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


                                  FORM 10-K/A
                               (Amendment No. 1)
                                 ANNUAL REPORT


     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED MARCH 3, 2001
                         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 2, 2001 was 5,781,480. The aggregate market value of Pierre Foods, Inc.
Common Stock held by nonaffiliates of Pierre Foods, Inc. as of May 2, 2001 was
$2,531,804.


<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM NUMBER                                                                                                       PAGE
<S>              <C>                                                                                              <C>
                                     PART I

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
                 Liquidity and Capital Resources.............................................................         9
                 Inflation...................................................................................        10
Item  7A.        Quantitative and Qualitative Disclosures About Market Risk..................................        10
Item  8.         Financial Statements and Supplementary Data.................................................        11
Item  9.         Changes in and Disagreements with Accountants on Accounting and
                   Financial Disclosure......................................................................        11

                                    PART III

Item  10.        Directors and Executive Officers of the Registrant..........................................        12
Item  11.        Executive Compensation......................................................................        13
Item  12.        Security Ownership of Certain Beneficial Owners and Management..............................        19
Item  13.        Certain Relationships and Related Transactions..............................................        20

                                     PART IV

Item  14.        Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................        22
</TABLE>

<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.
("Tyson"). 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 6, 1999 is referred to as "fiscal 1999,"
its fiscal year ended March 4, 2000 is referred to as "fiscal 2000," and its
fiscal year ended March 3, 2001 is referred to as "fiscal 2001."

FINANCIAL INFORMATION ABOUT SEGMENTS

         During fiscal 2001, the Company operated in the segment of food
processing operations, servicing the foodservice industry. In fiscal 2000 and
1999, 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 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:


                               REVENUES BY SOURCE

<TABLE>
<CAPTION>
                                              FISCAL 2001               FISCAL 2000               FISCAL 1999
                                             -------------             -------------             -------------
                                                REVENUES        %         REVENUES        %         REVENUES        %
                                             -------------   -------   -------------   -------   -------------   -------
                                             (IN MILLIONS)             (IN MILLIONS)             (IN MILLIONS)
<S>                                          <C>             <C>       <C>             <C>       <C>             <C>
Food Processing:
   Fully-Cooked Protein Products .......        $ 115.3         54.7      $ 107.0         57.7      $  89.9         57.3
   Microwaveable Sandwiches ............           88.4         41.8         68.5         36.9         52.4         33.4
   Bakery and Other Products ...........            7.3          3.5          8.0          4.3          7.5          4.8
                                                -------      -------      -------      -------      -------      -------
   Total Food Processing ...............          211.0        100.0        183.5         98.9        149.8         95.5
Ham Curing .............................              0            0          2.1          1.1          7.0          4.5
                                                -------      -------      -------      -------      -------      -------
   Total ...............................        $ 211.0        100.0      $ 185.6        100.0      $ 156.8        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 90
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) and
Mom `n' Pop's(R). 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
26% 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, 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 six food technologists in the product 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 over 100
new SKUs in fiscal 2001. Over 20% of fiscal 2001 food processing sales were
related to products developed in the last two years, the Company's definition of
a new product. In fiscal 2001, 2000 and 1999, the Company spent approximately
$465,000, $354,000 and $302,000, 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 subsidiaries.

         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 3, 2001, the Company employed approximately 1,200 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
$103,200 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 subsidiaries 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 2001.


                                        4

<PAGE>

                                     PART II

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

         The Company's common stock trades on the NASDAQ Small Cap Market tier
of the NASDAQ Stock Market under the symbol "FOOD". As of May 2, 2001, the
Company had approximately 1,458 shareholders of record.

         The following table sets forth the quarterly high and low closing bid
price quotations for the Company's common stock. These quotations represent
interdealer prices, without retail mark-up, mark-down or commissions, and do not
necessarily reflect actual transactions.

<TABLE>
<CAPTION>
                                                                                                    RANGE OF PRICES
                                                                                                  ------------------
                                                                                                    HIGH       LOW
                                                                                                  -------    -------
<S>                                                                                               <C>        <C>
Fiscal year ended March 4, 2000:
   First Quarter........................................................................          $ 6.938    $ 5.125
   Second Quarter.......................................................................            9.875      6.750
   Third Quarter........................................................................           10.500      6.688
   Fourth Quarter.......................................................................            6.375      3.000

Fiscal year ended March 3, 2001:
   First Quarter........................................................................          $ 4.813    $ 2.875
   Second Quarter.......................................................................            3.094      1.750
   Third Quarter........................................................................            2.500      1.125
   Fourth Quarter.......................................................................            1.250      0.750
</TABLE>

   The closing price on May 2, 2001 was $1.19 per share.

         The Company did not declare a cash dividend during fiscal 2001 or
fiscal 2000. The Company's debt instruments restrict its ability to pay
dividends. 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 2001
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.


                                        5

<PAGE>

<TABLE>
<CAPTION>
                                                                                     Fiscal Years Ended
                                                             ---------------------------------------------------------------
                                                              March 3      March 4,      March 6,      Feb. 27,     Feb. 28,
                                                               2001          2000          1999          1998         1997
                                                             ---------     ---------     ---------     --------     --------
                                                                       (dollars in thousands, except per share data)
<S>                                                          <C>           <C>           <C>           <C>          <C>
STATEMENT OF OPERATIONS DATA:
   Revenues .............................................    $ 211,040     $ 185,598     $ 156,842     $ 66,245     $ 58,615
   Cost of goods sold ...................................      133,740       116,025       101,413       59,153       53,821
   Selling, general and administrative ..................       62,962        65,319        40,003       10,356        7,630
   Loss on sale of Mom `n' Pop's Country
       Ham, LLC .........................................           --         2,857            --           --           --
   Net (gain) loss on disposition of property, plant
       and equipment ....................................           27           (22)        1,004         (640)        (346)
   Depreciation and amortization ........................        6,238         5,662         4,902        1,615        1,401
                                                             ---------     ---------     ---------     --------     --------
   Operating income (loss) ..............................        8,073        (4,243)        9,520       (4,239)      (3,891)
   Interest expense .....................................       13,334        14,986        12,332        1,762        1,868
   Other income, net ....................................          281           169           409          204           61
   Income tax benefit ...................................          767         4,825           613        1,926        2,262
                                                             ---------     ---------     ---------     --------     --------
   Loss from continuing operations ......................       (4,213)      (14,235)       (1,790)      (3,871)      (3,436)
   Income from discontinued operations ..................           --         2,828         4,285        6,121        5,461
   Gain on disposal of discontinued operations ..........           --         6,802            --           --           --
   Extraordinary item (1) ...............................         (455)          (52)          (64)          --          415
                                                             ---------     ---------     ---------     --------     --------
   Net income (loss) ....................................    $  (4,668)    $  (4,657)    $   2,431     $  2,250     $  2,440
                                                             =========     =========     =========     ========     ========

NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED:
   Loss from continuing operations ......................    $   (0.73)    $   (2.45)    $   (0.30)    $  (0.68)    $  (0.67)
   Income from discontinued operations ..................           --          0.49          0.72         1.08         1.07
   Gain on disposal of discontinued operations ..........           --          1.17            --           --           --
   Extraordinary item ...................................        (0.08)        (0.01)        (0.01)          --         0.08
                                                             ---------     ---------     ---------     --------     --------
   Net income (loss) ....................................    $   (0.81)    $   (0.80)    $    0.41     $   0.40     $   0.48
                                                             =========     =========     =========     ========     ========

OTHER DATA:
   Capital expenditures .................................    $   2,764     $   5,488     $  15,479     $ 13,252     $  9,702

BALANCE SHEET DATA:
   Working capital (deficit) ............................    $  36,120     $  36,403     $  27,126     $   (497)    $  2,114
   Total assets .........................................      160,308       164,727       216,989       71,656       59,571
   Total debt ...........................................      115,165       115,479       146,940       20,918       18,208
   Shareholders' equity .................................       26,867        31,533        41,152       39,227       31,348
</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, and an extraordinary gain from early extinguishment of debt in
         the amount of $415 in fiscal 1997.


                                        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. As detailed in
Exhibit 99.1 to this Report, with respect to the Company, 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 on 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 will contain
13 weeks except for the infrequent fiscal years with 53 weeks. In order to adopt
this interim calendar, the fiscal year ended March 6, 1999 contains 53 weeks.
This additional week of activity did not have a material impact on any reported
line item on the consolidated statements of earnings when compared with fiscal
2000 and fiscal 2001.

         Results for fiscal 2001, 2000 and 1999 for each segment are shown
below:

<TABLE>
<CAPTION>
                                                                                    FISCAL YEARS ENDED
                                                                          -----------------------------------
                                                                          MARCH 3,      MARCH 4,      MARCH 6,
                                                                            2001          2000          1999
                                                                          --------      --------      --------
                                                                                     (IN MILLIONS)
<S>                                                                       <C>           <C>           <C>
Revenues:
   Food processing .................................................      $ 211.0       $ 183.5       $ 149.8
   Ham curing ......................................................           --           2.1           7.0
                                                                          -------       -------       -------
         Total .....................................................        211.0         185.6         156.8
                                                                          -------       -------       -------
Cost of goods sold:
   Food processing .................................................        133.7         113.9          95.2
   Ham curing ......................................................           --           2.1           6.2
                                                                          -------       -------       -------
         Total .....................................................        133.7         116.0         101.4
                                                                          -------       -------       -------
Selling, general and administrative ................................         63.0          65.3          40.0
Loss on sale of Mom `n' Pop's Country Ham, LLC .....................           --           2.9            --
Net loss on disposition of property, plant and equipment ...........           --            --           1.0
Depreciation and amortization ......................................          6.2           5.6           4.9
                                                                          -------       -------       -------
Operating income (loss) ............................................          8.1          (4.2)          9.5
Interest and other expense, net ....................................        (13.1)        (14.8)        (11.9)
                                                                          -------       -------       -------
Loss from continuing operations before income tax benefit ..........         (5.0)        (19.0)         (2.4)
Income tax benefit .................................................          0.8           4.8           0.6
                                                                          -------       -------       -------
Loss from continuing operations ....................................         (4.2)        (14.2)         (1.8)
Income from discontinued restaurant segment ........................           --           2.8           4.3
Gain on disposal of discontinued restaurant segment ................           --           6.8            --
Extraordinary item .................................................         (0.5)         (0.1)         (0.1)
                                                                          -------       -------       -------
Net income (loss) ..................................................      $  (4.7)      $  (4.7)      $   2.4
                                                                          =======       =======       =======
</TABLE>


                                        7
<PAGE>

Fiscal 2001 Compared to Fiscal 2000

         Revenues. Revenues increased by $25.4 million, or 13.7%, due to a $27.5
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 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 $17.7 million, or
15.3%, comprised of a $19.8 million (17.4%) 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 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 $2.3 million, or 3.5%, 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 operating revenues, selling, general and
administrative expenses decreased from 35.2% to 29.8% 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 operating revenues, depreciation and amortization decreased from
3.1% to 3.0%.

         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 significant.

         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.

Fiscal 2000 Compared to Fiscal 1999

         Revenues. Revenues increased by $28.8 million, or 18.3%, due to a $33.7
million (22.5%) increase in the food processing segment, offset by a $5.0
million (70.3%) decrease in the ham curing segment. The increase in food
processing revenues was due to the Pierre Cincinnati acquisition in fiscal 1999
which contributed four quarters of revenues in fiscal 2000 compared to three
quarters of revenue in fiscal 1999. The decrease in ham curing 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 $14.6 million, or
14.4%, comprised of a $18.7 million (19.6%) increase in the food processing
segment, offset by a $4.1 million (66.0%) decrease in the ham curing segment.
The increase in the food processing segment was due to the Pierre Cincinnati
acquisition in fiscal 1999 which contributed four quarters of operations in
fiscal 2000 compared to three quarters of operations in fiscal 1999. As a
percentage of food processing revenues, food processing cost of goods sold
decreased from 63.6% to 62.1% due to a shift in demand to product categories
with higher margins. The decrease in ham curing cost of goods sold was due to
the Company's strategic decision to exit the ham curing business, effective July
2, 1999.

         Selling, general and administrative. Selling, general and
administrative expenses increased by $24.3 million, or 59.2% primarily due to
indirect expenses incurred in the disposition of the restaurant segment, and
expenses associated with consulting and non-compete agreements with former
shareholders. As a percentage of operating revenues, selling, general and
administrative expenses increased from 26.1% to 35.2% for the same reasons.

         Depreciation and amortization. Depreciation and amortization increased
by $.8 million, or 15.5%, primarily due to four quarters of Pierre Cincinnati
depreciation and amortization in fiscal 2000 compared to three quarters of
Pierre Cincinnati depreciation and amortization in fiscal 1999, offset by a
decline in depreciation due to the sale of the assets of the ham curing
business. As a percentage of operating revenues, depreciation and amortization
was 3.1% for both fiscal years.


                                        8


<PAGE>

         Other expense, net. Net other expense increased by $2.9 million, or
24.3%. This increase primarily was due to an increase in interest expense
resulting from four quarters of interest expense in fiscal 2000, compared to
three quarters of interest expense resulting from financing of the Pierre
Cincinnati acquisition in June 1998 (see -- "Liquidity and Capital Resources"
below). Other non-operating expenses were not significant in fiscal 2000 or
fiscal 1999.

         Income tax benefit. The effective tax benefit rate for fiscal 2000
continuing operations was 25.3% compared to 25.5% for fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES


         Net cash provided by operating activities was $2.1 million for fiscal
2001, compared to cash used in operating activities of $6.7 million in fiscal
2000 and $11.0 million provided by operating activities in fiscal 1999. 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 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 decrease in net cash provided by operating activities from
fiscal 1999 to fiscal 2000 was primarily due to the following factors: 1)
indirect expenses incurred in the disposition of the restaurant and ham curing
segments of $11.3 million, 2) payment of estimated income taxes due of $3.6
million and 3) a decrease in accounts payable and other accrued liabilities,
excluding income taxes payable, of $12.6 million. The Company had positive
working capital at March 3, 2001 and March 4, 2000 of $36.1 million and $36.4
million, respectively, as compared to working capital of $27.1 million at March
6, 1999.


         Cash flows used in investing activities were $2.5 million for fiscal
2001. The primary component was for routine capital expenditures, offset by the
collection of a related party note receivable. 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, offset by capital expenditures for the food processing and restaurant
segments. Cash flows used in investing activities were $132.7 million in fiscal
1999. The primary components were cash used to purchase Pierre in June 1998 and
capital expenditures relating to the opening of thirteen new restaurants in
fiscal 1999, offset slightly by collections on notes payable to the Company and
proceeds from the sale of assets. Cash acquisitions of fixed assets were $2.8
million for fiscal 2001, compared to $5.5 million for fiscal 2000 and $15.5
million for fiscal 1999.


         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 associated with the Company's $25 million
revolving credit facility secured May 24, 2000 of $0.2 million. Cash flows
provided by (used in) financing activities were $(37.4) million in fiscal 2000
and $120.5 million in fiscal 1999, respectively. 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. The major
components of financing activities in fiscal 1999 included the issuance of
$115.0 million principal amount of 10.75% Senior Notes Due 2006 and initial
borrowings under a five-year, $75.0 million revolving credit facility. The
proceeds of these financing activities were used to acquire Pierre, extinguish
all existing debt of the Company, with the exception of outstanding industrial
revenue bonds and certain lease obligations, and repurchase 110,000 shares of
the Company's common stock.


         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.


                                        9


<PAGE>

         At March 3, 2001, the Company had $1.8 million in cash or cash
equivalents on hand, had no outstanding borrowings under the revolving credit
facility, and had approximately $20.4 million of additional borrowing
availability. At March 3, 2001, 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 2001 operating cash flows were not sufficient to provide
necessary working capital and to service existing debt. These cash requirements
were instead satisfied through a combination of funds provided by cash on hand
at the end of fiscal 2000 and borrowings under the $25 million revolving credit
facility. The Company anticipates that its fiscal 2002 cash requirements for
working capital and debt service will be met through a combination of funds
provided by operations and borrowings under the $25 million revolving credit
facility.

         The Company has budgeted approximately $4.8 million for capital
expenditures in fiscal 2002. These expenditures are devoted to routine food
processing capital improvement projects and other miscellaneous expenditures and
should be sufficient to maintain current operating capacity. The Company
believes that funds from operations and funds from the $25 million revolving
credit facility, as well as the Company's ability to enter into capital or
operating leases, will be adequate to finance these routine 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 various 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, 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.

         The Company anticipates continued sales growth in key market areas. As
noted above, however, this growth will require 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.

INFLATION

         The Company believes that inflation has not had a material impact on
its results of operations for fiscal 1999, fiscal 2000 or fiscal 2001. The
Company does not expect inflation to have a material impact on its results of
operations for fiscal 2002.


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 3,
2001, March 4, 2000 or March 6, 1999. Certain of the Company's outstanding
nonderivative financial instruments at March 3, 2001 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 3, 2001, all principal amounts were accruing
interest at fixed rates. In the future, should the Company borrow funds under
the variable-rate $25 million revolving 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 3, 2001. The
table presents principal cash outflows and related interest rates by maturity
date.


                                       10


<PAGE>

                                  March 3, 2001
                       Expected Maturities in Fiscal Years

<TABLE>
<CAPTION>
                                                         Long-Term Debt
                                            -------------------------------------
                                                                 Weighted Average
                                              Fixed Rate          Interest Rate
                                            -------------        ----------------
                 <S>                        <C>                  <C>
                 2002                       $      67,631             9.28%
                 2003                              49,686             9.28
                 2004                              46,066             9.28
                 2005                               1,539             9.28
                 Thereafter                   115,000,000            10.75
                                            -------------
                 Total                      $ 115,164,922            10.75
                                            =============

                 Fair Value                 $  41,975,000            10.75%
</TABLE>


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 3,
2001, 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 3, 2001, 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. At March 3, 2001, excluding long-term debt shown above, 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. Fair value of nonderivative financial instruments are estimated
using discounted cash flow analysis, based on current incremental borrowing
rates for similar nonderivative financial instruments.


ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


         The information required by this Item is set forth on pages F-1 through
F-30.



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

         None.


                                       11

<PAGE>

                                    PART III

ITEM  10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                        DIRECTORS AND EXECUTIVE OFFICERS

         JAMES C. RICHARDSON, JR., CHAIRMAN, age 52, 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 44, 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 58, 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 65, 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 51, 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 52, 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 67, 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 serves as Mayor of the City
of Hickory, North Carolina, an elective office he has held since 1981. 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 51, 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. During fiscal 2001, Mr. Meisner served on the Audit, Executive
Compensation and Special Committees. He continues to serve on those Committees.


                                       12

<PAGE>

         NORBERT E. WOODHAMS, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR,
age 55, 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 44, became the Company's Chief Financial Officer on December 16, 1999. 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.

             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 3, 2001. William P.
Foley II, E. Edwin Bradford, William McDonald III and Bobby G. Holman each
filed Form 4 reporting one transaction seven months late.


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").

<TABLE>
<CAPTION>
                                                                                       Long Term
                                                     Annual Compensation             Compensation
       Name and                Fiscal    ------------------------------------------  -------------       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.       2001             (3)     $1,775,000(4)     $      0     $      0          $    0
     Chairman                   2000             (3)      1,145,748(4)      795,522             (5)            0
                                1999             (3)              0               0      215,000(6)            0

 David R. Clark                 2001     $150,000(7)     $        0        $      0     $      0          $3,200
     Vice Chairman              2000      150,000(7)      1,261,969(4)      795,522             (5)        3,200
                                1999      150,000(7)        375,000(8)            0      215,000(6)        3,200

 Norbert E. Woodhams            2001     $300,000        $        0        $      0     $      0          $3,200
     President and              2000      275,622           355,007         179,100             (5)        3,200
     Chief Executive Officer    1999      189,493(9)         62,500               0      200,000(6)        2,200

 Pamela M. Witters              2001     $152,500        $   20,000        $      0     $ 25,000          $3,200
     Chief Financial Officer,   2000      104,438            73,546               0            0             652
         Treasurer and          1999       18,750(10)             0               0       12,500               0
         Treasurer and

</TABLE>


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


                                       13


<PAGE>


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

(3)      No salary was paid by the Company to this individual, who was instead
         compensated by HERTH. 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 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, each of the Named Executive Officers, except Ms.
         Witters, 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)      Certain options granted under the 1997 Special Stock Option Plan and
         under the 1997 Incentive Stock Option Plan were repriced on August 27,
         1998, reducing the per share option exercise price from $16.00 to
         $10.50. The repricing was accomplished by canceling old options and
         granting new options at the reduced exercise price.

(7)      For each year, excludes $200,000 paid by the Company and offset from
         amounts owing to HERTH. See "Employment Contracts and Change in Control
         Agreements" and "Certain Relationships and Related Party Transactions."

(8)      Includes a one-time bonus of $375,000 paid upon the Company's
         acquisition of Pierre in June 1998.

(9)      Mr. Woodhams' employment with the Company began in June 1998.

(10)     Ms. Witters' employment with the Company began in November 1998. She
         was appointed Chief Financial Officer on December 1, 1999.

                        OPTION GRANTS IN LAST FISCAL YEAR

         The following table presents information relating to option grants made
during fiscal 2001 to the Named Executive Officers of the Company and the
present value of the grant at the date of grant, determined with the Black
Scholes Option Pricing Model.

<TABLE>
<CAPTION>
                                 NUMBER OF       PERCENTAGE OF                                         GRANT DATE
                                   SHARES           OPTIONS         EXERCISE OR                      PRESENT VALUE
         NAME                    UNDERLYING       GRANTED TO      BASE PRICE PER    EXPIRATION     USING BLACK SCHOLES
                                  OPTIONS        EMPLOYEES IN          SHARE            DATE      OPTION PRICING MODEL
                                  GRANTED         FISCAL YEAR
-----------------------          ----------      -------------    --------------   -------------  --------------------
<S>                              <C>             <C>              <C>              <C>            <C>
James C. Richardson, Jr.                --             --                --                   --               --

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

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

Pamela M. Witters                   25,000            100%            $2.00        July 26, 2010            $1.09
</TABLE>



                                       14


<PAGE>

                   AGGREGATED OPTION EXERCISES IN FISCAL 2001
                        AND FISCAL YEAR-END OPTION VALUES

         The following table presents certain information about stock options
exercised by the Named Executive Officers during fiscal 2001 and the value of
unexercised options held by them at the end of fiscal 2001.

<TABLE>
<CAPTION>
                             SHARES ACQUIRED            NO. SHARES UNDERLYING                 VALUE OF IN-THE-MONEY
                               ON EXERCISE             OPTIONS AT MARCH 3, 2001            OPTIONS AT MARCH 3, 2001 (1)
                           ------------------       -------------------------------       ------------------------------
                                      VALUE
NAME                        NO.      REALIZED       EXERCISABLE       UNEXERCISABLE       EXERCISABLE      UNEXERCISABLE
----                       ----      --------       -----------       -------------       -----------      -------------
<S>                        <C>       <C>            <C>               <C>                 <C>              <C>
James C. Richardson, Jr.     --         --                --                  --                --               --

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

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

Pamela M. Witters            --         --             5,000              32,500              $  0             $  0
</TABLE>

(1)      The closing price of the Company's common stock on Wednesday, May 2,
         2001, was $1.19 per share.

                            COMPENSATION OF DIRECTORS

         During fiscal 2001, 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 June 30, 1996, Mr. Clark and the Company executed an Employment
Agreement (the "Clark Employment Agreement") providing that Mr. Clark would
serve as President and Chief Operating Officer of the Company for three years at
an annual base salary of $200,000 and an annual bonus based on the Company's
financial performance. The Clark Employment Agreement was amended on February
23, 1998 (the "Amended Clark Employment Agreement") to increase Mr. Clark's
annual base salary to $350,000 and to provide Mr. Clark an annual bonus based
upon the Company's performance. The Company can also award bonuses to Mr. Clark
based upon other considerations. See "Report of the Executive Compensation
Committee." $200,000 of Mr. Clark's base salary is paid by HERTH and $150,000 of
his base salary is paid by the Company. See "Certain Relationships and Related
Party Transactions." The Amended Clark Employment Agreement has a term of five
years, expiring February 28, 2003, and shall be automatically extended for
additional, successive, one-year terms, unless the Company notifies Mr. Clark
that it does not intend to extend the term. Should Mr. Clark's employment be
terminated by the Company without cause, or by reason of death or disability, or
should Mr. Clark resign from employment for good reason during the five-year
term, 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 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 of the Clark Employment Agreement, the severance payment would
equal three months of Mr. Clark's then-existing base salary. Under the Clark
Employment Agreement, the Company agreed to appoint Mr. Clark to fill the first
available vacancy on the Board. Mr. Clark subsequently filled a vacancy and
currently serves as a member of the Board.


                                       15


<PAGE>

         On August 18, 1999, Mr. Woodhams and the Company executed an Incentive
Agreement, which was amended on January 1, 2000 (the "Woodhams Incentive
Agreement"). The Company agreed to pay Mr. Woodhams an annual salary of $300,000
and a periodic bonus under the Company's executive bonus plan. 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 term of the Woodhams Incentive Agreement expires on June 8,
2003 and shall 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.

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         During fiscal 2001, the Executive Compensation Committee of the
Company's Board of Directors consisted of Messrs. Lanier, Howard, Meisner and
Puzder, none of whom was an officer or employee of the Company or any of its
subsidiaries during fiscal 2001. Messrs. Lanier, Meisner and Puzder 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. Mr. Puzder resigned his position in February 2001.

                 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 or stock options, (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.


                                       16

<PAGE>

         The Company's Chairman, Mr. Richardson, is compensated pursuant to a
Management Services Agreement with HERTH (the "HERTH Agreement"), which was
amended and restated in December 1999 and expires in March 2002. Mr. Clark's
compensation is partially from HERTH and partially from the Company. See
"Employment Contracts and Change in Control Agreements" and "Certain
Relationships and Related Party Transactions."

         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. The performances of executives compensated under the HERTH
Agreement, like those of other executives of the Company, are evaluated by the
Committee using these criteria.

         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 2001 management met and
surpassed many goals set for them by the Board, including retention and
development of customer relationships, negotiating new credit facilities, and
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.

         Chief Executive Officer Compensation. Mr. Woodham's compensation as
Chief Executive Officer, and the evaluation of his performance as Chief
Executive Officer, is consistent with the compensation principles described
above and reflects the performance of the Company and Mr. Woodhams.
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.

         Chief Financial Officer Compensation. Ms. Witters' compensation as
Chief Financial Officer, and the evaluation of her performance as Chief
Financial Officer, is consistent with the compensation principles described
above and reflects the performance of the Company and Ms. Witters. 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


                                       17

<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 23, 1996 and ending March 3, 2001. The
graph assumes that $100 is invested on February 23, 1996 in each of the
Company's common stock, the Peer Group, and on February 23, 1996 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, Hormel
Foods Corporation and WLR Foods, Inc. 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.

<TABLE>
<CAPTION>

          Measurement Period               Pierre Foods,           Peer               S&P
           (Fiscal Year-End)                   Inc.                Group              500
          ------------------               -------------           ------            ------
          <S>                              <C>                     <C>               <C>
                2/23/96                        100.00              100.00            100.00
                2/28/97                        205.71              120.21            126.16
                2/27/98                        411.43              160.15            170.32
                3/6/99                         120.00              162.41            203.94
                3/4/00                          92.87               91.02            227.86
                3/3/01                          22.86              127.49            209.18
</TABLE>



                                      18

<PAGE>

ITEM  12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             PRINCIPAL SHAREHOLDERS

         The following table sets forth, as of April 27, 2001, information
relative to Company common stock ownership by (i) each person known by the
Company's management to own beneficially 5.0% or more of the Company's
outstanding common stock, (ii) each director of the Company, (iii) each Named
Executive Officer and (iv) 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(2)
             ----------------                      ---------------------                    ---------------
<S>                                                <C>                                      <C>
PF Management, Inc.(3)
361 Second Street, NW                                    3,630,212                                 62.8%
Hickory, NC  28601

James C. Richardson, Jr.(4)
P.O. Box 3967                                            3,630,212                                 62.8
Hickory, NC 28603

David R. Clark(4)
P.O. Box 3967                                            3,630,212                                 62.8
Hickory, NC 28603

James M. Templeton(4)
P.O. Box 1295                                            3,630,212                                 62.8
Claremont, NC 28610

Dimensional Fund Advisors Inc.(5)
1299 Ocean Avenue, 11th Floor                              493,375                                  8.5
Santa Monica, CA 90401

Norbert E. Woodhams
9990 Princeton Road                                          7,627                                    *
Cincinnati, OH  45248

Pamela M. Witters(6)
9990 Princeton Road                                          6,346                                    *
Cincinnati, OH  45246

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

E. Edwin Bradford(7)
P.O. Box 3081                                                3,141                                    *
Hickory, NC 28603

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
</TABLE>


                                       19
<PAGE>

<TABLE>

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

All directors and executive officers as a
group (10 persons)                                       3,653,914                                63.23%
</TABLE>



*        Less than one percent

(1)      Ownership is direct with sole voting power and sole investment power
         unless otherwise indicated by footnote.

(2)      The actual number of shares outstanding at April 27, 2001 was
         5,781,480. Each percentage has been calculated on the basis of such
         number. In addition, there were 5,000 shares subject to outstanding
         call options exercisable not later than May 4, 2001. Shares subject to
         such options have been considered outstanding for the purpose of
         computing the percentage of outstanding shares owned by the person who
         holds such options, but have not been considered outstanding for the
         purpose of computing the percentage of outstanding shares owned by any
         other person other than the group of all directors and executive
         officers.

(3)      All of the shares owned by PF Management are also deemed to be
         beneficially owned by each of its shareholders. The shareholders of PF
         Management and their ownership percentages are: Richardson (52.9%),
         Clark (35.2%) and Templeton (11.9%).

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

(5)      The information provided for Dimensional Fund Advisors Inc.
         ("Dimensional") was obtained from a Schedule 13G dated February 6, 2001
         filed with the SEC by Dimensional relative to the Company's common
         stock. 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.

(6)      Consists of (i) 1,346 shares held directly, and (ii) 5,000 shares
         underlying currently exercisable call options.

(7)      Consists of (i) 1,941 shares held directly, and (ii) 1,200 shares 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

         HERTH Management, Inc. provides management services to the Company,
including strategic planning and the direction of strategic initiatives,
including the identification and pursuit of mergers, acquisitions, other
investment opportunities (both within and without the Company's industry) and
divestitures; management of the Company's relationships with investment bankers,
securities broker-dealers, significant shareholders, noteholders, banks, lawyers
and accountants; facilitation of meetings of the Board of Directors; and general
oversight of the Company's performance. HERTH provides the full-time services of
Messrs. Richardson and Clark. In exchange for these services, the Company pays
HERTH $1,500,000 per year pursuant to a management services agreement, which
expires in March 2002. 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. The Company paid
$3,241,270 in fiscal 2000, consisting of $1,300,000 under the HERTH agreement
and an additional $1,941,270 as bonuses paid to Richardson. The


                                       20


<PAGE>

HERTH Agreement provides for $200,000 of Mr. Clark's salary to be paid for by
HERTH. In fiscal 2001, the Company paid such amount directly to Mr. Clark and
reduced the $1,500,000 owed to HERTH under the HERTH Agreement by $200,000.
Prior to April 17, 2001, the shareholders of HERTH included Messrs. Richardson
(22.0%), Templeton (11.0%), and Columbia Hill, LLC ("Columbia") (45.0%), whose
equity owners included Messrs. Clark (45.0%) and Richardson (40.0%). As of April
17, 2001, HERTH was owned only by Richardson and Gregory A. Edgell, a former
affiliate of the Company. As of April 25, 2001, the HERTH Agreement was assigned
to PF Management.

         Columbia Hill Management, Inc. ("Columbia Hill"), owned 50% by each of
Messrs. Richardson and Clark, provides accounting, tax and administrative
services, as well as professional services for the management of special
projects. During fiscal 2001, Columbia Hill also provided consulting services
for development of new foodservice programs, and consulting services for
assessment and development of alternative warehousing and distribution programs.
Fees paid for these services were approximately $860,000 in fiscal 2001.

         During fiscal 2001, Columbia Hill, LLC ("Columbia"), owed the Company
as much as $705,493 plus accrued interest pursuant to a promissory note payable
on demand and bearing interest at the prime rate. Columbia was owned by Messrs.
Clark, Richardson and Hefner, who unconditionally guaranteed repayment of the
note. In April 2001, the note was assumed by PF Management, and Columbia was
liquidated and dissolved.

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

         Atlantic Cold Storage of Mocksville, LLC ("ACS"), owned one-third each
by Richardson, Clark and Hefner, plans to construct and finance a public cold
storage warehouse which would lease space to the Company as well as to others.
The proposed agreement with the Company is for 10 years and a minimum of 4,000
pallet positions to be leased as of April 1, 2001 or the first date the facility
is operational. The Company also agreed to pay $250,000 for specialized
construction costs. On November 7, 2000, a Fairness Opinion was obtained which
stated that the proposed lease is no less favorable to the Company than those
that could be obtained in an arm's-length transaction with a non-affiliated
person, and that the transaction is fair to the Company. During fiscal 2001, the
Company paid $250,000 to ACS for the specialized construction costs.

         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.


                                       21

<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.

         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. All required Exhibits were included in
         the original 10-K filing made by the Company on May 4, 2001, and are
         incorporated herein by reference.


(b)      Reports On Form 8-K.

         A current report on Form 8-K was filed on March 30, 2001 announcing a
         press release made that same day disclosing the existence and status of
         certain management buyout negotiations.

         A current report on Form 8-K was filed on April 27, 2001 announcing the
         signing of an Agreement and Plan of Share Exchange dated as of April
         26, 2001 among the Company, PF Management Inc., David R. Clark and
         James C. Richardson, Jr.


                                       22
<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 4, 2001

         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 4, 2001
-----------------------------
  James C. Richardson, Jr.

     /s/ David R. Clark                        Vice Chairman of the Board                        May 4, 2001
-----------------------------                     (Principal Executive Officer)
       David R. Clark

  /s/  Norbert E. Woodhams                     Chief Executive Officer, President                May 4, 2001
-----------------------------                     and Director
     Norbert E. Woodhams

   /s/  Pamela M. Witters                      Chief Financial Officer, Treasurer                May 4, 2001
-----------------------------                     and Secretary (Principal
      Pamela M. Witters                           Financial Officer and Principal
                                                  Accounting Officer)


   /s/  E. Edwin Bradford                      Director                                          May 4, 2001
-----------------------------
      E. Edwin Bradford

    /s/  Bobby G. Holman                       Director                                          May 4, 2001
-----------------------------
       Bobby G. Holman

   /s/  Richard F. Howard                      Director                                          May 4, 2001
-----------------------------
      Richard F. Howard

    /s/  Lewis C. Lanier                       Director                                          May 4, 2001
-----------------------------
       Lewis C. Lanier

    /s/  Bruce E. Meisner                      Director                                          May 4, 2001
-----------------------------
      Bruce E. Meisner

/s/  William R. McDonald III                   Director                                          May 4, 2001
-----------------------------
   William R. McDonald III
</TABLE>


                                       23
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit No.                             Description
-----------                             -----------
<S>            <C>
   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 and incorporated herein by
               reference)

   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))
</TABLE>


                                       24
<PAGE>

<TABLE>
   <S>         <C>
   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)

   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        1994 Employee Stock Purchase Plan (incorporated by reference to Exhibit
               4(c) to the Company's Registration Statement on Form S-8 (No.
               33-79014))

   10.9        Amendment to 1994 Employee Stock Purchase Plan, dated as of May 10,
               1995 (incorporated by reference to Exhibit 4(b) to Post-Effective
               Amendment No. 3 to the Company's Registration Statement on Form S-8
               (No. 33-79014)

   10.10       Second Amendment to 1994 Employee Stock Purchase Plan, dated as of
               August 30, 1995 (incorporated by reference to Exhibit 4(c) to
               Post-Effective Amendment No. 3 to the Company's Registration Statement
               on Form S-8 (No. 33-79014)

   10.11       Third Amendment to 1994 Employee Stock Purchase Plan, dated as of
               February 12, 1997 (incorporated by reference to Exhibit 4(d) to
               Post-Effective Amendment No. 4 to the Company's Registration Statement
               on Form S-8 (No. 33-79014))

   10.12       Employment Contract, dated as of June 30, 1996, between the Company and
               David R. Clark, together with Amendment to Employment Contract, dated
               as of February 23, 1998 (incorporated by reference to Exhibit 10.18 to
               the Company's Registration Statement on Form S-4 (No. 333-58711))
</TABLE>


                                       25
<PAGE>

<TABLE>
   <S>         <C>
   10.13       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))

   10.14       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)

   10.15       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)

   10.16       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)

   10.17       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)

   10.18       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)

   10.19       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)

   10.20       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)

   10.21       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)

   10.22       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)

   10.23       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)

   10.24       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)
</TABLE>


                                       26

<PAGE>

<TABLE>
   <S>         <C>
   10.25       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)

   10.26       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)

   10.27       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)

   10.28       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)

   10.29       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)

   10.30       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)

   10.31       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)

   10.32       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)

   10.33       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)

   10.34       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)

   10.35       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)

   10.36       Bonus Agreement dated as of June 30, 1999 between the Company and James
               E. Harris (incorporated by reference to Exhibit 10.50 to the Company's
               Quarterly Report on Form 10-Q for its fiscal quarter ended December 4,
               1999)
</TABLE>


                                       27
<PAGE>


<TABLE>
   <S>         <C>
   10.37       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)

   10.38       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)

   10.39       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)

   10.40       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)

   10.41       Agreement and Plan of Share Exchange between Pierre Foods, Inc. and PF
               Management, Inc., dated as of April 26, 2001 (incorporated by
               reference to Exhibit 10.41 to the Company's Annual Report on Form
               10-K for its fiscal year ended March 3, 2001)

   12          Calculation of Ratios of Earnings to Fixed Charges (incorporated by
               reference to Exhibit 12 to the Company's Annual Report on Form 10-K
               for its fiscal year ended March 3, 2001)

   21          Subsidiaries of Pierre Foods, Inc. (incorporated by reference to
               Exhibit 21 to the Company's Annual Report on Form 10-K for its fiscal
               year ended March 3, 2001)

   23          Independent Auditors' Consent (incorporated by reference to
               Exhibit 23 to the Company's Annual Report on Form 10-K for its fiscal
               year ended March 3, 2001)

   99.1        Risk Factors (incorporated by reference to Exhibit 99.1 to the Company's
               Annual Report on Form 10-K for its fiscal year ended March 3, 2001)
</TABLE>


         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.


                                       28
<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 3, 2001 and March 4, 2000 .....................     F-3
   Consolidated Statements of Operations for the Years Ended March 3, 2001,
       March 4, 2000 and March 6, 1999 ...................................................     F-4
   Consolidated Statements of Shareholders' Equity for the Years Ended March 3,
       2001, March 4, 2000 and March 6, 1999 .............................................     F-5
   Consolidated Statements of Cash Flows for the Years Ended March 3, 2001,
       March 4, 2000 and March 6, 1999 ...................................................     F-6
   Notes to Consolidated Financial Statements ............................................     F-7
</TABLE>



                                      F-1





<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," formerly "Fresh Foods, Inc.") as of March
3, 2001 and March 4, 2000, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three fiscal
years in the period ended March 3, 2001. 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 3, 2001 and
March 4, 2000, and the results of its operations and its cash flows for each of
the three fiscal years in the period ended March 3, 2001 in conformity with
accounting principles generally accepted in the United States of America.


DELOITTE & TOUCHE LLP
Cincinnati, Ohio
May 4, 2001


                                      F-2

<PAGE>
                               PIERRE FOODS, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                       March 3,          March 4,
                                                                                                         2001              2000
                                                                                                    -------------     -------------
<S>                                                                                                 <C>               <C>
                                                       ASSETS
CURRENT ASSETS:
       Cash and cash equivalents                                                                    $   1,813,185     $   2,701,464
       Accounts receivable, net (Notes 3, 7 and 16 - includes related party receivables of
          $229,551 and $292,990 at March 3, 2001 and March 4, 2000, respectively)                      18,427,453        17,422,811
       Notes receivable - current, net (Notes 3 and 16 - includes related party notes receivable
          of $152,456 at March 4, 2000)                                                                        --           238,513
       Inventories (Notes 4 and 7)                                                                     26,804,063        25,025,421
       Refundable income taxes (Note 8)                                                                 1,292,667         2,828,156
       Deferred income taxes (Note 8)                                                                   2,174,642         2,290,361
       Prepaid expenses and other current assets                                                        1,033,015           799,582
                                                                                                    -------------     -------------
               Total current assets                                                                    51,545,025        51,306,308
PROPERTY, PLANT AND EQUIPMENT, NET (Notes 5, 9 and 16 - includes related party capital
          expenditures of $250,000 at March 3, 2001)                                                   34,916,493        35,784,819
                                                                                                    -------------     -------------
OTHER ASSETS:
       Trade name (Note 6)                                                                             40,286,636        41,764,636
       Excess of cost over fair value of net assets of businesses acquired, net (Note 6)               27,871,114        28,893,723
       Other intangible assets, net (Note 6)                                                            2,363,956         2,556,936
       Notes receivable-related party (Notes 3 and 16)                                                    705,493           705,493
       Deferred loan origination fees, net                                                              2,619,157         3,714,748
                                                                                                    -------------     -------------
               Total other assets                                                                      73,846,356        77,635,536
                                                                                                    -------------     -------------
               Total Assets                                                                         $ 160,307,874     $ 164,726,663
                                                                                                    =============     =============

                                        LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
       Current installments of long-term debt (Note 7)                                              $      67,631     $     314,433
       Trade accounts payable                                                                           5,368,066         5,493,168
       Accrued insurance                                                                                   54,582           154,947
       Accrued interest                                                                                 3,153,280         3,213,929
       Accrued payroll and payroll taxes                                                                3,915,799         2,427,691
       Accrued promotions (includes related party payables of $32,833 and
            $51,540 at March 3, 2001 and March 4, 2000, respectively)                                   1,926,650         1,903,241
       Accrued taxes (other than income and payroll)                                                      584,206           563,879
       Other accrued liabilities                                                                          355,253           831,681
                                                                                                    -------------     -------------
               Total current liabilities                                                               15,425,467        14,902,969
LONG-TERM DEBT, less current installments (Note 7)                                                    115,097,291       115,164,922
OTHER LONG-TERM LIABILITIES (Note 16)                                                                   1,347,231         1,638,466
DEFERRED INCOME TAXES (Note 8)                                                                          1,571,087         1,487,134
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, 2001 - 5,781,480 shares and
                 March 4, 2000 - 5,781,000 shares                                                       5,781,480         5,781,000
       Additional paid in capital                                                                      23,317,053        23,315,881
       Retained earnings                                                                                2,768,265         7,436,291
       Note Receivable-related party                                                                   (5,000,000)       (5,000,000)
                                                                                                    -------------     -------------
               Total shareholders' equity                                                              26,866,798        31,533,172
                                                                                                    -------------     -------------
               Total Liabilities and Shareholders' Equity                                           $ 160,307,874     $ 164,726,663
                                                                                                    =============     =============

</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>
                              PIERRE FOODS, INC.

                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                               FISCAL YEARS ENDED
                                                                                 -------------------------------------------------
                                                                                   MARCH 3,           MARCH 4,          MARCH 6,
                                                                                     2001              2000              1999
                                                                                 -------------     -------------     -------------
<S>                                                                              <C>               <C>               <C>
REVENUES (Note 13):
        Food processing                                                          $ 211,040,483     $ 183,502,144     $ 149,778,206
        Ham curing                                                                          --         2,096,052         7,063,625
                                                                                 -------------     -------------     -------------
                    Total operating revenues                                       211,040,483       185,598,196       156,841,831
                                                                                 -------------     -------------     -------------
COSTS AND EXPENSES:
        Costof goods sold (Note 16 - includes related party transactions
            totaling $12,733 and $658,826 in fiscal 2000
            and 1999, respectively)                                                133,740,149       116,024,983       101,413,313
        Selling, general and administrative expenses (Notes 11 and 16 -
            includes related party transactions totaling $4,199,591, $3,983,434
            and $2,600,529 in fiscal 2001, 2000 and 1999, respectively)             62,961,744        65,319,315        40,003,255
        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                 27,695           (22,038)        1,003,555
        Depreciation and amortization (Note 13)                                      6,237,969         5,661,893         4,901,356
                                                                                 -------------     -------------     -------------
                    Total costs and expenses                                       202,967,557       189,841,313       147,321,479
                                                                                 -------------     -------------     -------------
OPERATING INCOME (LOSS)                                                              8,072,926        (4,243,117)        9,520,352
                                                                                 -------------     -------------     -------------
OTHER INCOME (EXPENSE)
        Interest expense (Note 16)                                                 (13,334,022)      (14,985,577)      (12,332,248)
        Other income (expense), net  (Note 16 - includes related party
            income totaling $61,293, $137,364 and $152,743 in fiscal 2001,
            2000 and 1999, respectively)                                               281,600           168,959           409,095
                                                                                 -------------     -------------     -------------
                    Other expense, net                                             (13,052,422)      (14,816,618)      (11,923,153)
                                                                                 -------------     -------------     -------------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT                           (4,979,496)      (19,059,735)       (2,402,801)
INCOME TAX BENEFIT (Note 8)                                                            766,708         4,825,168           612,885
                                                                                 -------------     -------------     -------------
LOSS FROM CONTINUING OPERATIONS                                                     (4,212,788)      (14,234,567)       (1,789,916)
DISCONTINUED OPERATIONS (Note 1):
        Income from discontinued restaurant segment  (net of income taxes of
           $1,507,029, and $2,325,555  in fiscal 2000 and 1999, respectively)               --         2,828,367         4,285,108
        Gain on disposal of discontinued restaurant segment (net of income
           taxes of $3,968,525)                                                             --         6,801,726                --
                                                                                 -------------     -------------     -------------
                               Discontinued operations, net                                 --         9,630,093         4,285,108
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                             (4,212,788)       (4,604,474)        2,495,192
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF
        DEBT (net of income tax benefit of $258,303, $35,633 and $44,158 in
            fiscal 2001, 2000 and 1999, respectively)                                 (455,238)          (52,350)          (64,335)
                                                                                 -------------     -------------     -------------
NET INCOME (LOSS)                                                                $  (4,668,026)    $  (4,656,824)    $   2,430,857
                                                                                 =============     =============     =============

NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED
        Loss from continuing operations                                          $       (0.73)    $       (2.45)    $       (0.30)
        Discontinued operations                                                             --              1.66              0.72
        Extraordinary loss from early extinguishment of debt                             (0.08)            (0.01)            (0.01)
                                                                                 -------------     -------------     -------------
                    Net income (loss)                                            $       (0.81)    $       (0.80)    $        0.41
                                                                                 =============     =============     =============


WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED                              5,781,319         5,808,075         5,898,839
</TABLE>


         See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>
                               PIERRE FOODS, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>

                                                                                                          ACCUMULATED
                                                                CAPITAL IN                  RECEIVABLE        OTHER       TOTAL
                                                   COMMON       EXCESS OF      RETAINED        FROM      COMPREHENSIVE SHAREHOLDERS'
                                                   STOCK        PAR VALUE      EARNINGS     SHAREHOLDER      INCOME       EQUITY
                                                 -----------   ------------  ------------   -----------  ------------- ------------
<S>                                              <C>           <C>           <C>            <C>          <C>           <C>
BALANCE AT FEBRUARY 27, 1998                     $ 5,898,449   $ 23,647,020  $  9,662,258   $        --     $ 19,261   $ 39,226,988
Comprehensive income:
      Net income                                          --             --     2,430,857            --           --             --
      Realized gain on sale of available for sale
            securities (net of reclassification
            adjustments and tax of $13,094)               --             --            --            --      (19,261)            --
Total comprehensive income                                                                                                2,411,596
Common stock options exercised (15,625 shares)                                                                    --
      (Note 11)                                       15,625         65,625            --            --           --         81,250
Purchase of common stock (110,000 shares)           (110,000)      (490,022)           --            --           --       (600,022)
Issuance of common stock (2,975 shares)                2,975         29,222            --            --           --         32,197
                                                 -----------   ------------  ------------   -----------     --------   ------------

BALANCE AT MARCH 6, 1999                           5,807,049     23,251,845    12,093,115            --           --     41,152,009
Net loss and comprehensive 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 (39,375 shares)                                                                    --
      (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 shares)             (68,024)      (510,180)           --            --           --       (578,204)
Issuance of common stock (2,600 shares)                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 and comprehensive loss                           --             --    (4,668,026)           --           --     (4,668,026)
Issuance of common stock (480 shares)                    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
                                                 ===========   ============  ============   ===========     ========   ============
</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 3,        MARCH 4,         MARCH 6,
                                                                                       2001             2000             1999
                                                                                    -----------     ------------     -------------
<S>                                                                                 <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                               $(4,668,026)    $ (4,656,824)    $   2,430,857
                                                                                    -----------     ------------     -------------
    Adjustments to reconcile net income (loss) to net cash provided by (used in)
       operating activities:
    Extraordinary loss on extinguishment of debt before
      income tax benefit                                                                713,541           87,983           108,493
    Depreciation and amortization                                                     6,237,969        8,199,039         8,463,851
    Amortization of deferred loan origination fees                                      570,625          899,931           620,301
    Deferred income taxes                                                               199,672            8,400           298,617
    Net (gain) loss on disposition of assets (net of writedowns)                         27,695        2,835,122         1,003,555
    Net gain on disposal of discontinued operations (Note 1)                                 --      (10,770,251)               --
    Increase (decrease) in other long-term liabilities                                 (291,235)       1,638,466                --
    Other noncash adjustments                                                             1,653          705,039          (126,278)
    Changes in operating assets and liabilities (net of effects from
      purchase of restaurant companies and Pierre, and net of sales of ham
      curing and restaurant segments) providing (using) cash:
            Receivables                                                              (1,004,642)        (287,077)       (4,815,226)
            Inventories                                                              (1,778,642)       3,301,173        (2,124,657)
            Refundable income taxes, prepaid expenses and other assets                1,302,056       (2,917,660)          148,285
            Trade accounts payable and other accrued liabilities                        769,300       (5,763,674)        5,023,953
                                                                                    -----------     ------------     -------------
              Total adjustments                                                       6,747,992       (2,063,509)        8,600,894
                                                                                    -----------     ------------     -------------
              Net cash provided by (used in) operating activities                     2,079,966       (6,720,333)       11,031,751
                                                                                    -----------     ------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of net assets of Pierre Foods                                                   --               --      (119,289,571)
    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                                              60,300          652,523           363,056
    Proceeds from sales of assets to other related parties                                   --           19,750            13,746
    Decrease in related party notes receivables                                         238,513          441,782           777,499
    Decrease in other notes receivables                                                      --          103,974           804,843
    Capital expenditures to related parties                                            (250,000)        (316,233)       (2,148,910)
    Capital expenditures - other                                                     (2,514,050)      (5,171,445)      (13,315,626)
    Other investing activities, net                                                          --           53,875           111,680
                                                                                    -----------     ------------     -------------
           Net cash provided by (used in) investing activities                       (2,465,237)      45,166,279      (132,683,283)
                                                                                    -----------     ------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net borrowings (repayments) under revolving credit agreement                             --      (29,000,000)       29,000,000
    Proceeds from issuance of long-term debt                                                 --               --       115,000,000
    Principal payments on long-term debt                                               (314,433)      (2,415,224)      (12,888,165)
    Net repayments under short-term borrowing agreements                                     --               --        (5,105,144)
    Loan origination fees                                                              (188,575)        (177,909)       (4,990,060)
    Loan to shareholder                                                                      --       (5,000,000)               --
    Purchase of common stock                                                                 --       (1,020,360)         (600,022)
    Proceeds from exercise of stock options                                                  --          204,613            81,250
                                                                                    -----------     ------------     -------------
           Net cash provided by (used in) financing activities                         (503,008)     (37,408,880)      120,497,859
                                                                                    -----------     ------------     -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   (888,279)       1,037,066        (1,153,673)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                          2,701,464        1,664,398         2,818,071
                                                                                    -----------     ------------     -------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                              $ 1,813,185     $  2,701,464     $   1,664,398
                                                                                    ===========     ============     =============
</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 Bites(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 and the results of Pierre Cincinnati's operations
were included in the Company's fiscal year ended March 6, 1999 consolidated
statements of operations from the date of acquisition. 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. Costs
associated with the acquisition totaling $1.5 million were capitalized as part
of the transaction. The acquisition price was allocated as follows (in
millions):

<TABLE>
                 <S>                                                           <C>
                 Accounts receivable                                           $  8.5
                 Inventory                                                       20.9
                 Fixed assets                                                    22.3
                 Trade name                                                      44.3
                 Assembled work force                                             2.9
                 Excess of cost over fair value of assets acquired (goodwill)    30.8
                 Accounts payable                                                 5.3
                 Accrued liabilities                                              5.1
</TABLE>

         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. In addition,
borrowings under the bank facility were used to extinguish all existing
indebtedness of the Company, with the exception of outstanding industrial
revenue bonds and certain capital lease obligations (Notes 5, 7 and 9).

         Following is selected unaudited pro forma combined results of
operations for the fiscal year ended March 6, 1999, assuming that the two
companies had been combined for accounting purposes as of the beginning of
fiscal 1999. All necessary adjustments based on the allocated purchase price of
net assets acquired and eliminations for transactions between the Company and
Pierre Cincinnati have been reflected in the pro forma calculations. However,
the pro forma amounts are not necessarily indicative of the actual results of
operations had the two companies been combined at the beginning of the year
presented.


                                       F-7


<PAGE>

<TABLE>
<CAPTION>
                                                               Fiscal Year Ended
                                                 ------------------------------------------------
                                                                March 6, 1999
                                                 (Unaudited, In Thousands, Except Per Share Data)
        <S>                                      <C>
        Total operating revenues                               $  185,719
        Operating income                                           11,150
        Loss from continuing operations                        $   (3,795)

        Loss per share from continuing operations -
               basic and diluted                               $     (.65)
</TABLE>


         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 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.

         Coinciding with the transaction discussed above, on October 3, 1999 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. Net cash proceeds
received after payment of legal and other fees totaled $1,080,083, resulting in
a net gain of $522,210 from the sale.


                                       F-8
<PAGE>
         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         March 6, 1999
                                                -------------         -------------
<S>                                             <C>                   <C>
Net operating revenues                           $59,583,905          $101,440,315
                                                 -----------          ------------

Operating profit                                   4,502,401             7,161,985
Other expense, net                                   167,005               551,322
Income tax provision                               1,507,029             2,325,555
                                                 -----------          ------------

Income from discontinued
     restaurant segment                          $ 2,828,367          $  4,285,108
                                                 -----------          ------------

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>


                                       F-9
<PAGE>
         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.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation. The accompanying consolidated financial
statements include Pierre Foods, Inc. and subsidiaries. All intercompany
transactions have been eliminated.

         Fiscal Year. The Company reports the results of operations using a
52-53 week basis. As a result of the Pierre acquisition, described in Note 1,
the Company changed its interim fiscal periods to conform with standard food
processing industry interim periods. Each quarter of the fiscal year will
contain 13 weeks except for the infrequent fiscal years with 53 weeks. Prior to
the change in interim periods the Company reported the results of operations
based on quarters of 12, 12, 12 and 16 weeks. In order to adopt this new interim
calendar, the fiscal year ended March 6, 1999 contains 53 weeks. Fiscal 2001 and
fiscal 2000 represent 52 week periods.

         The Company's fiscal year ended March 3, 2001 is referred to herein as
"fiscal 2001," its fiscal year ended March 4, 2000 is referred to herein as
"fiscal 2000," and its fiscal year ended March 6, 1999 is referred to herein as
"fiscal 1999."

         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 3, 2001.

         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.

         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>


                                      F-10


<PAGE>

         Revenue Recognition. Revenue from sales of food processing products are
recorded at the time the goods are shipped and title passes. Revenue is
recognized as the net amount to be received after deductions for estimated
discounts and product returns.

         Advertising Costs. The Company expenses advertising costs as incurred.
Advertising expense included in continuing operations for fiscal 2001, fiscal
2000 and fiscal 1999 was $891,173, $994,334 and $435,976 respectively.

         Research and Developments. The Company expenses research and
development costs as incurred. Research and development expense included in
continuing operations for fiscal 2001, fiscal 2000 and fiscal 1999 was $464,594,
$354,322 and $301,674 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 2000 and fiscal 1999
have been reclassified, where applicable, to conform to the financial statement
presentation used in fiscal 2001.

         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 at March 3, 2001 and March 4, 2000 include sales discounts and
promotional allowances, inventory reserves, insurance reserves, and useful lives
assigned to intangible assets. Actual results could differ from those estimates.

         New Accounting Pronouncement In June 1998, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 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 derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Company adopted the provisions of these
statements in the first quarter of the fiscal year ending March 2, 2002. The
adoption of this new standard did not have a material impact on the financial
condition, results of operations or cash flows of the Company.

         In June 2000, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. The
Company adopted the applicable provisions of SAB 101 during fiscal 2001. The
impact of adopting the provisions of SAB 101 was not material.


                                      F-11


<PAGE>

3.       ACCOUNTS AND NOTES RECEIVABLE

         Accounts and notes receivable consist of the following:

<TABLE>
<CAPTION>
                                                                                                 March 3,               March 4,
                                                                                                  2001                    2000
                                                                                               -----------            -----------
         <S>                                                                                   <C>                    <C>
         Accounts receivable:
             Trade accounts receivable (less allowance for doubtful receivables of
                $244,881 and $114,661 at March 3, 2001 and March 4, 2000)                      $17,802,086            $16,398,631
             Franchisees                                                                                --                 50,000
             Other                                                                                 395,816                681,190
                                                                                               -----------            -----------
                                                                                                18,197,902             17,129,821
             Related parties (Note 16)                                                             229,551                292,990
                                                                                               -----------            -----------
                     Total accounts receivable                                                 $18,427,453            $17,422,811
                                                                                               ===========            ===========

         Notes receivable:
             Related parties; interest rates 8.25% to 9.0%  (Note 16)                          $   705,493            $   857,949
             Less current portion                                                                       --                152,456
                                                                                               -----------            -----------
             Noncurrent notes receivable - related parties                                         705,493                705,493
                                                                                               -----------            -----------

             Notes receivable - other; interest rates 8.5% to 9.5%                                      --                 86,057
             Less current portion                                                                       --                 86,057
                                                                                               -----------            -----------
             Noncurrent notes receivable - other                                                        --                     --
                                                                                               -----------            -----------
                     Total noncurrent notes receivable                                         $   705,493            $   705,493
                                                                                               ===========            ===========
</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 3,                March 4,
                                                                                                  2001                    2000
                                                                                               -----------            -----------
         <S>                                                                                   <C>                    <C>
         Manufacturing supplies                                                                $ 1,189,481            $ 1,149,107
         Raw materials                                                                           4,404,820              3,857,801
         Work in process                                                                             4,281                     --
         Finished goods                                                                         21,205,481             20,018,513
                                                                                               -----------            -----------
                 Total                                                                         $26,804,063            $25,025,421
                                                                                               ===========            ===========
</TABLE>


                                      F-12
<PAGE>

5.       PROPERTY, PLANT AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                            Estimated          March 3,           March 4,
                                                                           Useful Life           2001               2000
                                                                          ------------       ------------       ------------
         <S>                                                              <C>                <C>                <C>
         Land                                                                                $  1,270,025       $  1,270,025
         Land improvements                                                 10-20 years            382,304            382,304
         Buildings                                                         20-40 years         16,073,803         15,661,100
         Leasehold improvements                                             5-20 years            670,143            660,598
         Machinery and equipment                                            5-20 years         28,459,116         27,770,877
         Machinery and equipment under capital leases                       5-15 years            630,650            763,517
         Furniture and fixtures                                             5-15 years          4,031,735          3,451,153
         Automotive equipment                                                2-5 years            487,504            472,307
         Construction in progress                                                                 636,828            279,891
                                                                                             ------------       ------------
         Total                                                                                 52,642,108         50,711,772
         Less accumulated depreciation and amortization                                        17,725,615         14,926,953
                                                                                             ------------       ------------
         Property, plant and equipment, net                                                  $ 34,916,493       $ 35,784,819
                                                                                             ============       ============
</TABLE>

6.       INTANGIBLE ASSETS

         Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                                                                                  March 3,               March 4,
                                                                                                    2001                   2000
                                                                                                ------------           ------------
         <S>                                                                                    <C>                    <C>
         Trade name                                                                             $ 44,340,000           $ 44,340,000
         Less accumulated amortization                                                            (4,053,364)            (2,575,364)
                                                                                                ------------           ------------
                 Total                                                                          $ 40,286,636           $ 41,764,636
                                                                                                ============           ============

         Excess of cost over fair value of net assets of businesses acquired                    $ 30,678,287           $ 30,678,287
         Less accumulated amortization                                                            (2,807,173)            (1,784,564)
                                                                                                ------------           ------------
                 Total                                                                          $ 27,871,114           $ 28,893,723
                                                                                                ============           ============

         Assembled workforce                                                                    $  2,893,000           $  2,893,000
         Less accumulated amortization                                                              (529,044)              (336,064)
                                                                                                ------------           ------------
                 Total                                                                          $  2,363,956           $  2,556,936
                                                                                                ============           ============
</TABLE>


                                      F-13
<PAGE>

7.       FINANCING ARRANGEMENTS

         Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
                                                                                               March 3,               March 4,
                                                                                                 2001                   2000
                                                                                             -------------          -------------
         <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)                                                                           164,922                479,355
                                                                                             -------------          -------------
              Total long-term debt                                                             115,164,922            115,479,355
              Less current installments                                                             67,631                314,433
                                                                                             -------------          -------------
         Long-term debt, excluding current installments                                      $ 115,097,291          $ 115,164,922
                                                                                             =============          =============
</TABLE>

         The Senior Notes are unsecured obligations of the Company,
unconditionally guaranteed on a senior unsecured basis by all existing
subsidiaries of the Company, subject to certain financial and non-financial
covenants. At March 3, 2001, 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.

         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.

         The average rate on the $25 million revolving line of credit was 9.41%
for the fiscal year ended March 3, 2001. The average rate on the $75 million
revolving line of credit was 8.27% for the fiscal year ended March 4, 2000, and
8.26% for the fiscal year ended March 6, 1999.

         Long-term debt maturities, including capital leases (Note 9),
subsequent to March 3, 2001, are as follows:

<TABLE>
<CAPTION>
          Fiscal Year                                                                             Amount
          -----------                                                                         -------------
          <S>                                                                                 <C>
          2002                                                                                $      67,631
          2003                                                                                       49,686
          2004                                                                                       46,066
          2005                                                                                        1,539
          2006                                                                                  115,000,000
                                                                                              -------------
               Total                                                                          $ 115,164,922
                                                                                              =============
</TABLE>


                                      F-14
<PAGE>

8.       INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                                      FISCAL YEARS ENDED
                                                                --------------------------------------------------------------
                                                                   MARCH 3,                  MARCH 4,               MARCH 6,
                                                                     2001                      2000                   1999
                                                                ------------               ------------           ------------
         <S>                                                    <C>                        <C>                    <C>
         Current:
             Federal                                            $ (1,201,123)              $ (5,477,218)          $    788,314
             State                                                   (23,557)                   191,094                (87,467)
                                                                ------------               ------------           ------------
                Total current                                     (1,224,680)                (5,286,124)               700,847
                                                                ------------               ------------           ------------

         Deferred:
             Federal                                                 675,159                   (404,262)            (1,427,927)
             State                                                  (217,187)                   865,218                114,195
                                                                ------------               ------------           ------------
                Total deferred                                       457,972                    460,956             (1,313,732)
                                                                ------------               ------------           ------------
                Total benefit                                   $   (766,708)              $ (4,825,168)          $   (612,885)
                                                                ============               ============           ============
</TABLE>

         Actual income tax 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
benefit from continuing operations as follows:

<TABLE>
<CAPTION>
                                                                               FISCAL YEARS ENDED
                                              -------------------------------------------------------------------------------------
                                                   MARCH 3, 2001                MARCH 4, 2000                  MARCH 6, 1999
                                              ----------------------        ----------------------        -------------------------

                                                              PERCENT OF                   PERCENT OF                    PERCENT OF
                                                AMOUNT       PRETAX LOSS      AMOUNT      PRETAX LOSS       AMOUNT      PRETAX LOSS
                                              ----------     -----------    ----------    -----------     ----------    -----------
<S>                                           <C>            <C>            <C>           <C>             <C>           <C>
Computed benefit at statutory rate            $(1,693,028)     (34.0)%      $(6,480,310)     (34.0)%      $ (816,952)      (34.0)%
Tax effect resulting from:
      State income taxes, net of
          federal tax benefit                   (158,889)       (3.2)           790,493        4.1            17,641         0.7
      Compensation limitation                    442,000         8.9            833,752        4.4                --          --
      Meals and entertainment                    117,368         2.4             90,648        0.5           138,962         5.8
      Other permanent differences                525,841        10.5            (59,751)      (0.3)           47,464         2.0
                                              ----------       -----        -----------      -----        ----------       -----
      Income tax benefit                      $ (766,708)      (15.4)%      $(4,825,168)     (25.3)%      $ (612,885)      (25.5)%
                                              ==========       =====        ===========      =====        ==========       =====
</TABLE>


                                      F-15
<PAGE>

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 2001 and fiscal 2000 is as follows:

<TABLE>
<CAPTION>
                                                         MARCH 3, 2001                                MARCH 4, 2000
                                            ----------------------------------------     ----------------------------------------
                                              ASSETS       LIABILITIES      TOTAL          ASSETS       LIABILITIES      TOTAL
                                            ----------     -----------    ----------     ----------     -----------    ----------
<S>                                         <C>            <C>            <C>            <C>            <C>            <C>
Current:
    Allowance for doubtful receivables      $   45,822     $        --    $   45,822     $   56,037     $        --    $   56,037
    Inventory                                  811,625              --       811,625        852,219              --       852,219
    Accrued promotional expense                751,394              --       751,394        684,792              --       684,792
    Accrued vacation pay                       410,265              --       410,265        378,650              --       378,650
    Reserve for returns                         35,721              --        35,721         73,743              --        73,743
    Reserves - other                            34,281              --        34,281         58,195              --        58,195
    Prepaid expenses                                --        (168,178)     (168,178)            --         (91,239)      (91,239)
    Accrued bonus                              107,809              --       107,809         48,534              --        48,534
    Accrued worker's compensation              128,937              --       128,937        144,992              --       144,992
    Other                                       16,966              --        16,966         84,438              --        84,438
                                            ----------     -----------    ----------     ----------     -----------    ----------
                   Total current             2,342,820       (168,178)     2,174,642      2,381,600         (91,239)    2,290,361
                                            ----------     -----------    ----------     ----------     -----------    ----------

Noncurrent:
    Property, plant and equipment                   --      (3,332,260)   (3,332,260)            --      (2,476,686)   (2,476,686)
    Consulting agreements                      517,359              --       517,359        608,976              --       608,976
    Goodwill amortization                                   (2,675,410)   (2,675,410)            --      (1,620,144)   (1,620,144)
    General business credit
      carryforward                           1,070,799              --     1,070,799        932,546              --       932,546
    Alternative minimum tax credit
      carryforward                             654,317              --       654,317        295,847              --       295,847
    Federal loss carryforward                1,427,658              --     1,427,658        728,369              --       728,369
    State loss carryforward                    528,718              --       528,718         28,934              --        28,934
    Other                                      237,732              --       237,732         15,024              --        15,024
                                            ----------     -----------    ----------     ----------     -----------    ----------
                   Total noncurrent          4,436,583      (6,007,670)   (1,571,087)     2,609,696      (4,096,830)   (1,487,134)
                                            ----------     -----------    ----------     ----------     -----------    ----------
                   Total current and
                     noncurrent             $6,779,403     $(6,175,848)   $  603,555     $4,991,296     $(4,188,069)   $  803,227
                                            ==========     ===========    ==========     ==========     ===========    ==========
</TABLE>

         At March 3, 2001, federal and state operating loss carryovers of
approximately $4,200,000 and $10,600,000, 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 2006 and continuing through fiscal 2021.

         No valuation allowance has been provided as of March 3, 2001 because
management believes that it is more likely than not that the deferred tax assets
will be realized.


                                      F-16
<PAGE>

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 $279,034, $394,810 and $1,022,457 at March 3, 2001,
March 4, 2000 and March 6, 1999, respectively.

         Certain machinery and equipment are under operating leases with terms
that are effective for varying periods until 2006. Certain of these leases have
remaining renewal clauses, exercisable at the option of the lessee. Leases with
related parties are discussed in Note 16.

         At March 3, 2001, 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>
      2002                                       $   729,655      $  (34,260)      $   695,395        $  79,739        $   775,134
      2003                                           536,769         (34,260)          502,509           56,980            559,489
      2004                                           499,464         (34,260)          465,204           48,582            513,786
      2005                                           471,078         (34,260)          436,818            1,563            438,381
      2006                                           119,723         (34,260)           85,463                -             85,463
      Later years                                    258,000         (68,520)          189,480                -            189,480
                                                 -----------      ----------       -----------        ---------        -----------
      Total minimum lease payments               $ 2,614,689      $ (239,820)      $ 2,374,869          186,864        $ 2,561,733
                                                 ===========      ==========       ===========                         ===========
      Less amount representing interest                                                                 (21,942)
                                                                                                      ---------
      Present value of minimum lease
         payments under capital leases
         (Note 7)                                                                                     $ 164,922
                                                                                                      =========
</TABLE>

         Rental expense charged to continuing operations is as follows:

<TABLE>
<CAPTION>
                                                                                           Fiscal Year Ended
                                                                    -------------------------------------------------------------
                                                                      March 3,                  March 4,                 March 6,
                                                                        2001                      2000                     1999
                                                                    -----------                -----------              ---------
         <S>                                                        <C>                        <C>                      <C>
         Real estate                                                $   185,103                $   251,340              $ 147,756
         Equipment                                                      998,012                    808,164                738,622
                                                                    -----------                -----------              ---------
         Total                                                      $ 1,183,115                $ 1,059,504              $ 886,378
                                                                    ===========                ===========              =========
</TABLE>


                                      F-17
<PAGE>

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, $82,707 and $5,937 in fiscal 2001, 2000 and 1999, 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 4% of that
employee's annual compensation or $10,500 for fiscal 2001. Effective July 3,
2000, the Company increased its matching contribution from the lesser of 4% to
the lesser of 5% of that employee's annual compensation or $10,500 for fiscal
2001. The Company's contributions included in continuing operations were
$396,883, $352,773 and $243,578 in fiscal 2001, 2000 and 1999, respectively.

         The Company provides employee health insurance benefits to employees.
During fiscal 2001, 2000 and 1999, benefits were provided through both fully
insured and self insurance group medical plans which are partially funded by the
Company. During fiscal 2000 and 1999, benefits were also provided through a
Voluntary Employee Benefit Association ("VEBA") which is partially funded by the
Company. During fiscal 2001, 2000 and 1999, contributions included in continuing
operations were $1,789,926, $1,844,874 and $2,126,292, 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. As of March 3, 2001, cash contributions to the
Plan total $56,167.


                                      F-18
<PAGE>

11.      CAPITAL STOCK

STOCK OPTIONS

         The Company's 1987 Incentive Stock Option Plan, as amended, provides
for the issuance of up to 625,000 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. At March 3, 2001, no options were outstanding under this
Plan.

         The Company's 1987 Special Stock Option Plan, as amended, provides for
the issuance of up to 625,000 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.

         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 1999, the Company repriced certain of its outstanding
options to $10.50, the fair market value on the date of repricing. All options
with an exercise price in excess of $10.50 were repriced.

         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>
                                                                          1987 AND 1997 INCENTIVE         1987 AND 1997 SPECIAL
                                                                             STOCK OPTION PLANS             STOCK OPTION PLANS
                                                                       -----------------------------   ----------------------------
                                                                                         WEIGHTED                       WEIGHTED
                                                                                          AVERAGE                        AVERAGE
                                                                         SHARES       EXERCISE PRICE     SHARES      EXERCISE PRICE
                                                                       ----------     --------------   ----------    --------------
         <S>                                                           <C>            <C>              <C>           <C>
         Balance at February 27, 1998 ..........................          367,739        $ 11.92        1,050,000        $ 13.99
              Forfeited or cancelled * .........................         (617,285)         15.47       (1,075,000)         16.00
              Issued * .........................................        1,077,969          11.93        1,275,000          11.36
              Exercised ........................................          (15,625)          5.20               --             --
                                                                       ----------                      ----------
         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
              Issued ...........................................          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
              Issued ...........................................           25,000           2.00               --             --
                                                                       ----------                      ----------
         Balance at March 3, 2001 ..............................          260,800        $  8.52          237,500        $  7.04
                                                                       ==========                      ==========
</TABLE>

*        Includes 584,402 Incentive Stock Options and 1,075,000 Special Stock
         Options repriced on August 27, 1998.


                                      F-19
<PAGE>

11.      CAPITAL STOCK, 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 3, 2001 is as follows:

<TABLE>
<CAPTION>
                                                                               WEIGHTED                                AVERAGE
                                                                                AVERAGE              SHARES          CONTRACTUAL
                                                                            EXERCISE PRICE        OUTSTANDING            LIFE
                                                                            --------------        -----------        -----------
         <S>                                                                <C>                   <C>                <C>
         1987 and 1997 Special Stock Option Plans ......................       $  3.20               112,500           10 months
                                                                               $ 10.50               125,000           86 months
                                                                                                   ---------

                                                                                                     237,500
                                                                                                   =========

         1987 and 1997 Incentive Stock Option Plans ....................       $ 10.50               185,000           87 months
                                                                               $  5.13                22,500           94 months
                                                                               $  5.75                25,000           97 months
                                                                               $  5.38                 1,500           99 months
                                                                               $  6.75                 1,800          105 months
                                                                               $  2.00                25,000          113 months
                                                                                                   ---------

                                                                                                     260,800
                                                                                                   =========
</TABLE>

         A summary of the number of shares exercisable and the weighted average
exercise price at March 3, 2001 is as follows:

<TABLE>
<CAPTION>
                                                                                                                        WEIGHTED
                                                                                                SHARES                   AVERAGE
                                                                                             OUTSTANDING             EXERCISE PRICE
                                                                                             -----------             --------------
         <S>                                                                                 <C>                     <C>
         1997 Special Stock Option Plan .............................                          112,500                  $  3.20
                                                                                               125,000                  $ 10.50
                                                                                              --------                  -------
                                                                                               237,500                  $  7.04
                                                                                              ========                  =======

         1997 Incentive Stock Option Plan ...........................                          123,209                  $  9.41
                                                                                              ========                  =======
</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, 2000, and
1999 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 2001, 2000, and 1999 would
approximate the following pro forma amounts:

<TABLE>
<CAPTION>
                                                              FISCAL YEARS ENDED
                                           ----------------------------------------------------------------------------------------
                                                 MARCH 3, 2001                  MARCH 4, 2000                   MARCH 6, 1999
                                           --------------------------    ----------------------------    --------------------------
                                           AS REPORTED     PRO FORMA     AS REPORTED       PRO FORMA     AS REPORTED     PRO FORMA
                                           -----------    -----------    ------------    ------------    -----------    -----------
<S>                                        <C>            <C>            <C>             <C>             <C>            <C>
Loss from continuing operations            $(4,212,788)   $(4,489,924)   $(14,234,567)   $(15,363,122)   $(1,789,916)   $(3,743,044)
Income from discontinued operations                 --             --       9,630,093       9,051,558      4,285,108      4,016,347
Extraordinary loss                            (455,238)      (455,238)        (52,350)        (52,350)       (64,335)       (64,335)
                                           -----------    -----------    ------------    ------------    -----------    -----------
Net income (loss)                          $(4,668,026)   $(4,945,162)   $ (4,656,824)   $ (6,363,914)   $ 2,430,857    $   208,968
Net income (loss) per common share --
       basic and diluted:
   Loss from continuing operations         $     (0.73)   $     (0.78)   $      (2.45)   $      (2.65)   $     (0.30)   $     (0.63)
   Income from discontinued operations              --             --            1.66            1.56           0.72           0.68
   Extraordinary loss                            (0.08)         (0.08)          (0.01)          (0.01)         (0.01)         (0.01)
                                           -----------    -----------    ------------    ------------    -----------    -----------
   Net income (loss)                       $     (0.81)   $     (0.86)   $      (0.80)   $      (1.10)   $      0.41    $      0.04
Weighted average fair value of the
       options                                                   5.02                            6.04                          5.18
</TABLE>


                                      F-20
<PAGE>

11.      CAPITAL STOCK, CONTINUED

         The fair value of options granted under the Company's stock option
plans during fiscal 2001, 2000, and 1999 were estimated on the date of grant
using the Black-Scholes option pricing model.

         The weighted-average assumptions used were as follows:

<TABLE>
<CAPTION>
                                                                                   MARCH 3, 2001    MARCH 4, 2000   MARCH 6, 1999
                                                                                  --------------    -------------   -------------
<S>                                                                               <C>               <C>             <C>
Dividend yield ..............................................................             --              --               --
Expected volatility .........................................................           73.9%           62.6%            66.6%
Risk free interest rate .....................................................            4.1%            6.0%             5.0%
Expected lives ..............................................................            3.5             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 3,
2001.

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>

12.      DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

         The estimated fair values of the financial instruments listed below
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.

<TABLE>
<CAPTION>
                                                        March 3, 2001
                                            ------------------------------------
                                            Carrying Amount          Fair Value
                                            ---------------        -------------
<S>                                         <C>                    <C>
Assets:
  Cash and cash equivalents                 $   1,813,185          $  1,813,185
  Accounts receivable                          18,427,453            18,427,453
  Notes receivable                                705,493               705,493

Liabilities:
  Accounts payable                              5,368,066             5,368,066
  Long-term debt (excluding capital leases)   115,000,000            41,975,000

Equity:
  Receivable from shareholder                   5,000,000             5,000,000
</TABLE>

<TABLE>
<CAPTION>
                                                        March 4, 2000
                                            ------------------------------------
                                            Carrying Amount          Fair Value
                                            ---------------        -------------
 <S>                                        <C>                    <C>
Assets:
  Cash and cash equivalents                 $   2,701,464           $ 2,701,464
  Accounts receivable                          17,422,811            17,422,811
  Notes receivable                                944,006               944,006

Liabilities:
  Accounts payable                              5,493,168             5,493,168
  Long-term debt (excluding capital leases)   115,000,000            63,250,000

Equity:
  Receivable from shareholder                   5,000,000             5,000,000
</TABLE>

         The carrying amounts of cash and cash equivalents, accounts receivable
and accounts payable are a reasonable estimate of their fair value due to
short-terms to maturity. The fair value of notes receivable is estimated by
discounting the future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities.

         The fair value of long-term debt is estimated based on quoted market
prices and interest rates currently available for issuance of debt with similar
terms and remaining maturities.


                                      F-22
<PAGE>
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. The inclusion of Pierre Cincinnati's operations in fiscal 1999
(see Note 1) results in increases in every revenue and expense category compared
with p

         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 and 1999, 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: Food Ham Processing Curing Total

<TABLE>
<CAPTION>
                                                                                    FOOD             HAM
                                                                                 PROCESSING         CURING             TOTAL
                                                                                ------------      -----------       ------------
<S>                                                                             <C>               <C>               <C>
Fiscal 2001:
     Revenues from external customers                                           $211,040,483      $        --       $211,040,483
     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 from external customers                                           $183,502,144      $ 2,096,052       $185,598,196
     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

Fiscal 1999:
     Revenues from external customers                                           $149,778,206      $ 7,063,625       $156,841,831
     Intersegment revenues (1)                                                            --           25,532             25,532
     Depreciation and amortization                                                 4,450,616          340,966          4,791,582
     Segment profit (loss)                                                        18,183,964          (87,556)        18,096,408
     Segment assets                                                              150,857,914        4,012,412        154,870,326
     Expenditures for capital assets                                               4,085,653          498,290          4,583,943
</TABLE>

(1)      Intersegment sales are recorded on prevailing prices and relate solely
         to the food processing and ham curing segments.

<TABLE>
<CAPTION>
                                                                                                FISAL YEARS ENDED
                                                                               ---------------------------------------------------
                                                                               MARCH 3, 2001      MARCH 4, 2000      MARCH 6, 1999
                                                                               -------------      -------------      -------------
<S>                                                                            <C>                <C>                <C>
Revenues:
     Total revenues from reportable segments                                    $211,040,483       $185,598,196       $156,867,363
     Elimination of intersegment revenues                                                 --                 --            (25,532)
                                                                                ------------       ------------       ------------
         Total consolidated revenues                                            $211,040,483       $185,598,196       $156,841,831
                                                                                ============       ============       ============
</TABLE>


                                      F-23
<PAGE>

<TABLE>
<CAPTION>
                                                                                                FISAL YEARS ENDED
                                                                               ---------------------------------------------------
                                                                               MARCH 3, 2001      MARCH 4, 2000      MARCH 6, 1999
                                                                               -------------      -------------      -------------
<S>                                                                            <C>                <C>                <C>
Profit or Loss:
     Total profit for reportable segments                                       $  8,072,926       $ 15,061,894       $ 18,096,408
     Corporate expenses                                                                   --        (16,447,851)        (8,576,056)
     Loss on sale of Mom 'n Pop's Country Ham, LLC                                        --         (2,857,160)                --
     Interest and other expense, net                                             (13,052,422)       (14,816,618)       (11,923,153)
                                                                                ------------       ------------       ------------
         Loss from continuing operations before income tax benefit              $ (4,979,496)      $(19,059,735)      $ (2,402,801)
                                                                                ============       ============       ============

Assets:
     Total assets for reportable segments                                       $160,307,874       $143,236,471       $154,870,326
     Corporate and discontinued restaurant segment assets                                 --         21,490,192         62,118,697
                                                                                ------------       ------------       ------------
         Consolidated total                                                     $160,307,874       $164,726,663       $216,989,023
                                                                                ============       ============       ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                 SEGMENT                     CONSOLIDATED
                                                                                  TOTALS       CORPORATE       TOTAL(1)
                                                                                ----------     ---------     ------------
<S>                                                                             <C>            <C>           <C>
Other Significant Items:
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

Fiscal 1999:
     Expenditures for capital assets                                            $4,583,943      $777,027      $5,360,970
     Depreciation and amortization                                               4,791,582       109,774       4,901,356
</TABLE>

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


Sales by major product line are as follows:

<TABLE>
<CAPTION>
                                                                                                FISAL YEARS ENDED
                                                                               ---------------------------------------------------
                                                                               MARCH 3, 2001      MARCH 4, 2000      MARCH 6, 1999
                                                                               -------------      -------------      -------------
<S>                                                                            <C>                <C>                <C>
Food Processing
    Fully-cooked protein products                                               $115,330,520       $107,001,251       $ 89,886,921
    Microwaveable sandwiches                                                      88,425,039         68,500,800         52,392,376
    Bakery and other products                                                      7,284,924          8,000,093          7,498,909
                                                                                ------------       ------------       ------------
         Total food processing revenues                                         $211,040,483       $183,502,144       $149,778,206
                                                                                ============       ============       ============
Ham Curing
      Sliced hams                                                               $         --       $  1,530,118       $  4,944,538
      Whole hams                                                                          --            565,934          2,119,087
                                                                                ------------       ------------       ------------
         Total ham curing revenues                                              $         --       $  2,096,052       $  7,063,625
                                                                                ============       ============       ============
</TABLE>

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


                                      F-24
<PAGE>

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. 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 $500,000 in fiscal
2000 and 1999, and $360,000 during fiscal 2001. Beginning fiscal 2001, the
Company also provides a secured letter of credit in the amount of $250,000 to
one of its suppliers.

         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.


15.      SUPPLEMENTAL CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
                                           FISAL YEARS ENDED
                          ---------------------------------------------------
                          MARCH 3, 2001      MARCH 4, 2000      MARCH 6, 1999
                          -------------      -------------      -------------
<S>                       <C>                <C>                <C>
Interest                   $ 12,790,175       $ 14,495,414       $  8,954,506
Income taxes               $  2,760,172       $  3,585,875       $    346,372
</TABLE>

16.      TRANSACTIONS WITH RELATED PARTIES

Related party transactions recorded in continuing operations during fiscal 2001,
2000 and 1999 arose in connection with the following relationships:

         Under a contract with a management services company owned by certain
officers and directors, as amended on December 17, 1999, the Company receives
corporate management services, which include, 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
contract are in lieu of salary compensation for certain of the Company's senior
executives. During fiscal 2001, 2000 and 1999, the amount paid annually under
this contract was $1,300,000. In addition, during fiscal 2001, 2000 and 1999 the
Company paid bonuses of $1,775,000, $1,695,522 and $375,000, respectively, to
the management services company and its senior executives.

         The Company uses the services of a company in which the Company's
principal shareholders have substantial ownership interests. Services provided
by this company 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 $860,000 in fiscal
2001.

         The Company has agreed to lease warehouse space from a company in which
the Company's principal shareholders have substantial ownership interests. The
warehouse facility currently is under construction. 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.


                                      F-25
<PAGE>

         During fiscal 2000 and 1999, 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 and
$2,267,000 in fiscal 2000 and 1999, respectively.

         During fiscal 2000 and 1999, 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
$61,293, $137,364 and $152,743 in fiscal 2001, 2000 and 1999, respectively, on
related party notes receivable.

         The Company obtains public relations, investor relations and graphic
design services from a marketing services company that was owned by a current
director. Payments for these services totaled $7,000, $221,000 and $529,000,
during fiscal 2001, 2000 and 1999, respectively. During fiscal 2001, the
marketing services company 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 $103,200, $103,200 and $51,600 during fiscal 2001, 2000
and 1999, respectively.

         Two directors have direct and indirect interests in a company with
which a product licensing agreement has been signed. Under the terms of the
agreement, the Company can produce and market certain products under brand names
owned by the other company in exchange for royalty payments. Production of such
a product began in mid-fiscal 1999. Royalties paid totaled $156,000, $120,000
and $78,000 during fiscal 2001, 2000 and 1999, 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.

         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 4, 2000, 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 company'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.


                                      F-26
<PAGE>

         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.

         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
$2,857,000.

         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, 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 17, 1999, the Company signed an Amended and Restated
Management Services Agreement with HERTH Management, Inc ("HERTH"). The amended
agreement, which terminates March 31, 2002, outlines the nature of the services
to be provided by HERTH and continues to provide for annual payments totaling
$1,500,000, payable in four equal quarterly installments.

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).

         Certain current and past officers, directors and principal shareholders
of the Company had ownership interests in franchisee companies during fiscal
1999. Total franchise, royalty and other fees from related party franchise
companies were $34,000 during fiscal 1999.


                                      F-27
<PAGE>

         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 and $2,555,000
during fiscal 2000 and 1999, respectively.

         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 and $1,796,400 during fiscal 2000 and 1999,
respectively.

         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

         A definitive agreement and plan of share exchange with PF Management,
Inc., a management group that owns approximately 63% of the Company's
outstanding common stock, was approved by the Company's Board of Directors on
April 26, 2001. The agreement, also executed on April 26, 2001, calls for PF
Management, Inc. to purchase for $1.21 per share, all shares of the Company's
common stock owned by unaffiliated investors. The transaction requires a
favorable vote by the holders of 75% of the Company's outstanding shares but
does not require approval by the holders of the Company's outstanding 10 3/4%
senior notes. The closing of the transaction is subject to shareholder approval,
financing and other conditions typical of a management buyout.


                                      F-28
<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-29
<PAGE>


                  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
                                                                               QUARTERS ENDED
                                                    --------------------------------------------------------------------
                                                      6/3/2000           9/2/2000           12/2/2000         3/3/2001
                                                    ------------       ------------       ------------      ------------
<S>                                                  <C>               <C>                <C>               <C>
Operating revenues                                  $ 45,946,753       $ 48,734,129       $ 60,883,230      $ 55,476,371
Gross profit                                        $ 16,689,074       $ 17,661,453       $ 22,094,858      $ 20,854,949
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          $      (0.25)     $       (0.18)      $      (0.07)     $      (0.23)
     share - basic and diluted
</TABLE>
<TABLE>
<CAPTION>
                                                                               QUARTERS ENDED
                                                    --------------------------------------------------------------------
                                                      6/5/1999           9/5/1999           12/4/1999          3/4/00
                                                    ------------       ------------       ------------      ------------
<S>                                                   <C>               <C>                <C>               <C>
Operating revenues                                  $ 44,454,722       $ 41,620,043       $ 50,012,578      $ 49,510,853
Gross profit                                        $ 17,748,079       $ 17,443,832       $ 17,754,810      $ 16,626,492
Loss from continuing operations                     $   (408,468)      $ (3,033,793)      $ (7,914,628)     $ (2,877,678)
Income from discontinued restaurant segment         $  1,241,783       $  1,287,338       $    299,246      $         --
Gain on disposal of discontinued restaurant segment $         --       $         --       $  6,801,726 (2)  $         --
Extraordinary loss                                  $         --       $    (52,350)(1)   $         --      $         --
Net income (loss)                                   $    833,315       $ (1,798,805)(3)   $   (813,656)     $ (2,877,678)
Loss from continuing operations per common          $      (0.07)      $      (0.52)      $      (1.36)     $      (0.50)
     share - basic and diluted
</TABLE>


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

(2)   Includes gross proceeds of $53,392,554 on the sale of net assets totaling
      $38,252,738.

(3)   Includes $4,492,193 in payments made to certain officers that were in
      addition to usual compensation.



                                      F-30