               23, 1998) (incorporated by reference to Exhibit 99.1 to
               Post-Effective Amendment No. 1 to the Company's Registration
               Statement on Form S-8 (No. 333-33439))

10.7           First Amendment to 1997 Special Stock Option Plan, dated February
               23, 1998 (incorporated by reference to Exhibit 99.2 to
               Post-Effective Amendment No. 1 to the Company's Registration
               Statement on Form S-8 (No. 333-33439))

10.8           Consulting and Non-Competition Agreement, dated as of January 29,
               1998, between the Company and Charles F. Connor, Jr.
               (incorporated by reference to Exhibit 10.20 to the Company's
               Registration Statement on Form S-4 (No. 333-58711))

10.9           Rights Agreement, dated as of September 2, 1997, between the
               Company and American Stock Transfer & Trust Company, Rights Agent
               (incorporated by reference to Exhibit 99.1 to the Company's
               Current Report on Form 8-K filed with the SEC on September 5,
               1997)

10.10          Credit Agreement, dated as of June 9, 1998, among the Company,
               certain Guarantors, First Union Commercial Corporation ("First
               Union"), as Agent and a Lender, and NationsBank N.A., American
               National Bank and Trust Company of Chicago and National City
               Commercial Finance, Inc., as Lenders (incorporated by reference
               to Exhibit 99.1 to the Company's Current Report on Form 8-K filed
               with the SEC on June 24, 1998)

10.11          Security Agreement, dated as of June 9, 1998, among the Company,
               certain Guarantors and First Union, as Agent (incorporated by
               reference to Exhibit 99.2 to the Company's Current Report on Form
               8-K filed with the SEC on June 24, 1998)

10.12          Pledge Agreement, dated as of June 9, 1998, among the Company,
               certain Guarantors and First Union, as Agent (incorporated by
               reference to Exhibit 99.3 to the Company's Current Report on Form
               8-K filed with the SEC on June 24, 1998)

10.13          Amendment to Credit Agreement and Consent, dated as of September
               5, 1998, among the Company, certain subsidiaries of the Company,
               First Union, as Agent and a Lender, and certain other Lenders
               (incorporated by reference to Exhibit 10.32 to Pre-Effective
               Amendment No. 1 to the Company's Registration Statement on Form
               S-4 (No. 333-58711)



                                       28


<PAGE>


10.14          Borrower Joinder Agreement dated as of February 26, 1999 between
               Fresh Foods Restaurant Group, LLC and First Union, as Agent
               (schedules omitted) (incorporated by reference to Exhibit 10.33
               to the Company's Quarterly Report on Form 10-Q for its fiscal
               quarter ended December 4, 1999)

10.15          Amendment No. 2 to Credit Agreement and Waiver dated as of April
               14, 1999 among the Company, certain subsidiaries of the Company,
               First Union, as Agent and a Lender, and certain other Lenders
               (incorporated by reference to Exhibit 10.34 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended
               December 4, 1999)

10.16          Amendment No. 3 to Credit Agreement dated as of May 14, 1999
               among the Company, certain subsidiaries of the Company, First
               Union, as Agent and a Lender, and certain other Lenders
               (incorporated by reference to Exhibit 10.35 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended
               December 4, 1999)

10.17          Consent dated as of July 29, 1999 among the Company, certain
               subsidiaries of the Company, First Union, as Agent and a Lender,
               and certain other Lenders (incorporated by reference to Exhibit
               10.36 to the Company's Quarterly Report on Form 10-Q for its
               fiscal quarter ended December 4, 1999)

10.18          Amended and Restated Change in Control Agreement dated as of July
               6, 1999 between the Company and David R. Clark (incorporated by
               reference to Exhibit 10.37 to the Company's Quarterly Report on
               Form 10-Q for the fiscal quarter ended December 4, 1999)

10.19          Amended and Restated Change in Control Agreement dated as of July
               6, 1999 between the Company and James C. Richardson, Jr.
               (incorporated by reference to Exhibit 10.38 to the Company's
               Quarterly Report on Form 10-Q for the fiscal quarter ended
               December 4, 1999)

10.20          Severance, Consulting and Noncompete Agreement dated as of July
               12, 1999 among Claremont Restaurant Group, LLC, the Company and
               L. Dent Miller (incorporated by reference to Exhibit 10.39 to the
               Company's Quarterly Report on Form 10-Q for the fiscal quarter
               ended December 4, 1999)

10.21          Severance, Consulting and Noncompete Agreement dated as of July
               12, 1999 among Claremont Restaurant Group, LLC, the Company,
               HERTH Management, Inc. and Richard F. Howard (incorporated by
               reference to Exhibit 10.40 to the Company's Quarterly Report on
               Form 10-Q for the fiscal quarter ended December 4, 1999)

10.22          Incentive Agreement dated as of August 18, 1999 among the
               Company, Pierre Foods, LLC and Norbert E. Woodhams, together with
               First Amendment to Incentive Agreement dated as of January 1,
               2000 (incorporated by reference to Exhibit 10.41 to the Company's
               Quarterly Report on Form 10-Q for the fiscal quarter ended
               December 4, 1999)

10.23          Severance, Consulting and Noncompete Agreement dated as of
               September 13, 1999 among Claremont Restaurant Group, LLC, the
               Company, HERTH Management, Inc. and James M. Templeton
               (incorporated by reference to Exhibit 10.42 to the Company's
               Quarterly Report on Form 10-Q for the fiscal quarter ended
               December 4, 1999)

10.24          Amendment No. 4 to Credit Agreement dated as of September 23,
               1999 among the Company, certain subsidiaries of the Company,
               First Union, as Agent and Lender, and certain other Lenders
               (incorporated by reference to Exhibit 10.43 to the Company's
               Quarterly Report on Form 10-Q for the fiscal quarter ended
               December 4, 1999)

10.25          Asset Purchase Agreement dated as of September 30, 1999 among
               Fairgrove Restaurants, LLC, the Company and Fresh Foods Sales,
               LLC (schedules and exhibits omitted) (incorporated by reference
               to Exhibit 10.44 to the Company's Quarterly Report on Form 10-Q
               for the fiscal quarter ended December 4, 1999)

10.26          Amended and Restated Management Services Agreement dated as of
               December 17, 1999 between HERTH Management, Inc. and the Company
               (incorporated by reference to Exhibit 10.45 to the Company's
               Quarterly Report on Form 10-Q for the fiscal quarter ended
               December 4, 1999)



                                       29


<PAGE>


10.27          Agreement dated December 21, 1999 between the Company and Gungor
               Solmaz, together with form of Agreement dated January 2000
               between the Company and Gungor Solmaz (incorporated by reference
               to Exhibit 10.46 to the Company's Quarterly Report on Form 10-Q
               for the fiscal quarter ended December 4, 1999)

10.28          Fifth Amendment to Credit Agreement and Consent dated as of
               December 30, 1999 by and among the Company, certain subsidiaries
               of the Company, First Union, as Agent and Lender, and certain
               other Lenders (schedules and exhibits omitted) (incorporated by
               reference to Exhibit 10.47 to the Company's Quarterly Report on
               Form 10-Q for the fiscal quarter ended December 4, 1999)

10.29          Consulting and Noncompete Agreement dated as of January 6, 2000
               between the Company and L. Dent Miller (incorporated by reference
               to Exhibit 10.48 to the Company's Quarterly Report on Form 10-Q
               for the fiscal quarter ended December 4, 1999)

10.30          Consulting and Noncompete Agreement dated as of January 14, 2000
               between the Company and Charles F. Connor, Jr. (incorporated by
               reference to Exhibit 10.49 to the Company's Quarterly Report on
               Form 10-Q for the fiscal quarter ended December 4, 1999)

10.31          Loan and Security Agreement, dated as of May 24, 2000, between
               the Company and Fleet Capital Corporation, as Lender (schedules
               omitted) (incorporated by reference to Exhibit 10.51 to the
               Company's Annual Report on Form 10-K for its fiscal year ended
               March 6, 2000)

10.32          Pierre Foods, Inc. Compensation Exchange Plan dated August 1,
               2000 (incorporated by reference to Exhibit 10.38 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended
               September 2, 2000)

10.33          Assumption and Assignment Agreement dated as of April 17, 2001,
               between Columbia Hill, LLC and PF Management, Inc. (incorporated
               by reference to Exhibit 10.39 to the Company's Annual Report on
               Form 10-K for its fiscal year ended March 3, 2001)

10.34          Cancellation and Assignment Agreement dated as of April 25, 2001,
               between David R. Clark, HERTH Management, Inc. and PF Management,
               Inc. (incorporated by reference to Exhibit 10.40 to the Company's
               Annual Report on Form 10-K for its fiscal year ended March 3,
               2001)

10.35          Amendment No. 1, dated as of May 5, 2001, to Loan and Security
               Agreement, dated as of May 24, 2000, between the Company and
               Fleet Capital Corporation, as Lender (incorporated by reference
               to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
               for its fiscal quarter ended June 2, 2001)

10.36          Cancellation and Termination on September 3, 2001, of Amended and
               Restated Management Services Agreement dated as of December 17,
               1999, by and between Pierre Foods, Inc. and PF Management, Inc.
               (the successor by assignment from HERTH Management, Inc.)
               (incorporated by reference to Exhibit 10.1 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended
               December 1, 2001)

10.37          Employment Agreement dated as of September 3, 2001, by and
               between Pierre Foods, Inc. and James C. Richardson, Jr.
               (incorporated by reference to Exhibit 10.2 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended
               December 1, 2001)

10.38          Employment Agreement dated as of September 3, 2001, by and
               between Pierre Foods, Inc. and David R. Clark (incorporated by
               reference to Exhibit 10.3 to the Company's Quarterly Report on
               Form 10-Q for its fiscal quarter ended December 1, 2001)

10.39          Purchasing Agent Agreement dated as of September 3, 2001, by and
               between Pierre Foods, Inc. and PF Purchasing, LLC (incorporated
               by reference to Exhibit 10.4 to the Company's Quarterly Report on
               Form 10-Q for its fiscal quarter ended December 1, 2001)



                                       30




<PAGE>


10.40          Engagement Letter dated December 13, 2001, between PF Management,
               Inc. and William E. Simon & Sons, LLC (performance by PF
               Management, Inc. guaranteed by Pierre Foods, Inc.) (incorporated
               by reference to Exhibit 10.5 to the Company's Quarterly Report on
               Form 10-Q for its fiscal quarter ended December 1, 2001)

10.41          Agreement and Restated Agreement and Plan of Share Exchange
               between Pierre Foods, Inc. and PF Management, Inc., dated as of
               December 20, 2001 (incorporated by reference to Appendix A to the
               Company's Preliminary Proxy Statement on Schedule 14A file on
               January 24, 2002)

10.42          Employment Agreement dated as of December 31, 2001, between the
               Company and Pamela M. Witters

10.43          Employment Agreement dated as of December 31, 2001, between the
               Company and Robert C. Naylor

10.44          Non-Exclusive Aircraft Dry Lease dated as of March 1, 2002,
               between the Company and Columbia Hill Aviation, LLC

10.45          Logistics Agreement dated as of March 3, 2002, between the
               Company and PF Distribution, LLC

12             Calculation of Ratios of Earnings to Fixed Charges

21             Subsidiaries of Pierre Foods, Inc.

23             Independent Auditors' Consent

99.1           Risk Factors

         The Company hereby agrees to provide to the Commission, upon request,
copies of long-term debt instruments omitted from this report pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K under the Securities Act.




                                       31


<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PIERRE FOODS, INC.
INDEPENDENT AUDITORS' REPORT................................   F-2
CONSOLIDATED FINANCIAL STATEMENTS:
  Consolidated Balance Sheets as of March 2, 2002 and March
     3, 2001................................................   F-3
  Consolidated Statements of Operations for the Years Ended
     March 2, 2002, March 3, 2001 and March 4, 2000.........   F-4
  Consolidated Statements of Shareholders' Equity for the
     Years Ended March 2, 2002,
     March 3, 2001 and March 4, 2000........................   F-5
  Consolidated Statements of Cash Flows for the Years Ended
     March 2, 2002, March 3, 2001 and March 4, 2000.........   F-6
  Notes to Consolidated Financial Statements................   F-7
</Table>
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Pierre Foods, Inc.
Cincinnati, Ohio

     We have audited the accompanying consolidated balance sheets of Pierre
Foods, Inc. and subsidiaries (the "Company") as of March 2, 2002 and March 3,
2001, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three fiscal years in the period ended
March 2, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at March 2, 2002
and March 3, 2001, and the results of its operations and its cash flows for each
of the three fiscal years in the period ended March 2, 2002 in conformity with
accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Cincinnati, Ohio
April 26, 2002


                                       F-2
<PAGE>

                               PIERRE FOODS, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                MARCH 2,       MARCH 3,
                                                                  2002           2001
                                                              ------------   ------------
<S>                                                           <C>            <C>
                           ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  4,577,982   $  1,813,185
  Certificate of deposit of special purpose entity (Note
    16).....................................................     1,240,000             --
  Accounts receivable, net (Notes 3 and 7)..................    21,469,035     18,197,902
  Inventories (Notes 4 and 7)...............................    23,852,855     26,804,063
  Refundable income taxes (Note 8)..........................        70,622      1,292,667
  Deferred income taxes (Note 8)............................     2,349,617      2,174,642
  Prepaid expenses and other current assets.................     1,624,161      1,033,015
                                                              ------------   ------------
         Total current assets...............................    55,184,272     51,315,474
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 5, 9 and 16)......    43,281,303     34,916,493
                                                              ------------   ------------
OTHER ASSETS:
  Trade name (Note 6).......................................    38,808,636     40,286,636
  Excess of cost over fair value of net assets of businesses
    acquired, net (Note 6)..................................    26,848,504     27,871,114
  Other intangible assets, net (Note 6).....................     2,171,067      2,363,956
  Note receivable-related party (Notes 3 and 16)............       993,247        935,044
  Deferred loan origination fees, net.......................     2,092,904      2,619,157
  Other.....................................................       440,931             --
                                                              ------------   ------------
         Total other assets.................................    71,355,289     74,075,907
                                                              ------------   ------------
         Total Assets.......................................  $169,820,864   $160,307,874
                                                              ============   ============
            LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current installments of long-term debt (Note 7)...........  $    325,071   $     67,631
  Trade accounts payable....................................     4,972,870      5,368,066
  Accrued payroll and payroll taxes.........................     6,077,062      3,915,799
  Accrued interest..........................................     3,090,624      3,153,280
  Accrued promotions (includes related party payables of
    $32,833 at March 3, 2001)...............................     1,943,479      1,926,650
  Accrued taxes (other than income and payroll).............       566,677        584,206
  Other accrued liabilities.................................     1,147,558        409,835
                                                              ------------   ------------
         Total current liabilities..........................    18,123,341     15,425,467
LONG-TERM DEBT, less current installments (Note 7)..........   115,047,605    115,097,291
OBLIGATION OF SPECIAL PURPOSE ENTITY (Note 16)..............     5,858,139             --
OTHER LONG-TERM LIABILITIES (Note 16).......................     1,032,696      1,347,231
DEFERRED INCOME TAXES (Note 8)..............................     2,552,066      1,571,087
COMMITMENTS AND CONTINGENCIES (Notes 9 and 14)..............            --             --
SHAREHOLDERS' EQUITY (Notes 11 and 16)
  Preferred stock -- par value $.10, authorized 2,500,000,
    no shares issued........................................            --             --
  Common stock -- no par value, authorized 100,000,000
    shares; issued and outstanding March 2,
    2002 -- 5,781,480 shares and March 3, 2001 -- 5,781,480
    shares..................................................     5,781,480      5,781,480
  Additional paid in capital................................    23,656,692     23,317,053
  Retained earnings.........................................     2,768,845      2,768,265
  Note receivable-related party.............................    (5,000,000)    (5,000,000)
                                                              ------------   ------------
         Total shareholders' equity.........................    27,207,017     26,866,798
                                                              ------------   ------------
         Total Liabilities and Shareholders' Equity.........  $169,820,864   $160,307,874
                                                              ============   ============
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>

                               PIERRE FOODS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                          FISCAL YEARS ENDED
                                                              ------------------------------------------
                                                                MARCH 2,       MARCH 3,       MARCH 4,
                                                                  2002           2001           2000
                                                              ------------   ------------   ------------
<S>                                                           <C>            <C>            <C>
REVENUES, NET (Note 13):
  Food processing...........................................  $242,605,000   $203,475,325   $176,969,884
  Ham curing................................................            --             --      2,096,052
                                                              ------------   ------------   ------------
         Total operating revenues, net......................   242,605,000    203,475,325    179,065,936
                                                              ------------   ------------   ------------
COSTS AND EXPENSES:
  Cost of goods sold (Note 16 -- includes net related party
    transactions totaling $620,191 in fiscal 2002)..........   160,781,388    133,384,944    115,631,474
  Selling, general and administrative expenses (Notes 11 and
    16 -- includes related party transactions totaling
    $3,943,452, $4,199,591 and $3,983,434 in fiscal 2002,
    2001 and 2000, respectively)............................    61,725,969     55,751,791     59,180,564
  Loss on sale of Mom 'n' Pop's Country Ham, LLC (Note 1)...            --             --      2,857,160
  Net (gain) loss on disposition of property, plant and
    equipment...............................................        83,833         27,695        (22,038)
  Depreciation and amortization.............................     6,437,873      6,237,969      5,661,893
                                                              ------------   ------------   ------------
         Total costs and expenses...........................   229,029,063    195,402,399    183,309,053
                                                              ------------   ------------   ------------
OPERATING INCOME (LOSS).....................................    13,575,937      8,072,926     (4,243,117)
                                                              ------------   ------------   ------------
OTHER INCOME (EXPENSE)
  Interest expense (Note 16)................................   (13,206,634)   (13,334,022)   (14,985,577)
  Other income, net (Note 16 -- includes related party
    income totaling $58,203, $61,293 and $137,364 in fiscal
    2002, 2001 and 2000, respectively)......................       364,237        281,600        168,959
                                                              ------------   ------------   ------------
         Other expense, net.................................   (12,842,397)   (13,052,422)   (14,816,618)
                                                              ------------   ------------   ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
  TAX.......................................................       733,540     (4,979,496)   (19,059,735)
INCOME TAX (PROVISION) BENEFIT (Note 8).....................      (732,960)       766,708      4,825,168
                                                              ------------   ------------   ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS....................           580     (4,212,788)   (14,234,567)
DISCONTINUED OPERATIONS (Note 1):
  Income from discontinued restaurant segment (net of income
    taxes of $1,507,029)....................................            --             --      2,828,367
  Gain on disposal of discontinued restaurant segment (net
    of income taxes of $3,968,525)..........................            --             --      6,801,726
                                                              ------------   ------------   ------------
         Discontinued operations, net.......................            --             --      9,630,093
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.....................           580     (4,212,788)    (4,604,474)
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT (net of
  income tax benefit of $258,303 and $35,633 in fiscal 2001
  and 2000, respectively)...................................            --       (455,238)       (52,350)
                                                              ------------   ------------   ------------
NET INCOME (LOSS)...........................................  $        580   $ (4,668,026)  $ (4,656,824)
                                                              ============   ============   ============
NET INCOME (LOSS) PER COMMON SHARE -- BASIC AND DILUTED
  Income (loss) from continuing operations..................  $       0.00   $      (0.73)  $      (2.45)
  Discontinued operations...................................            --             --           1.66
  Extraordinary loss from early extinguishment of debt......            --          (0.08)         (0.01)
                                                              ------------   ------------   ------------
         Net income (loss)..................................  $       0.00   $      (0.81)  $      (0.80)
                                                              ============   ============   ============
WEIGHTED AVERAGE SHARES OUTSTANDING -- BASIC AND DILUTED....     5,781,480      5,781,319      5,808,075
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>

                               PIERRE FOODS, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<Table>
<Caption>
                                                 CAPITAL IN                   RECEIVABLE        TOTAL
                                     COMMON     EXCESS OF PAR    RETAINED        FROM       SHAREHOLDERS'
                                     STOCK          VALUE        EARNINGS     SHAREHOLDER      EQUITY
                                   ----------   -------------   -----------   -----------   -------------
<S>                                <C>          <C>             <C>           <C>           <C>
BALANCE AT MARCH 6, 1999.........  $5,807,049    $23,251,845    $12,093,115   $        --    $41,152,009
Net loss.........................          --             --     (4,656,824)           --     (4,656,824)
Short swing profit
  reimbursement..................          --         48,542             --            --         48,542
Loan to shareholder (Note 16)....          --             --             --    (5,000,000)    (5,000,000)
Common stock options exercised
  (Note 11)......................      39,375        165,238             --            --        204,613
Accelerated vesting of stock
  options (Note 11)..............          --        345,970             --            --        345,970
Purchase of common stock.........     (68,024)      (510,180)            --            --       (578,204)
Issuance of common stock.........       2,600         14,466             --            --         17,066
                                   ----------    -----------    -----------   -----------    -----------
BALANCE AT MARCH 4, 2000.........   5,781,000     23,315,881      7,436,291    (5,000,000)    31,533,172
Net loss.........................          --             --     (4,668,026)           --     (4,668,026)
Issuance of common stock.........         480          1,172             --            --          1,652
                                   ----------    -----------    -----------   -----------    -----------
BALANCE AT MARCH 3, 2001.........   5,781,480     23,317,053      2,768,265    (5,000,000)    26,866,798
Net income.......................          --             --            580            --            580
Contributions of special purpose
  entity (Note 16)...............          --        339,639             --            --        339,639
                                   ----------    -----------    -----------   -----------    -----------
BALANCE AT MARCH 2, 2002.........  $5,781,480    $23,656,692    $ 2,768,845   $(5,000,000)   $27,207,017
                                   ==========    ===========    ===========   ===========    ===========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

                               PIERRE FOODS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                        FISCAL YEARS ENDED
                                                              ---------------------------------------
                                                               MARCH 2,      MARCH 3,      MARCH 4,
                                                                 2002          2001          2000
                                                              -----------   -----------   -----------
<S>                                                           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss).........................................  $       580   $(4,668,026)  $(4,656,824)
                                                              -----------   -----------   -----------
  Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
  Extraordinary loss on extinguishment of debt before income
    tax benefit.............................................           --       713,541        87,983
  Depreciation and amortization.............................    6,437,873     6,237,969     8,199,039
  Amortization of deferred loan origination fees............      528,202       570,625       899,931
  Deferred income taxes.....................................      806,004       199,672         8,400
  Net loss on disposition of assets (net of writedowns).....       83,833        27,695     2,835,122
  Net gain on disposal of discontinued operations (Note
    1)......................................................           --            --   (10,770,251)
  Increase in other assets..................................     (440,931)           --            --
  Increase (decrease) in other long-term liabilities........     (314,535)     (291,235)    1,638,466
  Other noncash adjustments.................................           --         1,653       705,039
  Changes in operating assets and liabilities (net of
    effects from sales of ham curing operations and
    restaurant segments) providing (using) cash:
    Receivables.............................................   (3,271,133)   (1,004,642)     (287,077)
    Inventories.............................................    2,951,208    (1,778,642)    3,301,173
    Refundable income taxes, prepaid expenses and other
      assets................................................      630,899     1,302,056    (2,917,660)
    Trade accounts payable and other accrued liabilities....    2,440,434       769,300    (5,763,674)
                                                              -----------   -----------   -----------
        Total adjustments...................................    9,851,854     6,747,992    (2,063,509)
                                                              -----------   -----------   -----------
        Net cash provided by (used in) operating
          activities........................................    9,852,434     2,079,966    (6,720,333)
                                                              -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Net proceeds from sale of restaurant segment (Note 1).....           --            --    49,234,814
  Net proceeds from sale of Mom 'n' Pop's Country Ham, LLC
    (Note 1)................................................           --            --       147,239
  Proceeds from sales of assets to others...................        1,000        60,300       652,523
  Proceeds from sales of assets to other related parties....           --            --        19,750
  (Increase) decrease in related party notes receivables
    (Note 16)...............................................      (58,203)      238,513       441,782
  Decrease in other notes receivables.......................           --            --       103,974
  Capital expenditures to related parties (Note 16).........           --      (250,000)     (316,233)
  Capital expenditures -- other.............................   (5,994,017)   (2,514,050)   (5,171,445)
  Certificate of deposit of special purpose entity..........   (1,240,000)           --            --
  Other investing activities, net...........................           --            --        53,875
                                                              -----------   -----------   -----------
        Net cash provided by (used in) investing
          activities........................................   (7,291,220)   (2,465,237)   45,166,279
                                                              -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net repayments under revolving credit agreement...........           --            --   (29,000,000)
  Principal payments on long-term debt (Note 16)............     (134,107)     (314,433)   (2,415,224)
  Loan origination fees.....................................       (1,949)     (188,575)     (177,909)
  Loan to shareholder.......................................           --            --    (5,000,000)
  Purchase of common stock..................................           --            --    (1,020,360)
  Capital contributions of special purpose leasing entity
    (Note 16)...............................................      339,639            --            --
  Proceeds from exercise of stock options...................           --            --       204,613
                                                              -----------   -----------   -----------
        Net cash provided by (used in) financing
          activities........................................      203,583      (503,008)  (37,408,880)
                                                              -----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........    2,764,797      (888,279)    1,037,066
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................    1,813,185     2,701,464     1,664,398
                                                              -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, END OF YEAR......................  $ 4,577,982   $ 1,813,185   $ 2,701,464
                                                              ===========   ===========   ===========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>

                               PIERRE FOODS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION, ACQUISITION AND DISCONTINUED OPERATIONS

     Description of Business.  Pierre Foods, Inc. (the "Company" or "Pierre
Foods," formerly known as "Fresh Foods, Inc." or "Fresh Foods") is a vertically
integrated producer and marketer of fully-cooked branded and private label
protein and bakery products and microwaveable sandwiches for the domestic
foodservice market. The Company sells its products through various distribution
channels under the Pierre(TM), Fast Choice(R), Fast Bite(R), Rib-B-Q(R), Chop
House(TM), Deli Breaks(TM), Hot 'n' Ready(TM) and Mom 'n' Pop's(R) brand names.
Prior to the sale of the ham curing business effective July 2, 1999, the Company
also produced cured hams which were sold primarily through distributors to
retail supermarkets under the "Mom 'n' Pop's"(R) brand name. In addition, prior
to the sale of the restaurant segment effective October 7, 1999, the Company
owned and operated 67 restaurants and franchised an additional 36 restaurants
operating under the Sagebrush, Western Steer, Prime Sirloin and Bennett's
concepts.

     Acquisition of Pierre Foods Division of Hudson Foods, Inc.  On June 9,
1998, the Company purchased certain of the net operating assets of the Pierre
Foods Division ("Pierre Cincinnati") of Hudson Foods, Inc. ("Hudson"), a wholly
owned subsidiary of Tyson Foods. The acquisition was accounted for using the
purchase method of accounting. The purchase price, which totaled $119.3 million
including capitalized transaction costs was allocated to the net underlying
assets based on their respective fair values. Excess purchase price over fair
market value of the underlying assets was allocated to goodwill, trade name and
assembled work force and is being amortized on a straight-line basis over lives
ranging from fifteen to thirty years (Note 2).

     The purchase was financed by the issuance of $115.0 million 10.75% Senior
Notes Due 2006 (the "Senior Notes") and an initial borrowing under a five-year,
$75.0 million, revolving bank credit facility. That $75.0 million facility was
replaced in fiscal 2000 with a $25 million facility from a new lender (Note 7).

     Disposition of Mom 'n' Pop's Country Ham, LLC.  Effective July 2, 1999, the
Company sold Mom 'n' Pop's Country Ham, LLC, its ham curing business, to the
management group of that subsidiary that includes the Chairman of the Board for
$995,000. Under the terms of the sale agreement, the Company received cash of
$9,950 and an 8%, unsecured $985,050 note, due December 31, 1999. In addition,
the Company agreed to provide an 8%, $500,000 unsecured working capital line of
credit through December 31, 1999. As part of the sale transaction, the Company,
on behalf of Mom 'n' Pop's Country Ham, LLC, paid $490,178 for a non-compete and
consulting agreement with a former executive officer of the subsidiary. In
addition, the executive officer received severance benefits totaling $357,583 as
a result of the disposal of this business. As a result of this sale, the Company
recorded a loss on disposition of $2,857,160. At March 4, 2000, all outstanding
principal amounts and accrued interest under the note and working capital line
were paid in full. The ham curing business did not qualify for discontinued
operations presentation.

     Disposition of the Restaurant Segment.  On September 10, 1999, the Company
signed an agreement to sell substantially all of its restaurant operations and
thereby committed itself to disposing of its restaurant segment in a transaction
completed on October 8, 1999. Under the terms of the agreement, the buyer,
Carousel Capital Partners, L.P., acquired Claremont Restaurant Group, LLC
("Claremont Restaurant Group"), as well as non-compete and consulting contracts
with certain key restaurant executives in exchange for a cash purchase price of
$49,796,904, subject to adjustments. Cash proceeds were used for payments to key
restaurant executives for severance, consulting, and noncompete agreements
totaling $2,015,361, payments of bonuses to certain restaurant employees
totaling $333,868 and payments of investment banking, legal, and accounting fees
totaling $1,756,167 to arrive at net cash proceeds of $45,691,508. As of October
8, 1999, the net book value of Claremont Restaurant Group was $34,074,024,
resulting in a gain of $11,617,484. In addition, at the time of the sale, the
Company accelerated vesting of

                                       F-7
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock options for all restaurant employees, resulting in the recognition of a
charge totaling $207,314, which reduced the net gain to $11,410,170.

     In addition, on September 14, 1999 the Company sold five former restaurant
properties and one tract of vacant land, with a combined book value of
$2,433,482, to an entity in which a former officer and principal shareholder is
a minority investor, for a net cash purchase price of $938,585. This transaction
was completed under an agreement entered into earlier during the fiscal year and
was contingent upon the sale of Claremont Restaurant Group. Under the terms of
the initial agreement, all non-operating restaurant properties, consisting of
seven former restaurant locations and three tracts of undeveloped land with a
total book value of $3,620,842, were offered for sale at an aggregate price of
$2,635,000. The agreement further specified that the cash proceeds from the sale
of any of these properties to third parties prior to the sale of Claremont
Restaurant Group would reduce the purchase price of the remaining pool of
properties on a dollar-for-dollar basis, subject to the sale of Claremont
Restaurant Group. Prior to the sale, four of the properties, with a book value
totaling $1,187,359, were sold to unrelated third parties for cash totaling
$1,557,065. Due to the nature of this transaction, gross gains totaling $369,706
were netted with the loss recorded from the sale of the remaining real estate
occurring on September 14, 1999. Net cash proceeds from these transactions,
after legal fees and other settlement costs of $32,428, totaled $2,463,223,
resulting in a net loss of $1,157,619.

     Due to the disposition of all assets and liabilities relating to Claremont
Restaurant Group, the results of the restaurant segment have been reported
separately as discontinued operations in the consolidated statements of
operations. Operating results prior to the measurement date of September 10,
1999 are presented in "Income From Discontinued Restaurant Segment". The
operating loss subsequent to the measurement date through the date of disposal
was $4,510 and is included in "Gain on Disposal of Discontinued Restaurant
Segment", along with the gains and losses discussed above. The results of the
discontinued operations do not reflect any interest expense or management fees
allocated by the Company. In addition, the results of discontinued operations
exclude transaction success bonuses paid to certain corporate officers totaling
$3,102,689, as well as amounts totaling $1,389,503 paid to the Company's former
Chairman under a severance, consulting, and noncompete agreement as part of the
sale (Note 16). Prior year consolidated financial statements have been
reclassified to present Claremont Restaurant Group as a discontinued operation.

     Net revenues and income from discontinued operations are as follows:

<Table>
<Caption>
                                                              MARCH 4, 2000
                                                              -------------
<S>                                                           <C>
Net operating revenues......................................   $59,583,905
                                                               ===========
Operating profit............................................     4,502,401
Other expense, net..........................................       167,005
Income tax provision........................................     1,507,029
                                                               -----------
Income from discontinued restaurant segment.................   $ 2,828,367
                                                               ===========
Pretax gain on disposal of discontinued restaurant
  segment...................................................   $10,770,251
Income tax provision........................................     3,968,525
                                                               -----------
Gain on disposal of discontinued restaurant segment.........   $ 6,801,726
                                                               ===========
</Table>

     Corporate Reorganization.  On December 31, 1999, the Company completed a
reorganization which merged Pierre Foods, LLC (Pierre Cincinnati) and Pierre
Leasing, LLC into Fresh Foods, Inc. In July 2000, the Company changed its name
to "Pierre Foods, Inc." Subsequent to the reorganization in 1999, Fresh Foods
Properties, LLC is the only subsidiary of the Company.

     On April 26, 2001, the Company signed a definitive exchange agreement
documenting a management buyout proposal by PF Management, Inc. ("PF
Management"). In July, the Special Committee of the Board of Directors of the
Company received a competing proposal from William E. Simon & Sons ("Simon") and
Triton Partners ("Triton") in which Simon and Triton proposed to commence a
tender offer to purchase the Company's common stock for $2.50 per share, subject
to certain

                                       F-8
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  MANAGEMENT BUYOUT

conditions. The Special Committee was considering the Simon and Triton proposal
in light of the exchange agreement and other factors when the Company was
contacted in August by counsel to an Ad Hoc Committee of holders of the
Company's 10 3/4% Senior Notes Due 2006 who stated that the members of the Ad
Hoc Committee, collectively owning at least $90 million in aggregate principal
amount of the Senior Notes, were interested in negotiating with the Company to
restructure the Company's debt and equity capital. The Special Committee and the
Board of Directors decided that the Company should pursue these negotiations;
however, when the Company and the Ad Hoc Committee were unable to agree on a
mutually acceptable proposal, the Company terminated formal negotiations with
the Ad Hoc Committee.

     On December 13, Simon entered into an agreement with PF Management,
guaranteed by the Company, whereby Simon agreed to assist PF Management in
completing the management buyout and possible subsequent restructurings of PF
Management and the Company. Commensurate with the signing of this agreement,
Simon withdrew its offer made in July with Triton. Following the signing of this
agreement, PF Management and the Company entered into an amendment of the
definitive exchange agreement. The amendment, dated December 20, 2001, provides
for an increase in the exchange price to be paid in the management buyout from
$1.21 to $2.50 per share.

     The Company is currently revising its preliminary proxy statement filed
April 11, 2002 in preparation for a special meeting of the shareholders to
consider the management buyout proposal, tentatively scheduled for June 26,
2002.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation.  The accompanying consolidated financial
statements include Pierre Foods, Inc. and subsidiary, as well as amounts of the
special purpose leasing entity (see Note 16). All intercompany transactions have
been eliminated.

     Fiscal Year.  The Company reports the results of operations using a 52-53
week basis. Each quarter of the fiscal year contains 13 weeks except for the
infrequent fiscal years with 53 weeks. Fiscal 2002, fiscal 2001 and fiscal 2000
represent 52 week periods.

     The Company's fiscal year ended March 2, 2002 is referred to herein as
"fiscal 2002," its fiscal year ended March 3, 2001 is referred to herein as
"fiscal 2001," and its fiscal year ended March 4, 2000 is referred to herein as
"fiscal 2000."

     Cash and cash equivalents.  The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.

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

     Property, Plant and Equipment.  Property, plant and equipment are stated at
cost. Expenditures for maintenance and repairs which do not significantly extend
the useful lives of assets are charged to operations whereas additions and
betterments, including interest costs incurred during construction, which was
not material for any year presented, are capitalized.

     Depreciation of property, plant and equipment is provided over the
estimated useful lives of the respective assets on the straight-line basis.
Leasehold improvements are depreciated over the shorter of their estimated
useful lives or the terms of the respective leases. Property under capital
leases is amortized in accordance with the Company's normal depreciation policy.
Depreciation expense, along with amortization of intangible assets, is recorded
as a separate line item in the consolidated statements of operations. Cost of
goods sold and selling, general and administrative expenses exclude depreciation
expense.

     The Company evaluates the carrying values of long-lived assets for
impairment by assessing recoverability based on forecasted operating cash flows
on an undiscounted basis, and determined no impairment charge was necessary at
March 2, 2002.


                                       F-9
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Intangible Assets.  Intangible assets consist of the excess of cost over
the fair value of net assets of businesses acquired, assembled workforce and
trade name. The Company assesses recoverability of the excess cost over the
assigned value of net assets acquired by determining whether the amortization of
the balance over its remaining life can be recovered through the undiscounted
future operating cash flows of the acquired operations. See "New Accounting
Pronouncements" following.

     The estimated lives of the intangible assets are as follows:

<Table>
<S>                                                           <C>
Excess of cost over fair value of net assets acquired.......  15 - 30 years
Trade name..................................................       30 years
Assembled workforce.........................................       15 years
</Table>

     Deferred Loan Origination Fees.  Deferred loan origination fees associated
with the Company's revolving credit facility and long-term debt are amortized
based on the term of the respective agreements. This amortization expense is
included in interest expense.

     Revenue Recognition.  Revenue from sales of food processing products is
recorded at the time title transfers. Standard shipping terms are FOB
destination, therefore title passes at the time the product is delivered to the
customer. Revenue is recognized as the net amount to be received after
deductions for estimated discounts, product returns and other allowances.

     Promotions.  Effective with the fiscal year beginning March 4, 2001,
promotional expenses associated with rebates, marketing promotions and special
pricing arrangements are recorded as a reduction of revenues at the time the
sale is recorded, in accordance with EITF 0014. The appropriate reclasses were
made for all other fiscal years presented. Certain of these expenses are
estimated based on expected future payments to be made under these programs. The
Company believes the estimates recorded in the financial statements are
reasonable estimates of the Company's future liability.

     Advertising Costs.  The Company expenses advertising costs as incurred.
Advertising expense included in continuing operations for fiscal 2002, fiscal
2001 and fiscal 2000 was $810,367, $891,173 and $994,334, respectively.

     Research and Development.  The Company expenses research and development
costs as incurred. Research and development expense included in continuing
operations for fiscal 2002, fiscal 2001 and fiscal 2000 was $372,797, $464,594
and $354,322, respectively.

     Distribution Expense.  The Company expenses distribution costs as incurred.
These costs include warehousing, fulfillment and freight costs, and are included
in selling, general and administrative expense. Distribution expense included in
continuing operations for fiscal 2002, fiscal 2001 and fiscal 2000 was
$17,010,037, $18,219,688 and $16,894,823, respectively.

     Income Taxes.  Income taxes are provided for temporary differences between
the tax and financial accounting bases of assets and liabilities using the asset
and liability method. The tax effects of such differences are reflected in the
balance sheet at the enacted tax rate applicable to the years when such
differences are scheduled to reverse. The effect on deferred taxes of a change
in tax rates is recognized in the period that includes the enactment date.

     Reclassifications.  Financial statements for fiscal 2001 and fiscal 2000
have been reclassified, where applicable, to conform to the financial statement
presentation used in fiscal 2002.

     Use of Estimates.  The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant accounting
estimates include sales discounts and promotional allowances, inventory
reserves, insurance reserves, and useful lives assigned to intangible assets.
Actual results could differ from those estimates.


                                      F-10
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     New Accounting Pronouncements.  In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative financial instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as embedded
derivatives) and for hedging activities. The new standard requires an entity to
recognize all derivative instruments as either assets or liabilities in its
statement of financial position and to measure those instruments at fair value.
The Company adopted SFAS No. 133 effective March 4, 2001. The Company purchases
natural gas contracts as a means of managing the risk of price changes in
forecasted natural gas purchases. As of March 2, 2002, these contracts qualify
for the normal purchases and sales exception within SFAS No. 133, and
accordingly, the Company has not recorded the fair value of these contracts
within the consolidated financial statements.

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase
method of accounting for business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interests method. The adoption of SFAS 141 did not
have a material impact on its financial position and results of operations.

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is effective
for the fiscal year beginning March 3, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization. In addition, the standard
includes provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing recognized
intangibles, reclassification of certain intangibles out of previously reported
goodwill and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS 142 also requires the Company to
complete a transitional goodwill impairment test six months from the date of
adoption.

     Any impairment loss resulting from transitional impairment test would be
recorded as a cumulative effect of a change in accounting principle for the
fiscal quarter ending June 1, 2002. The Company is currently assessing the
impact of SFAS 142 on its financial position and results of operation. As a
result, the assembled work force, with an amortized balance of $2,171,067 at
March 2, 2002, will be reclassified as goodwill. In addition, there are
preliminary indications that the revised goodwill amount of $29,019,571 may be
impaired. The assessment of the impact of SFAS 142 will be completed by the
second quarter ending August 31, 2002.

     The reason for the potential impairment loss is the result of the change
(effective March 3, 2002) in the evaluation criteria for goodwill from an
undiscounted cash flow approach, which was previously utilized under the
guidance in Accounting Principles Board Opinion No. 17, to the fair value
approach which is stipulated in SFAS No. 142.

     In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations," which is
effective for the Company beginning March 2, 2003. SFAS 143 addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement cost. The Company
does not believe that the adoption of SFAS 143 will have a material impact on
its financial position and results of operations.

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


                                       F-11
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3.  ACCOUNTS AND NOTES RECEIVABLE

     Accounts and notes receivable consist of the following:

<Table>
<Caption>
                                                              MARCH 2,      MARCH 3,
                                                                2002          2001
                                                             -----------   -----------
<S>                                                          <C>           <C>
Accounts receivable:
  Trade accounts receivable (less allowance for doubtful
     receivables of $219,118 and $244,881 at March 2, 2002
     and March 3, 2001)....................................  $20,608,422   $17,802,086
  Other....................................................      860,613       395,816
                                                             -----------   -----------
          Total accounts receivable........................  $21,469,035   $18,197,902
                                                             ===========   ===========
Note receivable (includes accrued interest):
  Related parties; interest rates 8.25% to 9.0% (Note
     16)...................................................  $   993,247   $   935,044
                                                             -----------   -----------
          Total noncurrent note receivable.................  $   993,247   $   935,044
                                                             ===========   ===========
</Table>

     See Note 16 regarding a $5,000,000 note receivable from a significant
shareholder presented as a reduction of shareholders' equity.

4.  INVENTORIES

     A summary of inventories, by major classification, follows:

<Table>
<Caption>
                                                              MARCH 2,      MARCH 3,
                                                                2002          2001
                                                             -----------   -----------
<S>                                                          <C>           <C>
Manufacturing supplies.....................................  $ 1,199,647   $ 1,189,481
Raw materials..............................................    4,974,350     4,404,820
Work in process............................................          838         4,281
Finished goods.............................................   17,678,020    21,205,481
                                                             -----------   -----------
          Total............................................  $23,852,855   $26,804,063
                                                             ===========   ===========
</Table>

                                       F-12
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  PROPERTY, PLANT AND EQUIPMENT

     The major components of property, plant and equipment are as follows:

<Table>
<Caption>
                                                 ESTIMATED     MARCH 2,      MARCH 3,
                                                USEFUL LIFE      2002          2001
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Land..........................................                $ 1,270,025   $ 1,270,025
Land improvements.............................  10-20 years       382,304       382,304
Buildings.....................................  20-40 years    16,721,925    16,073,803
Leasehold improvements........................   5-20 years     1,517,143       670,143
Machinery and equipment.......................   5-20 years    30,954,454    28,459,116
Machinery and equipment under capital
  leases......................................   5-15 years       763,517       630,650
Furniture and fixtures........................   5-15 years     4,987,449     4,031,735
Aircraft (Note 16)............................     16 years     6,200,000            --
Automotive equipment..........................    2-5 years       542,412       487,504
Construction in progress......................                  1,318,912       636,828
                                                              -----------   -----------
          Total...............................                 64,658,141    52,642,108
Less accumulated depreciation and
  amortization................................                 21,376,838    17,725,615
                                                              -----------   -----------
  Property, plant and equipment, net..........                $43,281,303   $34,916,493
                                                              ===========   ===========
</Table>

6.  INTANGIBLE ASSETS

     Intangible assets consist of the following:

<Table>
<Caption>
                                                              MARCH 2,      MARCH 3,
                                                                2002          2001
                                                             -----------   -----------
<S>                                                          <C>           <C>
Trade name.................................................  $44,340,000   $44,340,000
Less accumulated amortization..............................   (5,531,364)   (4,053,364)
                                                             -----------   -----------
          Total............................................  $38,808,636   $40,286,636
                                                             ===========   ===========
Excess of cost over fair value of net assets of businesses
  acquired.................................................  $30,678,287   $30,678,287
Less accumulated amortization..............................   (3,829,783)   (2,807,173)
                                                             -----------   -----------
          Total............................................  $26,848,504   $27,871,114
                                                             ===========   ===========
Assembled workforce........................................  $ 2,893,400   $ 2,893,000
Less accumulated amortization..............................     (722,333)     (529,044)
                                                             -----------   -----------
          Total............................................  $ 2,171,067   $ 2,363,956
                                                             ===========   ===========
</Table>

     Amortization expense was $2,693,499 for each of the fiscal years 2002, 2001
and 2000.

                                       F-13
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7.  FINANCING ARRANGEMENTS

     Long-term debt is comprised of the following:
<Table>
<Caption>
                                                           MARCH 2, 2002   MARCH 3, 2001
                                                           -------------   -------------
<S>                                                        <C>             <C>
10.75% Senior Notes, interest payable on June 1 and
  December 1 of each year, maturing on June 1, 2006......  $115,000,000    $115,000,000
9.25% to 11.5% capitalized lease obligations maturing
  2004 (Note 9)..........................................        97,291         164,922
                                                           ------------    ------------
          Total long-term debt...........................   115,097,291     115,164,922
          Less current installments......................        49,686          67,631
                                                           ------------    ------------
Long-term debt, excluding current installments...........  $115,047,605    $115,097,291
                                                           ============    ============
</Table>

     The Senior Notes are unsecured obligations of the Company, subject to
certain financial and non-financial covenants. At March 2, 2002, the Company was
in compliance with all covenants under the Senior Notes.

     Effective May 24, 2000, the Company obtained a three-year variable rate $25
million revolving credit facility which provides that the Company will be able
to borrow up to an amount (including standby letters of credit up to $5.0
million) equal to the lesser of $25.0 million less required minimum availability
or a borrowing base (comprised of eligible accounts receivable and inventory).
Funds available under the revolving credit facility may be used for general
working capital needs. In addition, the Company is required to meet certain
financial covenants regarding net worth, cash flow and restricted payments,
including a restriction against dividend payouts. As of March 2, 2002, the
Company was in compliance with the financial covenants under this facility.

     Effective May 30, 2000 the Company terminated a $75 million credit facility
which resulted in the recognition of an extraordinary loss of $455,238, net of
income taxes of $258,303 in fiscal 2001.

     The average rate on the $25 million revolving line of credit was 7.30% and
7.65% for the fiscal years ended March 2, 2002 and March 3, 2001, respectively.
The average rate on the $75 million revolving line of credit was 8.27% for the
fiscal year ended March 4, 2000. There were no outstanding borrowings under this
facility at March 2, 2002 or March 3, 2001.
<Table>
<Caption>
   LONG-TERM DEBT MATURITIES, INCLUDING CAPITAL LEASES (NOTE 9)
-------------------------------------------------------------------
 2003      2004      2005      2006         2007          TOTAL
-------   -------   -------   -------   ------------   ------------
<S>       <C>       <C>       <C>       <C>            <C>
$49,686.. $47,605   $    --   $    --   $115,000,000   $115,097,291
</Table>

     Obligation of special purpose entity is comprised of a seven year variable
rate note payable, due in monthly installments with a balloon payment due in
December 2008 (see Note 16):
<Table>
<Caption>
                                                               MARCH 2,     MARCH 3,
                                                                 2002         2001
                                                              ----------   ----------
<S>                                                           <C>          <C>
Obligation of special purpose entity........................  $6,133,524   $       --
  Less current installments.................................     275,385           --
                                                              ----------   ----------
Obligation of special purpose entity, excluding current
  installments..............................................  $5,858,139   $       --
                                                              ==========   ==========
</Table>
<Table>
<Caption>
              OBLIGATION OF SPECIAL PURPOSE ENTITY
-----------------------------------------------------------------
                                           2007 AND
 2003      2004       2005       2006     THEREAFTER     TOTAL
-------  --------   --------   --------   ----------   ----------
<S>      <C>        <C>        <C>        <C>          <C>
$275,385.. $291,208 $307,941   $325,636   $4,933,354   $6,133,524
</Table>

                                       F-14

<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  INCOME TAXES

     The income tax provision (benefit) attributable to continuing operations is
summarized as follows:

<Table>
<Caption>
                                                           FISCAL YEARS ENDED
                                                  ------------------------------------
                                                  MARCH 2,    MARCH 3,      MARCH 4,
                                                    2002        2001          2000
                                                  --------   -----------   -----------
<S>                                               <C>        <C>           <C>
Current:
  Federal.......................................  $(59,063)  $(1,201,123)  $(5,477,218)
  State.........................................   (13,981)      (23,557)      191,094
                                                  --------   -----------   -----------
          Total current.........................   (73,044)   (1,224,680)   (5,286,124)
                                                  --------   -----------   -----------
Deferred:
  Federal.......................................   694,949       675,159      (404,262)
  State.........................................   111,055      (217,187)      865,218
                                                  --------   -----------   -----------
          Total deferred........................   806,004       457,972       460,956
                                                  --------   -----------   -----------
          Total provision (benefit).............  $732,960   $  (766,708)  $(4,825,168)
                                                  ========   ===========   ===========
</Table>

     Actual income tax provision (benefits) are different from amounts computed
by applying a statutory federal income tax rate to loss before income tax from
continuing operations. The computed amount is reconciled to total income tax
provision (benefit) from continuing operations.

<Table>
<Caption>
                                                             FISCAL YEARS ENDED
                              --------------------------------------------------------------------------------
                                   MARCH 2, 2002               MARCH 3, 2001               MARCH 4, 2000
                              ------------------------   -------------------------   -------------------------
                                          PERCENT OF                   PERCENT OF                  PERCENT OF
                               AMOUNT    PRETAX INCOME     AMOUNT      PRETAX LOSS     AMOUNT      PRETAX LOSS
                              --------   -------------   -----------   -----------   -----------   -----------
<S>                           <C>        <C>             <C>           <C>           <C>           <C>
Computed provision (benefit)
  at statutory rate.........  $249,404       34.0%       $(1,693,028)     (34.0)%    $(6,480,310)     (34.0)%
Tax effect resulting from:
  State income taxes, net of
    federal tax provision
    (benefit)...............    55,857        7.6           (158,889)      (3.2)         790,493        4.1
  Compensation limitation...   315,941       43.0            442,000        8.9          833,752        4.4
  Meals and entertainment...    80,429       11.0            117,368        2.4           90,648        0.5
  Other permanent
    differences.............    31,329        4.3            525,841       10.5          (59,751)      (0.3)
                              --------       ----        -----------      -----      -----------      -----
  Income tax provision
    (benefit)...............  $732,960       99.9%       $  (766,708)     (15.4)%    $(4,825,168)     (25.3)%
                              ========       ====        ===========      =====      ===========      =====
</Table>

                                       F-15
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  INCOME TAXES, CONTINUED

     The approximate tax effect of each type of temporary difference and
carryforward that gave rise to the Company's deferred income tax assets and
liabilities for fiscal 2002 and fiscal 2001 is as follows:

<Table>
<Caption>
                                              MARCH 2, 2002                            MARCH 3, 2001
                                  --------------------------------------   --------------------------------------
                                    ASSETS     LIABILITIES      TOTAL        ASSETS     LIABILITIES      TOTAL
                                  ----------   -----------   -----------   ----------   -----------   -----------
<S>                               <C>          <C>           <C>           <C>          <C>           <C>
Current:
  Allowance for doubtful
    receivables.................  $  342,421            --   $   342,421   $   45,822   $        --   $    45,822
  Inventory.....................     657,455            --       657,455      811,625            --       811,625
  Accrued promotional expense...     757,957            --       757,957      751,394            --       751,394
  Accrued vacation pay..........     487,329            --       487,329      410,265            --       410,265
  Reserve for returns...........      48,591            --        48,591       35,721            --        35,721
  Reserves -- other.............     127,726            --       127,726       34,281            --        34,281
  Prepaid expenses..............          --      (172,885)     (172,885)          --      (168,178)     (168,178)
  Accrued bonus.................          --            --            --      107,809            --       107,809
  Accrued worker's
    compensation................      51,921            --        51,921      128,937            --       128,937
  Other.........................      49,102            --        49,102       16,966            --        16,966
                                  ----------   -----------   -----------   ----------   -----------   -----------
         Total current..........   2,522,502      (172,885)    2,349,617    2,342,820      (168,178)    2,174,642
                                  ----------   -----------   -----------   ----------   -----------   -----------
Noncurrent:
  Property, plant and
    equipment...................          --    (4,303,962)   (4,303,962)          --    (3,332,260)   (3,332,260)
  Consulting agreements.........     402,751            --       402,751      517,359            --       517,359
  Goodwill amortization.........          --    (3,650,651)   (3,650,651)                (2,675,410)   (2,675,410)
  General business credit
    carryforward................   1,070,799            --     1,070,799    1,070,799            --     1,070,799
  Alternative minimum tax credit
    carryforward................     654,317            --       654,317      654,317            --       654,317
  Federal loss carryforward.....   1,980,513            --     1,980,513    1,427,658            --     1,427,658
  State loss carryforward.......     609,988            --       609,988      528,718            --       528,718
  Other.........................     703,633       (19,454)      684,179      237,732            --       237,732
                                  ----------   -----------   -----------   ----------   -----------   -----------
         Total noncurrent.......   5,422,001    (7,974,067)   (2,552,066)   4,436,583    (6,007,670)   (1,571,087)
                                  ----------   -----------   -----------   ----------   -----------   -----------
         Total current and
           noncurrent...........  $7,944,503   $(8,146,952)  $  (202,449)  $6,779,403   $(6,175,848)  $   603,555
                                  ==========   ===========   ===========   ==========   ===========   ===========
</Table>

     At March 2, 2002, federal and state operating loss carryovers of
approximately $5,825,000 and $12,200,000, respectively, are available to offset
future federal and state taxable income. The carryover periods range from five
to twenty years, which will result in expirations of varying amounts beginning
in fiscal 2007 and continuing through fiscal 2022.

     No valuation allowance has been provided as of March 2, 2002 because
management believes that it is more likely than not that the deferred tax assets
will be realized.

                                       F-16
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9.  LEASED PROPERTIES

     The Company operates certain machinery and equipment under leases
classified as capital leases. The machinery and equipment leases have original
terms ranging from one to eight years. The assets covered under these leases
have carrying values of $163,256, $279,034 and $394,810 and at March 2, 2002,
March 3, 2001 and March 4, 2000, respectively.

     Certain machinery and equipment are under operating leases with terms that
are effective for varying periods until 2008. Certain of these leases have
remaining renewal clauses, exercisable at the option of the lessee. Amounts
below include leases with related parties (see Note 16).

     At March 2, 2002, minimum rental payments required under operating and
capital leases are summarized as follows:

<Table>
<Caption>
                                              OPERATING LEASES
                                     -----------------------------------
                                                   MINIMUM
                                      MINIMUM     SUBLEASE                 CAPITAL
FISCAL YEAR                           PAYMENTS    RECEIPTS      TOTAL       LEASES      TOTAL
-----------                          ----------   ---------   ----------   --------   ----------
<S>                                  <C>          <C>         <C>          <C>        <C>
2003...............................  $  581,016   $ (34,260)  $  546,756   $ 56,640   $  603,396
2004...............................     329,639     (34,260)     295,379     49,805      345,184
2005...............................     218,747     (34,260)     184,487         --      184,487
2006...............................     634,815     (34,260)     600,555         --      600,555
2007...............................     126,796     (34,260)      92,536         --       92,536
Later years........................     289,200     (34,260)     254,940         --      254,940
                                     ----------   ---------   ----------   --------   ----------
Total minimum lease payments.......  $2,180,213   $(205,560)  $1,974,653    106,445   $2,081,098
                                     ==========   =========   ==========              ==========
Less amount representing
  interest.........................                                          (9,154)
                                                                           --------
Present value of minimum lease
  payments under capital leases
  (Note 7).........................                                        $ 97,291
                                                                           ========
</Table>

     Rental expense charged to continuing operations is as follows:

<Table>
<Caption>
                                                            FISCAL YEAR ENDED
                                                   ------------------------------------
                                                    MARCH 2,     MARCH 3,     MARCH 4,
                                                      2002         2001         2000
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Real estate......................................  $  164,003   $  185,103   $  251,340
Equipment........................................   1,185,738      998,012      808,164
                                                   ----------   ----------   ----------
Total............................................  $1,349,741   $1,183,115   $1,059,504
                                                   ==========   ==========   ==========
</Table>

                                       F-17
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  EMPLOYEE BENEFITS

     On March 1, 1994, the Company established an employee stock purchase plan
through which employees, after meeting minimum eligibility requirements, may
contribute up to 10% of their base earnings toward the purchase of the Company's
common stock. The plan provides that the Company will make matching
contributions of 25% of the employee's contribution. Participation in the plan
is voluntary. All contributions are funded monthly and vest immediately. The
Company's contributions to the plan included in continuing operations totaled
$11,699 and $82,707 in fiscal 2001 and 2000, respectively. Effective June 16,
2000, the Company terminated the plan. During fiscal 2001, the plan assets,
comprised of the Company's common stock and cash, totaling approximately
$230,000 were distributed to plan participants based on their respective account
balances.

     The Company maintains a 401(k) Retirement Plan for its employees which
provides that the Company will make a matching contribution of up to 50% of an
employee's voluntary contribution, limited to the lesser of 5% of that
employee's annual compensation or $11,000 for fiscal 2002. The Company's
contributions included in continuing operations were $450,085, $396,883, and
$352,773 in fiscal 2002, 2001 and 2000, respectively.

     The Company provides employee health insurance benefits to employees.
During fiscal 2001 and 2000, benefits were provided through both fully insured
and self insurance group medical plans which are partially funded by the
Company. During fiscal 2000, benefits were also provided through a Voluntary
Employee Benefit Association ("VEBA") which is partially funded by the Company.
During fiscal 2002, 2001 and 2000, contributions included in continuing
operations were $1,579,999, $1,789,926 and $1,844,874, respectively.

     Effective August 1, 2000, the Company adopted the Pierre Foods, Inc.
Compensation Exchange Plan. The Plan is a non-qualified deferred compensation
plan in which eligible participants consist of highly compensated employees and
the Company's Board of Directors. Cash contributions to the Plan were $55,270
and $56,167 during fiscal 2002 and fiscal 2001, respectively.






                                       F-18
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  CAPITAL STOCK

  STOCK OPTIONS

     The Company's 1987 Incentive Stock Option Plan and 1987 Special Stock
Option Plan provided for the issuance of up to 625,000 shares each of the
Company's stock to key employees. At March 2, 2002, no options were outstanding
under these Plans.

     The Company's 1997 Incentive Stock Option Plan, as amended, provides for
the issuance of up to 1,000,000 shares of the Company's common stock to key
employees, including officers of the Company. The Company may grant Incentive
Stock Options ("ISOs") or nonqualified stock options to eligible employees.
Stock options granted under this plan have terms of ten years, vest evenly over
five years, and are assigned an exercise price of not less than the fair value
on the date of grant.

     The Company's 1997 Special Stock Option Plan, as amended, provides for the
issuance of up to 1,500,000 shares of the Company's common stock to key
management employees, including officers and directors of the Company and
certain other individuals. All options granted under this Plan are nonqualified
stock options. Stock options granted under this plan have terms of ten years,
vest immediately, and are assigned an exercise price of not less than the fair
value on the date of grant.

     During fiscal 2000, certain current and former officers and directors of
the Company voluntarily tendered 150,000 stock options of the Incentive Stock
Option Plan and 1,000,000 stock options of the Special Stock Option Plan for
cancellation.

     A summary of the changes in shares under option and the weighted-average
exercise prices for these Plans follows:

<Table>
<Caption>
                                            1997 INCENTIVE                1997 SPECIAL
                                           STOCK OPTION PLAN            STOCK OPTION PLAN
                                       -------------------------   ---------------------------
                                                     WEIGHTED                      WEIGHTED
                                                     AVERAGE                       AVERAGE
                                        SHARES    EXERCISE PRICE     SHARES     EXERCISE PRICE
                                       --------   --------------   ----------   --------------
<S>                                    <C>        <C>              <C>          <C>
Balance at March 6, 1999.............   812,798       $9.37         1,250,000       $ 9.50
  Forfeited or cancelled.............  (457,919)       9.07        (1,000,000)       10.27
  Granted............................   166,671        5.76                --           --
  Exercised..........................   (39,375)       5.20                --           --
                                       --------                    ----------
Balance at March 4, 2000.............   482,175        8.75           250,000         6.84
  Forfeited or cancelled.............  (246,375)       8.12           (12,500)        2.90
  Granted............................    25,000        2.00                --           --
                                       --------                    ----------
Balance at March 3, 2001.............   260,800        8.52           237,500         7.04
  Forfeited or cancelled.............   (80,800)       8.95          (112,500)        3.20
                                       --------                    ----------
Balance at March 2, 2002.............   180,000       $8.33           125,000       $10.50
                                       ========                    ==========
</Table>


                                       F-19
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A summary of the range of weighted average exercise prices and weighted
average remaining contractual lives for options outstanding under the Plans at
March 2, 2002 is as follows:

<Table>
<Caption>
                                                                     SHARES
                                                     WEIGHTED      OUTSTANDING     AVERAGE
                                                     AVERAGE           AND       CONTRACTUAL
                                                  EXERCISE PRICE   EXERCISABLE      LIFE
                                                  --------------   -----------   -----------
<S>                                               <C>              <C>           <C>
1997 Special Stock Option Plan..................      $10.50         125,000      74 months
                                                                     -------
                                                                     125,000
                                                                     =======
1997 Incentive Stock Option Plan................      $10.50         131,000      75 months
                                                      $ 5.13          22,500      82 months
                                                      $ 5.38           1,500      86 months
                                                      $ 2.00          25,000     101 months
                                                                     -------
                                                      $ 8.33         180,000
                                                                     =======
</Table>

     The Company accounts for its stock option plans using the intrinsic value
based method. Accordingly, no compensation expense was recognized for
stock-based compensation relating to options granted in fiscal 2001 and 2000
since the exercise price of the options approximated the fair market value on
the date of grant. Had compensation for stock options granted been determined
using the fair value based method, the Company's net income (loss) and net
income (loss) per common share amounts for fiscal 2002, 2001, and 2000 would
approximate the following pro forma amounts:

<Table>
<Caption>
                                                           FISCAL YEARS ENDED
                            ---------------------------------------------------------------------------------
                                 MARCH 2, 2002              MARCH 3, 2001                MARCH 4, 2000
                            -----------------------   -------------------------   ---------------------------
                            AS REPORTED   PRO FORMA   AS REPORTED    PRO FORMA    AS REPORTED     PRO FORMA
                            -----------   ---------   -----------   -----------   ------------   ------------
<S>                         <C>           <C>         <C>           <C>           <C>            <C>
Net Income (loss) from
  continuing operations...     $580       $(252,854)  $(4,212,788)  $(4,489,924)  $(14,234,567)  $(15,363,122)
Income from discontinued
  operations..............       --              --            --            --      9,630,093      9,051,558
Extraordinary loss........       --              --      (455,238)     (455,238)       (52,350)       (52,350)
                               ----       ---------   -----------   -----------   ------------   ------------
Net income (loss).........     $580       $(252,854)  $(4,668,026)  $(4,945,162)  $ (4,656,824)  $ (6,363,914)
Net income (loss) per
  common share -- basic
  and diluted:
  Net Income (loss) from
    continuing
    operations............     $ --       $   (0.04)  $     (0.73)  $     (0.78)  $      (2.45)  $      (2.65)
  Income from discontinued
    operations............       --              --            --            --           1.66           1.56
  Extraordinary loss......       --              --         (0.08)        (0.08)         (0.01)         (0.01)
                               ----       ---------   -----------   -----------   ------------   ------------
  Net income (loss).......     $ --       $   (0.04)  $     (0.81)  $     (0.86)  $      (0.80)  $      (1.10)
Weighted average fair
  value of options
  granted.................                $      --                 $      1.09                  $       2.87
</Table>


                                       F-20
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The fair value of options granted under the Company's stock option plans
during fiscal 2001 and 2000 were estimated on the date of grant using the
Black-Scholes option pricing model. No options were issued in fiscal 2002.

     The weighted-average assumptions used were as follows:

<Table>
<Caption>
                                                             MARCH 3, 2001   MARCH 4, 2000
                                                             -------------   -------------
<S>                                                          <C>             <C>
Dividend yield.............................................        --              --
Expected volatility........................................      73.9%           62.6%
Risk free interest rate....................................       4.1%            6.0%
Expected lives.............................................       3.5             3.5
</Table>

     In fiscal 2000, contributed capital increased $345,970, due to accelerated
vesting of stock options resulting from the dispositions of the restaurant
segment and the ham curing business.

SHAREHOLDER RIGHTS PLAN

     In fiscal 1998, the Company adopted a shareholder rights plan pursuant to
which the holder of each share of Company common stock also holds a stock
purchase right ("Right") that may be exercised for Company preferred stock or
Company common stock upon the occurrence of certain "triggering events"
specified in a Rights Agreement dated as of September 2, 1997 between the
Company and American Stock Transfer and Trust Company.

     On August 28, 1997, the Company's Board of Directors declared a dividend
distribution of one Right for each share of the Company's common stock to the
Company's shareholders of record at the close of business on September 10, 1997.
Each Right entitles the record holder to purchase from the Company one
one-hundredth of a share of Junior Participating Preferred Stock, Series A, of
the Company at a purchase price of $30. The Rights are attached to the Company's
common stock and are not exercisable except under the limited circumstances set
forth in the Rights Agreement relating to the acquisition of, or the
commencement of a tender offer for, 15% or more of the Company's common stock.
The Rights may be redeemed at a price of $.001 per Right by the Company any time
prior to any person or group acquiring 15% or more of the Company's common stock
and will expire on September 10, 2007. Until the Rights separate from the
Company's common stock, each newly-issued share of such common stock will have a
Right attached. The Rights do not have voting or dividend rights

PREFERRED STOCK

     The Company is authorized to issue 2,500,000 shares of preferred stock with
a par value of $.10 per share in one or more series. All rights and preferences
of each series are to be established by the Company prior to issuance. There are
no issues of this class of stock outstanding as of March 2, 2002.

COMMON STOCK REPURCHASE

     On December 21, 1999, the Company signed an agreement with a shareholder
which finalized an agreement in principal reached on November 16, 1999. Under
the terms of the agreement, the Company agreed to purchase from the shareholder
68,024 shares of the Company's common stock and receive a release of any
possible claims against the Company for a total price of $1,020,360. The excess
of the purchase price over the market price of the stock at November 16, 1999
totaled $442,156 and was recognized as selling, general and administrative
expense.


                                      F-21



<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

     The Company's nonderivative financial instruments consist primarily of cash
and cash equivalents, trade and note receivables, trade payables and long-term
debt. The estimated fair values of the financial instruments have been
determined by the Company using available market information and appropriate
valuation techniques. Considerable judgment is required, however, to interpret
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

     At March 2, 2002, excluding long-term debt, the book values of each of the
nonderivative financial instruments recorded in the Company's balance sheet are
considered representative of fair value due to variable interest rates, short
terms to maturity and/or short length of time outstanding.

     The fair value of the Company's Senior Notes is estimated based on quoted
market prices and interest rates currently available for issuance of debt with
similar terms and remaining maturities. As of March 2, 2002 and March 3, 2001,
the fair value of the Senior Notes was $57,500,000 and $41,975,000,
respectively.




                                       F-22
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13.  MAJOR BUSINESS SEGMENTS

     Food Processing: Pursuant to the acquisition of Pierre Cincinnati, the
Company produces beef, poultry and pork products that typically are
custom-developed to meet specific customer requirements. These products are (i)
sold to foodservice customers such as restaurant chains, schools and healthcare
providers, (ii) sold through various distribution channels, including warehouse
clubs and grocery stores, or (iii) combined with specialty breads to produce
microwaveable sandwiches that are sold through other foodservice channels such
as convenience stores, vending machines, warehouse clubs and grocery stores.
Prior to the acquisition of Pierre, the Company produced a variety of biscuits,
yeast rolls and other flour-based products, sold primarily under the "Mom 'n'
Pop's" brand name to institutional buyers, vending companies, delicatessens and
supermarkets.

     Ham Curing: Prior to the sale of Mom 'n' Pop's Country Ham, LLC, effective
July 2, 1999, the Company produced whole cured hams, packaged cured ham slices,
pre-portioned ham for portion control customers, and various "side meat"
products. A portion of ham production was sold directly or through distributors
to retail supermarkets under the "Mom 'n' Pop's" brand name, primarily in North
Carolina, South Carolina, Virginia, Tennessee, Alabama and Georgia. The
remainder of production was sold to institutional food distributors.

     During fiscal 2000, corporate expenses related to the management of the
food processing, restaurant and ham curing segments are excluded from profit for
reportable segments. During fiscal 2001, subsequent to the sales of the
restaurant segment and ham curing business, corporate expenses are included in
food processing profit for reportable segments.

     The following tables set forth revenue and operating profit by segment
included in continuing operations:

<Table>
<Caption>
                                                 FOOD           HAM
                                              PROCESSING       CURING         TOTAL
                                             ------------   ------------   ------------
<S>                                          <C>            <C>            <C>
Fiscal 2002:
  Revenues, net from external customers....  $242,605,000   $         --   $242,605,000
  Depreciation and amortization............     6,437,873             --      6,437,873
  Segment profit...........................    13,575,937             --     13,575,937
  Segment assets...........................   169,820,864             --    169,820,864
  Expenditures for capital assets (Note
     15)...................................    12,194,017             --     12,194,017
Fiscal 2001:
  Revenues, net from external customers....  $203,475,325   $         --   $203,475,325
  Depreciation and amortization............     6,237,969             --      6,237,969
  Segment profit...........................     8,072,926             --      8,072,926
  Segment assets...........................   160,307,874             --    160,307,874
  Expenditures for capital assets..........     2,764,050             --      2,764,050
Fiscal 2000:
  Revenues, net from external customers....  $176,969,884   $  2,096,052   $179,065,936
  Depreciation and amortization............     5,419,582         95,488      5,515,070
  Segment profit (loss)....................    15,330,661       (268,767)    15,061,894
  Segment assets...........................   143,236,471             --    143,236,471
  Expenditures for capital assets..........     4,318,863             --      4,318,863
</Table>

                                       F-23
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                           FISCAL YEARS ENDED
                                              ---------------------------------------------
                                              MARCH 2, 2002   MARCH 3, 2001   MARCH 4, 2000
                                              -------------   -------------   -------------
<S>                                           <C>             <C>             <C>
Profit or Loss:
Total profit for reportable segments........   $13,575,937    $  8,072,926    $ 15,061,894
Corporate expenses..........................            --              --     (16,447,851)
Loss on sale of Mom 'n Pop's Country Ham,
  LLC.......................................            --              --      (2,857,160)
Interest and other expense, net.............   (12,842,397)    (13,052,422)    (14,816,618)
                                               -----------    ------------    ------------
     Income (loss) from continuing
       operations before income tax
       provision (benefit)..................   $   733,540    $ (4,979,496)   $(19,059,735)
                                               ===========    ============    ============
</Table>

<Table>
<Caption>
                                                    SEGMENT                 CONSOLIDATED
                                                    TOTALS      CORPORATE     TOTAL(1)
                                                  -----------   ---------   ------------
<S>                                               <C>           <C>         <C>
Other Significant Items:
Fiscal 2002:
  Expenditures for capital assets...............  $12,194,017   $     --    $12,194,017
  Depreciation and amortization.................    6,437,873         --      6,437,873
Fiscal 2001:
  Expenditures for capital assets...............  $ 2,764,050   $     --    $ 2,764,050
  Depreciation and amortization.................    6,237,969         --      6,237,969
Fiscal 2000:
  Expenditures for capital assets...............  $ 4,318,863   $690,544    $ 5,009,407
  Depreciation and amortization.................    5,515,070    146,823      5,661,893
</Table>

---------------

 (1)Excludes discontinued restaurant segment expenditures for assets and
    depreciation and amortization.

     Sales by major product line are as follows:

<Table>
<Caption>
                                                          FISCAL YEARS ENDED
                                             ---------------------------------------------
                                             MARCH 2, 2002   MARCH 3, 2001   MARCH 4, 2000
                                             -------------   -------------   -------------
<S>                                          <C>             <C>             <C>
Food Processing
  Fully-cooked protein products............  $138,980,147    $111,221,290    $103,081,473
  Microwaveable sandwiches.................    95,779,974      85,196,416      66,389,287
  Bakery and other products................     7,844,879       7,057,619       7,499,124
                                             ------------    ------------    ------------
     Total food processing revenues........  $242,605,000    $203,475,325    $176,969,884
                                             ============    ============    ============
Ham Curing
  Sliced hams..............................  $         --    $         --    $  1,530,118
  Whole hams...............................            --              --         565,934
                                             ------------    ------------    ------------
     Total ham curing revenues.............  $         --    $         --    $  2,096,052
                                             ============    ============    ============
</Table>

     Significantly all revenues and long-lived assets are derived and reside in
the United States.

                                       F-24
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. COMMITMENTS AND CONTINGENCIES

     Under the provisions of the Purchase Agreement with Carousel Capital, the
Company is responsible for all income tax and payroll taxes for the period prior
to the sale, relating to Claremont Restaurant Group and related subsidiaries.
The Company believes it has properly recorded any such liabilities to taxing
authorities.

     The Company provides a secured letter of credit in the amount of $1,500,000
to its insurance carrier for the underwriting of certain performance bonds,
which expires in fiscal 2003. The Company also provides secured letters of
credit to its insurance carriers for outstanding and potential worker's
compensation and general liability claims. Letters of credit for these claims
totaled $225,000, $360,000 and $500,000 in fiscal 2002, fiscal 2001 and fiscal
2000, respectively. In addition, the Company provides secured letters of credit
to a limited number of suppliers. Letters of credit for suppliers totaled
$500,000 and $250,000 in fiscal 2002 and fiscal 2001, respectively.

     The Company is involved in various legal proceedings. Management believes,
based on the advice of legal counsel, that the outcome of such proceedings will
not have a materially adverse effect on the Company's financial position or
future results of operations and cash flows.

<Table>
<Caption>
                                                        COMMITMENTS BY FISCAL YEAR
                               ----------------------------------------------------------------------------
                                                                                  2007 AND
                                  2003          2004        2005       2006      THEREAFTER       TOTAL
                               -----------   ----------   --------   --------   ------------   ------------
<S>                            <C>           <C>          <C>        <C>        <C>            <C>
Letters of Credit............  $ 2,225,000   $       --   $     --   $     --   $         --   $  2,225,000
Purchase Commitments for
  Capital Projects...........    9,610,281           --         --         --             --      9,610,281
                               -----------   ----------   --------   --------   ------------   ------------
    Total....................  $11,835,281   $       --   $     --   $     --   $         --   $ 11,835,281
                               ===========   ==========   ========   ========   ============   ============
</Table>

<Table>
<Caption>
                                                  CONTRACTUAL OBLIGATIONS BY FISCAL YEAR
                               ----------------------------------------------------------------------------
                                                                                  2007 AND
                                  2003          2004        2005       2006      THEREAFTER       TOTAL
                               -----------   ----------   --------   --------   ------------   ------------
<S>                            <C>           <C>          <C>        <C>        <C>            <C>
Long-Term Debt...............  $        --   $       --   $     --   $     --   $115,000,000   $115,000,000
Capital Lease Obligations....       49,686       47,605         --         --             --         97,291
Operating Lease
  Obligations................      581,016      329,639    218,747    634,815        415,996      2,180,213
Consulting and Noncompete
  Agreements.................      339,291      423,651    269,754         --             --      1,032,696
Obligation of Special Purpose
  Entity.....................      275,385      291,208    307,941    325,636      4,933,354      6,133,524
                               -----------   ----------   --------   --------   ------------   ------------
    Total....................  $ 1,245,378   $1,092,103   $796,442   $960,451   $120,349,350   $124,443,724
                               ===========   ==========   ========   ========   ============   ============
</Table>


                                       F-25
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15.  SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest and net income taxes refunded is as follows:

<Table>
<Caption>
                                                            FISCAL YEARS ENDED
                                               ---------------------------------------------
                                               MARCH 3, 2002   MARCH 4, 2001   MARCH 4, 2000
                                               -------------   -------------   -------------
<S>                                            <C>             <C>             <C>
Interest.....................................   $12,612,803     $12,790,175     $14,495,414
Income taxes.................................   $ 1,164,569     $ 2,760,172     $ 3,585,875
</Table>

     During the fourth quarter of fiscal 2002, the special purpose leasing
entity exchanged a note payable in the amount of $6,200,000 for the purchase of
an aircraft for $6,200,000, in a non-cash transaction (see Note 16).

16.  TRANSACTIONS WITH RELATED PARTIES

     Related party transactions recorded in continuing operations during fiscal
2002, 2001 and 2000 arose in connection with the following relationships:

     Under an agreement with a management services entity owned by certain
officers and directors, as amended on December 17, 1999, the Company received
corporate management services, which included, among other things, strategic
planning, investor relations, management of the Company's banking, accounting
and legal relationships and general oversight. Management fees paid under this
agreement were in lieu of salary compensation for certain of the Company's
senior executives. Amounts paid under the agreement were $925,000 in fiscal
2002, and $1,300,000 during each of fiscal 2001 and 2000. In addition, during
fiscal 2001 and 2000 the Company paid bonuses of $1,775,000 and $1,695,522,
respectively, to the management services entity and its senior executives.
Effective April 25, 2001, the agreement was assigned to another management
services entity, owned by certain officers and directors. Fees paid in fiscal
2002 under the assigned agreement were $325,000, with an additional $350,000
paid as a termination fee, and $292,500 paid in bonuses to its senior
executives. This agreement was cancelled as of September 3, 2001. In addition,
$426,435 was paid to this entity for reimbursement of expenses incurred in
connection with the exchange as required by the amended exchange agreement (see
Note 1).

     The Company uses the services of an entity in which the Company's principal
shareholders have substantial ownership interests. Services provided by this
entity include accounting, tax and administrative services, as well as
consulting services related to the development of new sales, warehousing and
distribution programs. Total payments for such services were $1,133,850 and
$862,400 in fiscal 2002 and 2001, respectively.

     The Company uses the services of an entity owned by the Company's principal
shareholders. This entity serves as an exclusive purchasing agent pursuant to a
three-year agreement that commenced September 3, 2001. Under the agreement, the
entity pays $100,000 per quarter for the right to serve as exclusive purchasing
agent. Net payments to the purchasing entity were $620,191 in fiscal 2002, and
are recorded in cost of goods sold.

     During the fourth quarter of fiscal 2002, the Company leased an aircraft
from an entity owned by the Company's principal shareholders. Under this lease,
the Company maintained its own flight department and was responsible for all
operating costs. Total payments under that lease were $168,263 in fiscal 2002.
Effective March 1, 2002, that lease was cancelled and replaced with a four-year
non-exclusive operating lease agreement. Pursuant to the new lease, the Company
is obligated to make minimum quarterly lease payments of $471,500 each for the
right to use the aircraft for a specified number of hours. Under this lease
arrangement, the entity is responsible for all expenses incurred in the
operation and use of the aircraft, except that the Company must provide its own
crew. On March 1, 2002, the Company paid $943,000 as a refundable deposit under
the agreement and $471,500 for its first quarterly lease payment.


                                       F-26
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The aircraft leasing entity is not a subsidiary of the Company, however the
Company considers the entity a non-independent special purpose leasing entity.
Accordingly, the entity's financial condition, results of operations and cash
flows have been included in the Company's consolidated financial statements.
Under the terms of the operating lease with the entity, and the financing
agreements between the entity and its creditor, the Company does not maintain
the legal rights of ownership to the aircraft, nor does the entity's creditor
maintain any legal recourse to the Company.

     The Company has agreed to lease warehouse space from an entity in which the
Company's principal shareholders have substantial ownership interests. The lease
is a ten-year term to begin the first day the facility is operational. During
fiscal 2001, the Company paid $250,000 for specialized construction costs.

     The Company uses the services of an entity in which one of the Company's
principal shareholders has a substantial ownership interest. This entity
provides general construction and maintenance services. Total payments for such
services were $142,050 in fiscal 2002.

     The Company uses the services of an entity in which the Company's principal
shareholders have substantial ownership interests. This entity provides
team-building opportunities for customers and employees. Total payments for such
services were $89,250 in fiscal 2002.

     During fiscal 2000, the Company maintained comprehensive insurance coverage
through an insurance agency whose owner was a principal shareholder of the
Company. Payments made to this agency totaled $447,000 in fiscal 2000.

     During fiscal 2000, the Company maintained two notes receivable from two of
its principal shareholders. During fiscal 2001, one note plus accrued interest
was paid in full. The Company recorded interest income of $58,203, $61,293 and
$137,364 in fiscal 2002, 2001 and 2000, respectively, on related party notes
receivable.

     The Company obtained public relations, investor relations and graphic
design services from a marketing services entity that was owned by a current
director. Payments for these services totaled $7,000 and $221,000, during fiscal
2001 and 2000, respectively. During fiscal 2001, the marketing services entity
was sold by the director.

     The Company has mutual leasing agreements with certain related individuals
and with certain companies in which the Company's principal shareholders have
substantial ownership interests. Total payments under such leasing agreements
were $109,400 in fiscal 2002, and $103,200 in each of fiscal 2001 and 2000.

     Until February 2001, two directors had direct and indirect interests in an
entity with which a product licensing agreement had been signed. Under the terms
of the agreement, the Company could produce and market certain products under
brand names owned by the entity in exchange for royalty payments. Production of
such a product began in mid-fiscal 1999. Royalties paid totaled $156,000 and
$120,000 during fiscal 2001 and 2000, respectively. During February 2001, these
directors resigned their positions.

     On January 14, 2000, the Company entered into a Consulting and Noncompete
Agreement with Mr. Charles F. Connor, Jr., a significant shareholder and
co-founder of the Company. The agreement, which has a five-year term, provides
payments of $200,000 per year and family medical insurance coverage. The net
present value of payments under the agreement, including the net present value
of the medical insurance coverage over the term, is estimated to be $831,000.
This amount was expensed in selling, general and administrative expense during
the fourth quarter of fiscal 2000, and the balance is reflected in other
long-term liabilities.

     On January 6, 2000, the Company entered into a Consulting and Noncompete
Agreement with Mr. L. Dent Miller, a significant shareholder, former President
of Claremont Restaurant Group and former member of the Company's Board of
Directors. The agreement, which has a five-year term, provides payments of
$200,000 per year. The net present value of payments under the agreement is
estimated to be $807,000. This amount was expensed in selling, general and
administrative expense during the fourth quarter of fiscal 2000, and the balance
is reflected in other long-term liabilities. Mr. Miller resigned from his
position as a member of the Board of Directors of the Company, pursuant to his
Consulting and Noncompete Agreement. Subsequent to fiscal 2000, Mr. Miller is no
longer a shareholder or related party.


                                       F-27
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On December 16, 1999, the Board of Directors approved a loan to Mr. James
C. Richardson, the Company's current Chairman, of an amount up to $8.5 million
for the purpose of enabling Mr. Richardson to purchase shares of the Company's
common stock owned by certain shareholders. The terms of the loan provide that
outstanding amounts will bear a simple interest rate of 8.5%, with principal and
interest due at maturity, three years from the date of the loan. At March 2,
2002, disbursements under the loan approval totaled $5 million. Due to the
nature of the loan, the outstanding balance is presented as a reduction of
shareholders' equity.

     On June 30, 1999, the Company replaced the existing Change in Control
Agreement with the entity's former Chief Financial Officer (Mr. Harris) with a
Bonus Agreement which specified the amounts of bonus payments to be received
upon disposition of Claremont Restaurant Group. The Company paid $1,059,701
under the terms of this agreement in fiscal 2000 as a result of the sale. The
related expense is included in continuing operations in selling, general and
administrative expense.

     On July 6, 1999, the Company replaced certain existing Change in Control
Agreements with the Company's current Chairman (Mr. Richardson) and current Vice
Chairman (Mr. Clark) with revised Change in Control Agreements. The revised
agreements provide that, if a change in control of the Company occurs, the
following benefits will be provided by the Company: three times the amount of
the annual base salary of the officer; three times the amount of the cash bonus
paid or payable to such person for the most recent fiscal year; and a "gross-up"
payment for all excise and income tax liabilities resulting from payments under
the Change in Control Agreements. A change in control of the Company is
considered to have occurred if: 1) the individuals who constituted the Board of
Directors as of the date of the applicable Change in Control Agreement cease to
constitute a majority of the Board; 2) any "person" (as defined in the
applicable Change in Control Agreement) acquires 15% of the Company's common
stock; 3) any of certain business combinations is consummated, unless the
beneficial owners of the Company's common stock before the combination own more
than 50% of the stock after the combination; or 4) the Company is liquidated or
dissolved. Payments under the Change in Control Agreements are payable upon a
change in control of the Company, whether or not an officer's employment is
terminated. The term of each Change in Control Agreement is ten years unless it
expires earlier upon the termination of an officer's employment.

     On September 3, 2001, the Company entered into Employment Agreements with
the Company's current Chairman (Mr. Richardson) and current Vice-Chairman (Mr.
Clark). The agreements specify terms relating to salary, bonus and benefits to
be paid to the executive during the three-year term of the agreements.

     During fiscal 2000, the Company replaced an existing Change in Control
Agreement with the Company's former Chairman (Mr. Howard) with a Severance,
Consulting, and Noncompete Agreement. Payments made to Mr. Howard under this new
agreement totaled $1,389,503 and are included in continuing operations in
selling, general and administrative expense.

     During fiscal 2000, the Company sold its ham curing business to the
management group of that subsidiary for $995,000, resulting in a net loss of
$2,857,160. During fiscal 2002, the Company purchased pork products from the ham
curing business totaling $150,720.

     On August 18, 1999, the Company entered into an Incentive Agreement with
the Company's current President (Mr. Woodhams), which replaced a Change in
Control Agreement and Employment Contract. The agreement, as amended on January
1, 2000 and December 31, 2001, specifies terms relating to salary and bonus
amounts to be paid to the executive during the four-year term of the agreement,
as well as severance and disposition bonus amounts to be received upon any sale
of the Company.

     On December 31, 2001, the Company entered into Employment Agreements the
Company's current Chief Financial Officer (Ms. Witters) and current Senior Vice
President of Sales (Mr. Naylor). The agreements specify terms relating to
salary, bonus and benefit amounts to be paid to the executive during the
three-year term of the agreements, as well as severance and disposition bonus
amounts to be received upon any sale of the Company.

                                       F-28
<PAGE>
                               PIERRE FOODS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Related party transactions recorded in discontinued operations during
fiscal 2000 and 1999 arose in connection with the following relationships:

     During fiscal 2000, the Company replaced certain existing Change in Control
Agreements with two key restaurant executives (Mr. Miller and Mr. Templeton)
with Severance, Consulting and Noncompete Agreements. These agreements, which
became effective with the disposition of the restaurant operations, provide the
terms under which the two executives are to provide consulting services to
Claremont Restaurant Group, and stipulate that they are to refrain from engaging
in competitive activities related to restaurant operations and franchising for a
period of five years. On October 7, 1999, payments totaling $2,015,361 were made
to the two restaurant executives as a result of these agreements, and the
consulting and noncompete agreements were transferred to Carousel Capital
Partners, L.P., the purchaser of Claremont Restaurant Group. The costs of the
agreements are reflected in the gain on disposal of discontinued restaurant
segment (Note 1).

     Immediate family members of a current director have ownership interests in
companies from which the Company purchased restaurant equipment, furnishings and
supplies. Purchases from these companies totaled $13,000 during fiscal 2000.

     The Company had mutual leasing agreements with certain related individuals
and with certain companies in which the Company's principal shareholders have
substantial ownership interests. Total payments under such leasing agreements
were $867,800 during fiscal 2000.

     During fiscal 2000, the Company sold five former restaurant properties and
one tract of vacant land to an entity in which a former officer and principal
shareholder is a minority investor, for a net cash purchase price of $939,000,
resulting in a net loss of $1,495,000.

     During fiscal 2000, the Company sold the net assets of its one Bennett's
restaurant operation to certain members of management for a cash purchase price
of $1,100,000, resulting in a net gain of $522,000.

17.  SUBSEQUENT EVENTS

     On March 3, 2002, the Company entered into a one-year agreement with an
entity owned by the Company's principal shareholders that will serve as an
exclusive logistics agent for the Company. Under the agreement, warehousing,
fulfillment and transportation services will be provided by the entity.

     On March 27, 2002, the Company filed a current report on Form 8-K,
announcing the delisting of its common stock from the Nasdaq Small Cap Market,
and its transfer to the Over-the-Counter Bulletin Board.

     On April 11, 2002, the Company filed a revised preliminary proxy statement
with the Securities and Exchange Commission in connection with a special meeting
of shareholders, at which the shareholders will be asked to adopt and approve
the Amended and Restated Agreement and Plan of Share Exchange dated as of
December 20, 2001.

                                       F-29
<PAGE>

                              REPORT OF MANAGEMENT

     The management of Pierre Foods, Inc. is responsible for the preparation and
integrity of the consolidated financial statements of the Company. The financial
statements and notes have been prepared by the Company in accordance with
accounting principles generally accepted in the United States of America and, in
the judgment of management, present fairly and consistently the Company's
financial position and results of operations and cash flows. The financial
information contained elsewhere in this annual report is consistent with that in
the financial statements. The financial statements and other financial
information in this annual report include amounts that are based on management's
best estimates and judgments.

     The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that transactions are
executed in accordance with management's authorization and recorded properly to
permit the preparation of financial statements in accordance with generally
accepted accounting principles.

     The Company's financial statements have been audited by Deloitte & Touche
LLP. Management has made available to them all of the Company's financial
records and related data, and believes that all representations made to Deloitte
& Touche LLP during this audit were valid and appropriate. Their report provides
an independent opinion upon the fairness of the financial statements.

     The Board of Directors discharges its responsibility for the Company's
financial statements through its three-member Audit Committee, all of which are
non-management directors. The Audit Committee meets periodically with Deloitte &
Touche LLP, and the reporting staff have direct access to the Audit Committee to
discuss the scope and results of their work, the adequacy of internal accounting
controls and the quality of financial reporting.


          /s/ Norbert E. Woodhams                 /s/ Pamela M. Witters
--------------------------------------    --------------------------------------
Norbert E. Woodhams                       Pamela M. Witters
President and Chief Executive Officer     Chief Financial Officer and Treasurer



                                       F-30
<PAGE>

                 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
                                                             QUARTERS ENDED
                                         -------------------------------------------------------
                                          6/2/2001        9/1/2001      12/1/2001     3/2/2002
                                         -----------     -----------   -----------   -----------
<S>                                      <C>             <C>           <C>           <C>
Operating revenues.....................  $50,825,924     $57,839,217   $68,021,456   $65,918,403
Gross profit...........................  $17,569,859     $19,384,359   $22,685,668   $22,183,726
Income (loss) from continuing
  operations...........................  $  (760,635)    $  (251,171)  $   887,587   $   124,799
Net income (loss)......................  $  (760,635)    $  (251,171)  $   887,587   $   124,799
Loss from continuing operations per
  common share -- basic and diluted....  $     (0.13)    $     (0.04)  $      0.15   $      0.02
</Table>

<Table>
<Caption>
                                          6/3/2000        9/2/2000      12/2/2000     3/3/2001
                                         -----------     -----------   -----------   -----------
<S>                                      <C>             <C>           <C>           <C>
Operating revenues.....................  $44,333,524     $47,151,034   $58,682,269   $53,308,498
Gross profit...........................  $15,114,027     $16,138,529   $19,967,911   $18,869,914
Loss from continuing operations........  $(1,445,351)    $(1,022,886)  $  (397,851)  $(1,346,700)
Extraordinary loss.....................  $  (455,238)(1) $        --   $        --   $        --
Net income (loss)......................  $(1,900,589)    $(1,022,886)  $  (397,851)  $(1,346,700)
Loss from continuing operations per
  common share -- basic and diluted....  $     (0.25)    $     (0.18)  $     (0.07)  $     (0.23)
</Table>

---------------

(1)Represents an extraordinary loss from early extinguishment of debt.

                                       F-31